Archive for the ‘Communications & Telco Industry’ Category

The virtue of strategic consistency

“Adapt or die” may be one of the most over-hyped business phrases of the last decade. The reality is that most firms don’t face disruptive threats. And seasoned leaders understand the serious business risks of poorly designed transformations.

Fortunately, there is another way to ensure competitiveness and growth. Companies that stay true to a winning corporate strategy over the long run can be very successful. How do you do this, especially when unforeseen internal and external events test your convictions?

In an ideal world, leaders craft and follow a clear, compelling and multi-year strategic plan. Realistically, this approach often doesn’t survive more than a few quarters. Headwinds such as slowing customer demand, rising costs, or competitive moves often spur managers on to increase spending, or to make deep cuts. In essence, leaders overreact to short-term noise instead of focusing on the long-term market.

Furthermore, organizational dynamics can lead to management prematurely hitting the panic button. These include:

  1. Some leadership practices have a built-in bias towards quick reactions at the expense of deliberation and patience;
  1. The need to hit short-term metrics to meet goals creates incentives to do things at any cost;
  1. Without the anchor of an existing strategy or priorities, it’s easy for companies to zigzag with no clear direction.

All of this can lead to operational distraction, wasted investment, high employee turnover and a compromised brand image.

Staying the course

Consistency pays off over time. And companies that stick with a good plan will become more efficient and develop better relationships with customers and partners. Importantly, there is no trade-off between speed and deliberation in a strategically consistent business. Staying the course also enables quicker decision-making and follow-through.

Canadian telecom provider Telus Corp. has successfully used strategic consistency. Telus’s focus on service, brand and culture helped it outperform its rivals during the last 15 years, according to a strategy+business article published on Aug. 31. During this time, the Vancouver-based company’s revenue more than doubled to $12 billion and it returned 351 percent to shareholders, making it a global leader in the sector, the article stated.

Staying the course is particularly important in business services, where clients measure performance over years, or decades. For example, the investment-servicing company CIBC Mellon built profitable market share by remaining true to its goals of focusing on clients and reliability.

“Consistency over the long term has been critical to earning the trust of our clients,” said Claire Johnson, senior vice president, strategic initiatives. “Choosing the right strategy and supporting it through ever improving products and services is the key to long-term market success and customer satisfaction.”

Becoming strategically consistent

Any organization can maintain strategic coherency. Here’s how Telus and others have made it work:

1. Define values

Leaders need to define the winning strategic values (i.e. how the company competes and with what capabilities) that work for their firm and use these to guide important decisions and actions over the long term.

2. Take a long-term view

Compensation programs and reporting tools should prioritize long-term shareholder value creation and reflect the performance of key strategic values.

3. Encourage clear leadership

Every employee, supplier and shareholder takes his or her cue from what leaders say, and more importantly, do.  When short-term emergencies arise, managers need to have the patience, support and fortitude to focus on what is truly vital.

4. Understand the relationship between time and change

New events, competitive moves, or technologies often encourage a short-term overreaction at the expense of more deliberate thinking and prudence. Remember what Bill Gates said: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”

Mitchell Osak is managing director, strategic advisory services at Grant Thornton LLP

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Traditional media companies reboot

When I was growing up, watching TV was a family affair. We gathered around one cathode set at the same place at the same time to watch the same shows as everybody else. How times have changed. Nowadays adults spend more time online and on mobile devices than they spend watching TV, listening to the radio or reading the printed word.

Yet some things have stayed the same: We’re still watching TV shows. Only now we’re not necessarily watching the same shows, or watching them at the same time, or even watching them on TV. This trend, which shows no signs of abating, has significant implications for traditional TV cable and content providers, says David Purdy, Rogers Communications Inc.’s senior vice-president, content.

“We’re playing in a market now that has a solid mix of traditional cable subscribers, a growing group of ‘cord shavers’ — those who are tuning in less to traditional cable and more to online sources for TV and movies — and ‘cord nevers,’ many of which are Millennials.”

The move toward the digital consumption of television content is spurring a series of watershed developments in the industry, such as:

  • The rise of high-quality original programming exclusively available on streaming services (e.g. Netflix)
  • Increasing competition from vendors that historically haven’t offered professionally produced content (e.g. YouTube)
  • Increased crowd sourcing to determine which shows get produced, cancelled or resurrected (e.g. Amazon)

Traditional media companies and cable providers should be concerned. All of these developments reflect the fact that more consumers have relinquished cable and forgo live programming, opting instead for cheaper online services.

