Is it wise for eCommerce to go Mobile-Only?

After PayTM’s mobile-only launch, Myntra, and reportedly Flipkart is going mobile-only. While there is no debate wether it makes sense to build mobile web / apps, does it make sense to forego the PC experience, and in time the mobile-web experience? That is a tougher question to answer. 

It is certainly a brave decision. The future is mobile. Some claim the future is apps and no m-web. There could be some truth there, but the real question would be on the benefits of going off the PC/mobile-web completely. Let’s take the PC-web question first. 

Focus could be a key point gained. There’s significant upkeep one could avoid, but the PC experience is already build for most players, and is easier to build if not. The PC experience does have advantages - much more decision-information on one screen, an experience users are used to and so on - and there may actually be a segment of users used to the PC experience who is not used to the mobile experience. On the other hand on mobile there are significant unknowns - it’s something that is evolving as we speak. But that said and done, mobile is a significant portion of the eCommerce future. But it is not 100% by any projection.

And again, the same question - would it be wise to discount the benefits of the PC-web? Is there something inherently distracting or destructive about maintaining the PC experience? One could always build a responsive experience where one has a shop-front for every access-point. The engineering doesn’t need to be different - and while smartphone numbers beat the PC numbers by a mile, those aren’t population numbers, just ship-outs. I haven’t seen the Comscore numbers for mobile-access since very few Indian eCommerce sites are covered or unified, but I believe the page-view and minute numbers would be much lower than the 50-90% traffic claimed by most eCommerce sites - this percentage is most probably the visit percentage. And we know how GMVs are not that closely linked to just visits.

Arguably, the quality of experience on a PC still beats the mobile today. There are enough pointers to lower conversion on mobile - smaller screens, more impulse less mission mindsets on an average, reluctance to use complex payment schema (read non-COD), a fresher TG and so on.

The worst reason to go mobile-only I heard recently was that app-downloads increase when a website goes down - does that even sound like a long-term strategy? It’ll only be a spike - we all know it’s about being most easily accessible across all channels for existing and new users - that’s religion unless you have a reason better than those above. More app installs is a nice metric, but one has to watch the cost at which that comes. If your cost per install is already way higher than the user’s lifetime value, the last thing you’d want to do is add the cost of lost-GMV to it - GMV lost-to-competition to be precise.

It gets worse. Some players in the Industry today don’t want to fire their engineering or product resources. They just want these people who were hired and trained for the PC-web front-end to start creating apps. Not fair or productive, I’d say.

There’s even more. The advertising story is less effective on the mobile-app. If a business wants to make money from space-selling like Alibaba does, the mobile just offers no real-estate for it. On the PC screen one can cover even three-fourths of the screen and still have enough space left to showcase the item to be sold. 

One could argue that while it is okay to reduce or even stop the investments on PC-web, it could be foolish or even dangerous to discount it as a past that has completely ceased to exist. I believe the comfortable-with-PC shoppers will take a bit of time to change and may not like the fact that their favourite website isn’t asking for their opinion or offering a bridge to the future. What will happen, in my opinion, is that affiliate websites will have a party once they are the only route to the inventory on the PC-web. And we all know that’s 5-10% more expensive a sale. 

Is it wise to put all your eggs in either basket is the question. Is it wise to forego an established paradigm and exit the field in favour of competition while taking a bet on the (almost) entirely unknown is the question. What do you feel? 

Sub-Segmenting Cash-on-Delivery

I’m sure we must have all read enough about the immense COD business in India. Estimates of this market’s size vary between 50% to 70% of the entire eCommerce opportunity in India. Interestingly enough, I’ve seen many businesses talk of this segment as just One segment. How can two-thirds of your market be just one segment? It seems natural to peel layers here. There could be various gaps and opportunities to be unearthed if we stop seeing this entire COD opportunity as one market, with similar consumers, needs & wants, drivers & barriers etc. 

India is supposed to be amongst the most cash-intensive economies in the world. India has more than twice the number of bank notes in circulation compared to the US, at a fraction of the GDP. The bank-notes to GDP ratio stands at 13% - which for most countries is 2.5-8%, and this proportion is rising in India.

Too add further perspective, India has also not had a history in catalog shopping. Far from it, India’s traditional retail has been next-door. Most commodities were bought on touch-and-feel - the current pre-weighed flour and pulses is a very recent and marginal phenomenon, and paid-for after a month’s free credit. Banks have always ‘rewarded' savings with sub-inflation interest rates. Tax avoidance has been, and is, common. Retailers commonly charge more for card transactions over cash. Just the amount of India’s black-money stashed abroad runs into billions. There’s more stored in real-estate, gold and sometimes just wads of notes buried underground. The phenomenon is bigger than the broad cash-for-convenience label that’s put on it. 

