The Impact of Rising Customer Expectation

By AgileBusiness, Digital Disruption, Disruptive Innovation No Comments

…or why ‘Uber’s children’ means a new paradigm in organisational responsiveness.

Customer experience has become THE area of focus over the past few years for organisations from the broadest spread of sectors. As more products become services, and even physical goods are augmented with layers of software-driven service interaction, the operational focus of many organisations is shifting from a focus on value chain efficiency to ecosystems of value where customer experience becomes a critical component.

Respondents to Econsultancy’s brand new 2017 Digital Trends report (published in association with Adobe and based on a global survey of more than 14,000 digital professionals) for example, named ‘optimising customer experience’ as their number one priority for 2017. The same answer has been top of the list for the last three iterations of this research, demonstrating that this is a long-term, but game-changing priority. So it is for future potential advantage. When asked what are anticipated to be the primary ways in which their organisation (or their client’s organisation in the case of agency respondents) will differentiate themselves over the next five years from competitors, participants in the same survey named customer experience as the primary focus:

Over the next five years, what is the primary way your organisation/clients will seek to differentiate itself/themselves from competitors?

There are evidently many challenges wrapped up in this focus on delivering exceptional customer experience, not least those inherent in joining up disparate data sources and effectively extracting insight and value through application, the challenge of legacy systems, and the reinvention of the business itself (structures, processes, priorities) to be more responsive to rapidly shifting consumer and competitive contexts.

This too is an ongoing challenge, not least because for every slick new service that comes to market, customer expectation rises with it. Adam Morgan once described this phenomenon as ‘Uber’s children’ – the idea that this ongoing rise in customer expectation creates a continually shifting context which businesses need to to deliver to and the need for continuous (not episodic) improvement.

In 2015, the Uber Data Team did an analysis on whether increased efficiency (shorter time to get a cab) resulted in increased expectations over time from Uber users. They found that the cities that Uber had been in longest had experience the sharpest decay in the willingness to wait for a car.

The greater the efficiences Uber gained from improvements in supply and optimising despatch algorithms, the more impatient people became in their expectation – a pattern that was replicated regardless of geography. As the Uber team says:

‘The bottom line is that we realize we have to continually raise the bar, to get you home from the bar.’

The bottom line for just about every business is that as customer experience increasingly becomes the differentiator, the agility to respond to shifting user expectation becomes one of the key competitive advantages or disadvantages. This is no small change. It means means a re-orientation of the entire business towards far more customer-centric structures, processes, practices and behaviours.

Platform and Pipeline Organisations

By AgileBusiness, Digital Economy, Disruptive Innovation, Strategy No Comments

Platform-Businesses

The word ‘platform’ (business) is perhaps a little overused these days, but it speaks to perhaps one of the most significant shifts in internet era business economics. The internet has always been great at facilitating relationships between nodes in a network, but the shift from traditional ‘pipeline’ businesses to so-called ‘platform’ organisations capitalises on this in a way that neatly characterises truly digital-native thinking and models.

My favourite exploration of this concept comes from Van Alstyne, Parker and Choudary in their HBR piece that talks about the new rules for strategy. I like the way that they make the point that platforms are nothing new (like many things, the digital age simply serves to give certain concepts a heightened importance, a brand new context and application). Yet the internet era has changed some key dynamics: the need to own infrastructure and assets; scalability becoming faster and cheaper; interaction and participation more frictionless; the flow and exchange of data and value more fluid. So…

‘Platform businesses bring together producers and consumers in high-value exchanges. Their chief assets are information and interactions, which together are also the source of the value they create and their competitive advantage.’

The classic value chain model (originated by Michael Porter of-course) fits the linear idea of ‘pipeline’ businesses, where inputs go in at one end, go through a series of processes and activities in the organisation to result in outputs, and the margin is the difference between the resultant value that is created and the cost of creating that value. In contrast, say the authors, platform businesses sit within an ecosystem that typically comprises four key components:

  • Owners of the platform (e.g. Google owns Android)
  • Providers who serve as the platforms interface (e.g. mobile device manufacturers)
  • Producers who create their offerings (e.g. the app creators making apps for Google Play)
  • Consumers who use those offerings

It’s perfectly possible for companies to be both a pipeline and a platform business (as Apple is, with it’s device manufacturing business, and app store marketplace and services business) but the difference between the two involves a few key strategic and mindset shifts, which Van Alstyne, Parker and Choudary capture as:

  1. From resource control to resource orchestration: instead of a model strongly focused on ownership and control of (perhaps scarce or unique) resources (which may be tangible or intangible, like IP), the main value asset (and what is difficult to copy) comes from the community, assets and contributions of the producers and consumers
  2. From internal optimisation to external interaction: rather than a (internal) primary focus on efficiency in value chain activities, the value in platform businesses comes from facilitating the (external) interaction between producers and consumers. As the authors note, this means a focus on ecosystem governance rather than costs of production.
  3. From a focus on customer value to a focus on ecosystem value: the difference here is that between optimising lifetime customer value and the value that come from optimising an expanding ecosystem powered by iterative, fast-feedback loops (the example they give is perhaps subsidising one type of consumer in order to attract another type)

Key to platform business thinking then, are concepts like network effects – the principle that the more participants there are in the system the better and more attractive the system becomes (better supply-demand matching, more data to apply), driving scalability, demand-side economies-of-scale, and advantages in average value per transaction. Network effects creates the kind of virtuous feedback loop that has enabled companies like Alibaba to scale in the way that they have.

