How Old Metrics may strand you strategically

Ever stIMG_0267op to consider how the ever present changes going on around you make your own transformation easier?

John Hagel relatively recent blog post describes the opposite.

In a world of accelerating change, one of our greatest imperatives is to “unlearn” – to challenge and ultimately abandon some of our most basic beliefs about how the world works and what is required for success.

Accenture a few years ago noticed that many different companies had shifted their approach to strategy. Perhaps, the availability of cheap, powerful computing capacity and Big Data are responsible for driving changes in strategy development as more organizations using technology find it easier to build consideration of the future into their present planning.   Hagel, a long time fan of scenario planning would applaud these efforts too.

With the rise of automated business processes, analytics too get incorporated automatically to enhance decision making and may be simultaneously compromising management capabilities to internalize all of these changes or understand the underlying dynamics traditional measures mask. Several articles provided case studies in different industries provided the basis of discussion around transformation (see the bottom of the post for specific article links).

how to lie with staticsSuccessful organizations rely on their strategy to put forward action plans, realize new ideas while averting risk. Statesmen and management alike find themselves in precarious places when they assume a trend will continue without change. Many statistical methods and decision-makers use of data remain unchanged from 1954 when Daniel Huff first published How to Lie with Statistics. His timeless book describes very simply the perils of improper use of methods that were designed to capture and explain if not contextualize the significance of singular observations, or data.   The current transformations enabled by technology have done more to alter behavior than organizations seem to recognize. That’s the path our discussion took.

The capability for insight

Prospective vs retrospective cohort analysis  and data mining techniques are far from new. Though the volume and speed of available data to digest and process with ever The increasingly sophisticated tools and the ease with which volume and speed of available can be processed may help as well as hinder their digestion. Sure the time to test alternative scenarios may be faster, but how do you choose the model?

Do you begin with the intended outcome? The scientific method and numerous models from multiple disciplines make it possible to isolate factors, determine their significance, and estimate alternative scenarios and assess how these variations produce changes in impact.

Similarly, the cross pollination of data modeling from one discipline into multiple industries and use cases continue to shift management beliefs regarding the importance of specific factors and interactions in their processes. The perennial blind spot denies many organizations and their leadership the insight necessary to transform both their internal strategic thinking process and business operating models. Last month’s discussion of McDonald’s and Coca-Cola illustrated how easily leadership misinterpreted fluctuating performance as temporal issues versus recognizing structural factors. It’s one thing to balance efficiency and effectiveness, quality and satisfaction and another to manage awareness of change and insights necessary to your continued survival.

What else thinking

“…both the digital world and the physical one are indispensable parts of life and of business. The real transformation taking place today isn’t the replacement of the one by the other, it’s the marriage of the two into combinations that create wholly new sources of value.  “

The sudden availability of online data tracking provided many organizations with the proper capability to understand user behavior differently. A whole new industry arose to focus on interpretation while creating of new measures while also introducing new thinking about effectiveness in sales, customer service, training etc.  Metrics, once created to prove out a strategy or an idea, now leave many organizations vulnerable until they build up the capacity to understand this new thinking let alone make corresponding operational changes necessary to sustain their business.

This is not the story of companies who fail to adapt such as Kodak who invented digital cameras only to retain their focus on film; but maybe it is.

http://www.cognoise.com/index.php?topic=17598.0Computerized reporting dashboards summarize specific indicators or activity associated with managing process or business relevant factors. The time and reporting cost savings that result from the automatic generation and ready access to information by managers and executives reinforce existing thinking and leave little room for understanding wider changes that may be impacting their business. It wasn’t long ago that analysts, and teams of them, spent their entire day pulling data and then calculating critical statistics detailing the effectiveness and efficiency of organizational activities to create reports for senior management. These efforts also made them accountable by insuring the data was clean, verifying whether outliers were real or indicative of a model failing to fully capture the wider dynamics. I was once one of those managers.  Today, automated reporting has eliminated many of the people capable of deeper data exploration and who chose what data, which statistics and the context necessary to understand the situation. The second problem is that data shared graphically or in tables never tell the whole story, though infographics do try.