Rogers is transforming its business to address these shifts, says Mr. Purdy. “We recently partnered with Vice Media to bring more compelling content to the Canadian market. We also invested in and launched Shomi, a video-streaming service.”

How will these trends change advertising?

Online video is changing the way people interact with each other and relate to sponsoring brands. As a result, media companies are facing flat — and in many cases reduced — advertising spending, as ad buyers shift their dollars from well understood TV to new (and unproven) digital formats.

In some ways, however, advertising will become more valuable as TV watching becomes more, not less, social. For example, a growing number of people are having real-time conversations on Twitter about the shows they’re watching. Some viewers have even begun purchasing products they find appealing right from a show, with eBay and other sellers offering apps that enable viewers to browse and buy items related to what they’re watching.

But in other ways viewers are becoming less engaged with programming, and thus with ads, as fewer people watch the same shows (with the notable exception of live sports and a few big television productions such as Canadian Idol). This could translate into more complicated ad buys, more fragmented marketing strategies and harder times ahead for traditional broadcast media companies.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.  Follow me on Twitter @MitchellOsak

Using behavioural economics to trigger action

Behavioural economics posits that all human behaviour, including in business, is shaped by irrational and unconscious influences, such as bias, social pressure and cognitive inertia. The notion of psychology as a driver of economic action is not new: As an academic discipline behavioural economics dates back to the 1970s, and the foundational principle back at least to Adam Smith’s The Theory of Moral Sentiments (1759). Behavioural economics has, however, only in recent years found widespread currency within the business world, spurred by a plethora of bestsellers, including Thinking Fast and Slow (2011) by Daniel Kahneman and Predictably Irrational (2oo8) by Dan Ariely.

Increased interest from the business community is due to the insights gleaned from the discipline, which have been used to successfully “nudge” customer behaviour in a variety of sectors, such as wealth management, insurance, customer products and retail. Specifically, behavioural economics has been used by product managers to guide consumers toward certain product choices (i.e., “choice design”), by marketers to develop brochures and Web sites that more persuasively communicate marketing messages and by service managers to design better support experiences.

The field can provide hundreds of potential “triggers” to augment behaviour, depending on the business objective, situation and context. Psychologists Robert Cialdini, Noah Goldstein and Steve Martin identify 50 different possible applications in The Small Big: Small Changes That Spark Big Influence (2014). Three among the list include:

  1. Leverage social proof: People will make the same decisions as a group with which they identify. Nudge people to adopt a new behavior by showing them a training video featuring their peers doing the same thing.
  2. Invoke first names: Get and keep people’s attention by frequently using their first name. A sales representative’s repeated use of a prospect’s name will cue their attention through the clutter of other sensory inputs and focus attention on the key message.
  3. The power of loss avoidance: Individuals strongly prefer avoiding losses to acquiring gains. Marketing studies have shown that consumers would rather avoid a $5 surcharge then get a $5 discount even though the net effect is the same.
    Case study: behavioural economics in action

Communications Case Study

A technology company was struggling with customer support issues, resulting in unsustainable levels of customer churn, high support costs and wasteful discounting. We were tasked with identifying the root cause of the problem and recommending fixes.

We reviewed the support scripts and escalation processes and listened to call records. Using the lens of behavioural economics to look for unconscious biases, explicit and implicit incentives and insidious social pressures, we discovered both that the existing scripts were ineffective and that the prescribed escalation process was not being followed by most service reps.

While management believed more resources and training were the answer, we convinced them to first experiment with a pilot program that featured rewritten scripts and process redesign. These changes included a variety of nudges to trigger the desired service experience, including:

  • Establishing a rapport from the get-go: People are more easily persuaded by those that they like and have some connection with.
  • Starting with the bad news but ending on a high note: Getting bad news out of the way shows empathy, acknowledges responsibility and allows for a good finish.
  • Following the script: Because a good process is only effective if it is consistently applied, we recommended having service reps formally and publically commit to following the revised protocol.

By implementing insights gleaned from behavioural economics, customer satisfaction scores increased, service escalations fell and cross-selling rates improved.

