Is there a nucleus, a critical mass for talent?

We all agree that there are always changes in the environment and the company's priorities. We also know that there's a need to continuously create new capabilities that never existed before. And we may have all seen that it's a tough thing to start creating a competence from scratch.

If there's no one in your company who knows Internet Marketing, you want to start hiring Internet Marketing experts. The question is how do you decide on the best candidate when you don't know enough to judge competence in that area. You hire the person who seems the best to you. You make a mistake and realize your mistake in six months. You give it a 'I-don't-know-how-but-fix-it' speech and give it another three months, then a last warning and another three. Then what? You have the same risk hanging on your head. How do you get around this chicken and egg?

Take another equivalent problem. Say you have IM competence and you, for some reason, start losing it. At some point, the people who are left start getting frustrated because no one in your company now understands what they do. Some start enjoying the vacation and start doing what they fancy, or even nothing. There's no one to guide and drive them. At some point, the IM folks don't have a gang and they lose interest and motivation. More people leave. Is that something that also rings a bell?

So here's the question, is there a nucleus needed for talent / capability? Is there a critical mass needed to make that talent-pool self-sustaining? And the other question, if you don't have a nucleus, what do you do?

Some companies try an agency model, some try and get experts on board to help out in hiring. Some just push good people in the company to acquire that missing competence through trainings. And are there ways to increase your capability mass? If you were to connect your IM people to IM folks in other countries within your company, or if you connect them to a similar community in another, non-competing company, does that delay the exodus?

Missionaries vs. Mercenaries

We all want to establish a culture of commitment in our teams and companies. We all prefer to work in teams where people are willing to die for each other. And yet we all know that's rare to find. It would seem almost a Utopian imagination if we did not have examples of where this has happened, at least for certain lengths of time. We've heard about it in books and movies, all the way from love stories to war stories. We hear stories of people so motivated that they strap bombs and blow themselves up, and of soldiers who choose to die saving others and each-other.

The one place it seems to happen the least, if one looks at basic social connects of self, family, clan, society, nation and so on, is unfortunately work, a context where we probably spend more time than any other.

When Wharton management professor Peter Cappelli and Monika Hamori of IE Business School analyzed job search data from a leading executive search firm, they found that more than half of the high-level executives contacted by the firm — 52% — agreed to be candidates for positions outside their company. The more senior the executive, the more willing he or she is to engage in a job search. The lack of allegiance to one’s company “is symptomatic of a broader way of managing organizations in general,” Cappelli says. The two researchers found that executives with “career breadth” — including international experience — are more likely to engage in a job search, suggesting that when executives are moved around from city to city or country to country, “they don’t develop strong ties to the organization. It becomes easier for them to leave”.

The bigger facts to consider are that companies nowadays hire employees with a width of experience. They also make it clear that churn is inevitable. Any post-merger-acquisition, leadership change, or just plain hard times mean that employees will be let go off. Employees treat the company as they are treated. Such employees also create companies that behave this way. Structurally, there are very few long-term incentives at most firms.

Now, I do realize every startup is not the same, but the typical copybook garage startup starts with friends, or at least people comfortable with each other, not from hiring the best resumes. The best resumes climb corporate ladders while start-up-ers slug it out in at least some hard times. Even after a few years, these guys may not have very marketable resumes because they've done bits coding and business-dev and marketing and HR and everything else, but the corporate world is looking for functional specialists. You see? They need the startup and the startup needs them, and needs them to stay. If they stay long, they can cash out. If they don't, both have nothing.

That could be the one reason why so many people mention they find missionaries in startups and mercenaries in corporates. And while it's far from conclusive in my mind, it's definitely a thought starter.

Piloting Non-existent Concepts

One of the more interesting discussions I have had around Strategy is around Pilots. We all know that in general, and specifically in emerging or nascent markets, is that there isn't enough past data to base decisions on or to make business plans on. What you do in such cases is not research but pilots? Bet small amounts on multiple horses, see which horses win their first races, bet more on them and less on the others and so on till you have a winner.

Talking of Pilots, it is possible in eCommerce, more so in eCommerce than in offline commerce, to pilot out hypotheses. If you have a great packaging solution, try and see how the product does without the fancy packaging but discounted to that effect, check how the same listing does with or without CoD, or with or without no-questions-asked returns. If website / platform flexibility is an issue, one could try out the demand pilots purely on mailers. If one wants to know what's the sweet spot on prices or discounts, or the tradeoff between, say, faster delivery and price, it is possible to have two listings at different prices and different delivery timelines to check which one takes off faster in sales. It is then possible to dynamically alter the discount and the delivery timeline to check what's the point at which decreasing returns set in. And this brings us to the crux of this discussion.

How does one pilot faster deliveries - or any other offering we don't have and that takes sunk investments to build-out? We already operate on optimal delivery schedules. Won't we have to set up a separate infrastructure to create faster deliveries? And if we have to invest in setting up stuff, then doesn't it defeat the purpose of piloting the concept? We can't create a warehousing and pre-shipment infra and then conclude that faster delivery doesn't create value in the eyes of the consumer i.e. the consumer is not willing to pay more to get the goods faster. Then we can't roll back our investments to go back to what we had earlier.

Or maybe we can.

We could partner with a third party to create this experience for the pilot, but then the costs of doing this won't be representative. But there's something simpler we could do - which is not exactly the same thing, but quite useful for pilot results.

We can pilot slower delivery!