A good analyst is taught to review the data and results, double-check whether the model or calculated results makes sense. Sure managers and executives may be quicker to detect aberrations and then raise questions but , how many of them have the time, patience or skills to test their ideas or intuitions? I imagine very few if any. Where are these available resources and how widely known are they to questioning executives?   How might the dashboard provide additional information to help frame the results executives see as they too seek to understand or make sense of the results?

Outside in thinking

Established data flow processes and automated reporting do deliver great advantages but they may also explain why outsiders find it easier than insiders to create new business models.   Where’s the out of the box thinking? And how can different data help?

Sure, it’s easy to blame regulatory requirements or compensation structures incentivized to focus on effectiveness and efficiency that leave little latitude to notice opportunity. For example, in the airline industry route fares were once set by regulations. The minimum fares were intended to cover airlines operating expenses that both insured passenger safety and access to air travel in more locations where market forces may lead airlines to cut corners. Deregulation may have given airlines additional freedom but many manage their business using the same metrics that they report to the Department of Transportation. Likewise in Healthcare, the imposition of new regulatory requirements came with new metrics that forced hospitals to focus on patient outcomes not just their costs.

When executives bottom line focus limits their thinking as an exercise in how making corrections in operation may maximize that number they overlook other contexts. Data quality issues should surface quickly in most organizations, but what if another factor created the data issue? A misplaced data point, or inconsistent treatment of the content of a data field rarely explain all aberrations in the results.   Weather, for example exemplifies a ubiquitous, exogenous variable. Observable data fluctuations may be directly or indirectly responsible by affecting other more directly connected factors, such as a snowstorms that change people’s activity plans. I’m not familiar with any automated reporting system that will automatically create a footnote to the data point associated with the arrival of a snowstorm. The reviewer is forced to remember or manually if possible add the footnote for others.

Bigger transformations to come

Bain believes there are significant implications for every organization that result from this digital and physical combination of innovations , they call Digical. It’s not easy to keep up with the corresponding behavioral shifts that result from these rapidly changing technological capabilities.

Focusing exclusively on efficiency and cost data helped management measure impact in the old era, though still necessary today they may no longer suffice. Do you know how social behaviors of your customers impact your bottom line? The technologies to support your business, such as your website or your cash register misses out on the social behaviors evident on sites like Facebook, Twitter, Yelp or even their bank. Mapping the ecosystem and then aligning the digital tracking data can now be supplemented with sensor data that may be anonymous to specific customers but can inform movement and actions relevant to your engagement.http://intronetworks.com/making-amazing-connections-siggraph-asia/

Naturally, as mentioned earlier bias plays a role in our inability to notice the significance of new data. The more we automate and configure systems to measure what we always knew mattered, the less likely we are to be able to recognize new data and its significance. What should you the analyst and you the executive do to counteract these factors?

Takeaways

Monitor the activity of smaller companies as they experiment to learn what’s most relevant.

Don’t make assumptions, exercise strategic intentions to become more open receptive and curious about anomalies and be more creativity and persistent in identifying the drivers or possible factors.

Historically, metrics were an output designed to assess the validity of your strategy –did it work and/or deliver value. Not it’s time for strategic thinking to view metrics as an input. The use of statistics enabling analysis tools partnered with business knowledge and acumen must be part of communicating to higher levels in the business.

Often we measure the wrong things because the incentives are misaligned. Am I paid based on my proven ability to produce widgets at specific levels , or to produce effective, sustainable results for the business, not just my business unit?

Computers are useless they can only give you answers. For strategy, validating the questions may be important but so too is taking the time and effort needed to determine even better questions.

ARTICLES

Alternative case examples

Bain’s study and understanding of the state of “digical” transformation:
http://www.bain.com/publications/articles/leading-a-digical-transformation.aspx#sidebar
Fast Food
http://www.qsrmagazine.com/reports/drive-thru-performance-study-2014
Wireless
http://www.rcrwireless.com/20140812/opinion/reality-check-new-metrics-for-a-changing-industry-tag10
Television
http://fortune.com/2014/10/23/adobe-nielsen-tv-ratings-system/
Gaming
http://www.gamesindustry.biz/articles/2014-03-10-social-currency-has-real-value

Beyond Social Media, Creating Social Capital

Rich conversation and insights flowed on Friday morning when the Booth Strategy Discussion group happily pondered four key questions on the topic of Social Media, Not just for Marketing.

