I've been told many times that outcome based contracts, such as flying hours, power by the hour, availability etc. are actually solutions-based contracts. (more on outcome based contracts at my previous blogpost here)
It's not.... so I thought l'll blog about the difference. Much of these insights come from my research in OBC so if you want the papers, check out my academic site
1. Diferent capability. Ability to achieve outcomes on Outcome based contracts means a capability to co-create, partner, collaborate and work together with your customer (see blogpost on value co-creation). That means you recognise that you need to keep your customers engaged and working with you and you develop your capability to do that. Solutions imply a passive customer. When you deliver 'a solution' it implies you do everything, and everything is under your control and the customer stays as a passive 'consumer'. Companies that don't really know how to collaborate, co-create and partner often prefer solutioning. Why? Because they want everything under their control. Co-creating and partnering is hard because they lose control. The ability to achieve outcomes on OBC is therefore a different capability from solutions. It's a capability of managing customer autonomy and complexity.
2. Different system. The system of solutioning is complicated. The system of achieving outcomes is complex. Complicated systems often means there is a central 'command and control' to achieve a solution. Complex means parties are autonomous and collaborating to achieve an outcome (see blog post on complicated vs complex). Complicated systems are based on reductionistic engineering science. Complex systems are based on holistic and systems science. Two completely different ways of understanding, viewing and analysing the system. Complicated systems are usually closed systems where anything outside comes into the system through designed and pre-specified conduits for inputs and outputs and predetermined 'touchpoints'. Complex systems are usually open systems where, because of autonomy, allows for a freer flow of people and information. I must stress that there are often closed complicated-type systems within complex systems so the distinction is a logical one, rather than a physical difference. We have inherited a world where often managers use reductionistic science to carve out the 'problem space' and solve it in isolation which can create more complexity from unintended consequences elsewhere in the system so its hard to tell the line between complicated and complex (there usually isn't one).
3. Paradox of solutioning is that the more you provide 'solutions' and relegate your customer to a passive role, the harder it is for you to please your customer. The logic is that an engaged customer is a happy customer because you respect their autonomy and yet able to manage the cooperation. Wanting your customer to be passive is like wanting your child to be passive and you provide everything for a child. it usually doesn't make for happy children.
4. Sometimes more expensive. Solutioning is sometimes more expensive than OBC. Why? Because to provide the 'solution' a provider need to price resources where ideally, some of these resources should not be provided by the provider but by the customer, because the customer, at the use end, has more updated information. For example, say you provide a security service for a house. If your customer wants 'incident-free' as an outcome, it goes beyond just patrolling the grounds or cctvs. It is also knowing when there may be a particular event in the house (e.g. a celebrity visit) where the event could attract security incidents. Your customer knows it but you may not. Not knowing it may make it costly for you as you need to overprovide or be overly cautious. If the customer is also responsible for the risk, the total cost of the outcome may come down. Of course, OBC could also be more expensive sometimes because of cost of cooperation/engagement. Hey, its a capability right? It's not meant to be easy.
5. Complex outcomes vs functional complicated outcomes. Some outcomes are impossible to be 'solutioned'. For example, if you may be able to provide the 'solution' of constructing a 'village' (build houses, townhall, parks, roads etc.), but you can never provide a 'community'. that can only be co-created. Similarly, many emergent properties of systems e.g. family, experience are co-created and not 'solutioned'. So if you are outsourcing a service of your firm be very careful what outcome you are outsourcing. I see firms specifying functions to be outsourced and then becoming very unhappy because they got the outcomes wrong. Its easily to think the world is about functions. Often the outcomes we want are complex outcomes and not complicated functional outcomes. Specifying only the complicated functional outcomes for outsourcing is the most common problem I encounter because it underestimates the full outcome of the 'outsourced' element and reduces it to only a function when that element was achieving more complex outcomes before it was outsourced (and when it was part of an internal division).