Behavioural economics for your business

As mentioned earlier, how you should apply behavioural economics insights to your business depends on your circumstances and your goals. However, here are five general tips to guide your strategy:

1.  Understand the business context:  What business problem are you trying to solve?
2.  Audit key customer decision points:Look for hidden bias, social and incentive pressures and opportunities to catalyze desired actions.
3.  Prioritize your opportunities: The economic, operational and brand impact of each decision should be considered.
4.  Identify suitable nudges:This should involve an optimized choice design that guides actions and decisions toward your desired result.
5.  Experiment, measure and scale: Only then will you discover the optimal strategy for your business.

For more information on our services and work, please visit our web site at Quanta Consulting Inc. 

4 rules for running a business

Many companies in mature sectors have been known to embrace the latest management thinking (or fad) to help cope with low market growth, margin compression and lack of differentiation. Examples of these “big ideas” include lean management, outsourcing, business process re-engineering, offshoring and, lately, social business and cloud computing. Despite considerable effort and investment, most of these firms have been unable to outperform their peers over the long term, often due to weak strategic fit, poor planning or flawed execution.

In fact, only 344 of 25,000 public companies analyzed in the Harvard Business Review by Michael Raynor and Mumtaz Ahmed of Deloitte consistently produced above average return on assets from 1966 to 2010.

What made these firms special? Two rules identified in the study — noteworthy for their simplicity, reliability and practicality — helped drive the extraordinary business performance. Below them, I’ve included two other rules for achieving exceptional performance well worthy of consideration.

Better before cheaper

Companies need to focus first on service, quality, design or distribution — not on being the lowest-price competitor. Non-price differentiated brands tend to command richer margins, which can support further product and marketing investments, which, over time, further sustain the firm’s competitive position and profitability.

Revenue growth before costs

Leaders should prioritize top-line revenue by driving volume gains, competing in growing categories and taking advantage of every opportunity to maximize pricing. Volume increases also bring other benefits, including scale economies and channel optimization, which help drive down operating costs and block out competition.

Brands matter

“Brand equity might be the only asset that consistently generates differentiation, higher margins and long-term revenue streams,” says Jerry Mancini, president, Dole Packaged Foods Company. “Dole’s focus on value, quality and brand-building has helped deliver almost 100% brand awareness in close to 100 countries. This allows us, for example, to provide transient consumers around the world with the same quality and unique products they are familiar with, wherever they go.” This strong brand equity has enabled Dole to more easily tap new markets and categories — and drive higher volumes.

Maximize human capital

“Competition, technology and customers are never static,” says Paul Bruner, a partner with McCracken Executive Search. “The key to long-term success is attracting and developing leaders of exceptional character, with the brains, passion and resourcefulness to adapt to and lead through changing circumstances.” Organizations need to focus on recruiting and training the right employees and reinforcing positive behaviours through innovative training and compensation programs.

To be clear, the above four rules suggest a direction, not specific strategies and tactics; it is up to management to make the tough strategic choices and back them up with good plans and sufficient investment. Leaders still need to understand where they should compete (i.e., which markets with which value proposition) and what they are especially good at (i.e., organizational and asset fit). They’ll also need to support their mission by assembling the right capabilities and cultivating them through a culture of continuous improvement and adaptability. Finally, the company and shareholders must recognize they are playing the long game — they will need patience and resilience as well as management systems that reinforce long-term thinking.

For more information on our services or work, please visit the Quanta Consulting Inc. web site.

6 steps to transformation

To everything, turn, turn, turn.

There is a season, turn, turn, turn.

And a time to every purpose under heaven.

The Byrds

In today’s dynamic business environment, it is axiomatic that firms must in some part reinvent themselves to compete at a high level. Yet, this is easier said than done. Transformation is hard and as economists say, ‘there is no such a thing as a free lunch’. Fortunately, change agents can fall back on some battle tested lessons to improve their chances of success.

Many Canadian companies such as Target, Blackberry and Rogers are dealing with industry, customer, or technology challenges. These issues can range from battling a disruptive competitor or adapting to a zero growth market to trying to leverage the potential of digital technology or adjusting to new consumer behavior. Should they rise to the occasion, firms can ramp up competitiveness, boost profitability and enhance their brand image.

