Steve Shu on Management, Consulting, and Strategic Initiatives

Perspectives on “The 24-Hour Customer” (Strategy, Marketing, and Innovation Book) in Context of Marketing Segmentation

Adrian C. Ott, CEO and founder of Exponential Edge Inc., included me on her distribution list for an advanced reading copy of her new book, The 24-Hour Customer. I cannot say enough good things about this book. In my mind, the book is excellent for executives, strategists, marketing, and innovators. From a strategy perspective, the approaches are well-structured and remind me of timeless, Michael Porter-esque classics. Yet the book goes beyond the classics and uses examples in the book that are cutting-edge, modern, timely, and technology-rich. Above all, Adrian Ott provides an innovative treatment of customer segmentation based on their propensity to pay attention and spend time. She additionally sheds light on various tools that can be exploited specifically with respect to dimensions of time and customer values. In this post, rather than addressing an overview of Adrian Ott’s total approach, I’ll simply point out one of the key frameworks and cover why it renews and gives marketing segmentation the respect it deserves.

One of the biggest laments I hear from marketing professors at various universities is with respect to how students and undergraduates look at marketing segmentation. Marketing segmentation is about subdividing markets into subsets of customers that behave similarly or have similar needs. But the craft of identifying segments is often under-appreciated or rushed. My wife, a professor of marketing at the UCLA Anderson School of Management, has often characterized a segmentation “pecking order” to students:

Segment based on “why” customers purchase first. Then look at what they purchase, how they purchase, and who purchases. (The Why/What/How/Who marketing segmentation pecking order)

The biggest segmentation error that people tend to make is that they start with the “who” because it is the most salient. Suppose one wanted to have a business that sold roses. If you started with the “who” dimension, you might start with a marketing segmentation strategy that is focused on middle-class families in a metro area. But a better strategy is to start by thinking about “why” people purchase. By engaging in this research, you might unearth important consumer behavior and situational aspects. For example, many males buy roses last-minute because they need to improve prospects with a key relationship. “Last-minute” is a key reason why people purchase – hence the presence of roses in places like grocery stores, 7-Elevens, and entrepreneurial, street-side vendors.

With that perspective on common customer segmentation errors as backdrop, Adrian Ott’s book offers up a series of methods and tools for understanding and applying how time (and the scarcity of time) affects a company’s potential approaches to engaging customers. One key tool (the "Time-ographics Framework") that Adrian uses in her book is depicted below (image reproduced with permission of author and publisher):

The Time-ographics Framework relates a customer’s propensity to spend time with the propensity to pay attention. (Yes! It is focused on teasing out the details of “why” people really purchase!) The significance of the stratification Adrian uses is that in order to play in one quadrant, one often needs to develop separate and specialized strategies. For example, to play in the “Habit” quadrant, one often has to tie into regular routines that cue the customer. Adrian Ott cites the example of P&G’s Febreeze, which was a great product that initially failed in the market because people forgot to use it. Once P&G helped to tie the image of Febreeze with the notion of the daily task of tidying up a room, Febreeze turned the situation around into one of the fastest growing brands. As another example in the “Motivation” quadrant, Adrian Ott introduced me to the concept of geocaching (which I have since purchased software and taken up with my kids). At risk of selling geocaching short, geocaching is basically a worldwide treasure hunt and trinket exchange system where users use global positioning systems (GPS) on their mobile phones to locate hidden boxes all around us (yes, sometimes hidden everyday in parking lots, by restaurants, etc.). Services by http://www.geocaching.com enable people to use slices of time to embark on quick, mysterious adventures. My kids are “motivated” by the mystery to check on the position of geocaches near us. Sometimes we’ll take a 1000-foot detour to find a hidden magnetic Altoids box that someone has tacked on the back of a fire hose box (where we drop off some items and pick up things like foreign coins, coupons, etc.). To bring Adrian Ott’s framework back full circle, she addresses the challenges of products in each Time-ographics quadrant and key tools that can be used for each.

The 24-Hour Customer is a book with rich thinking. It is sure to become a definitive source for professionals with respect to time-strategies, very current company examples and case studies, and timeless treatment of a marketing segmentation area that has not been comprehensively addressed before.

Adrian, excellent work on the book!

Update (6/30/2010): Catchy teaser video on Time-onomics just released. Link here.

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Review of “Open Leadership” Framework (Leadership and Social Technologies Book)

Charlene Li, founder of the Altimeter Group and co-author of the bestselling book Groundswell, was generous to include me on her distribution list for an advanced reading copy of her new book Open Leadership: How Social Technology Can Transform the Way You Lead. Open Leadership both motivates and provides an excellent framework & toolkit for changing and opening up an organization through support of social technologies. In this post I overview key elements of the book and my favorite contributions to the business & leadership book landscape.

