Who is your benchmark? Does that determine your success?

I remember being trained on the Baldrige Model quite some years back and quite liking the concept that a metric did not mean anything unless it had a trend, a comparative, and a benchmark or goal. the statistic (e.g. 15% gross margin) could mean anything, or its opposite, depending on the trend, comparisons and the goals. 

That brings me to an interesting discussion on choosing your benchmarks. Since that has such a huge role in defining your story, and since one has such a huge flex on deciding benchmarks, wouldn't that be the Achilles' Heel of determining your future actions, and your success? Example - if my headcount is 100, and a competitor is at 200 at the same business value, I could be at double employee-productivity. But then maybe another country in my company is operating at twice that productivity already. Maybe I can look at a benchmark in a different but similar industry and find another story there. 

Truth be told, a company is a group of people. People try to maximize utility (in theory, don't get me all behavioral here), and they will pick benchmarks that make them look good. I have rarely seen benchmarks being questioned, leave alone audited, in a company. Herein lies the loophole. 

But hang on, I am not even saying this is all bad intent - it could just be lack of thought, or information, or knowledge, or just legacy, that makes us pick the wrong benchmarks, set the wrong targets and get the wrong feeling about our market success. 

I like asking people for alternate benchmarks - give me one that makes you look good, one that makes you look ok / bad and one that makes you look pathetic. Then pick two - yes, two. One for the external world when you want to justify your performance and ask for your raise (make sure this one is logical and defensible though), and one that you use to push yourself and your team. 

What are your thoughts?

Battles in life are fought from where you stand

Very often, when one conducts strategy brainstorming sessions, two beautiful but often futile phrases, typically starting with 'if only' and 'only if' make their way into the discussion. If only we hadn't exited that one segment three years back, only if there was more money coming from the headquarters, and so on.

There is some beauty in thinking out-of-the-box, and in thinking about possibilities - my only issue with these discussions is that they take away time from the more here-and-now talks that are probably more useful, and maybe critical to have.  Competition has a model of eCommerce where they carry inventory, we don't. There's little point thinking only if we had the inventory model too. It's a useful discussion if you are thinking ten years ahead - if you're thinking just the next year, maybe there is other stuff to fix. Battles in life, not only organizational, but also personal, are fought from where you stand.

If I was standing on top of a hill in this battle, I'd roll a boulder. But if I'm in the valley, that's where I am and that's where I'll have to fight from. If I roll a boulder, it'll roll back on to me.

Maybe I should not be searching for boulders to roll. I should be thinking about avoiding stones that I'll get thrown on me. That's my today. When it's a good time, I should think about how to get on top of the hill. That's tomorrow. And if and when I do figure out a way to the top and get there, that's when I should look for a boulder to push. That's day-after.

Can Data go the Public Goods way?

We know Public Goods - we read about them in introductory economics. There are fishermen living around a lake that's become prone to overfishing, and now fishing it banned there. If one fisherman still goes out and fishes, it is his gain and everyone else's loss. If he does not go fishing, it's his loss and potentially, everyone else's gain. No prizes for guessing what happens. 

Now data, come to think of it, is getting easier to get. A whole lot of our lives right from our correspondence to reading to shopping lists to shopping to money have all become data. A whole lot of data sits in servers and the cloud, and at some permissible level of aggregation, all data can be and is sold. There is data about you that I have access to that you don't know I have access to - and this is still legal. Beyond what's legal, there's obviously a lot more that can happen. People can use this data, for good purposes (e.g. check, you have high heart-risk in your family, heart attacks peak in the winters, most happening within one hour of getting up, and you have run out of your medication...and so on) and otherwise (don't want to give examples here, but you get the drift, right from invasion of privacy to selling you crazy stuff to outright blackmail). So what will data operators do?

A lot of the data is just out there. There could be a traffic camera capturing your movements, your cell-phone operator knows where you are, social networks know what you like, search engines know what you search for, eCommerce guys know what you buy, and so on. The list is endless and includes your stock-broking-engine, your bank, your tax-software and everything app you have on your phone and every website you sign into. To make matters worse, all these guys are bombarding you with cookies that now know information across platforms and websites and try to make sense of it. 

There is the obvious risk of malpractice, data-leakage and hacking. And there are simpler risks like just the headache of irrelevant offers made to you, and others knowing what you are - which could be uncomfortable sometimes. There are Target-like examples of knowing too much. There could be violation of data-walls, the issue ot shared-devices and the joke about the wife who complains that the only thing my husband cleans at home is his browsing history! Or the cartoon about the wife who knows the surprise her husband has for her because the common PC is bombarded with retargeting ads for that gift. Mind you, this is before the internet of things hits us in our face.

Mature businesses don't want to use any data the consumer doesn't realize he's shared. But there are all kinds of companies out there at all stages of desperation. There are lax laws on this, one could always argue out a certain level of anonymity that is still insightful - in other words actionable and useful to a company. Today the cookie people get paid by the platform that gives them data as well as the platform that uses it. 

Now what does your crystal ball say? Can it go bad to the point that the Golden Goose of data is killed by some operators? Can consumers get miffed to the point that they (try to, it's tough) share data altogether, or at least lobby to get legislation around the use of data unless the operator has an explicit, simply-worded opt-in with a forewarning?    

What do you think?