This month, David Friedman of Bridgewell Partners offered to facilitate and he began inviting us to consider four key questions:

  1. Do social media supported interaction practices represent a fundamental change in how people work?
  2. What barriers exist to adopting these practices and are the practices optional?
  3. How many, and what kind of resources does converting existing social media activities into successful practices require?
  4. What kind of governance and rules makes social media work and how do you find and manage the advocates?

As usual, the conversation flowed from topic to topic, not chaotically, just indicative of authentic interactive thinking. In hindsight, the face to face conversation and personal value participants derive from ongoing, live exchange of perspectives offers a contrast to the online tools we had met to discuss.  I’ll do my best to share some of the key learning and insights. As usual, I took  time to extend, document sources and supplement my notes, so please do add your thoughts.

People are social animals

Learning is a social endeavor. Knowledge sharing, collaboration and innovation processes succeed when they leverage the subtleties of social interactions. Today’s social media tools facilitate social engagement and may solidify associations that typically erode over time and as geographic distance increases. Today, it is easier than ever to stay actively in touch with associates—neighbors, classmates, friends or colleagues that we no longer see regularly. Their value however comes in creating opportunities that go behind the real world encounter.

Business requires connection and by design, social tools enable people to connect to others for every possible purpose. Want to grow your expertise, make new acquaintances, qualify and connect with experts on specific or general problem or topic areas?  The social tools are a two –way street.  The same behaviors gain new understanding and win support for specific activities and perspectives.

Google changed the way we look for ideas, people, places and things. Twitter  compact messages unleash conversations, debates and ongoing thoughts.  The messages are easy to find and monitor. Content once shared in exclusive forums once closed become public. The virtual location and use of links expands the audience once limited to insiders. Dedicated communities of practice consistently create value for participants, and switching up technology choices amplify the reach of these conversations, e.g. threaded topic discussions used by groups on Linked in.

Closed, restricted conversations however too have their place and have been the domain of  membership restricted list-serves such as those used by MENG—the Marketing Executives Network email list serve, or SERMO (http://www.crunchbase.com/company/sermo) for surgeons.  Some individuals have always been keen to share best practices, or seek out the specialized knowledge of admired colleagues.

Social Capital

Businesses don’t make decisions, people do.  In Bowling Alone, Robert Putnam described the growing isolation that technology promotes. Leveraging  work by Gary Becker and others the book opened new conversations.

Social Capital, embedded in the social realm, is not based on assets or individuals.  Social Capital resides in the fabric of relationships between individuals and in individuals’ connections with their communities (Putnam 1995c)

The emphasis to calculate ROI from Social media misses this point.  No wonder many organizations fail to capture value from socially shared knowledge to improve the way people work? Among the articles we reviewed were some promising signs some companies are making the leap, changing the way they work and incorporating social media practices.

How are some companies succeeding? 

“Organizations operate more like machines, their structure a legacy of the industrial age, taking comfort and finding security in maintaining bureaucratic control.”   In 2006, Chris Anderson published The Long Tail: Why the Future of Business is Selling Less of More.  Transitioning from a command control operating model to deliver unlimited variety to meet specific, personalized needs demands a complete upheaval of management practices, organization charts that operate according to very different rules, beliefs and values.

The industrial age made power free. Many industries gained advantage harnessing that power. Similarly, the present social age, enables communications to spread freely. Success flows to those who manage to find and amplify freely exchanged messages, support their business proposition and gain competitive advantage.

The social paradigm’s counter-intuitive approach contrasts sharply to old push process, where a company worked hard to choose the message and then spent ample budget to promote messages designed to attract the interest of buyers. Today, businesses who listen and move to position themselves within the ongoing conversations that match their product or service set, stand to gain.

Examples of social media transformations of work

Edelman’s business is public relations. They turned their entire recruitment process around by pursuing and inviting those people who demonstrate ability to build an active following.

Intuit’s TurboTax built customer comment threads directly  into their interactive software   allowing people using the platform to learn practices and see examples from other users.

Ernst & Young  created mobile applications on ITunes giving customers insights , tax guides, legal tips etc.   They also created EYE, Ernst and Young Executive, an IPAD based magazine .

Two books, Smart customers, Stupid companies  and Opting In, by IBM Lotus Notes Executive and social business thought leader Ed Brill, admirably illustrate how knowledge IS social, the more interactions the smarter each of us get.