Charlene Li describes “open leadership” as “about how leaders must let go to gain more.” Stepping aside from Open Leadership’stable of contents, I created a one-slide summary figure (sort of like a "cheatsheet") to help describe the key concepts. While the figure doesn't capture every element of the book, I think the figure focuses on the key areas a company must address when designing and implementing social technology-based strategy.

I see her book as tying together five key areas:

• Openness Strategy and Design – This part of the book covers an audit of where your company is at in terms of openness. This part also frames open strategy in terms of four objective areas (applicable to company/brand/product) of learn, dialog, support, and innovate and increasing levels of engagement with constituents. I like this part of the book particularly because it starts to weave together marketing, branding, social technologies, and the fringes of innovation.
• Benefits & ROI – For those that have read Groundswell, this part is similar in that it covers some qualitative and quantitative models for using social technologies. One area where the book goes further is in its segmentation of these models by the learn, dialog, support, and innovation objectives outlined in the openness strategy section. Here I see the models as inspirational and thought-provoking as opposed to being ready off-the-shelf. Readers should draw learnings from these and figure out how to best adapt for their specific management context (as there are a mixture of top-down and bottoms-up quantitative analysis and numerical sensitivity issues). Charlene provides some additional perspectives on customer lifetime value and net promoter score, the latter which is a personal favorite for tying brand management and social technologies together in an instructional context (e.g., business school curricula).
• Openness Covenants – This part of the book covers social media guidelines and policies. Covenants are about how an organization defines the “safe area of the sandbox to play in”. The use of checklists and case examples makes for a nice reference and workbook to drive an organization’s development process.
• Openness Orchestration – I found this part of the book to be one of the most important areas of the book. Because the use of social technologies involves openness across the entire organization (sometimes cutting across isolated departments and functions) this book provides a nice treatment of thinking about customers and constituents, specific workflow areas (e.g., customer service, marketing), and organizational models (e.g., centralized, distributed) and tradeoffs for implementing.
• Organizational Change – There are sections of the book dedicated to nurturing organization change, and this involves mindsets and traits, leadership assessments, and something Charlene Li calls the “failure imperative”. While organizational change is a “soft” topic in many texts, Charlene Li does a nice job reconstructing a variety of real-life case examples of how companies and individuals failed in specific situations related to social technologies. Some of the companies and individuals managed to pick themselves up, re-adapt, and succeed eventually. Similar to use of social technologies, effectively dealing with failure is something core to innovation, improvisation, and leadership. So the sections covering organizational change are a nice wrap to the book and provides concrete inspiration from which to draw.

Open Leadershipserves as an excellent, end-to-end process toolkit and is well-suited for corporate executives, marketers, business information technology professionals, and management consultants looking for leadership frameworks supported by social technologies. Treatment of the subject is just above the technology-evaluation level (which would include determining whether technologies such as BuzzMetrics, Yammer, Radian6, Communispace, Umbria, Twitter, Wordpress, and Facebook are appropriate).

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The Business Plan Is Alive And Well But It May Not Be What You Think

As many times I have written a "business plan", it seems the flavor of it can vary quite substantially. I think the notion of this catches a good number of people by surprise. And why shouldn't that be the case? Many textbooks and templates seem to cover business plan outlines with relatively similar structures. My suspicion is that the perspective that gets lost in the mix is intent. The intent of a business plan affects its format and content dramatically (more than outline). For this post, I thought it would be good to share some perspectives on why the process and plan should vary.

Business plan as a process - The process of vetting ideas, getting buy-in, and achieving alignment is most important in these situations. Example situations are new business launches in larger companies (e.g., intrapreneurship). Business plans can often take the form of workshop sessions and Powerpoint documents as opposed to a traditional textual Word document. See a popular post of mine, "In Consulting The Process Is An Essential Part Of The Deliverable".

Business plan as a sales document - This situation is particularly appropriate for fund raising (e.g., angels, VCs). Key goals of the document are to establish trust with prospects, enable the investment idea to be shared via networks, and persuade people of the merits of an investment opportunity. Often need a mix of instruments here (Powerpoint & Word docs, napkin drawings, demo), depending on the team, industry, and phase of product development (e.g., technology feasibility, commercial feasibility, ramp-up).

Business plan as a hypothesis test or investigative framework - An entrepreneurial way of looking at a business plan is more as a framework or series of hypotheses tests. Questions may be: do customers really want product aspect A, do customers prefer this variation over that one, do customers perceive me as Y relative to my competitors, and will the dog eat the dog food? The business planning effort can be more organic than written and involve focus groups, customer prospect interviews, etc. But the framework process should be systematic in determining which hypotheses are true/false to prove out aspects the business over time.

Some other ways that come to mind are viewing the business plan as a communication tool, a dissertation (that must be closely inspected), debate tool, product development stage gate requirement, and RFP response requirement (e.g., for government grants).