Loyalty - so much more than RFM

What does RFM mean? Someone's shopped recently - does it mean the person is more loyal? Frequency is again a function of category - one should look at share-of-occasion and not frequency unless one is working within a closely defined category - which is rare. Monetary value similarly means less. These three factors perhaps are telling you which customers are contributing disproportionately to your company's value - but but not as much about how loyal they are and why. 

 

Talking of loyalty, the first distinction to be made is obviously between purchased vs. natural loyalty. Purchased loyalty - buying occasions induced by throwing money at the customer is more in the league of buying turnover and hence not really part of a loyalty discussion. The use of insights and analytics to this field will at best yield a better efficiency for interventions such as subsidy and coupons, but loyalty by definition is not this, right? Now that brings us to the rudimentary but complex topic of defining loyalty and more importantly, remembering the definition as we go about undertaking various activities under the garb of loyalty. For this discussion, therefore, paid loyalty is out of syllabus. 

The second most important distinction to be made is between attitudinal vs. behavioral loyalties. Both are important and in syllabus, but it is still important to put the right label when we speak - because both are fairly different animals. While behavioral is observable, measurable and clear, it cannot easily answer 'why' questions. One could have high exhibited loyalty just due to the lack of  alternatives, or better alternatives. It is a practical kind of loyalty to measure though, and a focus here ensures one is not wasting time running faster than the tiger. At the same time, it is important to remember that buyers can be loyal and potentially open to switching at the same time - not single but ready to mingle nonetheless. 

The attitudinal kind of loyalty is the holy grail of the 'why'. 

Storks mate for life. Wild dogs, ants and bees exhibit loyalty to the pack. Dogs may not show loyalty to their mates, but they're loyal to their human masters. Cats are said to be loyal to the house and the lioness to the 'position' of the most powerful lion. The logic of loyalty is certainly complex and non-trivial - and we haven't even started talking about humans.

We haven't spoken about how some people may be more 'predisposed' to being and staying loyal. This is something you could possibly measure - such people have clear favorites that don't change that often. in most cases - music, food, colors and so on. On the other extreme are 'variety seeking' people - who like to try different things and not get tied into a pattern. The first person, if ordering five dishes in a restaurant, will order four familiar ones if not five, while the second person will order only one familiar dish if at all, and others he hasn't even heard of - the more exotic the better. Of-course the perplexing question here would be are the predisposed people already taken? Or they still have 'open' slots for newer brands to latch on?

A close topic is the cultural context to relationships - in India, disloyalties to a girlfriend are commonly / socially forgiven, but not to a wife. Disloyalty to an employer is again, forgiven - but in Japan that too, is a matter of loyalty. Within various age-groups in India, the elder generation is probably still loyal to a brands like Bata and Tata, the younger prides itself on discovering new, cool brands every day.  

We haven't spoken about some categories being more prone to loyalty - more 'emotional' and less 'commodity'. Now who's loyal to a brand of memory-cards? But we are, to mobile phone brands, right? What about inherently infrequent purchases like double-beds? How many will you buy even if you're loyal to a retailer?

So clearly, we aren't having the debates we should be having - we're merely talking about which customers already bought more from us. We're talking about cross and up-selling, driving repeat and many things I completely respect - but loyalty is the wrong label for these conversations. 

After we separate the discussion around transaction incentives (don't you hate the term 'paid-loyalty?'), after we speak of customers predisposed to loyalty towards categories they care about, after we put the filter of financial and emotional viability on it - in other words creating loyalty drives meaning for the customer and the company, after we separate behaviors from underlying attitudes, then and only then would we begin to understand this noble emotion.  

ps: thoughts welcome - I think it's happening to a lot of other big words (e.g. Trust - familiar?) too. More on that later. 

The Concept and Problems of Modular price

The new Honda City in India has been launched at a price ranging from 7 Lakh to 14 Lakhs. It has the usual variations of engine-types, interior-options, accessories and so on. Airline tickets come with an insurance that's bundled but if you search, there's a small radio button to exclude the insurance mark-up. There are strong views that unbundling the price is buyer-friendly and more than that, is seen to be transparent. And yet, there are as many examples of prices that are not modular.

You can't order a Dominoes' pizza without the 30 minute guarantee though, it makes sense to imagine, that pizza could be served for less since the risk of free-if-not-within-30-min payout will then not be bundled with the 'base price'. Why is the  price-guarantee-markup not unbundled then? Only Dominoes will know the answer, but I'm guessing it's because the guarantee has become the brand. In some hotels, they'd love to over-charge you for the mineral water, but they think it works better if they hike up the price of the room and give you the water free. What you see is all there is - so Daniel Kahneman says.  

There could be another factor though - breaking a price into three could mean three separate decisions. It could mean confusion. When the buyer is not in the frame to give the decision so much time, it's not beneficial. Of-course when I'm buying a car, I have all the time in the world since it is, monetarily and emotionally, a high-involvement decision. So is a house. A holiday is sometimes not. I'm happy to purchase a 'package' because I really don't want to work for my vacation, especially if I can easily afford it. In the eCommerce world, giving the customer options could mean an extra in-between page in the checkout flow, three extra radio buttons, and an extra click. An extra click means additional drop-out. Traffic drops out at every decision-point in eCommerce, and sometimes it makes sense to not give the user that option to think so hard again.

The balance, in my view, is how one separates buying decisions into packages for segments - Amazon Prime won't ask you to select a payment option every time, it'll just ask you to pay up once and give you faster delivery every time. And for the buffet-lunch-types, just lay out the spread and allow them to choose their food, but don't make them decide and pay at every step.

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?

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?