Specifically for eCommerce, I think there are various subsegments including, but not limited to, the following:

• offline buyers: These are genuinely financially-disconnected buyers who do not have access to instruments needed for online transactions - they may have internet access but not online banking, credit or debit cards, or digital wallets. 
• cash economy buyers: There are people who earn and store money in cash, and for whom a digital transaction involves first depositing cash into an account.
• convenience-led buyers: The most-well known segment perhaps, but to note, there are two key sub-segments here. For these buyers, either the use of cash, OR the process of cash-payment is convenient. COD is often if not always a faster transaction with lesser steps. The trade-off on convenience is of-course that (some)one has to be present at the time of delivery, which is inconvenient to some, but everyone defines convenience differently. Particularly of note is the case of the mobile buyer, who finds it hard to input 16 digits, sometimes twice, then the CVV, then exit the app and go to his SMS inbox for the OTP, then come back and complete the transaction- often on a small screen and sketchy bandwidth. COD is a single-click option in comparison. 
• trust-deficit buyers: These are people trying out a platform that they’re not sure about. Maybe they don’t trust the product that they are buying, or the service that the platform will deliver. Once it’s delivered properly, and the packet is opened, they feel comfortable paying.
• post-paid buyers: These are people who simply prefer paying after. Simple. These could technically do a card-on-delivery transaction as well if incentivised to. Unlike the trust-deficit buyers who won’t pre-pay for a specific reason, these buyers are on a default setting of post-paying. They need a strong reason to even consider pre-paying. 
• impulse-buyers: These are buyers who are not sure if they want to buy the product. They often click on buy, sometimes to check the final price, and they don’t take it seriously enough to cancel the transaction (for them refusal of delivery is as good as cancelling the transaction. The subsets of people ordering expensive things for ‘fun’, or to try out the experience belong here
• remorse-affected-buyers: Let’s be real. Many a buyer continue their price-research even after their purchase is done. More often than not, a buyer either discovers a cheaper source or worse, the price of the same article on the same website drops. It is tough to feel like a fool. It is easier to order post-paid COD so that one retains the right of refusal, and the bargaining power.   

Naturally, all these segments are similar symptoms of different diseases with different treatments. If one wants to expand or reduce or even understand the COD phenomenon, one needs a finer lens.   

What do you think?

Ability or Agility - what matters more?

I'm sure most of you made up your mind on the answer, as soon as you read the question. The small proportion of you who still don't have their answer to this are probably people who always answer with 'it depends'.

The truth is the many people have a strong point of view here. And in my experience the answer depends on where we are from, in an industry and experience sense.

From the perspective of an organization Ability is a more tangible thing to build. We need to execute a set of initiatives in the coming years, which need certain capabilities, which stem from certain competence and so on - clear. Agility is more vaguely defined. It's more talked about in a relative sense, or in a 'I know it when I see it' sense. For many organizations, it's about cross-skilling the employees, which mostly means a policy of job rotations, and a capability view of the employee superseding the experience view.

One thing is clear to me - agility follows ability. I have seen organizations where job rotations happen annually. The head of the company is there by virtue of being the head of marketing before, and he got there because he was head of a different function before. The number three person in sales used to be a number three person in service. While these people have great cross-functional understanding, they sometimes do not get enough time to build functional expertise. The other extreme, is the much cited organization where people super-specialize and finally know everything about nothing - so much so that employees can't speak each-others' language.

What is the best approach depends a bit on the industry and the competition too. In a startup environment in a budding industry, one maybe needs to build a team that knows something about everything. If on the other hand you're competing in a mature industry at the efficiency game, then you need functional and domain specialization.

Finally, to re-emphasize, I'm not against job-rotations or the culture of building for agility - just that each layer in the pudding takes time to set. If we're replanting our plants very often, they don't grow so well, if they grow at all.

Are Discontinuous Purchasing Funnels a norm in eCommerce?

We all talk of the customer journey or purchasing funnel at some point or the other. There are models that start with awareness. And some models start at basics like ability, opportunity and motivation to define the universe before that. Then from awareness, there is interest, there's decision and action. Multiple models exist to talk about similar flows. Then there are models that talk of marketing building a flow of consumers to your store, visual merchandising bringing them inside and engaging them, supply-chain ensuring the product is on the shelf and sales to ensure the customer makes the purchasing decision. One needs to be good at all the funnel acts for awareness, or need, to culminate in a transaction.

If you have a broken link, all other good effort is wasted. Do good marketing, have bad product-development, and you only get dissonance or ridicule, but no transaction. We all believe in this.

Now the interesting aspect you see in eCommerce - what happens when your funnel is better or worse than someone else's? Can a good section in the funnel compensate for a bad section that is later in the flow? What happens if you have good awareness, a great product experience, the widest range, great decision-aids, but not-so-great prices?

In the offline world, of-course, there's a high cost for the consumer to switch. Just because the end of some retailer's funnel isn't the best, the customer won't walk out of the store, take the elevator to the basement, drive out his car after paying for parking, drive through crowds to get to another mall, park in that basement, take the elevator to another outlet, and start flowing through that other funnel. The online world, of-course, bridges distance.

There are five tabs simultaneously open.

It is no additional cost for the consumer to start product search in one tab, price search on another, feature comparison and expert advise on the third, and use a fourth tab for transactions. Post the advent of price comparison, at least for standard, definite, cataloged products, it is possible for an eCommerce platform to be best at nothing but prices and still do well on transactions versus another platform that provides the best decision-tools but higher prices. Now with the democratization of prices, offers and coupons, it has started affecting offline retailers as well, though their leakages for reasons talked about earlier are lower.

So, that is perhaps the lesson to be learnt. The parts of the funnel that contain key decisions are key. Everything else is not. When your website is good for everything else but conversion, then unpleasant as it may sound, you're not in business - you're just an affiliate.

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?

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?

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

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".

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?