Genuinely transforming an organization’s core strategy, key activities or operating model is part art and part science – and loaded with risk. The challenge is akin to converting a car into a bus during a road trip: The car needs to adroitly mutate without breaking down or running off the road. The driver must be mindful of picking the right destination, taking the right route, choosing the right passengers and maintaining a vigorous but safe speed.

I have witnessed many successful transformations over the past 25 years. Though each case is different, winning companies tended to have strong Boards that empowered current or incoming CEOs to:

1.  Unify cross functional leadership around a new vision and change rationale, both of which were turned into a compelling narrative and an ambitious change plan;

2.  Quickly engage employees, suppliers and partners to build support for the new vision and roadmap;

3.  Test ‘sacred cow’ assumptions about what drives revenues, brand image, customers and costs;

4.  Make tough decisions around priorities, funding and resourcing, as they fit within the new vision;

5.  Go for quick wins that build on early momentum;

6.  Course correct the plans and activities when necessary.

The recent shake-up at Rogers is a good example (so far) of how to kick off a transformation. It is no secret that Rogers has had issues with poor customer service and rapidly changing market dynamics. A new CEO, Guy Laurence, was brought onboard in December 2013 to turn things around. At the outset, he spent a few months analyzing the entire business. One of the first things Laurence did was travel the country listening to employees, customers and partners about what ailed the company, the root causes of problems and where were the sources of growth. These learnings served as the foundation for a new customer-centered strategic vision focused on two go-to-market pillars – consumer and business – versus wireless, cable and media. Next, Laurence designed a simpler two-division structure that could drive both these pillars. Tough choices were (and will be) made around strategic priorities, staffing key positions, as well as defining new roles and responsibilities. Finally, Laurence is spending time communicating this plan down and across the company. Time will tell if his efforts bear fruit.

Yet, leaders should be mindful of hidden or unintended consequences during transitional periods. While a successful transformation can rejuvenate an organization, it can also hamstring a firm over the long-term. Risks are embedded in the financial and personnel trade offs that need to be made early in the change process. In particular:

Loss of talent

Inevitably, significant talent and institutional knowledge will be lost, the value of which is difficult to estimate early in the process. Rogers’ new structure eliminated the CMO position and replaced it with three smaller jobs. This decision left CMO John Boynton without an appropriate role and no job. Losing a wireless industry pioneer and seasoned marketer (#28 on Forbes’ list of the World’s Most influential CMOs) is never a good thing, potentially compromising long-term management depth and expertise. Having said that, Roger’s structural change is another firm’s gain.

Things get worse before they get better

Changes in structure, people and practices always bring hiccups. It takes time and money (e.g., you may need to invest IT) to execute with excellence, which you may not have when you need to deliver strong quarterly numbers. Furthermore, the confusion, strife or uncertainty around change efforts can lead to drops in employee engagement and brand image scores not to mention unintended employee and customer turnover. Not surprisingly, Laurence has acknowledged the potential for challenges over the next couple of quarters.

Change is inevitable. Leaders will improve the odds of transformation success if they follow best practices, stay the course and not ignore the potential ramifications of the decisions they make early in the process.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Guaranteeing integrated marketing

Many marketing departments resemble the Tower of Babel:  disparate teams, speaking different languages, working at cross paths and often not getting along.  In business parlance, this is called an integration problem.  Like the challenges facing the denizens of Babel, poor integration can wreak havoc on a company’s marketing effectiveness and brand image. Luckily, CMOs can overcome these problems by tweaking their structures, processes and practices and driving tighter strategic alignment.

Loose integration occurs when different customer-facing groups (e.g., marketing, sales, customer service) pursue different institutional (or personal) agendas. We have seen the implications of weak integration in dozens of our clients and the firms we benchmark.  Symptoms include: schizophrenic brand messages; tactics that run counter to the marketing strategy; duplication of effort and; in-fighting around who controls the priorities and budget.

The root causes of loose integration often arise unintentionally.  For example, programs are implemented unevenly; customer and channel fragmentation leads to a plethora of conflicting messages and tactics and; the growth of marketing outsourcing increases the odds of misalignment.  Not to be minimized is the personal dimension where department heads or employees purposely pursue agendas that are not aligned with the marketing strategy.