Now we'll put up two listings side by side, one with our standard price and delivery-time, and the other with a lower price but slower delivery, and check which one appeals to consumers. Versus a listing with an elevated price and faster delivery, this simulation will also give us results on what is the sensitivity on between delivery-time and price.

You see? There's always a way. When the ideal option is not possible to pick, pick the best possible option.

What are your thoughts?

Where is the Devil in Business Plans ....in the Assumptions?

...is in the details, right? Well if you know where to look. I have often been asked what I look for when I check a business plan. Many people I know spend a lot of time going through the data, the data-sources, the formulae, the methodology (e.g. discounted cash flow valuation) etc. Some even check for links between data-sheets, references and so on. Where I spend 90% of my time, based on my experiences so far, is on the assumptions sheet.

I'm not saying, for a moment, that the output sheet is not sensitive to the other things highlighted above. I'm saying something else. Most people who build business plans can be trusted for accuracy on formulae and linking of cells. Where competence has a smaller role to play is on the assumptions. Assumptions are futuristic, they are usually based on data but there is a choice of data to choose from e.g. for the GDP or inflation data, one could have different sources, all authentic, saying different things. Which source you pick determines which data point is picked up and how your business plan results look. A lot of assumptions are not even data based e.g. assumptions of how much market share one will get in year-3. There is no sure-shot way of getting that data. All you have in such cases are scenarios.

Next interesting point, how many business plans have scenarios built up? Even if it's not a complex monte-carlo simulation here, just basic scenarios - base case, pessimistic, optimistic etc. Now when you apply scenarios on the end-results, which is how it's commonly done, you'll end up pushing up results by 15% for one scenario and down by 10% in another - but that means little. What one could and should do is apply those to the assumptions sheet. Pick up the lowest GDP growth estimate in the pessimistic case, the most probable estimate in the base case and the best estimate in the optimistic case - and so on for all the assumed variables. This gives you a much wider range of what is the worst that might happen when all goes downhill and what is the best case when all looks up.

Now let's take yet another perspective, of biases and vested interests. Often the person who creates the business plan is the person who stands to gain or lose the most by the overall verdict on the plan. If this person were to have an ulterior motive, where do you think he / she plants his / her biases? It'll probably not be in the formulae or methodology - since getting caught there could be the end of that career. It's more likely to be in minor tweaks of assumptions one could easily reason or argue out of.

One more perspective is on what happens to business plans over time. The calculations don't change, what changes is all on the assumptions sheet. Interest rates change, market or competition developments happen, new products hit the market, and the impact is again on the assumptions sheet, and still when we look at our follow-up processes, so very often we tend to focus on the summary sheets e.g. RFP vs. actuals, projections vs. latest forecast etc, rather than setting up a frequency where all the past business plans are reopened and the assumptions revised.

Either way we look at it, checking assumptions is most critical. Updating assumptions periodically is also very important. Finally scenarios - do not accept business plans without scenarios, and without those scenarios being linked back to the assumption-sheet where - you guessed it - each assumption has scenarios.

What has been your experience? Have you caught more devils elsewhere? Or is your experience the same?

Is Cash-on-Delivery really eCommerce? if yes, then what is (also) Mobile Commerce?

We've all read about how eCommerce is bigger than it looks. There are needs other than actual purchasing that eCommerce fills. Amazon, it seems, has overtaken Google in the US as the startingpoint of product-search. In order to make a purchasing decision, you need information, and an eCommerce site is (or should be, it is believed), in the business of providing the same. Therefore, what you can also do is also use eCommerce only for the purpose of decision-making, deciding what to buy, maybe even where to buy - but not actually buying. 

A recent BCG report ("From Buzz to Bucks") have called this internet-influenced buying.

What also happens is the reverse - people don't know what an Xperia J looks like, weigh or feel like, so they go to a mall, check it out, come back and purchase online where prices are better for the same standard product. This is split by consultants (naturally) into (guess-what) a 2X2, with segments called Research-Online-Buy-Offline, Research-Offline-Buy-Online, and of-course the other two blocks of people who complete the buying process Online or Offline. The transaction will be called Online or Offline basis where it is *consummated*. So this is the first thought I'd like you to hold on to.

The third thought is a simple question - is Cash-on-Delivery eCommerce? The "transaction" i.e. the exchange of goods for consideration really happens after the goods are delivered to the shipping address, acknowledged, checked and then paid for. The entire decision-making process and the commitment to buy has happened online, but the transaction is really offline.

Now the second thought is just an extension of the same logic to say there are people who extensively use the mobile phone to research, but then open their PCs / laptops next morning to transact - maybe because screens are larger, or keyboards are better, or connectivity is better, or just due to plain habits. The use case for the reverse is thinner but still non-zero. You could have used your laptop to make a decision (where you can actually compare four products'-specs side by side), and then used your mobile to monitor prices and then when you saw the price drop to the level you wanted - maybe you were on your way home then - you just clicked on 'Buy' on the mobile.

Now putting it all together, if you read this at one go, it will appear that Mobile Commerce is bigger than it is. If CoD is eCommerce (and rightfully so) then mobile-initiated transactions are m-commerce. That can help change perspectives of a lot of organizations in countries like India where we keep thinking m-commerce has not happened yet just because there aren't enough transactions culminated on the mobile. 

How different is "my" customer and "yours"?