6. Variety. Solutions and reductionistic engineering science in systems are really useful when there isn't much variety in the system i.e. in the context of customer 'use' of your service, there aren't many anomalies e.g. the experience of a flight. In such cases, a fully systematic system could be put in place where almost every contingency have been covered. When you have a customer in an enclosed cabin, there isn't really much else s/he needs except sleep, eat, drink, entertain (which is why I always think they dont want to give us internet access). In systems where customer 'use' of a service could have high variety e.g. a resort hotel, trying to 'command and control' the experience could end up with the customer disengaged. Be careful how you try to limit variety because not only do you end up not co-creating value, you engineer a disengaged customer. 'Variety' is double edged. It means more work for you but also an opportunity to create a better experience.
So in short, outcome-based systems are not 'solutioning' systems!
-- Posted from my iPhone
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Thursday, 5 January 2012
Wednesday, 4 January 2012
New Year gripes on Top Tenners
Alright, alright since everyone is in that kind of a mood where new year predictions, and top tenners abound, I thought I'll blog mine. Here are my top six gripes about the top ten things that most top ten lists are talking about in 2012
1. Big data will just be fad of visualisations. Until analytics sort out HOW macro level visualisations can actually make individuals do things differently (micro level interactions), it will fizz out. The key is EMPOWERMENT and big data gives us visibility, but not empowerment i.e. it does not tell us how the individual entities can CHANGE the phenomenon, or how the phenomenon could be co-created, rather than merely described. Don't for a minute assume that the system is the aggregate of the one; when you decompose a system, you get the fallacy of decomposition i.e. what is good for the one, may not be good for all, and what might be overall 'good' for a system could be a false optimal because it may create perverse incentives and adverse selection at a micro-level. This micro-macro aggregation and decomposition issue has been around for as long as economics and systems theory and it is the reason why there is no real link between macro economics and micro economics (did you really think that macro economics derived from micro economics? stylized facts do not a theory make...ok ok I'm being harsh). I just worry that big data empowers the wrong sets of people - people who use it to manipulate, command, control and direct without any wish to empower, co-create and engage. Be careful the firm that talks co-creation but uses big data.....
2. Social networks grow older, more serious, less fun. Maybe you haven't noticed it but I have. Young people are starting to move out of facebook, twitter, google+. its become an 'old persons' thing now. My girls say 'Facebook is what your parents use'. Corporates, advertisements, privacy issues have taken all the joy out of social networking for the young. To the young crowd, gaffs, faulty privacy settings, faux pas - they are all part of the entertainment of social networks. Now its all 'check your privacy', 'make no mistakes', 'don't click on this', 'predators out there', 'whom to add' 'whom not to add' 'watch for spam' 'mark zuckerberg cannot be trusted with your data' - adults (and I mean adults in the logical sense and not the age sense) have a wonderful way of killing everything that is enjoyable (and risky of course) to the young (and young at heart like me ;p). I'm not saying we should let our children be stalked by pedophiles or give our data to zuckerberg. I'm just saying that our cautious attitudes are killing social enjoyment on line and many are leaving in droves. 'Corporatisation' is also making social networks an adult platform now, so this is all becoming all too serious. implications? well, we know the young are the derring-dos, the ones that try new and different things. They throw cows, act audaciously, say too much, show too much but resulting in more interesting interactions - adults are just. so. boring. and. careful. My pet theory is that for young people, the more they have on their network, the more they interact; for the adults, the more people on their network, the more scared they are about revealing too much about themselves so interactions reduce, which of course does not do well for the health and life of the network and I think its starting to happen already. so I predict a slowdown of ideas and innovation on such platforms. bring back the brave, the young and the risk-takers - we need you for the excitement! if not - every social network will become a linkedin. imagine how boring that is. I feel like throwing a cow at someone right now but that would be too old. the young have moved to 9gag and beyond. sigh.
