27 September 2012

Innovation and Efficiency - No Contradiction

In discussions with top executives we hear that efficiency is not the highest priority; innovation and new product development are. Therefore, the focus is shifting from improving the cost position and increasing the company performance to succeeding with new products and innovations.

However, innovation and efficiency are often perceived as contradictions: either a firm wants to be efficient or it wants to be creative. It can not be both at the same time, or can it?

Even more so, there is academic research that recommends to top executives to make up their minds: you should pursue cost leadership, customer intimacy or innovation (e.g. Treacy& Wiersma (1997)). 

In fact, our experience in the field teaches us a more differentiated understanding. Innovation and efficiency are very compatible concepts and need to be pursued in tandem. There are specifically these cases, where this is useful: 

  1. Innovation itself is a process that should be efficient. Not only the amount of money that is poured into innovation is decisive. It is the effect per invested dollar or euro that counts. For example, Apple is investing a lot less than other much less innovative market players, but is extremely successful with its new products. Therefore, companies need to focus on efficient innovation.
  2. Innovation and efficiency are based on the same disciplines of effective organizations. These success factors start with a strong leadership team, and goes on with highly motivated employees, strong results-orientation, high quality awareness and other virtues. That leads to the plausible conclusion that highly professional organizations do excel in efficiency and in innovation at the same time.
  3. Process innovation is not just a slogan. It means the application of new ideas on processes and activities. With thousands of small ideas a lot efficiency is generated. These continuous improvement efforts can make the difference between a highly creative, but bankrupt operation, and a successful innovative company, which earns money with its new products.
These cases show that innovation and efficiency are two sides of a medal. However, there ARE big differences between both. Managers and executives just need to be clear on how these two concepts are understood and implemented in their organizations. 

For questions and comments, post here or write an e-mail to asattlberger@gmail.com

12 January 2012

Customer Value As The First Principle of Lean Marketing

Customer value is the core of lean management. Paradoxically, exactly this basic principle too often is lost in lean organizations. As a customer, sometimes one has the impression to stand in the way of the processes of the company; as the saying goes: "Business would be easy, were it not for the customers!"

Those annoying customers, …

Quite to the contrary, specifically sales and marketing departments are needed to thoroughly understand customer value and to transform these insights into specific requirements. Unfortunately, many sales and marketing organizations fail at this task. Following symptoms reveal gross shortcomings in grasping customer value:
  • Lost in translation: the customer asks for a ball pen, however, sales delivers a laptop
  • Over engineering: a multitude of additional bells and whistles leads to solutions that are expensive and too complex for handling
  • Customer complaints: price, conditions, dates, or attributes of the offer were not clearly agreed upon, get not delivered and are the cause for frustration
  • Buyer´s remorse: marketing and sales people create unrealistic expectations that lead to disappointment
  • Branding mistakes: weak and confusing messages blur the brand and damage the reputation
  • Sub-optimal investment: old products and declining markets devour high marketing expenses at the expense of innovations and new initiatives
  • Obsolete sales strategies: sales people deliver information, but could be done more efficiently through the internet.
These examples show the waste generated because customer value has not been understood clearly. Customer value here refers to the whole buying and usage experience of the customer, not only to the service or product itself; this reaches from the first information on the offer, to the purchase, to the use and up to the disposal of the product.

Customer value across the whole buying cycle

The task of lean marketing and sales consists precisely in creating a useful and valuable experience for each and every customer. This experience can be captured with process steps like these:
  1. First acquaintance of offer
  2. Interest on the benefits
  3. Detailed information about the offer
  4. Development of buying intent
  5. Weighing of cost and risks / queries
  6. Negotiation of conditions
  7. Purchase and order
  8. Delivery and payment
  9. Usage of service / product
  10. Request and receipt of customer service
  11. Recommendation
  12. Re-purchase and disposal of product
In every of these steps marketing and sales can prove themselves valuable or not. With a clear understanding of customer requirements they can increase the benefits each and every time. However, when service and support are lacking or bad, these benefits are lost.

The task of lean marketing & sales consists then in the set up of specific standards and to deliver on these ever better. In this effort the size of the product assortment, the complexity of the channels, the multitude of customer segments and the range of media (off- and on-line) describe formidable challenges.

Thus, these marketing and sales organizations will win, which not only package the principle of customer value in slogans and as lip service, but who implement it in practice. Because, they win the most valuable: content customers.

For questions and comments, post here or write an e-mail to asattlberger@gmail.com