So many brand discussions start with customer profiling. There are deep dissections on the difference between our customers and those of our competition. Our customer is more open to using her credit card online while the competition's customer favors cash on delivery. Our customer is older but more evolved. Our lapsers are more likely to be staying in big cities. It stops striking some of us after a point that we're using a cognitive shortcut by giving an identity to an aggregate average statistic.

More importantly, we forget that in many if not all cases, all these different identities are just one person. These many customers aren't different people who behave differently. Our customer also shops with the competition. Our customer is the competition's customer.

This is not trivial. We draw up pen-portraits, day-in-life's, mood-boards of preferences and so on and forth for these supposedly different characters. We do qualitative research around customer groups that are 'our customers' and 'our lapsers' or 'competition customers' to understand them better. If we see the same person turning up in two groups, we suspect incorrect recruitment if not foul-play and impersonation. How could the agency mix up our customers with theirs? Or customers with non-customers? Sounds familiar?

If there are more men in the people who end up converting on my platform versus my competitor's, this may show up as 'our customer is 70% male while our competitor's is 80% female'. I think it starts off being a small poetic license (the use of the singular) and ends up sounding inane. There is no one out there who is 70% or 20% male.

Reality check - it gives us great pleasure to prick this balloon with the pin of knowledge you had all along. These different characters with their distinct unique personalities are like the average man. Like the man with exactly the average height, weight, hair and nose-length - who doesn't exist.

These customers - yours and mine, are heuristics, short-cuts, simplifications - and just that.

What we really should be talking about, and thinking about - are different need-states. In one need-state, a customer prefers my shop and in another, my competitor's. That's really what it is.

If my eCommerce platform, for example, is great for technology products and not so great for lifestyle products, the same customer, in the lifestyle need-state is my competitor's customer and when in the technology frame-of-mind, is my customer. A frequent misread of this state is as follows: my customer is a technology buyer and the competitor's is a lifestyle buyer. Familiar?

So what?

A lot of things. Just as a starting example, do you think segmenting users or customers makes more sense now or segmenting need-states, use-cases or states-of-mind? Litmus - think of yourself, are you ever just one brand's customer?

Are you building a Concorde?

All of us know about the concorde - sorry, let me correct myself - about Concorde, right? You have to get it right, so I hear.

So here's what happened, broadly.

An Anglo-French JV (Aérospatiale and the British Aircraft Corporation) built Concorde, a supersonic passenger plane (out of two ever built) that halved transatlantic flight-times, a proposition that'll still sell if you were to poll potential passengers today. It flew for 27 years but only 20 aircrafts were built. While there are multiple theories on its efficacy, it is known as a supreme technological feat. It is also known that it never made money. Finally after the one accident it had, and in face of mounting losses, the program was shut in 2003. This was despite Government subsidies and sponsorship, despite the muscle of Aérospatiale and BAC, but importantly, despite a very strong consumer proposition – halving transatlantic time, the hype value of flying cutting-edge etc.

Or was it? Was it really a strong value proposition? I'm not an expert there, I've not seen the value-prop, but I assume that while it was undeniably good for the customers to half their flying time, maybe it wasn't important enough to pay the ticket price premium. Why I say this because had it not been the case, I assume other supersonic passenger jets would have been built.

What is known is that costs spiraled to 6 times the initial estimate. For perspective it was $ 23mn. Note, in 1977 dollars. Post retirement, Branson offered to buy British Airways’ Concorde planes, first offering their nominal original price of £1 each, then increasing the offer to £1 million each. Note, this is in 2003 pounds.

Also quoted is the fact that the big reason behind Concorde's grounding, apart from the cited reasons of the 4590 crash, fuel cost etc, was that it was more profitable to carry passengers at subsonic speeds.

The existence of technology, and a thumbs-up from potential customers sometimes blinds us into confusing these things as a 'buy-in'. Today, a faster website, faster delivery, better packing, better consumer service will all be things that a customer wants. Without a sensitivity curve along all the value-prop axes, however, these are all directional and that's all. What we should be researching is how many customers will pay what it takes to get these desirables on the table. What we should also do is check if there's a margin buffer between original price and a post-spiral price for long development projects.


I'm never against cool technologies. I love them. I'm genuinely sad to see Pandora, Wikipedia and WorldSpace bleed. Maybe not wiki - they made a choice not to make ad-money, but WorldSpace was in it to make money. Customers loved it. Just not enough customers maybe, not enough love perhaps, not enough love to pay. This is an important litmus for those of us in the In Tech industries especially, it is common to see over-spec-ed products. It's an engineer's / designer's self-actualization, but let’s remember all that is useless if there aren't enough people who pay for those specs.

What do you think?

Social Recommendations, Discover-ability of the Truly New, and the Aha!

I'm sure you see a lot of "people who bought this also bought this" or "people who read..." or "friends who listened..." or "friends who watched...." nowadays on sites. That is social recommendation for a lot of businesses. The assumptions are clear. We are sheep. No, that sounds bad, but we're some similar creatures.

I kind-of agree. Most of us are not early adopters, and we seek sanction in the actions of other people. Why should we try untested waters unless we know people who jump in them come out alive, or better, enjoy it? The friends part makes even more logical sense. If we're sheep, we follow sheep and now flies. We make friends based on some commonality, and if my friends like something, maybe I like it too. Better chance than trying out a product none of my friends like. Right?