This is very different from linear ‘pipeline’ businesses who are focused on avoiding traditional threats (like those from the five forces), on ‘building a moat’ to counteract competition, and on controlling as much of the process as possible in order to gain from efficiencies. Traditional ‘pipeline’ thinking,say the authors, generally regards external forces as ‘depletive’ (i.e. extracting value from the company), yet in demand-side economies they can actually be ‘accretive’ (i.e. adding value). Powerful suppliers and customers can be beneficial rather than threatening, but the trick is in understanding that dynamic in order to shape an ecosystem.

This kind of platform thinking is a critical element in empowering organisational agility.  If we understand how ecosystems work, how we can capitalise on network effects, and how we might facilitate relationships to create value, we can not only survive but thrive in the digital age.

And it’s worth noting that that’s as true of public sector organisations as it is of businesses. When Mike Bracken talked about ‘government as platform’ (a phrase originated by Tim O’Reilly some time before) back in 2015, he talked about how siloed approaches to digital transformation create duplication and waste. Instead, the vision he was setting out was about establishing ‘a common core infrastructure of shared digital systems, technology and processes on which it’s easy to build brilliant, user-centric government services’:

The principles that underpin this way of thinking are about frictionless access, efficiency in matching supply with demand, understanding how value flows through a system, and reinforcing feedback loops that enable continuous improvement. And surely they’re things that every organisation wants to understand.

For more like this, and for exclusive content related to the upcoming book on Building the Agile Business, you can sign up here.

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Every teams project is a cat

By AgileBusiness, Culture, Digital Disruption, Strategy No Comments

team_management

James Everingham, Head of Engineering at Instagram wrote an enlightening post entitled The Principles of Quantum Team Management. Having started his career at Oracle and Netscape, he has plenty of experience to share regarding team management.

He talks about how he originally found management tough and therefore started to design a management system for his own use the way he would design a machine or software system, with few dependencies, single owners and minimal decision points.

“Setting up your team the way you would set up a machine can give you a ton of leverage — as long as you realize how complicated and unpredictable the people in that machine can be”.

This is where he starts to draw a comparison between quantum mechanics to his term ‘quantum leadership’. Using the fundamental principle of quantum physics called ‘superposition’ and the ‘cat in the box’ theoretical experiment, which you may have heard before, he concludes that…

“Every team’s project is a cat, and every manager has to constantly decide whether to look in the box at the risk of killing it”.

In most management situations there’s a feeling that the voice of authority should lead, show the path, provide the answer, yet it’s nearly always better to guide a team so as to enable the creation of a better solution. It sounds like common sense, but how many times have you stepped up and jumped to provide the answer?

As soon as you say what you think the solution is, everyone gets less enthusiastic and therefore less creative (you open the box and kill the cat). Employees want, and need, to think, challenge and create in order to maintain there edge in a constantly changing environment. Plus if you offer a solution they’ll always expect you to come up with answer.

“Being a good manager is not about avoiding failure — it’s about enabling as many different paths forward as possible for as long as possible”.

He goes on to explain that visible hierarchy tends to limit creativity. If you didn’t know the job titles or levels of seniority of others in the team, the ideas would speak for themselves. Therefore traditional corporate infrastructure negatively influences team dynamics.

There are two things which also came to mind when I read the post;

1. The link with Dan Pink’s Drive and his outline of Autonomy, Mastery and Purpose — which for us is now about the changing expectations of employees, of more freedom, flexibility, a sense of purpose and ultimately empowerment.

2. How Culture suddenly starts to take centre stage — in order to hire or even retain great people the culture and environment in which they work becomes the determining factor (and maybe we should be using the word ‘work’ less often and lean more to ‘create’ since machine learning will be doing more of the ‘work’ and it’s the creation that’ll be important).

This is further underpinned in James’s final outline of his 5 Principles of Quantum Team Management:
1. Manage to multiple “states” as opposed to singular outcomes.
2. Be hyper-aware of the observer effect.
3. Know when to open the box.
4. Understand and create strategic entanglements.
5. Embrace the challenge of self-observation.

 

Agile teams and Culture are also key themes in our book

For exclusive content related to the upcoming book on Building the Agile Business, you can sign up here.

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Image source Michael Green

Solving the Big Problems

By AgileBusiness No Comments

There was a lovely analogy for innovation that I heard in an excellent talk earlier this week by Dr Ali Parsa, an entrepreneur who is busy reinventing healthcare around a singular and not unambitious aim of putting an accessible and affordable health service in the hands of every person on earth.

He talked about Malcolm Gladwell’s thoughts on ‘desirable difficulties’ (the idea that sometimes performance can improve if the task of learning itself is more difficult) and how the most value often comes in solving the very difficult (but not impossible) problems. Humans, said Ali, share 83% of their DNA with cockroaches. But it’s the 17% that makes that huge difference. So it’s always worth pushing to solve the big problems. To do amazing things.

It reminded me of this Larry Page quote:

“When I talk to most companies, I do think their leaders are pretty short-term focused…It’s pretty difficult to solve big problems in four years. I think it’s probably pretty easy to do it in 20 years. I think our whole system is setup in a way that makes it difficult for leaders of really big companies.”

This, I think, is one of the key challenges in how organisational focus – short-termism against the need to build the new tomorrow. Alongside incremental, marginal improvements, we must create the vision and the space for breakthrough innovation and solving the big and difficult problems. Because that is where genuinely new value resides.