How do you view you business planning efforts? To what extent could you benefit from new ways of thinking about them?

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Using a “Frontier Chart” to Evaluate and Plan Project Portfolio Strategy

The introduction of new product or service lines into an existing customer base is a challenge that companies often face with new business development. Sometimes the opportunities can be readily quantified using traditional financial analysis (e.g., using net present value, scenario, and waterfall buildup methods). At other times, there may be hazards of trying to quantify an opportunity too early in the process before conceptual alignment of the stakeholders. For example, people can simply get stuck "in the weeds with the numbers".

In this post, I share a method that I have sometimes found useful as a first step in framing and getting alignment among parties (especially when looking at new product development situations involving platforms upon which multiple products or product lines can be built). To be honest, I am not sure if there is a name for the type of chart I describe below, but I call it a "frontier chart" (which is derived from investment portfolio theory from finance).

The basic idea is that there are a set of lower risk projects out on the left side of the chart which have more known (potentially lower) expected returns. In contrast, projects on the right side might have higher risks but also higher, expected returns. So as an example of a project on the left side, a software company may have early customer engagements with a straightforward, add-on product that it directly developed (say a GPS mapping tool). As an example of a project on the right side, that same software company may be looking to introduce new platform capabilities such that indirect, 3rd parties can develop applications (e.g., Apple's "there's an app for that"). The later project venture is more risky, but the payoff could be larger than the former project.

A key benefit of using a frontier chart is that it can help to get buy-in on the high-level things and projects that people tend to agree with. There will be plenty of time later to put on our "propeller hats" and get bogged down in detailed numbers and execution tactics.

The ability to facilitate a company's management team to move forward is priceless, and sometimes facilitation can be more difficult when introducing new products or services (which is outside of the core, day-to-day business). Consider using frontier charts and thinking about platform strategies (the latter which may be topic for another post).

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Musings On Conducting Competitive Intelligence Ethically

Competitive intelligence (CI) is an activity done by a wide range of professionals ranging from marketers to product managers to consultants to strategic planners. Now I’ve held back for many years on posting on the subject of conducting CI ethically. I tend to be more on the conservative side, and by posting my thoughts on this subject publicly, I’ve had concerns that some clients and future employers would see me as too soft on the issue. Would a client shy away from hiring me because I was unwilling to go the “distance” to get a job done?

In spite of my concerns, I’ve decided to address the issue here. In my experience with the business world, I’ve seen the topic of ethics (in the context of CI) discussed much less frequently than I would have expected, and that should change. Here I’ll provide some examples of bread and butter methods and more infrequently used methods for conducting CI. People should feel free to comment on other methods they have used. I’ll also provide some examples of activities that I either think are questionable or outright unethical.

Here are some examples of ethical, secondary research methods for performing CI:

• Pulling annual reports and shareholder presentations on competitors from the web
• Analyzing securities and exchange commission (SEC) filings and financial statements
• Gathering marketing collateral information from trade show booths of competitors
• Obtaining industry reports from investment banks and/or financial institutions
• Reverse engineering the positioning focus of competitors from marketing collateral
• Searching through LinkedIn to analyze salesforce profiles and reverse engineer likely go-to-market methods
• Analyzing resumes of employees of competitor
• Using Google satellite to analyze geographic profile and size of competitor facilities
• Using Crunchbase or Techcrunch to analyze private companies
• Using Compete, Alexa, and other web services to analyze web traffic
• Analyzing advertising copy and positioning
• Purchasing third-party reports (e.g., Gartner, Forrester, Parks Associates) to round out research
• Looking through job postings by the company on the web

Here are some examples of ethical, primary research methods for performing CI:

• Interviewing a distributor that has experience with competitors and asking questions whether client’s proposed offer would be competitive
• Asking distributor to describe any non-confidential information that they would be comfortable sharing about either the competitor or distributor’s relationship with competitor
• Visiting retail outlets of competitor to infer go-to-market methods, assess general profile of locations, etc.
• Directly purchasing a competitor’s service or product
• Surveying salespeople within client organization to get their feedback on what they’ve run into with respect to selling against the competition
• Conducting focus groups with general customers to get their feedback on competitor’s products versus the client’s prospective offerings
• Obtaining general information by calling into a competitor’s call center

Finally, here are some examples of questionable or unethical methods of performing CI (and these topics come up somewhat frequently in my experience):

• Misrepresenting oneself as a potential customer of competitor in order to get pricing information not made generally public
• Asking a current distributor or employee of competitor to share proprietary information about competitors and violate non-disclosure agreements
• Interviewing a competitor’s employees for the sole purpose of gathering competitive information as opposed to intending to consider such people for direct hire

One problem that I see organizations run into is that they can get focused on one single issue. For example, they may say “I must know exactly how competitor XYZ is pricing”. This type of logic can be dangerous because it tends to lead to one solution. It may also tempt one to try to take unethical shortcuts. If the problem statement is reframed around “getting a better picture of whether my client’s market offer is competitive”, then this can lead to more flexible and varieties of solutions. Tools like conducting customer focus groups, surveying salespeople, etc. then become possibilities for solving the real problem at hand.