Yes, except that most of us are also unique. Sometimes, actually most of the times, we are sheep. But some times we are deliberately not. We don't want to wear the same shirt as everyone else. We also try to be different. We want to seek our own New. We want the thrill of being the first to discover something cool which then, other people also like. Some times we want to hold on to what we discover and don't want others to know about the small cozy cafe we discovered because once they do, it'll stay neither small nor cozy. Also if you think about it from the other perspective, that of someone / something wanting to be discovered, you have a terrible cold-start chicken-egg problem.

No one knows you, no one likes you, so no one follows any one to your door. Seems like a dead-end.

Not on the Music Genome Project, not on Pandora.

Anyone who's used Pandora is a fan, or I haven't had the fortune to come across any other type. Pandora is a radio-station for those who still don't know, that will ask you for a couple of songs you like and then will go on to predict, based on what you like and what you skip, to progressively suggest songs that you love, but have never heard of. Pandora doesn't do the 'like' business. The Music Genome Project, in the background, describes each new song, through an algorithm on about 400 attributes (genes), and each new song is rated by a musician on those attributes again, and that is what it uses matches to match your taste. This means that if Pandora has figured out what kind of music you like, and there's someone who's written a song like that, you discover it, hear it, love it - without ever needing to hear about the band, or the genre, or the country or century it was written in - and without any of your friends having heard of it. For those who can (it's legally available only in US / AU / NZ I think), you must try it for genuine aha moments.

What I find even more amazing is that this stuff is possible in as complex a realm as music. What I find amusing, however, it how much simpler it might be for, say, books - and you don't see this happening. T-Shirt fans could be following the herd in styles and trying to stand out a bit in terms of the slogan, but book fans really look for that unheard of book that gives them the aha.

Recap, recommendations work. Social also works. Attribute-based cataloging also works. There are categories (like the undiscovered), and occasions (imagine gifting someone what everyone else is gifting), and people (the cult of the non-conformists) for whom a Pandora of things is a crying need.

It is more difficult to build this out, but this could be well worth its while. I'm sure, at least hoping, that there is stuff being built as we speak.

The Mobile Conundrum - Part 2 of 2

Continued from The Mobile Conundrum - Part 1 of 2...

Let me throw in the last bit of complexity to this one. Is it really bad if we can’t solve the entire problem today? There are people, we know, who research online (“this one has cool reviews”) and buy offline (“I know the guy”). There are others who research offline (“I like the feel of the phone”) and buy online (“better price online”). And of-course there are people who do both online, or both offline. Think for a moment about a similar framework around mobile. There would be people who research on the mobile (e.g. quick-price-check) and buy on the PC. Why not build out something for them? There’s more to this.

Lots of us were brought up on plain-jane information-only websites - text and a few images. Now the mobile adds multiple dimensions to this.

a) Now almost all mobiles have GPS. Users will share geographic information when there’s a proposition (e.g. the now much touted local-deals thing). Does our website leverage this information? Have we thought about propositions here?
b) Now many phones have inputs like the accelerometer. Have we thought about how we could leverage that? If I could shake my phone to navigate, it could be cool. It could even be, like the Wii, ground-breaking.
c) We all know the app real-estate is limited, we still expect the consumer to install one app per retailer. Maybe we can start thinking about platform plays, where the front-end is built by whoever knows the user-segment best.
d) It could be time to move on from what my facebook friends like to what my phone contacts like - most of us have our closer people there, and at least some junk contacts on facebook.

Are we thinking hard on this? Or we’re opening up the field for a new breed of mobile-first operators to walk in and cash in? We should start thinking about pure-engagement providers on the mobile who may move into eCommerce and for all we know, provide a better experience than us eCommerce guys.

The Mobile Conundrum - Part 1 of 2

What, really, is your mobile strategy?

What does mobile mean to your business? I believe the answer is unsurprising in most cases. It’s like an answer to the World Peace question. It’s great, it’s awesome, it’s the future. Women, children, youth, engagement, 3G, 4G, tablets, blah and more blah.

So, what really is your mobile strategy?

I think most businesses are in denial. I believe one could get interesting results by hooking CEOs to polygraphs and asking them questions like, “is mobile happening?”, “has it already happened?”, “will it happen?”, “will it not happen”, “what is mobile?” etc, one might get interesting results, if there are any responses at all.

We guys believe in mobile and World Peace. We believe the world will be 5 or 7 inches across (sorry, did I miss out on 11”?). We believe there will be tons of mobile-first consumers. We still ask users to register. We ask them to block a userid, then we ask for an email id. Our registration page is 20 fields long. We forget all these screen-holders have a Facebook id (well, almost all, unless someone’s really trying to make a statement), all the android guys at least, if not all, have a gmail id. We forget that it is really easy for a person to have 500 email ids, but difficult (/ expensive) to have more than 3 mobile numbers. All the junk we have in our user-bases, all the waste of coupons can become so much lesser if we start using the mobile number as our identifier.

We forget the 7 inches when we give him 247,000 results for his query, images unoptimised for the mobile screen, one-time-password-flows for checkout (i.e. the user exits the app / browser, goes to SMSes, picks up / memorises / copies the OTP, exits SMS, re-opens the browser / app and feeds in the password) and so on forth. What, really is our mobile strategy? We want the user to use drop-downs, buttons close-together, images in PC-screen resolution, and browse through our jungle of tiny text and million pages with tiny arrows to click, and still feel like paying at the end? And if he does, go through the payment flow described above?

Hmm... tough one, this one, anyone?