Likewise, peer-to-peer interactions occur within a pertinent context. Customer to customer interactions share very different information than when customers are sharing with company representatives.  The relevance of the exchange to the participants by itself offers  insights around customer perceptions and suggest alternatives to address and resolve their pain points.  This is the very stuff companies once paid researchers to find.  Brill describes the process unleashed by social media as “Thou Shall advocacy,” vs. the traditional company approach of thou shalt not employee governance.

The results?  Resources freed from “finding” should be put to use listening and gravitating to where their customers are actively engaged, communities created to talk about a company rarely happen to be the place the company created for its customers.

Changing the way we work

We all believe that change and changing behavior and processes at work continues to prove hard for several reasons.

Legacy workflows with established internal processes supporting hierarchical, command control organizations clash with the general ease people collaborate and bond outside of work.  Monsanto exemplifies a company who learned quickly how to use social media to build and strengthen what were formerly weak relationships.

Communications become conversations, as illustrated by their 2012 letter to shareholders proclaiming “the ways in which we are all interconnected…” Monsanto continues to evolve their communications beginning  with a move beyond stylistic changes to their communications as  this 2009 St. Louis Biz Journal story illustrates. Communications redesigned their department to listen and engage in honest dialogues with a wider audience of stakeholders. The corporate stakeholders no longer bequeath the controversial issues to the opposition. Instead of releasing official stances,  their communications team speaks directly to specific concerns and in so doing taps expertise inside the organization to share and engage employees as well as externally with consumers.

Value above replacement

At the core, social network mechanics leverage an individual’s ability to influence the behavior of others in their circles or network. The CEO of Klout wants everyone to believe that influence is the currency of the social web. Those companies who understand how to leverage their players may very well gain advantage.

 Ron Burt’s work calculates the “value of social capital, showing how in the business world reputation has come to replace authority and …. from other researchers’ studies, provide robust evidence of the value of brokerage.”  If you consider, as Burt does, that social capital is a metaphor for advantage then it’s not that hard to see how the sports world has put this to work.

Value over Replacement, aka VORP, may have begun with baseball but has since infiltrated the fan base of many other sports.  I even found the concept used to evaluate Rock and Roll band members. The adoption of  this concept by other domains illustrates word of mouth at work, and also the nature of social capital flows.  Studies and metrics rarely explain why some words travel and others remain where they were first spoken.

Is the problem workflow design?  The landscape of successful migration to enterprise2.0 practices remains checkered. In part, connected enterprises and successful adoption and implementation of social media platforms and tools require behavior shifts beyond adoption of new tools.  Successful organizations, who do the heavy lifting and restructure their organization, amplify the effects of influencers who in turn, encourage and promote informal collaboration.

The landscape however is littered with numerous unsuccessful change initiatives because they overlook how to put influencers to work. For example, Knowledge management systems, another extension of VORP, sought to capture the tacit as well as explicit understandings and intelligence of workers about to retire. What made them successful also brought success to the organization and it made sense to create the means to keep that knowledge around as people left.  The capture process however proved challenging and few organizations made conscious use of network analysis. This latter tool infiltrated strategic planning activities, but the record of deployment and use remains spotty.

Kraft’s KM initiative in 2000, shows the consequences of missing the opportunity to leverage individual players skills and influence.  The idea was to capture learnings from Consumer Intelligence and Research and Development. In theory, there would be an expert directory, discussion board and an electronic library.  Tagging information properly makes it possible for others to search and find relevant information.  AT Kraft, suppliers were asked to tag their own research, not good for their business model.  But this also diminished the value of the researchers and librarians whose knowledge and tagging skills were never acknowledged as added value.

In contrast, Stack Overflow, illustrates a very different knowledge sharing resource that isn’t dependendent on tagging.  It’s a give and take resource.  The value available depends on people providing good answers and asking good questions.  Participants with high stack overflow scores are deemed experts.

To Be Continued…More on this topic to follow shortly.

If you care to review the articles that were the basis of this discussion, links follow.  So much more to say and so little time, care to share your reaction?  or contribute some new inspirations?  Please do!

