It is now considered conventional wisdom that businesses constantly need to find new ways, or “innovations” in every aspect of their business, especially when it comes to understanding, interacting with and serving their customers.

Much of these new ways fall under what we call “innovation in business models” – which involves designing new packages that deliver the same or similar value propositions or promises to the customer (e.g., the infamous NINJA mortgages pioneered by Wall Street, the famous direct model established by Dell, cloud computing, etc). This is as opposed to “technological innovation”, which involves new discoveries that actually help customers do things differently (e.g., bank online vs going to the branch, hybrid cars, using a mobile phone instead of a computer to do email, etc). [Note: there can be overlap between these two types of innovation – with technology often underlying the change in business models, and the need for new business models leading to development of new technologies, or at the very least new applications of existing or tweaked technologies].
The collective experience of RedPillars over the last 9 years and my own personal experience in assisting clients to become more customer-centric over the last 24 years have led me to several conclusions regarding innovation. The most important of these is that every few years, businesses need to radically re-think their strategies for customer management.

Why?

This is an age where the explosion of information has led to truly empowered customers, and where the compression of time has led to ever-shortening attention spans (If Andy Warhol were speaking today, he would talk about 15 seconds, not minutes of fame). Both these have resulted in a massive growth in customer choice and access, accompanied by a massive reduction in customer and brand loyalty.
Jack Welch once famously said that ‘if the rate of change outside is greater than the rate of change within, the end is in sight’. And this is what is happening in the field of customer behaviour. Consumers are now far ahead of businesses in terms of their ability to access information, make choices, recommend and review products and buy from a variety of sources.

Businesses however, are still behaving like ostriches, with their heads firmly stuck in the sand, trying to ‘manage the process of customer centricity’. It is not uncommon for business managers to restrict relevant information, make it hard for customers to get to the right information or make meaningful comparisons, provide inefficient fulfillment choices, or just ignore trends in customer behaviour and wish it would go away.
They may of course think they are right, when they look at their business numbers and say ‘we are growing anyway’, or ‘the ROI doesn’t stack up’ or ‘why should we provide a forum for them to vent their anger’ or any number of such excuses (please do tell me your favourites from the list of excuses you’ve heard from your business associates) . But more often than not, they are wrong – because they have no real instruments to measure the loss of revenue or share by not adopting such practices, or the gain in customer satisfaction or stickiness.

And it is clear that the best businesses have in fact succeeded on both these measures, as the following blog posts will show.

In such an age, there is no strategy that can be based on standing still, and no room for thoughts like ‘we’ve always done it like this’, ‘that won’t happen anytime soon’, etc.

Based on our collective experience, we at RedPill have distilled some of the major trends we see in customer behaviour and why we feel this will (or at least should) change the way every firm does business. We owe our efforts in this field not just to our own experiences, but also other leading thinkers and we freely acknowledge our debt to them in each post.

Without much ado, here then are the 7 phrases that we think will change the way you do business:

1. The ‘It’s free’ economy is here
2. You can’t hide from the tyranny of transparency
3. Shared interests drive the world, they should drive your business too
4. The age of data has led to the ‘beginning of the end for guesswork’
5. It’s time for ‘share of time’, move over ‘share of wallet’
6. The paradox of choice means ‘Less is more’
7. It’s about ‘stakeholders’ not shareholders

In subsequent blog posts, over the next 2-3 weeks, I will expand on each of these and what it implies for your business.

Meanwhile, let me end with the over-arching thought I want to emphasise in this article. With the radical nature of changes in customer behaviour, businesses need to adopt the same level of innovative thinking in their customer management practices, every few years. This is the one constant that should never change.

It would help if business leaders actualized this constant in their businesses, by embedding this customer management innovation into their core strategy and planning processes. And one way to do that is to adopt what I call the “2020 law of innovation”.
The 2020 law of innovation says that ‘If you are not spending 20% of your time and 20% of your marketing and sales dollars in thinking of and executing new ways to serve your customers, you will lose 20% of potential and actual business growth.”
This is the one phrase that should never change.

Don’t ask me to justify the 2020 law. Because when you look at it, you know instinctively that it makes sense. In fact, there are some people who would argue that it should be higher than 20%.