...to be continued

The Dangers of Extrapolating Early Adoption

From Everett M. Rogers' Diffusion of Innovations (1962) we got this terminology around Early Adopters, and then for some reason it got even more popular than the term Innovators. Here's the classic adoption curve we all would have seen.

So what does that mean for our business? It means that the innovators and the early adopters really bring in the early majority, the bulk of our business. They give us signs on what's our likely scale, what we should get right, what we should do less of, and so on. They've taken the leap of faith with our products, so we also love them more, and rightfully so.

Everett M. Rogers' Diffusion of Innovations 1962

There are two dangers of this focus on early adoption that were called out in this article I came across recently by a gentleman called Peter de Jager, namely:

a) People do not fall into one Change Adoption Category; they drift from category to category depending on the specific change/innovation. There are no people who are always early adopters in every category, and

b) The statement "13.5% of the general population are Early Adopters" makes two related and dangerous assumptions.
        a.     complete Adoption Curve will exist for any change..
        b. It assumes 13.5% of us will embrace any change,

Evidence of the incorrectness of this statement is found in two casual observations, he says;
      a) At the height of the Hula Hoop craze, not everyone was hula-hooping
      b) Not even 2.5% of the population have bought a Segway

The adoption terms are accurate only in hindsight; they tell you nothing about how a population might respond to a change/innovation.

I found it very insightful and enlightening. In addition, I wanted to highlight something I've been trying to convince various companies on for a while. It may not be just useless to listen too literally to your early adopters, it could also be dangerous. It's like entering the weld-shop without the safety goggles and here's why.

The early adopters are called out as a separate segment in all these studies because they are different. How different? Sufficiently different to be called out separately from the majority. They think and act differently and look for different things in products or services. What may be really cool and worth paying for, for this community, may still be cool, but not worth paying for by the early majority. Concorde stands out as an example, but that probably deserves a separate dedicated post.

Peter's examples on the Hula Hoop and Segway are appropriate to think about here. One of our current struggles in eCommerce now is the same. Less than 1% of the opportunity has happened in India, there is temptation but not logic to extrapolate our learning to the entire potential community. It could be okay to do in Durables or Telecom where more than half the potential population has been onboarded. But in nascent industries, there is really no reason to believe that the other 99% will behave like this 1%.

Innovation and Attrition

They say men are known by the company they keep. I believe a company is also known by the men it keeps.

Who invented the iPhone? Most people might just say Apple, while we understand it must have been someone within Apple. A company is a set of people. Most of the intellectual property owned by a company comes from its people. This bit is clear.

If the link of innovation to attrition is unclear, let's just first establish IP = people, and then the link of people to attrition. For all companies in the world, attrition is a reality of varying proportions. Again for all companies, innovation and creation of intellectual capital is a clear part of purpose, and a strong lever of competitive advantage and sustainability. This IP, despite all the talk of DR/BCP, effectively resides in the minds of a company's employees, we know that. When we lose people, we lose IP.

I daresay it is impossible for a company to have a innovation strategy without having a strategy to retain key people responsible for innovation and other guardians of such IP. We all understand it is not very difficult to replicate innovations people see in one company in the next company they join. It is in more cases than some, easy to tweak designs to escape patent litigation. A lot of IP, especially around business innovation, as against technology, is implicit and never patented. A lot of other IP is not patented since patenting is a time-consuming process and requires you to declare and define the innovation, which is seen as making it easier for competition to access, copy and tweak the same.

Next level - it may not be real attrition, but maybe even pre-attrition loss of engagement that might prevent people from opening up their ideas for the good of the organization (or, let’s say, to further their own growth in the organization for the more self-centered ones) instead of saving up their ideas for the day they either start something on their own, or another environment that makes them feel it’s for the longer term there. Or simply provides for more respect for their ideas.

We hire people who bring knowledge with them. We value employees for their prior experience at respected organizations. We expect them to deliver results leveraging their knowledge and experience. The competition expects exactly this from our employees.

It’s high time we take a hard cross-functional look - are we really investing on ideas for our own company’s future or are we in danger of becoming a breeding ground for talent and ideas for our competition to benefit from?

Who's your Competition?

I'm sure all of us strategy guys get this all the time. How do we get competitor information? How do we confirm it? How do we spell-out risks and mitigation plans? How do we make plans around their weak points? What's our competitive strategy? How have we reverse engineered competition's strategy? Then the usual stuff around deep dives, war-game simulations, scenario planning and so on. I often feel another question should come first.

Who's our competition?

Now one approach is to dismiss this questions as too basic (come on, how old are you?). The other common approach is an exercise around competition mapping. The question, however, is different - it's not about listing but defining. Let me try and clarify, but before that, another basic question at this point, who should be defining competition for us? Aren't all of us senior guys smart enough to do this? Well sorry but no.

Our consumer defines who our competition is.

Let me try and peel the onion here. I work for an eCommerce firm. Our consumers aren't people who have a need for eCommerce because no one really dies without eCommerce, we're one of the channel choices (s)he makes. The need is perhaps for a Juicer. Maybe the consumer doesn't even need a Juicer but Juice. Maybe not even Juice but refreshment or health. Now given this hypothetical flow, a competing product is one that gives him / her a competing option, an alternate route to refreshment or health. Here's what - this is illustrative. I'm not claiming to define this for consumers and neither is the peeling of the onion complete. The point, however, is to show how competition is a) defined by the consumer's need-states and b) wider than we think.