An almost fully integrated company  (complete integration is probably unrealistic) stands a good chance of delivering superior marketing performance as defined by lower cost and higher levels of customer acquisition and retention, higher levels of innovation and a stronger brand image. Examples of highly ‘integrated’ firms include: Apple, Four Seasons, Nike, Coca-Cola, McDonald’s and Victoria’s Secret.

Leaders can preempt and overcome the harmful effects of low integration by considering three, interrelated, approaches:

1.  Drive strategic congruence across the company

Brand internally

Your employees are market ambassadors as well as influencers within their organizations. Getting them to read and execute off the same marketing script will minimize integration issues.  Some management action items include evangelizing the marketing mission and strategy across the company, regularly communicating the firm’s value proposition and point of difference, and quickly updating stakeholders with any important changes to the program, partners, etc.

Make planning visible

A transparent and inclusive planning process increases integration and alignment by ensuring all views are aired, promoting fact-driven decision making, exposing management bias and reducing organizational uncertainty.

In-source more activities

The more marketing agencies and contractors are used, the greater the chance of integration problems, tracing to complexity-induced errors and strategy-execution gaps. Bringing more work and functions in house (and ensuring they are properly managed) will improve integration.

2.  Break down silos

Revamp the structure

A business maxim says that structure should follow strategy.  Often the structure gets out of sync and needs to be corrected.  Some ways to do this include organizing around capabilities or strategic goals like customer acquisition and retention, and introducing a shared service-delivery model that centralizes program execution.

Rogers Communications uses a couple of different structures to drive integration. “We bring people from across the organization and regardless of reporting relationships on teams to focus around common goals such as retention or acquisition,” says John Boynton, chief marketing officer. “Another approach is around execution. For example, with social media executions we have a hub-and-spoke model with experts in the hub giving advice and assistance to those in the spoke trying to use social media for varying different objectives.”

Clarify roles and responsibilities

Unclear accountability and decision rights naturally lead to conflicting programs and duplication of effort, not to mention internal strife. One way to address this problem is to clarify and formalize roles and responsibilities with charters and circulate them to key stakeholders.

3.  Use one playbook

Fine-tune the management systems & culture

Employees often work at cross-purposes when their goals, metrics and incentives are not aligned.  Leaders need to ensure there is a shared marketing mission, lexicon and performance measurement systems that is congruent with corporate priorities and integrates every activity up and across the organization.

When formal systems are lacking, companies need to be pragmatic. “Our goal is to define and create a marketing culture where it is okay to have discussions at the outset to establish decision makers and inputers,” says Boynton. “This can save a lot of time and avoid disparate executions and decisions.”

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Measuring social media ROI

Deploying winning social media programs is a top priority for most companies.  While its early days with these initiatives, management being management still wants quantifiable value and ROI.   How do you determine if your social media program is delivering the goods?

Social media may be the brave new world of marketing but the tools to measure its returns are too often anachronistic.  Traditional approaches to measuring ROI calculate the returns in terms of short-term goals (e.g., sales increases, new product awareness) to their program expenditures. In many cases, measurement frameworks are solely based on traditional advertising metrics such as reach and frequency.  The customer’s digital behavior is usually ignored. This narrow focus has two problems. First, it is fixated on the short term (“show me how my company’s Facebook ‘likes’ will improve market share next quarter”). Secondly, traditional ROI methods ignore more qualitative factors — such as the value of a tweet about a brand — that flow from the unique characteristics of the internet and have no obvious equivalents in analogue media metrics.  Many leaders still do not fully appreciate that they are entering into interactive “conversations” with customers that takes time to cultivate. There are always several objectives in using social media so its important to declare in each strategy/tactic what the primary objective is so the focus is there

Since the digital world is so different, returns from social media investments will need to be measured in terms of customer brand engagement (i.e. relationships) tied to particular social media applications — as well as in dollars. Engagement with a brand includes obvious measures such as the number of visits and time spent with the application as well as rich conversations, such as the influence of blog comments and Twitter pages.

To evaluate their social media programs, it’s imperative to bring ROI into the 21stcentury by adding the impact of long-term customer engagement in the financial analysis.  This method takes into account not only short-term goals such as increasing sales in the next month via a social media marketing campaign or reducing costs next quarter due to more responsive online support forums, but also long-term relationship value due to social media investments. Marketers who don’t understand and can’t measure how this relationship influences a customer’s behavior will be unable to get a true picture of social media effectiveness and program ROI.