3. More firms will fail. Not really a prediction, because with the 'lack of growth' and 'economic stagnation' (see gripe no. 5), one would expect it but its why they fail that I think is interesting. My prediction is that more firms fail because of more firms coming into the market and squeezing the old firms out of new opportunities. The firms that fail are those that think that the world is still the same, and they underestimate how quickly they need to be more agile and entrepreneurial, or how fast they have to seize opportunities. Have you noticed how many people talk about 'change' and 'innovation'? That suggests a systemic problem. 'have you also noticed how many firms start initiatives and committees on change and innovation? that suggests what they think is the solution. Folks, change and innovation is not the same as productivity and efficiency. the usual way of 'managing' it is usually the first step towards killing it. of course i am not suggesting we dont 'manage' it. i am only suggesting that we take too many of our old tools and hope that all the problems are still nails and screws. But the market is a marvellous thing. New firms, new entrepreneurs will carve the way and they may even collaborate with more forward looking old companies. I like to ask companies 'so how are you not changing today?' or perhaps 'how are you impeding innovation today'. 2012 will (I hope!) see the battle against traditional 'management' and more 'intervention', 'self organisation' and intrapreneurship.
4. More intrapreneurs, less managers. I read this morning an article on a top business school crowing about where their ranking is on the worldwide MBA school list and I'm thinking, do I really want to shout about that? When so many firms, with managers educated by the world's business schools are not really performing well? Are they even in touch with what's happening around the world? I know the reply to this. Schools will say they teach specialist subjects such as strategy, marketing, OB, finance and its up to the managers to practice what has been taught, rightly or wrongly but I can't help feel, as a systems person, that there is something wrong when we teach business in piecemeal terms without giving an understanding of how its is holistically practiced. I mean, the medical profession also teaches in piecemeal terms (neurology, etc.) but they extol a healthy clinical education, a holistic education as part of the specialist knowledge and not separate from it. I think there is something wrong with business school education but that's an old refrain from me so I'll stop. I think 2012 will herald more intrapreneurs - I mean, why is it that CEOs get the big press? I would like to see 'Tom Jones - a normal working Joe - wins intrapreneur of the year working for 'tradfirm' - Tom Jones is credited for asking for a budget to buy out his whole team to spend 6 months as a 'subsidiary-within-a-firm' offshoot to improve the way the company's products are being delivered and used by their customers, improvements to service and bottom line more than paid for the budget...bla bla.... one can only hope. sigh.
5. Lower 'growth' in economies, but why does it not matter so much? I get irritated when bean counters equate 'consumer spending' with the 'health of the economy'. At a micro level, I used to spend £15 to do one thing now i can spend £15 on broadband and do 20 things so...... how are we calculating productivity again? oh, wait is it still a input-output firm production measure? of course it is - oh well, if we don't measure consumer 'productivity', I guess we'll never know. We are now getting much more for our money because value is increasingly distributed in systems, shared intelligence, information and knowledge is gaining currency on its own and we can actually buy less and spend less.... someone please work out a better metric. I really dont want to be told that revival of economies will depend on how much I spend. I would like to see more jobs out there but this whole produce-spend-produce leading to jobs is just becoming nonsense in a distributed, interconnected and co-created world of multiple 'currencies'. Here's an example. Lets say I work and earn £1000 a month. For my quality of life, I spend £800 a month with £200 savings. I now find, with this new wonderfully connected world, I can get the same quality of life with £600 a month with £400 savings but actually, I dont really want to work so many hours so I now work less, earn £900 a month, still have £300 savings and an even better quality of life. Measure that. That link between GDP (total of how much an economy produces and sells) and Consumer spending (how much we spend)? its called MY LIFE, or as Christensen likes to call it, my jobs to be done! and i could do it more efficiently and with less money!
6. Work and play gets even more blurred on social media. Google+ is so going to take advantage of this. It cant compete with facebook. or linkedin. or twitter so its going to start hugging corporates i'm sure. big firms are needing social media so much to improve connections and relationships within the firm and to incentivise innovation, change and intrapreneurship so i think we'll start seeing SAP circle, IBM circle and then it would mesh with personal circles. Then i want to work 2 days a week so i have a few other circles, and we talk about wine, work, children, and song. this is going to be fun. and boring. but still fun. and sooooo uncomfortable for many traditionalists. roll on.
sorry for the long post. its the new year and i ate too much so there is some spare energy to burn.