I've worked in the Durables and Appliances industry. I know for most of the time, we feel what competes with our juicer is another juicer. We don't think much about any threats that are not appliances while the truth is that if packaged juices get better and cheaper, if someone sets up juice-vending machines all around, no one will buy our juicers. If someone brings dissolve-and-drink juice-pills to the market (I realize it sounds like an ugly idea but who knows, so did rock music to the classical guys), then the juice-story also dies.

What hit pagers was not cheaper, better pagers. Film-photography, personal-computers, walkmans, watches and so many other products were killed because execs were too bothered looking for competition in the room while the consumers simply shifted to a better source to, literally, get their juice. I'm sure you will know many more examples of these occurrences than I can list, where, as someone says in Sharp Teeth by Toby Barlow - "the bullet that hits you is never the one you're running from".

Personalization versus Customization

A lot of things in online retail have changed in the last some years. The biggest is that we have been told that the online buyer now doesn't like take-it-or-leave-it experiences. I'm not sure anyone's tested it out (e.g. do users buy from suboptimal websites if, say, the prices are slightly lower there?), but let's say it makes logical sense. Another equally big thing that has changed is our ability to create multiple experiences on the same website, without which the first insight is useless. The third thing to keep in mind as background is what I may have said before in the Escalator Problem post, most shopping sites are built by techies, not retailers. Techies love complexity. Multiple experiences, multiple skins on the same backbone is exciting and cool for techies.

As a result of all the above and more, the hue and cry for Personalization.

There's one small school for customization and another big school for personalization, to be clearer, and the second school considers vanilla customization-ability uncool. Custom flows are about giving the user a choice of experience that the user explicitly makes (e.g. you want to see more deals? more lifestyle or tech? when you log in?) while Personalized flows second-guess the user (e.g. we know that you have bought / browsed T-shirts, so here's more T-shirts when you log in). It is cooler to not ask the user but surprise him / her with what we know without being told.

I'm not sure what the best approach is. Personalization could be cooler but could just be techie-cool and not user-cool. I believe customization is safer, not sure if that's the best. Here are a few things to remember whenever, if ever, we as businesses make this call.

a) Users may actually like being asked questions when they walk in. Maybe it's a nice thing to ask them if they like seeing deals on furniture better than music instruments.
b) We know some people mind being second-guessed. We all know the Target example, what happens when your analytics team figures out someone's daughter is pregnant without that someone knowing about it.
c) There could be parts of the user's browsing or buying that (s)he doesn't want recorded for a number of reasons you can imagine
d) Preferences change, with time, with occasion and so on. You may know the buyer's history, but that may not be a good predictor of his / her present state of mind. For that matter, even people change over time.
e) There could be things the user is done with. Maybe (s)he's already purchased the dream double-bed from your site or elsewhere, and now your snowing him / her with latest double-beds is not just useless but harmful. The next time the same person will buy a double-bed is either ten years later or never.
f) There is a distinct possibility, and probability of multiple-user-ids e.g. the son using his Dad's id or the wife using her husband's - maybe it is faster than creating a new id or maybe that someone's received a coupon the other person wants to use. In this case you'd be personalizing for an average of the husband and the wife, a person who doesn't exist, and not impressing them both.
g) Personalization needs data (if not Big-Data, the buzzier, fuzzier word) and if a lot of your users are new users without a lot of data history, you'll have a cold start problem. By the time you figure out the person's preferences, you may have already pissed him off with irrelevant suggestions

I'm sure a lot of statisticians and coders are working on these angles as we speak, but we have buyers walking in now. What should we do? Any views?

How much Variety is good?

a) a lot?

b) sufficient / enough?
c) too much?
d) any other_____?

It is not as simple as it looks. Sometimes I'm in a hurry and I just want to go right to the counter and pick up my stuff, sometimes I have the time to wallow. That's just me. Sometimes I feel a store isn't even credible if it doesn't have five brands of shirts, and sometimes I get annoyed when the salesperson 'encourages' me to try just one more brand. Imagine being led through a thousand shirt-options, to be told in the end it's not available in your size!! Extremely non-funny, this.

So it is complex, and all this while it's still me. There are other kinds on the planet with their own preferences. Mars and Venus, I  hear, are different. Mission-shopping and Impulse-Shopping is different. Routine and Occasional shopping is different. Variety could satiate or irritate. So is it that complex or are we looking through the wrong lenses?

Maybe yes. What the consumer looks for is availability, when it is mission-shopping and assortment, when impulse-shopping. Variety is the backend lever that leads to availability and assortment. A good retailers knows it is not wise to put your entire assortment on the shelf. I was chatting with an experienced retail CXO recently and he told me about this very interesting incident. Their shoppers complained of low variety, while their SKU count was actually higher than competition. After a drastic reduction in SKU-count, the customers turned around and said now you have variety. Counter-intuitive? Maybe not.

Maybe what gets articulated or captured as variety is simply the ability to find or discover your product.

Don't get me wrong - again - I'm not saying variety is bad, and I'm not saying the buyer wants only one choice (aside - views from Google might be interesting, I really want to know who the search engine impresses with the total number of results and time, and I really want to know how many ever clicked the "I'm feeling lucky" button).