ARTICLES

1. Keynote: Invest in Scalable Social Business Programs

by Jeremiah Owyang on Apr 05, 2011

http://www.slideshare.net/jeremiah_owyang/keynote-invest-in-scalable-social-business-programs

2. Large Scale Transformation–how social lies at the core of your strategy
by Dion Hinchcliffe

http://www.informationweek.com/thebrainyard/news/strategy/how-smart-businesses-reorganize-for-soci/240006107

3. The Collaborative Organization: How to Make Employee Networks Really Work
MIT Sloan Management Review Magazine: Fall 2010Research Feature

October 01, 2010 Rob Cross, Peter Gray, Shirley Cunningham, Mark Showers and Robert J. Thomashttp://sloanreview.mit.edu/article/the-collaborative-organization-how-to-make-employee-networks-really-work/

For JC Penney and Ron Johnson experience counts, but which one will deliver growth?

JCPenney in Frisco, TX
JCPenney in Frisco, TX (Photo credit: Wikipedia)

When I noticed the battering Ron Johnson received for attempting to reposition and re-brandthe  stalwart American department store JC Penney, I recognized a great case for peer learning among strategy as well as design thinking innovation professionals.  Johnson seems to have had the best experience for the job and  an attitude that placed the customer experience at the forefront of his proposed changes.  Falling stock price and fleeing customers tell a different story. Chart forJ. C. Penney Company, Inc. (JCP)

The Stock price when he took over as CEO on November 1, 2011 was $31.71.  Less than 14 months later, the day the discussion group met, the stock closed at $18.87.  In the last few days, the stock appears to be improving, most likely with the announcement that Johnson has backtracked on his strategy.  But I’m getting ahead of myself.

Two weeks ago, after reading a few background articles ( links and titles follow this posting), the discussion group met to review  JCP and Ron Johnson’s strategy.  Several questions raised in the course of the discussion prompted me to dig up additional history about this company and the changing conditions heating up the competition in this market sector.

Increased information, increased complexity

The days in which stores stood between buyers and consumer good manufacturers are dwindling. Location or proximity to the consumer may still have an edge but your competition’s ability  to insert themselves into the face to face transaction has dramatically altered the sales dynamic. Mobile communication devices  make it easy for sellers to find buyers anywhere anytime; and yet, the playbook  for many stores , from department stores to specialty retailers,  fail to keep pace with the change in buyer behavior, perception and thus fail to live up to  increased expectations.

Multi-channel interaction technologies perform double if not triple duty. Enabling information access by consumers for product details can direct attention to sales opportunities and enrich transaction data adding details and insights on behavior related to choice, in-store placement and preference. Investments  to enhance the customer experience easily generate additional sales but can also generate greater operating efficiency. In store sensors  make it possible to track consumer behavior similar to online consumer data collection software.  Once connected to specific consumer transactions the algorithms to generate value based pricing logically follow.  That is, if  pricing leverages the multiple data sources  which is typically the domain of  merchandisers and not a strategic function. RFID technologies and bar codes now  increase  supply chain efficiency all the way up to the checkout counter. (Note, JC Penney benefited from the tenure of VanessaCastagne ,a former SVP from Walmart, and  led online platform development efforts and integrated supply chain controls from 1999-2004. )  This data is just as valuable to suppliers, many experiment with QR codes  that allow them to forge direct relationships to customers via social media channels that can compete or play compatible with the store by directing consumers to specific purchase outlets either online or in store.

The arrival of direct consumer access, anywhere and anytime raises the stakes for all store owners. Setting priorities and synchronizing these technology introductions challenges  management in every sector.  For department stores and retailers alike, they have little time to adapt old school merchandising skills that support the  brand image and staff to client interactions while maintaining the cashflow necessary  to make it all work.  Oh, and figuring out the pricing thing in real time…that too!

Well that’s a tall order for any leader, let alone one who also needs to placate a trigger happy board and investors with high expectations.  It’s not a surprise that within one year of assuming the CEO spot at JC Penney, Ron Johnson  has backtracked on his strategy.  Year over year sales declines of 26%  are bitter pills for any business and the verdict on Johnson’s leadership choices are premature at best.

Additional context specific to JC Penney

A little more background may help. Just as the 2011 holiday sales season  commenced, Ron Johnson took the reigns and immediately set to the task of engineering a massive strategic overhaul of the JC Penney business.  Johnson in his first few months had opportunity to learn  the level of in-house capabilities and competencies of his team  from operating reports generated throughout retail’s peak sales cycle, but did he?