(Note: If you do need rational support for this, look at CapitalOne. It’s CEO Richard Fairbanks says that they spend nearly 55% of their marketing budget on new products or ideas that did not exist a year earlier, and which may not exist 6 months down the road. Because CapitalOne is good at spotting emerging opportunities and risks, and capitalizing on them.)
In each of my subsequent posts, I will talk about the 7 phrases mentioned earlier.

Interesting paper written by two economists on adjusting the top 50 batsmen ranking based not just on the Averages but also adjusting for consistency and value of score to team. Bottom line any way you break the numbers Bradman comes out on top.

Everyone has their own little choice for all types of products and services, be it soaps, coffee, chocolates or cars. Obviously the preference becomes much stronger, distinct and refined as you move towards durable goods like car, TV set, home theatre etc.  As long as there are choices in a perfectly competitive and globalised economy, customers would like to have everything according to their choice and taste, to the last piece of refinement. And as countries and economies become more and more globalised, leading to greater choices being available for the customers, the challenge or opportunity (depending on your point of view/as you see it) for organizations, be it a bank, or a consumer electronic company, or a FMCG company, is to meet these refined choices in a proactive way. The successful organizations in the coming years will be the ones who are smart in identifying these varied needs and choices of people and able to deliver products and services for them. To do this effectively requires micro-segmentation of the customer population to the largest extent possible. Obviously the costs of this micro-segmentation exercise need to be compared with the returns. Here, the use of smart analytics will come into play which will aid the organization to micro-segment at the same time keep the costs low and maintain a balance between revenue and costs. Some of the organizations like Google and CapitalOne are somewhat already into this space; but the power of analytics is going to be so endearing for organizations that it will be part of every successful organization’s lifeline. Of course the success will also depend on how the identified needs and choices are translated into product/service offerings.

I was reading the book Super Crunchers.

It is an entertaining survey of the power of Analytics and how data driven decision making is supplanting expert advise not just in business but more interestingly even in Government Programs.

One of the things that we keep hearing from a lot of our clients is how they do not have enough data. A way to get around this is explored in the book, through a concept of Randomized trials. The idea is to create various offers which differ in a particular way and send it to the entire population. For instance CapOne sends 28,000 different offers every year. An extremely interesting example was a Credit Company in South Africa which found that adding a photograph of a smiling women on the top-right hand corner of the offer, had a similar effect on response rates for their male customers as dropping interest rate by 4.5%.

Helping clients to run such randomized trials instead of the usual test and control campaigns, would add a lot more value to clients and simultaneously also generate more data for analysis.

Would love to see some examples of this in the comments.

I went out with some of my friends last week for a few drinks and we started discussing the wonderful trip to Bali we had earlier this year. I remember there were some wonderful shots taken and I asked one of them whether I could have some of the photographs. The response I got was – “Oh! I thought you already saw them…they are up on Facebook”. Now it so happened that I was not on Facebook then and thought it wasn’t necessary, to which my friend gave me a very appalled look and said – “You are NOT on Facebook”. The conversation went onto how I must be on it and it has become a way of life today.

This left me thinking about how the Web 2.0 era is taking over the world and is becoming the standard of human life. It reminds me of the famous dialogue by Morpheus from Matrix –

“The Matrix is everywhere. It is all around us, even now in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work, when you go to church, when you pay your taxes.”

And how we could easily say –

“Web 2.0 is everywhere. It is all around us, even now in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work, when you go to church, when you pay your taxes.”

Communication and interaction which has always been a major part of the human way is leveraging on Web 2.0. and becoming more effective. Sites like Digg.com, YouTube.com, Orkut.com, Wikipedia, Folksonomy.com, Myspace.com and list just grows bigger and bigger are some of the most popular sites today.

Today, I was browsing the internet and I happened to come across an advertisement for a social networking site, similar to Facebook.com, called VelvetPuffin. It brings the very popular social networking platform onto the mobile. VelvetPuffin isn’t the only one that has sprung up lately–Hi5.com continues to grow and is the most international of all the social networks, leading in Peru, Colombia, Central America, and other, scattered countries such as Mongolia, Romania, and Tunisia. Myspace.com has multiplied at least 100 times since 2005 - now almost to 175,000,000 people signed up on it. Fotolog, a photo service defeated in the US by Friendster, has re-emerged as the dominant social network in Argentina and Chile.