1. Big data will just be fad of visualisations. Until analytics sort out HOW macro level visualisations can actually make individuals do things differently (micro level interactions), it will fizz out. The key is EMPOWERMENT and big data gives us visibility, but not empowerment i.e. it does not tell us how the individual entities can CHANGE the phenomenon, or how the phenomenon could be co-created, rather than merely described. Don't for a minute assume that the system is the aggregate of the one; when you decompose a system, you get the fallacy of decomposition i.e. what is good for the one, may not be good for all, and what might be overall 'good' for a system could be a false optimal because it may create perverse incentives and adverse selection at a micro-level. This micro-macro aggregation and decomposition issue has been around for as long as economics and systems theory and it is the reason why there is no real link between macro economics and micro economics (did you really think that macro economics derived from micro economics? stylized facts do not a theory make...ok ok I'm being harsh). I just worry that big data empowers the wrong sets of people - people who use it to manipulate, command, control and direct without any wish to empower, co-create and engage. Be careful the firm that talks co-creation but uses big data.....
2. Social networks grow older, more serious, less fun. Maybe you haven't noticed it but I have. Young people are starting to move out of facebook, twitter, google+. its become an 'old persons' thing now. My girls say 'Facebook is what your parents use'. Corporates, advertisements, privacy issues have taken all the joy out of social networking for the young. To the young crowd, gaffs, faulty privacy settings, faux pas - they are all part of the entertainment of social networks. Now its all 'check your privacy', 'make no mistakes', 'don't click on this', 'predators out there', 'whom to add' 'whom not to add' 'watch for spam' 'mark zuckerberg cannot be trusted with your data' - adults (and I mean adults in the logical sense and not the age sense) have a wonderful way of killing everything that is enjoyable (and risky of course) to the young (and young at heart like me ;p). I'm not saying we should let our children be stalked by pedophiles or give our data to zuckerberg. I'm just saying that our cautious attitudes are killing social enjoyment on line and many are leaving in droves. 'Corporatisation' is also making social networks an adult platform now, so this is all becoming all too serious. implications? well, we know the young are the derring-dos, the ones that try new and different things. They throw cows, act audaciously, say too much, show too much but resulting in more interesting interactions - adults are just. so. boring. and. careful. My pet theory is that for young people, the more they have on their network, the more they interact; for the adults, the more people on their network, the more scared they are about revealing too much about themselves so interactions reduce, which of course does not do well for the health and life of the network and I think its starting to happen already. so I predict a slowdown of ideas and innovation on such platforms. bring back the brave, the young and the risk-takers - we need you for the excitement! if not - every social network will become a linkedin. imagine how boring that is. I feel like throwing a cow at someone right now but that would be too old. the young have moved to 9gag and beyond. sigh.
3. More firms will fail. Not really a prediction, because with the 'lack of growth' and 'economic stagnation' (see gripe no. 5), one would expect it but its why they fail that I think is interesting. My prediction is that more firms fail because of more firms coming into the market and squeezing the old firms out of new opportunities. The firms that fail are those that think that the world is still the same, and they underestimate how quickly they need to be more agile and entrepreneurial, or how fast they have to seize opportunities. Have you noticed how many people talk about 'change' and 'innovation'? That suggests a systemic problem. 'have you also noticed how many firms start initiatives and committees on change and innovation? that suggests what they think is the solution. Folks, change and innovation is not the same as productivity and efficiency. the usual way of 'managing' it is usually the first step towards killing it. of course i am not suggesting we dont 'manage' it. i am only suggesting that we take too many of our old tools and hope that all the problems are still nails and screws. But the market is a marvellous thing. New firms, new entrepreneurs will carve the way and they may even collaborate with more forward looking old companies. I like to ask companies 'so how are you not changing today?' or perhaps 'how are you impeding innovation today'. 2012 will (I hope!) see the battle against traditional 'management' and more 'intervention', 'self organisation' and intrapreneurship.