But if we are on the same page, implications are many-fold for retailers and marketplaces. When one is creating the initial assortment, variety adds to the experience and lends credibility. Beyond a point, it could add to confusion. This is super-critical in the online world, where one might feel real estate is free or unlimited, while it is actually not. The first-fold of the homepage is not unlimited space. More important, the buyer's ability to process information and his / her patience is always limited. It could be cool to say I have 247,000 results for your search, but unless we guide the buyer to what (s)he wants or needs, it's just noise. The buyer knows 246,999 out of these results are not what (s)he's looking for, and maybe we're giving him / her more and more of what (s)he's not looking for.

The two broad approaches could be either to curate via a Tailored Shopping Experience (i.e. we as store-owners decide / guess what you need, and show you only that one item you most-probably want, not the endless variety it takes to ensure we find a match) or via decision-aiding tools. Give the user a set of check-boxes and sliders to reduce the 247,000 to just 4 items (s)he can now compare on key attributes.

In a retail store, they lay out some key designs of shoes, in some sizes, in a way that looks most welcoming and least threatening. It will be scary if every size in every design is laid out on a table. You probably realize that's how good offline sales-people work. They just ask the buyer a few initial questions, narrow their eyes, lean back slightly and say, "I think I know what you're looking for", smile, and pull out four shoes you love.

Image courtesy: wallpaperscraft.com

The Privilege of a Privileged insight

This nice-sounding word that started doing the rounds a few years back, called Privileged Insight. Everyone from McKinsey to McDonalds was losing sleep over it and all the hot thought leaders were pounding their desks demanding it. This is a cool strategy, but what's our differentiator? What's the one competitive advantage that will remain our advantage? What's our privileged insight about the consumer? What do we know that they don't know?

Now we know that a lot of tough questions don't have answers.

We know what a Privileged Insight means (let's call it Pi for shortness's sake, I'm getting carpel-tunnel-syndrome from typing it each time). And we also know the magic of Pi, how we'll use Pi and how

it'll transform the world. The only thing most of us were unsure of is its existence, more than momentary-fleeting that is.

Now that I've had the fortune to work on emerging industries (like eCommerce, and yes, I know it's emerged to various extent in various countries, but in India it's called emerging or yet to emerge), I've

often hunted for Pi myself. I've sometimes imagined I have it figured, only to lose it again. It troubles me. What can give me the privilege to know any Pi to the last decimal? How do I keep it privileged evenif I do pin it down? I'll not be the only person in the company who knows, and people leave companies and join others. Plus the same customer talks to other companies too. The same research company /researcher talks to others in the game.

Bigger problem, if Pi isn't known, then we market-players have the same insights. Then we should have the same imperatives, the same strategy, right? Not really. Possible, but not necessary.

Sometimes I feel there's something like Pi, even if there's nothing that's 'exactly' Pi. Maybe the difference in my company and the next is not different insights, but the way we use them. Specifically, even if given same / similar insights, we take different punts. That's the difference between 'us' and 'them'. We go and invest in Rural while they invest in the Youth. We build out the smartphone experience while someone else grabs the SMS / feature phone platform. One, or both of us will win, but we'll be different.

Under the same sky, some plant more potatoes and some plant more onions. One of these farmers will make more money and people (including the farmer himself) may think he had this Pi thing figured out. A consultant will convince him, and a management guru will spell it out, it's 3.1415926....

What’s an Emerging Market?

What are emerging markets? Duh - Brazil, Russia, India and China (not in order, clearly), right? Or was it Brazil, India, China since Russia fell off some years back? Or is Russia back again? Or is this version outdated? Does the latest version of this definition contain Indonesia, Vietnam and blah?

Not sure. What we seem to be sure of is that we need a bucket to put emerging markets in. Why? Because they behave differently. Their needs are different, they are yet to evolve but have immense potential (some say population), they need to be invested in (some say spent on), nurtured with a long-term view (/ long breakevens  to be tolerated), and need a radically different approach (/ consultants to be hired). The logic, whatever it is, of having a bucket called Emerging Markets is sound.

The next part about putting the BRIC into that bucket pains me, especially coming from (over)-educated people wearing boring suits and smart glasses. Those four countries are huge animals to squeeze into the same bucket. Again, I get the need to treat emerging markets differently (just like the need to treat a child different from an adolescent to an adult or a geriatric). I just don't think India's one market, or China for that matter. 

I believe any market with a small size and a large growth rate is an emerging market. eCommerce in India could be emerging but Telecom probably isn't emerging anymore. Looks like Telecom's emerged fully, we can see the bottom and the bathwater dripping on the floor. And just for the sake of an example, maybe ayurveda or yoga or khadi in Europe is an emerging market. To my mind the logic of treating all these markets differently makes sense. The logic of treating everything in India, or every business across India, Brazil, Russia and China the same is tougher to get.

Come on, it’s 41% of the World’s population we’re talking about; just India + China is 36%, just for perspective.  

All Indians do not ride elephants (some do, I’ll concede), or charm snakes or work in BPOs or (I heard this recently) use tablets instead of notebooks. We have many different Indians in here. Indian businesses are also different. Snake-charming, elephant-riding is not emerging. Definitely. BPO did emerge but you’re very late to the party, some of us have forgotten the full form and just did a google-search on it to refresh. Only Tablets, as a business from that list could be emerging. 

See the difference?

Loyalty Programs versus Loyalty

What comes to your mind when you think of loyalty? My guess is, one of two very different things. You’ll think either of a loyalty-program (which is really a way of either incentivising repeat purchases or re-activating potential lapsers) or of Harley Davidson. Both, now that you see, are very different from each other. 