Fact is, it is very difficult to directly link social media performance metrics directly to business results. Therefore, we recommend managers use measurable social objectives as a bridge between social media performance and business results.  To do this, managers would initially identify social objectives like brand awareness, brand engagement and word-of-mouth impact.  These would explicitly measure the value of operating in the social media environment as well as tie directly to existing marketing objectives.

To undertake the analysis, managers would link social media performance metrics (e.g., Likes, Comments, Shares) to each social media objective.  These objectives would then connect (or bridge) to strategic marketing objectives like purchase intent or improved brand image which can then be linked to real business results like sales lift.  Rogers Communications Inc. is pioneering this approach.

“There are always several objectives in using social media so its important to declare in each strategy/tactic what the primary objective is so the focus is there. Its usually a combination of traditional reach/frequency, online metrics such as click throughs, and new metrics such as positive-negative-neutral mentions, reposts, likes, etc,” says John Boynton, chief marketing officer of Rogers Wireless. To further drill down into the true value of a social media initiative, marketers could use a variety of online tests, control groups and other testing tools to validate the social media results and compare to other analog marketing tactics. Not surprisingly, calculating the ROI of a sophisticated social media campaign is not easy.  The challenges range from matching online customer profiles with offline purchases to determining the size of the test and control samples.

“The hardest part of evaluating social media variables with a test and control approach is isolating some variables such as geography and business results. Rogers works deeply with a few select strategic partners in this area like Facebook and Google to solve this over a period of time while remaining committed,” says Boynton. Yet, even modest social media programs will benefit from plugging-in, segment-level estimates and proxy measures to quantify how the customer actions translate through brand awareness, brand engagement and word of mouth to impact purchase behavior and, ultimately, the bottom line.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Gold medal partnerships

These days, many companies are looking to build their brands, target new customers and launch new services using marketing sponsorships, outsourcing arrangements or business development alliances.  To do this, managers need to master partnership management with complementary firms, government agencies and non-government organizations.   Identifying the need for a partnership, however, is easier said than making one work. A myriad of issues can complicate key business relationships, including poor communication, misaligned objectives between the organizations, and weak integration between the entities.  

Our firm has identified a number of best practices around designing and implementing winning partnerships.  To illustrate these, we will look at two very different examples:  1) the Olympics and; 2) the software industry.

The Olympic Games

Recently, strategy+business magazine looked at the Olympics Games as a model for effective partnership management.  To successfully pull off the games, the International Olympic Committee must orchestrate a tightly choreographed dance of hundreds of sponsors, broadcasters and service firms. The IOC and its corporate partners have developed a world-class partnering model, based on the successful completion of many games (now including London) as well as a few painful experiences (think Montreal 1976).  Some of the IOC’s key learnings include:  

  1. Prioritize the brands

To maximize the value of the marketing sponsorships, all parties need to work closely to uphold the rules around brand usage and exclusivity.  Furthermore, corporate partners will drive better results when they have a clearly defined and powerfully articulated brand message that intersects the needs and desires of all stakeholders.

  1. Cultivate a few key relationships

Better outcomes are achieved by having fewer, deeper and longer term business relationships as opposed to more numerous, shorter term, and more superficial arrangements.  This ‘less is more’ strategy triggers each partner to invest more resources, capital and effort against longer term goals and to work more diligently through teething pains.

  1. Anticipate political pressure

The involvement of the public sector or a NGO usually brings some form of subtle (or not so subtle) political pressure that could run contrary to the financial interests of all players.  Managers should be aware of potential risks when structuring partnership deals and develop contingency plans to handle unexpected problems or political interference.

Software Industry

My firm was engaged to help a software company resurrect a stalled business development alliance with a global IT services firm.  Initially, the client thought they had the key ingredients – great technology and strong personal rapport at senior levels – for a winning relationship. We quickly discovered, however, through internal research that the partnership needed a structural, process and cultural tune-up to realize its potential. Three key lessons emerged:

  1. Align around common goals

At the outset, it is crucial that all players agree on what a successful partnership looks like, how it is evaluated and where their marketing and operational strategies converge to produce a mutually beneficial relationship. Not surprisingly, alliances based on similar long-term objectives & values, a ‘win-win’ deal and a ‘partnership mind set’ have a much greater chance of flourishing.