4. More intrapreneurs, less managers. I read this morning an article on a top business school crowing about where their ranking is on the worldwide MBA school list and I'm thinking, do I really want to shout about that? When so many firms, with managers educated by the world's business schools are not really performing well? Are they even in touch with what's happening around the world? I know the reply to this. Schools will say they teach specialist subjects such as strategy, marketing, OB, finance and its up to the managers to practice what has been taught, rightly or wrongly but I can't help feel, as a systems person, that there is something wrong when we teach business in piecemeal terms without giving an understanding of how its is holistically practiced. I mean, the medical profession also teaches in piecemeal terms (neurology, etc.) but they extol a healthy clinical education, a holistic education as part of the specialist knowledge and not separate from it. I think there is something wrong with business school education but that's an old refrain from me so I'll stop. I think 2012 will herald more intrapreneurs - I mean, why is it that CEOs get the big press? I would like to see 'Tom Jones - a normal working Joe - wins intrapreneur of the year working for 'tradfirm' - Tom Jones is credited for asking for a budget to buy out his whole team to spend 6 months as a 'subsidiary-within-a-firm' offshoot to improve the way the company's products are being delivered and used by their customers, improvements to service and bottom line more than paid for the budget...bla bla.... one can only hope. sigh.
5. Lower 'growth' in economies, but why does it not matter so much? I get irritated when bean counters equate 'consumer spending' with the 'health of the economy'. At a micro level, I used to spend £15 to do one thing now i can spend £15 on broadband and do 20 things so...... how are we calculating productivity again? oh, wait is it still a input-output firm production measure? of course it is - oh well, if we don't measure consumer 'productivity', I guess we'll never know. We are now getting much more for our money because value is increasingly distributed in systems, shared intelligence, information and knowledge is gaining currency on its own and we can actually buy less and spend less.... someone please work out a better metric. I really dont want to be told that revival of economies will depend on how much I spend. I would like to see more jobs out there but this whole produce-spend-produce leading to jobs is just becoming nonsense in a distributed, interconnected and co-created world of multiple 'currencies'. Here's an example. Lets say I work and earn £1000 a month. For my quality of life, I spend £800 a month with £200 savings. I now find, with this new wonderfully connected world, I can get the same quality of life with £600 a month with £400 savings but actually, I dont really want to work so many hours so I now work less, earn £900 a month, still have £300 savings and an even better quality of life. Measure that. That link between GDP (total of how much an economy produces and sells) and Consumer spending (how much we spend)? its called MY LIFE, or as Christensen likes to call it, my jobs to be done! and i could do it more efficiently and with less money!
6. Work and play gets even more blurred on social media. Google+ is so going to take advantage of this. It cant compete with facebook. or linkedin. or twitter so its going to start hugging corporates i'm sure. big firms are needing social media so much to improve connections and relationships within the firm and to incentivise innovation, change and intrapreneurship so i think we'll start seeing SAP circle, IBM circle and then it would mesh with personal circles. Then i want to work 2 days a week so i have a few other circles, and we talk about wine, work, children, and song. this is going to be fun. and boring. but still fun. and sooooo uncomfortable for many traditionalists. roll on.
sorry for the long post. its the new year and i ate too much so there is some spare energy to burn.
Tuesday, 20 December 2011
social CRM: some thoughts
So there's been some buzz for awhile about social CRM. I must admit not to have read everything. Just bits and bobs over time but Michael Brito's blogpost about thought leadership in Social CRM (here) caught my attention. It made me aware that I have been doing so many seminars and talks on my research that I've forgotten the stuff I used to be teaching i.e. Marketing and how I've not really integrated the latest of my work with the bog standard stuff that used to be out there. I recently did one about the 4Ps (here), but thought maybe I should now tackle social CRM, and blog some of my thoughts about this changing landscape.
What is really interesting would be the 5th example of excellent social CRM. That is around personalisation. This is where I think social CRM can really make a difference both to firms and to customers that is distinct from traditional CRM and marketing.
The idea of personalisation is that the firm can get personal with their customers, and start to socialise with them, building relationships. So let me tell you about how I am social. It's to do with my friends, my activities, my interests, my life. You want to get social with me? you've got to GET me. No, its not about pulling the conversation to what you want to talk about. its about what I want to talk about as well. its about my value creating context around your product, not yours. What do i mean? Well, let's say the department of motor vehicles wants to get social with me (why, I have no idea). Now, to the department, my car is 'transportation', which is around their categories of transportation i.e. bus, car, rail, planes. that's the government's value context. My car? my car is not in the 'transportation' value context. My car is in 'go work-go supermarket-fetch child' context. So if you want to get social with me about my car, you'll have to get social with me about what my car enables me as a resource in my micro context. So I think the biggest problem with firms when they want to embark on Social CRM is that the content around my context for social conversations may not be their content......mm... you can't blame organisations. they've just been brought up badly. ;p
There is a second aspect of social CRM that has also intrigued me about personalisation.