Inspired by the Matrix again (Yes I love that movie!), we could have a video game where a mental projection of our real self could be made. It would be so much more exciting to play those same games!

According to the results of an online media survey done by Piper Jaffray & Co. in 2006, 40% of the respondents responded that they are watching lesser TV than 2 years ago. Newspaper, television and radio companies have started to understand the threat posed to their traditional advertising revenues by online advertising. Media firms are realizing the importance of embracing the internet as means of advertising and marketing. The traditional telecoms and cable companies have also started to wake up to the potentially massive threat posed to their revenues by cut-price internet telephony of the sort offered by Skype.

Mobile 2.0  is pretty much the latest buzz. We are looking towards a new class of services that leverage mobility but are as easy to use and omnipresent as the Web is today.

The point I’m trying to make in all of this is that this whole Web 2.0 craze is turning into something much larger than just a phase. It is expanding into various technologies and industries. We can definitely expect in the next couple of years we’ll see some drastic changes and new things that will really make our heads turn. 

I remember an advertisement that Nokia ran in Business Today several years ago. It must have been the late 90s. Proclaiming features such as 30 hours of battery backup and a monochrome LCD, the phone, a Nokia 2110, cost about INR 40,000 then. Flip back to 10 years later. With hundreds of models to choose from, there is a phone that fits everyone’s needs and pockets (literally and rhetorically). Not long ago, short messaging service was a novelty. Today I have a phone that can snap photos, play MP3s and even videos, show me my location, and browse the web. I cannot imagine living without my phone. Of course, voice calls are the staple for any mobile phone, but the most useful features of my phone are completely different. 

I travel a lot, and the MP3 player on my phone is absolutely indispensable. Stand alone players used to be all the rage not long ago, however, no one wants to carry 5 devices on them when traveling on the subway to work or school. When I’m visiting another city, I use my phone to take photos of interesting places along the way. With a built-in 2.1 mega pixel, the quality rivals that of a conventional digital camera. One less device to carry. I also have a 4GB memory card installed in my phone, and I usually carry a couple more. That’s almost all of my music collection at my fingertips, so much that it makes a separate mp3 player redundant. 

Perhaps the one feature I absolutely can’t live without is the ability to surf the web. Although I can already go online from the in-built browser, the real advantage is when I use it via my laptop. While on a long journey, all I have to do to kill the boredom is go online. My phone has UMTS support, so I get great speeds. I don’t even need to fiddle with cables; I just use the Bluetooth link to interface my laptop with the phone. Check my email at 100 km/h driving down the Mumbai highway. Sweet. 

I love traveling and am also known to get lost very easily. Hence, the unique feature of my GPS enabled Nokia saves my skin most of the time. I remember I was a little skeptical in the beginning and was going to check on street directory for a location but instead decided to try out the GPS since I had enough time in my hand to make mistakes. I realized that it is very efficient and saves me a good half an hour or more of looking into printed maps in the street directory. I love using the GPS now.  

I once lived without my phone for two days. It was in for repair. I don’t even want to recall that incident - it was comparable to trauma. Not that I know what trauma’s like, but not being able to chat with my buddies, go online on-the-go, or snap photos at random moments sounds like serious trauma to me! 

There is a nice article on FT on how Consultants and Advisors are increasingly speaking the same language.

Money quote: “The traditional differences between life inside a business and a consultancy are also breaking down. Consultancy once meant travel and long hours, compared with a more comfortable and predictable life in-house. The global era has eroded the distinction: corporate life is no longer sedentary or steady state.” 

A few days ago, I received an email from Sprint, theUS phone service provider. They have started something called the Sprint Ambassador Program, in which they offer a bunch of freebies in return for, well, nothing. Here’s what they wrote:

We recently launched the Sprint Power Vision (SM) Network and want to provide you with the full experience, at no charge. Sprint Power Vision Network enables customers to download data at faster speeds and experience new data products.

So what’s the deal?

As a qualified participant, we will send you one Sprint Power Vision phone and provide you with six months of all-access service (at no charge). You’ll have access to the Sprint Music Store(SM) live TV broadcasts, gaming and more.  Yes, you will also have unlimited free calling and data service.