  1. Establish troubleshooting mechanisms

When disparate organizations come together, there is a good chance that modest disagreements and latent misperceptions could rapidly escalate to derail program implementation.  It is vital to deploy a high-level, cross-organization steering group that can quickly resolve issues before they can jeopardize the entire alliance. Moreover, this senior team can also support ongoing priority-setting and resource allocation.

  1. Foster intra-preneurialism

Rock solid contracts and detailed plans can not deal with all the demands and snafus that come with executing partnerships.  It is up to the ‘people in the trenches’ to make partnerships burgeon.  These vital individuals are most effective when they can act like intra-preneurs i.e. internal entrepreneurs.  To encourage these behaviors, key managers need a high level of empowerment, sufficient resources, and the opportunity to communicate extensively with their counterparts.

Some final and poignant thoughts come from John Boynton, Chief Marketing Officer, of Rogers Communications Inc. “Rogers prefers bigger partnerships. Bigger to us is a deeper, longer term, more integrated relationship. You know when you have a done a good job when you can’t tell who in the room is from which side. Getting one partnership or sponsorship to work on as many levels as possible provides a better return.”  To a prominent sponsor like Rogers, great partnerships are based on strong customer appeal.  “A lot of sponsorships don’t make sense to customers”, says Boynton, “because the target audience doesn’t line up in the “sweet spot”, or that companies choose the sponsorship based on profile or personal interests. Having a very tight overlap with the sweet spot and ensuring the sponsorship addresses the target customer’s “passion” are the keys.”

Despite the best intentions, many business partnerships will ultimately fail.   They need not.  Managers can follow a variety of marketing and organizational best practices to improve their odds of long term success.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Four secrets of innovation success

Before Silicon Valley, there was Bell Labs the R&D organization of the former telephone monopoly, AT&T.  For much of the 20th century, New York/New Jersey-based Bell Labs led the world in groundbreaking R&D that spawned some of the greatest inventions ever created.  A new book by Jon Gertner, “The Idea Factory:  Bell Labs and the Great Age of American Innovation,” documented the history of the lab and what companies can learn to kick start their innovation engines.

Among its many accomplishments, Bell Labs can take credit for many disruptive innovations that have impacted virtually every consumer and organization.  These include the invention of:  the transistor and semiconductor, the communication satellite, the silicon solar cell (precursor of all solar-powered devices), optical fiber, the UNIX operating system, the C programming language, foundational cell phone technology and the laser.  Importantly, Bell’s breakthrough thinking also crossed over into management practice. Their mathematicians were the first to apply statistical analysis to manufactured products, creating what is today known as quality control.

It would behoove managers to explore the secrets behind Bell Labs stunning success. Based on my 20 years of helping organizations innovate, I think they got 4 key things right.

Leadership

Behind every innovative organization there is usually strong, consistent and visionary leadership.  At Bell Labs, the man most responsible for building a culture of creativity was Mervin Kelly.  Between 1925 and 1959, Kelly was employed at Bell Labs, rising from researcher to chairman of the board. His vision was to establish an “institute of creative technology” that needed a “critical mass” of talented people to foster a “busy exchange of ideas.”  Kelly provided the critical leadership and management practices that allowed innovations and a supporting culture to flourish.

Credo

The Bell Labs’ mantra could have been stated: to boldly envision the future, move deliberately and build things.  It was clear to everyone that the ultimate aim of their organization was to transform new knowledge into transformational things that can be commercialized.  Behind this credo was a recognition that the innovation process was serendipitous and that real breakthroughs took a long time. This required both management and researchers to exhibit patience – having the time to do what was necessary – and to be practical, working on things with a commercial focus in mind.

TalentAdvertisement

This institution employed some of the smartest people in America, purposely recruiting across many disciplines, thinking styles and roles.  They put them under one roof, giving them the freedom to create and the duty to support each other.  Providing this autonomy was critical in ensuring the researchers were empowered and not hamstrung by organizational barriers to creativity.  Forcing collaboration was essential to mobilizing the necessary brain power, breaking down information silos, and avoiding politics.  For example, every expert was required to mentor new hires in order to transfer their subject matter expertise and to reinforce the organization’s esprit de corp. Bell Labs would end up pioneering the development of cross-functional, cross-specialty teams working under one roof on major initiatives.  Although harmony and sharing were important values, there was also recognition that creative tension and project competition was useful in solving certain hard-to-crack problems.