The firm is a macro system. I am a micro system. So conversations between me and 'the firm' is a bit odd. Its like me having a conversation with a crowd and expecting the crowd to have a single voice i.e. that person interacting with me. i mean, how does that work? I suppose that could work functionally like if I wanted to ask Mcdonalds how many countries they are in, or if I want to know the ingredients in my shampoo, I can tweet and ask and the 'disembodied voice' that tweets back is just responding to a query. But personalisation in social CRM is about conversations - that means its more than functional. It has social and emotional dimensions. I was at my garden centre recently and checked in on foursquare and said that I was having tea and scones. I got a tweet back from the garden centre to say 'mm... i would love scones right now and hoped i enjoyed it' or something like that which is rather personal and nice in a way but I didn't know if I was getting personal with my garden centre or with this person whom I don't really know. So how do I negotiate attribution in these social messages? are they my garden centre talking? or someone whose messages I do not attribute to my garden centre? Interestingly, I tweeted back about the banana scone not being very good and the 'garden centre' replied to say 'thanks for the tip'. clearly, I was NOT talking to my garden centre. So what does 'personalisation' mean in this case?
My thoughts are that social CRM raises a major issue for the firm. How is the macro-level firm formed from its (micro-level) employees? social conversations are held at a micro level, The paradox of social CRM is that successful micro social conversations may run contrary to the firm's 'so-called' macro culture and identity but if employees talk too much like how mr mcdonalds or mr ikea would speak, i guarantee you it would be a very boring conversation. Social CRM is an excellent an opportunity for firms to evaluate how their culture and identity are formed by their employees and if its their employees talking personally through social channels, it should also be them talking as well. The part is the whole. I get this feeling that a successful social CRM would probably happen when that happens. But I also suspect that command and control organisation types would hate it.
So CRM is some kind of systematic way of interacting with the customer but social CRM is more than that - its about engaging the customer in 'conversations' supported by a technology platform e.g. through facebook, twitter etc.
So here's what I'm thinking. First, your customer really hasn't changed much. If he has been using your product all these years, he probably is still doing the same thing. Except that suddenly, with twitter, facebook etc. your customer now has a voice. And you can hear them. And just because you can hear them, you suddenly decide its a good idea to have a conversation with them.
So here's what I'm thinking. First, your customer really hasn't changed much. If he has been using your product all these years, he probably is still doing the same thing. Except that suddenly, with twitter, facebook etc. your customer now has a voice. And you can hear them. And just because you can hear them, you suddenly decide its a good idea to have a conversation with them.
The real meaning of conversation, is what Milton Wright would say "an art or creation that two persons can give life to, or play with". In other words, conversations are usually interesting. Herein lies the problem with Social CRM. It's not. I mean, how can a conversation be interesting when the point of it is (as some sites have proposed) 'to assist firms to become more social, gain intelligence or harness customers as a resource'? That sounds really like having a conversation at a bar with an egoistical self centred self serving 'friend' you just met whose interest in you is all about how you can help him. ugh.
OKOK, not all social CRM are like that but if you trawl through the internet and ask about the examples of excellent social CRM, they generally fall into 5 categories. Here are the first 4: (1) feedback (2) damage control (3) promotion (4) brand identity. But guess what. It means that social CRM is just another marketing channel because those 4 are exactly a channel where firms connect and communicate with their customers - about the FIRMS, not about their customers. Nothing new there - certainly nothing new that SOCIAL CRM is contributing to thats not already available in OTHER CRM strategies. It's the usual firm-centric engagement.
OKOK, not all social CRM are like that but if you trawl through the internet and ask about the examples of excellent social CRM, they generally fall into 5 categories. Here are the first 4: (1) feedback (2) damage control (3) promotion (4) brand identity. But guess what. It means that social CRM is just another marketing channel because those 4 are exactly a channel where firms connect and communicate with their customers - about the FIRMS, not about their customers. Nothing new there - certainly nothing new that SOCIAL CRM is contributing to thats not already available in OTHER CRM strategies. It's the usual firm-centric engagement.