On February 1, 2012, four months into his arrival, he launched plans to update the store designs to a town square model and simplify pricing that would put an end to sales coupons.   The ideas were bold, but not as daring as many armchair critics suggest.

Success required implementation excellence, akin to the level of APPLE retail but at the scale of Target and the execution precision of McDonald’s.  Was that the department store JC Penney?

FYI, Apple had spent a year developing ideas before hiring Johnson in 2000, and built a prototype store near Apple headquarters where they tested their concept.  In May 2001, they opened their first two stores in May 2001, in Virginia’s high-end Tysons’ Corner shopping mall and in Glendale Galleria in Glendale, Calif.  A little over two years later,Apple had opened over 70 stores in locations such as Chicago, Honolulu and Tokyo. (See the full WSJ reported story).  By contrast, Johnson when he arrived at JC Penney threw together a strategy and placed huge bets based on a short-lived prototype experience.

Where was the evidence that the chain’s mix of  products and  brands when pigeonholed into  the three-tier pricing strategy change would match customer assessments of their value?  Note, he  replaced the pattern of ongoing price adjustments and coupon offers with:  every day pricing  40% off list, with the suggested retail price removed;  distinct monthly special offers; and best  prices-clearance items.  All prices would end in $.00, not $.99 .

Casual observations

The 50% failure rate of new product launches Gartner and other studies explain as ” poor knowledge of what price the market will bear for a new product. ”  Greg Petro writing for Forbes 1/22/2013 shared these and other findings, which someone on Johnson’s team must have read and studied.  Price signals to consumers the relative market value of a product or service, but the market dynamics are challenging to manage.  Interestingly,  in 2011 several department stores began to play with intraday  pricing by connecting their awareness of external competitors prices and match or best them at the point of sale. The unique price advantage Apple holds also made Johnson recognize the operating efficiencies gained from static and more constant price communication to customers.  In seeing the efficiency he may have overlooked the market dynamics.

In 2007, Macy’s had its head turned around by customers after it attempted to cut by half the frequency of its coupons and sales.  Of course this move engineered by Federated, the new parent,  followed their large purchase streak  and coordinated efforts to re-brand under the Macy’s name a series of regional based retailers (i.e. the May company, Marshall Field’s etc). The idea was to help regionally loyal customers recognize the opportunities for price the bigger national Macy’s offered.  Consumers were unwilling to adjust and found local alternatives preferable.   There’s something different about what a retailer can do and a department store, Greg Petro learned and reported in a Pricing series for Forbes.

“Compared to Department Stores and Brands, Specialty (and Vertically Integrated) Retailers have the most control when it comes to pricing. Vertically Integrated Retailers control the entire process.  The best ones design product from the beginning to target specific price and margin points. They also control the in-store experience, which can’t be ignored when understanding the value of the brand and how it affects pricing.”

Refreshing retail experiences that  appeal to the millienials as they begin to raise families and need the value that Jc Penney was historically famous for delivering  has all the marks of a sound strategy on paper.  Johnson clearly has the bench strength in delivering both; but,  does he have the stamina and correspondingly the capital for the task.   (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aU2MttAfdFYU&refer=news)

The bigger the change, the more steps to implementation and the greater the chance to fail.  Shaking up JCP takes capital and cash, especially since sales growth depends on the successful integration of online and in store sales.  Until recently, no links existed between online and in store experiences. The onset of omni-channel  increases the ease with which customers can experience more integrated,  consistent connections.  The closer my online shopping experience finding merchandise, and having it in my hands as well as sharing the social experience of shopping with friends matches the experiences in store creates both great challenges and enormous opportunity for retailers to manage.  To avoid customer confusion, in store sales staff need to have access and awareness of online sales promotions, merchandise and pricing.  Historically, a gifted sales person who knew their customer and purchase history offered assurance of their choice and saving  the customer time. The results  increased their overall satisfaction with the purchase  which by association carried over to the store. Now, online tools offer what the sales associate did  and offering more control to customers who research at home and may venture into a store to get a complete feel but won’t necessarily complete the purchase on the spot.  It may not be reasonable, but the expectations of consistency of offer, price and service between in store and online keeps growing.