Organizational dynamics

At Bell Labs, management used a variety of organizational strategies to encourage a busy exchange of ideas and to create a culture of collaboration.   For example, satellite labs were set up in the phone manufacturing plants to improve the odds of commercialization and to foster 3-way collaboration between the manufacturers, design engineers and researchers.  From an office perspective, the laboratories and common areas were physically laid out to ensure that people and ideas flowed freely and randomly.  The physical proximity of individuals was seen as important to driving collaboration; communicating via the phone was not enough.  In another case, there was an office open door policy (this before the era of cubicles) to encourage free-flow communications.

Two fundamental lessons can be drawn from the Bell Lab’s story.  First, to generate breakthrough innovation (as opposed to incremental improvements that are easily matched in the market) organizations must leverage both sides of the R&D coin:  basic research plus commercialization-focused development.  Second, innovation can just as easily happen with deliberate corporate teams as it could with young entrepreneurs working out of their garages.  Today’s dominant approach to innovation in IT – Facebook’s “move fast and break things,” and Google’s “gospel of speed” – is not the only way to produce R&D breakthroughs and winning products. Though technological revolutions happen quickly, they tend to evolve slowly.  Firms would be wise to spend the requisite time getting the technology, culture and products right.

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Are bundles bad for business?

According to conventional wisdom, product bundles are a great way to build customer loyalty, drive revenues and improve your brand image.  With a bundling strategy, consumers who purchase one product are tempted with incentives to buy  another, often complementary product.  The marketing premise – supported by solid evidence in many firms – is that companies can maximize total customer revenue by offering a second product at discount versus selling each product individually. Not surprisingly, bundling has become popular in many B2C and B2B markets ranging from telecommunications to financial services.

Bundle with care

Does bundling’s good reputation hold up to research? No, according to professors Alexander Chernev and Aaron Brough in a recent article in the Harvard Business Review.  Their research found significant problems with bundling. Specifically:

  • Consumers will pay more for a single expensive item, such as a TV, than they will for a combination of that item and a cheaper one, such as a radio.  In their study, people were willing to spend $225 on one piece of luggage and $54 on another when the items were offered separately. However when the bags were offered as a package, people were willing to spend just $165 for both
  • Bundling will have a negative effect on the perceived value of a product when a less expensive item is added as part of a bundle. The research found that when consumers were offered a choice between a gym membership and a home gym, slightly more than half preferred the home gym. But when a fitness DVD was included with the home gym, only about a third chose it.

It’s all in your head

In 5 experiments, real consumers were shown a series of real brand name products—phones, jackets, backpacks, TVs, watches, shoes, luggage, bikes, wine, and sunglasses – varying in price.  Respondents in one group were asked how much they would pay for each item by itself, and those in another group were asked how much they would pay for a bundle combining a high-priced and a low-priced item.

Psychological factors – specifically a process named categorical reasoning – are behind this consumer behavior. People naturally tend to classify products as either expensive or inexpensive.  This categorization influences how they judge products. When an expensive item is bundled with an inexpensive one, people categorize the bundle as less expensive, and this lowers their willingness to pay for it.    

It’s the bundle and price points that matter.  Categorical reasoning does not happen when lower priced products are valued side by side against more expensive products. This effect is only seen only when the two items are considered part of the same offering. Moreover, categorical reasoning does not arise out of differences in the perceived quality of the bundled products. Devaluation can happen when both items are of similar quality and brand image but different price points.

Marketing implications

Bundles aren’t and shouldn’t go away so fast.  However, this research suggests that firms should use them carefully. For example:

  1. Get consumers to focus on non-price attributes like reliability, performance or design.  This will eliminate the price effect since people categorize along just one dimension at a time. The findings show that when customers focus on one of those attributes, they’re much less likely to categorize items in terms of their expensiveness.
  2. Design bundles where each product has similar perceived value, image and price points.

For more information on our products and services, please visit the Quanta Consulting Inc. web site.