So what’s the deal, I echoed in my own head. Is this a scam? Is it just spam? All they wanted in return was “your candid feedback (you decide how much and how often)”.

One reason to think it wasn’t spam was because the email implied that I was being invited to participate because the Sprint Ambassador team had visited my blog, and that I had been shortlisted as a result. Moreover, the email was sent to an address (blogfeedback [at] murli [dot] net) that is only available on my website and which has to be manually copy-pasted into an email. Spambots haven’t harvested it so far. And combined with the fact that the email was addressed to me personally (firstname-lastname), I was fairly sure that this wasn’t spam.

To find out whether it was a scam, I shot back an email of my own.

Thanks for your kind offer. I’d love to participate in the program, except that I’m not based in the US.

I may be in the US later this year and I’d be more than happy to participate then if that’s possible.

In response, not an auto-reply, but an actual person. Wonder of wonders.

The upshot was that I can’t participate in the program (because I’m not a US resident) but that’s not the point of this post.

I found many things impressive about this entire exchange:     

• I have never written about Sprint on my blog.  But I have written about telecoms. Looks like Sprint searched for blogs related to telecoms and shortlisted some bloggers to receive invitations to join the program. The very fact that they’re taking blogs this seriously is impressive.

• That alone would have impressed me. But then their offer wasn’t a traditional big-company marketing tactic either. Lots of freebies and not much asked for in return. (I thought Starhub did a very good job in recruiting trial users –like me– for its i-mode launch in Singapore, and Sprint trumped even their offer.) Looks like they understand bloggers better than most people would credit big companies for. Look at the result: I haven’t even taken up their offer and yet here I am blogging about them. Zero cost to Sprint and God knows what the dollar benefit has been to them so far.

• Last, the whole email exchange had a human touch to it. An actual person at Sprint (not a bot) took the pains to find relevant blogs, read through them, then manually search for the names and emails of shortlisted bloggers. Someone also responded personally within a matter of hours to my email, even though it was probably about 10 pm when I wrote to them. I think the human touch is particularly important for bloggers — many of my compatriots are merciless in their criticism of form replies.

Well done, Sprint.

If any other bloggers received similar invitations, I’d be interested to know what their experience was like.

Guess which phone company I’m going to call first if I ever move to the US.

Digitalization and data analysis are going to rock your (music) world!

It is quite a known fact that banks analyze their existing customer data in various means. These include risk analysis, profitability analysis, scorecards, and propensity models, all in order to better understand their customers and subsequently maximize returns.

However, as data is becoming more and more available, analytics is quickly expanding into all industries and is reflected in many aspects of our consumer lifestyle.

Take the Music industry for example.

Pandora is analyzing music by breaking it into it more than 400(!) fundamental attributes, or in Pandora’s founders’ terminology - “genes”. Once you select a few of your favorite songs, Pandora is able to identify the common genes in the songs you selected and play songs with similar genes. This in essence, offers you a personalized and accurate music offering based on your own personal likings. You can even create your own ‘music channels’. In each you select a few favorite songs with a common theme. Thus, you can have a music channel for any state of mind (chill out, party time, classic, etc.). Their value proposition is “to help YOU connect with the music YOU like.” Not bad, right?

Yahoo Music is also providing a music service over the web with its ‘LAUNCHcast RADIO’ service. Just like Pandora, Yahoo analyzes your preferences by prompting you to rank various songs according to your likings. This process enables Yahoo to personalize the music that will be played to you.

While yahoo’s approach requires users to be more active (rating songs), it also provides Yahoo with great knowledge. Yahoo users provide demographic information upon registration. Combine demographic information with music preferences and now Yahoo can get great insights into the potential preferences of various customer segments which Yahoo can leverage for its own benefit.

Think about it; every time a user enters the Yahoo portal (be it email, MyYahoo, YahooNews, YahooIM, or any other Yahoo service), Yahoo can, using data analytics through various statistical modeling techniques,  make an educated guess what music that person might be interested based on his demographics. This can and should be turned into better customer experience, hence higher loyalty and usage, hence increased revenues and returns.For the customer - great customer experience tailored to the individual. For the company - Increased loyalty and financial returns. 

Isn’t this a great win-win situation?