The loyalty I’d get through a points program is ‘purchased’ loyalty. You stop giving me points, I stop buying. This ‘loyalty’ is a reward for threatening to be disloyal, for being a bad customer. The Thums-Up or Laphroaig loyalty is not only unlike this but I suspect opposite. I mean if you do start incentivising / paying a Thums-Up guy to drink Thums-Up, he’d hate it. He wants to be seen as the guy who loves his soft-drink and doesn’t compromise. He’d rather drink nothing than drink Coke or Pepsi. He’d hate to be seen as the guy who drinks Thums-Up since he gets a discount. 

The other big(-ger) issue is on withdrawing benefits. Benefits in perpetuity stop making a difference, and temporary benefits leave the consumer with withdrawal symptoms. We’ve all read about the day-care that started monies for parents who picked up their kids late. The percentage of parents coming late increased, and what was worse was when they got rid of the monetary penalty, the percentage increased further. So translating a monetary value back into an emotional value is impossible. 

Moral of the story - it’s tougher, but much much better to start creating emotional loyalty. Get that experience, that taste, that message right. Re-consider what your ‘loyalty’ consultant is telling you. Re-think before you go down that one-way street. I’m not saying points are bad, I’m just saying that it might not solve the loyalty problem. What’s common to Islam, Pink Floyd, Classic Milds, Manchester United, Old Monk and Royal Enfield is that they don’t offer points. And the day they do, they’re no longer on this list.

Post-script, maybe can be split up into another post, is a note on B2B. This is different, please do not confuse that with this. That’s a different ball-game altogether. Employees of a certain company will fly the most expensive airline as long as the company pays their bills, and never for personal trips unless they’re redeeming miles. Some other company will stick with sub-optimal bill plans of some telecom operator as long as one admin / facilities person is really happy with the operator for some reasons. Interesting topic, that one too, clearly not the ‘loyalty’ we’re talking about here, so maybe some other time on that....

How do you fight a suicide bomber?

There’s a term called asymmetric warfare that is commonly used for terrorism. One party in this war (the Government) has to secure all vulnerable points to win, while the other (the Terrorist) has to penetrate just one to win. Naturally, in most cases, the terrorist wins. It is just so much easier.

Of late, I’ve been wondering if we should worry about another similar, though not same, problem. How do you fight competition that wants to blow itself up? You come to the meeting armed with logic, profit and loss, analytics; while this other guy just parts his jacket to show you a string of bombs strapped to his belly. This kind of competition is not rational, or maybe is, but not in your conventional sense. You seek victory while he seeks martyrdom. You seek P&L while he seeks valuation. He’s happy showing a 200% rise in traffic even if he can’t sustain it beyond the year because he hopes to sell some stake within the year (aside, I know the offline guys are giggling here, guess how much traffic we can build at our stores if we sell at a loss :D). Worst, our suicide-bomber will spend till the consumers are so drunk on a cocktail of discounts, cash-on-delivery, coupons, no-questions-unlimited-returns and a variety of unknown ingredients that any rational person can’t persuade them to listen to anything sensible. 

What is worse is that your hope of sanity prevailing is faint. When this particular guy runs out of money, the next free-drinks guy walks in, and till there’s even one joker left in the pack, the suicide bombing continues. Even if someone does it sporadically, you’re done. 

Like the Uncle who walks into your house and spoils your kids on ice-cream, now the businesses are left dealing with irrational expectations of spoilt kids. eCommerce consumers would ideally like everything free, next they’d like to be paid to use eCommerce I guess. Soon we’ll have to send chauffeurs to their homes, with iPads encased in soft blue velvet for the users to tap - all for products with negative contributions. 

If Soft-Drink Giants can agree (unofficially, of course) on pricing for 200ml of soda, why can’t we eCommerce guys have some sanity?

The Escalator Problem

Is stepping on an escalator easy or tough? The answer depends on whether you’ve already been on one. Imagine someone who’s comfortable on escalators (e.g. me) explaining “how to step on an escalator” to someone who’s not (e.g. my Mom) and I’d probably say something like, “you just take a step forward, that’s all - nothing will happen, worst case, just grab the handrail and you will be fine”. and no prizes for guessing how effective this is. 

Doesn’t work.

This is the escalator problem. However, it is not just an escalator problem. I have seen teachers (“maths is easy”) explaining it thus to students (“maths is hard”), and I see it happen every day now on eCommerce. Let’s face it, most of eCommerce is built by techies and not retailers, not consumers. Hence you have this common occurrence of people in the room (“eCommerce is easy”) not being able to figure why the traffic (“eCommerce is tough”) isn’t converting. How many of us working in eCommerce companies have taken efforts to design a site that’s easiest for the first-timer to figure? 

As a first step, we should try and understand the first-timer better. Identifying him / her is easy, researching his / her state is easy, creating a simple flow for, and assisting the first transaction is also easy (remember Microsoft’s paper-clip assistant that us evolved users found irritating? guess what, a lot of newbies loved it). What is not easy is convincing the nerds around the table who’d think this isn’t cool. These guys think it is cool to tell you there are 247,000 results for your search (and ten ways to sort the results), free-shipping is available for some articles and not for others, cash-on-delivery has a minimum limit, T&Cs apply on all these and the personalization engine knows there’s no history for you but is still trying to do a good job and therefore throwing junk at you. Remember the movie-sequences with the waiter asking too many questions, and the customer ends up ordering nothing?