JC Penney’s margins, like many of its competitors were shrinking. Getting the experience for customers right  without changing pricing must have seemed ludicrous to Johnson, but from an implementation point of view,  it may have had more immediate impact on the top  line.  As customers adapt to omni-channel opportunities and sales people adjust their relationships with savvier customers, new segments and behaviors may emerge.

Perhaps, Johnson felt that there was no point in putting his team through a drawn out change process and felt it better to catch up all at once.  Being first, may have its advantages but it also comes at great cost which Johnson has begun to experience.

ARTICLES We Reviewed

1. Business model innovations looks at JC Penney

http://www.innovationlabs.com/2012/05/changing-your-business-model-maybe-its-not-so-easy-to-do/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+InnovationAndHighPerformance+%28Innovation+and+High+Performance%29&utm_content=Google+Feedfetcher

2. New York Times Nov. 12, 2012:  A dose of Realism for JC Penney

http://dealbook.nytimes.com/2012/11/12/a-dose-of-realism-for-the-chief-of-j-c-penney/

 3. MIT Sloan Business Review, summer 2012–Is it time to rethink your pricing strategy

http://sloanreview.mit.edu/the-magazine/2012-summer/53413/is-it-time-to-rethink-your-pricing-strategy/

AND as a  Bonus option,   the fitrade blog   5/26/2012

Why clothing retailers suck at posting amazing profits-year-over-year

http://www.fitrade.com/2012/05/26/why-clothing-retailers-suck-at-posting-amazing-profits-year-over-year/

Is it Too Late for a Web Strategy?

Old spice man

If you don't know this man, then you're missing out on one of the more popular twists in popular culture and marketing of 2010. 

This is the Old Spice campaign's man of mystery.  Intentionally I did not insert the web video, nor am I interested in chasing down the viewer stats, though sales report isn't great.  It's here because the ad reference exemplifes multi-channel linked marketing strategy and came up  in last Friday's monthly Chicago Booth Alumni Club's Discussion around  Strategic Management Practices.

Wearing my research hat, and doubling as a typical consumer, the first place I turned to find the reference was to type the key word phrase "old spice man" into my google search bar located at the top of my web browser. My search was not to purchase, engage in conversation or to gain proximity to someone with product experience –that would need  some different key words.  The campaign as well as my search process shows the evolution of the internet and the effect of its influence in our lives.  The shifting trends exhibited below in this wonderful chart  was the focus by Chris Anderson and Michael Wolff in the provocatively titled September 2010 article in Wired The Web is Dead, long live the Internet

Internet traffic trends 2010

CISCO compiled data using the Cooperative Association for Internet Data Analysis (CAIDA). The chart suggests that Video and Peer to Peer traffic is increasing while the use of the world wide web is declining.  This data is somewhat misleading and the chart's suggestions that mobile apps, and other specialized channel options, will displace the web browser  is not so clear-cut.

Is this graph a credible and reliable translation of the geek speak from  CAIDA?  A more recent  analysis than what appeared in Wired, expresses the following:

" Continuing its growth in traffic, connectivity, and complexity, the current Internet is full of applications with rapidly changing characteristics."

Overall, CAIDA has found that traffic on the internet continues to grow,  which is not adequately represented by the two- dimensional graph CISCO and WIRED depicted. Growth does accurately reflect the transition and growing emergence of traffic off the world wide web and into  alternative internet based transmission paths (e.g. mobile based and other applications that allow real time streaming).  

This same transition mimics strategies used by effective  marketers who link the brand messages and campaigns across  multiple media platforms.  Key words provide the bridge. The more consistent their use across the growing number of media platforms,  the more certain an organization's promotion efforts will  intersect key consumer touch points on or offline.   Ideally, consumers pick up these same key words  and carry them across other natural communication channels, further enhancing the brand's reputation and in theory  increasing sales.

If your business is selling Search Engine Optimization (SEO) this emphasis on key words appears  great for business. It's not however where a capable marketing strategy should invest the majority of its budget.  Not merely because there is some danger to pursuing this strategy (see the The dirty little secrets of search in last week's New York Times); but the greater, more complex objective is reputation management and not key word optimization.  