As a closing note, in a framework I alluded to in a prior post, one way to think about activities are to classify them in two dimensions: (ethical – unethical) & (legal-illegal). The other framework that I use for weighing ethical issues is to determine how I would feel if my activities were plastered all over major press outlets. Would I be embarrassed by my team’s or my personal activities? Posing that type of question is often a nice litmus test for good behavior.

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Stretching Your Personal Brand Through Brand Management Concepts

Linda VandeVrede invited me to post on her blog regarding brand-related topics, and I did so by providing some perspectives on "personal branding". "Personal branding" is not a widely understood term, so readers may find it interesting from a career and personal development perspective. In this post, I set the frame in the context of how companies look at a key aspect of brand management - in particular, brand associations. In my post, I take the position that personal branding is best built by making investments in three areas: 1) refining the meaning that defines where you want to be, 2) making conscious investments to improve yourself, and 3) ensuring that you use the prior investments to help and reach out to others. For more on the post, please visit Linda VandeVrede's blog.

Business Development May Be On The Upswing Careerwise, But What Is Business Development?

Earlier this year I had heard from sources at various business schools that given the recession and slower consulting and investment banking hiring, a lot of MBA graduates were looking to careers in business development. This is a great development, but in my experience the term "business development" means quite different things to different people. Here's a paraphrasing of some of the types of statements I've heard in the workplace:

• "Business development is about new customer acquisition and sales."
• "Sales personnel are divided into existing accounts and hunters. Business development looks for breakthrough, strategic sales."
• "Business development handles strategic partnerships & deals."
• "Channel sales are the primary focus of the business development team."
• "The VP of Business Development works financing, acquisition, and strategy activities."
• "Business development establishes the cross-promotional marketing deals."
• "Business development focuses on strategic initiatives (whether partnership, financing, product) identified by the Board."
• "The business development team is facilitating design of a new product with XYZ company and our development team."
• "Business development sells product to the channel."
• "Oh. You handle a mixture of finance, marketing & sales, strategy functions. You're business development."
• "Business development folks are jacks of many different trades."
• "Business development is about getting larger partners to commercialize on brand extensions that you may not be able to handle on your own."
• "The sales team does that. You want to know what business development does? We need to talk about that in my office. Come on in, and please shut the door so we can have some privacy."

There is an element of truth in all of these statements. Business development can be all of these things. It really depends on company. In my mind, however, the role of business development is to find new strategic opportunities for the company and start the company on the path to execute (incubation). It is not uncommon for business developers to have a combination of strategy, marketing & sales, finance, legal, and operations background.

Based on my experience in business development, here's the flavors I've run into (roughly from more to less common):

• Partnership development
• Strategic market development and sales
• Strategic marketing
• Mergers, acquisitions, and financing
• New business line exploration
• Channel sales
• New product development

What are your experiences with business development professionals? To what extent is it a well-defined function within your business? What types of issues have you run into?

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Mini-Brand Audit of Guitar Hero By Activision (Independent Research)

Listed below is a pre-release, draft copy of a brand audit on the Guitar Hero brand by Activision. I performed this mini-brand audit as a self-funded, independent party, and I created this document for reasons related to business development, marketing, and teaching purposes (brand management & consulting).

The purpose of a brand audit is to provide a company with a starting point for managing brand architecture, brand identity, and brand-building activities. Brand audits are often refreshed every one to two years and may be done by either internal staff of the company or external consultants.

Although I am a stickler for crafting problem statements, I did not explicitly articulate the problem statement assosciated with this audit (which is something I typically recommend in a consulting deliverable). That said, the general notion of an audit performed by an external 3rd party is to provide a wholistic, and independent view of strategy and tacics. I believe this document accomplishes that goal within the described limits stated in the document.

For the coming weeks, I would appreciate input and feedback from folks. I would also appreciate help in spreading the word as I am not a mainstream media channel. :)

Again, there are few angles I am thinking about in terms of releasing this note in the public domain:

• business development purposes for consulting
• general marketing & personal brand development
• instruction and teaching purposes

I plan to finalize version 1.0 of the document and re-release around September 1, 2009 before key milestones are reached by Activision and competitors.

Thanks for your interest. Please help to spread the word!

Draft copy of brand audit here (PDF file replaced by update below).

Update (8/30/09): Version 1.0 of Guitar Hero brand audit here (PDF file).

Update (9/4/09): Guitar Hero and related subbrand logos get a bit of a refresh (see here and here). The changes are consistent with the strategies outlined in the audit.

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