 Historically, brand owners/creators controlled media messaging and placement.  To successfully sell, you "paid" for the privilege of being placed in front of consumers walking through the yellow pages or by a billboard, listening over radio/TV  or their eyeballs scanning newspaper or specialty publications. Product packaging, placement and promotion  are often  budgeted separately and only occasionally linked for a "special" promotion (e.g. cause marketing or a contest).  The rise of the world wide web, added the category of "owned" media to the marketing mix and budgets had to cover the cost of website development, content writers and traffic analysis, including SEO.  With Social Media, a third area– "earned" warrants increasing budget and management attention to monitor the customer-created channels and chatter of your brand enthusiasts  as well as brand detractors. (see complete description in Branding in the Digital Age by David Edelman). 

 The Edelman article's case study of a TV manufacturer across one touch point within the wider consumer decision journey proves far more  instructive than my earlier reference to the Old Spice ad and its multi-channel focus. 

"A costly disruption of the journey across the category made clear that the company’s new marketing strategy had to deliver an integrated experience from consider to buy and beyond . In fact, because the problem was common to the entire category, addressing it might create competitive advantage."    

Unlike Old Spice, the manufacturer opted to shift the marketing emphasis away from paid media.  Focusing on owned and earned media seems to enhance the effectiveness of their key words and multi-channel linkages, and engage traffic where it mattered most at the buy, and enjoy, advocacy, bond  touch points. This is not a prescription for all brands, but the case is instructive in identifying the disconnects and deficiencies in common web based strategies, or even of marketing extravaganzas disconnected from the ongoing conversations that are circling your business, product and/or brand.

Whether or not you belief in Chris Anderson's prognosis about the death  of the Web or buy into David Edelman's Consumer Decision Journey research, few organizations appear to have fully leveraged these changes.  Increasingly, an ability to execute and efficiently allocate resources to address the demands presented by the growing number of communication channels  will  distinguish successful companies from their competitors.  The changes create more opportunities for strategy to take a more commanding role in managing and driving the combined efforts, either internally or with the help of outside specialty firms.

Additonal Discussion Take Aways

  • Social networks are informative, free sources of intelligence that naturally build out and generate mutual trust and benefits to buyers and sellers. 
  • The role of the marketer is merely to influence and no longer the producer/director of the brand experience.
  • The responsibility for marketing  is changing and increasingly is upending internal role limitations  and requiring participation from unlikely sources e.g. corporate governance, communication standards and guidelines.  Employees share roles with customers and the more acquainted with internal policies, strategies and planning the more they can aide and assist in  wider message consistency. 
  • Authenticity has become ever more important.
  • Fluidity and increasing knowledge of terminology around the digital communications space is a valuable skills set…not just for marketers and IT folks. 
  • As reputation management rises and people do business more and more with the people that they know,  is there anything really being created of value, and are other marketing and sales efforts as necessary?
  • How do these lessons translate or enhance B2B sales? 
  • It's not the web vs. the internet differentiation that matters, as much as recognizing how one innovation(social media)  has brought into focus an array of  deficiencies and gaps within an organization (marketing departments) as well as an industry (e.g. advertising) The challenge is how to best integrate the old with the new. 
  • In the end, the prescription to know your customer before creating your strategy remains the first and foremost lesson. Knowing what your customer wants will always be helpful but successful business requires more.
  • True differentiation in products being marketed remain beneficial but the emphasis should be toward innovation in developing products. 
  • Important to remember the shape of the adoption curves with new technology and Chris Anderson's point that new doesn't replace old. New merely creates more table space to accommodate more preferences.  The challenge is the frequency we change, resort and revisit our marketing activities and resource priorities. 
  • Both  articles confirm the importance of social media and keeping up with changing technologies.  They also call attention to the  the challenges organizations  face in trying to bring them together  to create successful communities around their products and/or brands.

 

Any added thoughts, perspectives or cases are welcome.

Added citations

Edelman makes some of the same points in this article:

Four ways to get more value from digital marketing

By David C. Edelman, McKinsey Quarterly, March 2010

https://www.mckinseyquarterly.com/Four_ways_to_get_more_value_from_digital_marketing_2556

 

Trust Agents, Using the web to build Influence    by Chris Brogan and Julien Smith

NOW Revolution, 7 shifts to make your business faster   by Jay Baer and Amber Naslund