What is really interesting would be the 5th example of excellent social CRM. That is around personalisation. This is where I think social CRM can really make a difference both to firms and to customers that is distinct from traditional CRM and marketing.
The idea of personalisation is that the firm can get personal with their customers, and start to socialise with them, building relationships. So let me tell you about how I am social. It's to do with my friends, my activities, my interests, my life. You want to get social with me? you've got to GET me. No, its not about pulling the conversation to what you want to talk about. its about what I want to talk about as well. its about my value creating context around your product, not yours. What do i mean? Well, let's say the department of motor vehicles wants to get social with me (why, I have no idea). Now, to the department, my car is 'transportation', which is around their categories of transportation i.e. bus, car, rail, planes. that's the government's value context. My car? my car is not in the 'transportation' value context. My car is in 'go work-go supermarket-fetch child' context. So if you want to get social with me about my car, you'll have to get social with me about what my car enables me as a resource in my micro context. So I think the biggest problem with firms when they want to embark on Social CRM is that the content around my context for social conversations may not be their content......mm... you can't blame organisations. they've just been brought up badly. ;p
There is a second aspect of social CRM that has also intrigued me about personalisation.
The firm is a macro system. I am a micro system. So conversations between me and 'the firm' is a bit odd. Its like me having a conversation with a crowd and expecting the crowd to have a single voice i.e. that person interacting with me. i mean, how does that work? I suppose that could work functionally like if I wanted to ask Mcdonalds how many countries they are in, or if I want to know the ingredients in my shampoo, I can tweet and ask and the 'disembodied voice' that tweets back is just responding to a query. But personalisation in social CRM is about conversations - that means its more than functional. It has social and emotional dimensions. I was at my garden centre recently and checked in on foursquare and said that I was having tea and scones. I got a tweet back from the garden centre to say 'mm... i would love scones right now and hoped i enjoyed it' or something like that which is rather personal and nice in a way but I didn't know if I was getting personal with my garden centre or with this person whom I don't really know. So how do I negotiate attribution in these social messages? are they my garden centre talking? or someone whose messages I do not attribute to my garden centre? Interestingly, I tweeted back about the banana scone not being very good and the 'garden centre' replied to say 'thanks for the tip'. clearly, I was NOT talking to my garden centre. So what does 'personalisation' mean in this case?
My thoughts are that social CRM raises a major issue for the firm. How is the macro-level firm formed from its (micro-level) employees? social conversations are held at a micro level, The paradox of social CRM is that successful micro social conversations may run contrary to the firm's 'so-called' macro culture and identity but if employees talk too much like how mr mcdonalds or mr ikea would speak, i guarantee you it would be a very boring conversation. Social CRM is an excellent an opportunity for firms to evaluate how their culture and identity are formed by their employees and if its their employees talking personally through social channels, it should also be them talking as well. The part is the whole. I get this feeling that a successful social CRM would probably happen when that happens. But I also suspect that command and control organisation types would hate it.
Sunday, 18 December 2011
Jobs of the Future
I have just read Stiglitz article in the Vanity Fair:
The link to the article is here
The phrase that I thought I'll blog about is:
"We have to transition out of manufacturing and into services that people want—into productive activities that increase living standards, not those that increase risk and inequality."
Nicely said, Professor Stiglitz but a little too simplistic. As someone who works in value, new business models and service systems, I would of course agree with you that the future is in services and I am pleased you are highlighting this. However, I suspect that the way you think about services might not the way I think about services and I do take issue with the way you have oversimplified it. Let me elaborate.
I argue that this 'investing in services' is more complicated you think. You intimate that the solution is to throw a lot of money into investing in skills for services when I don't think anyone can even specify what those skills are. Services behave as 'wholes' and to say that investing in skills for services might as well be saying that we should in invest in skills for the economy - it doesn't mean a thing. There is also the fallacy of composition when you decide to say 'services' because these 'wholes' (service systems) don't behave like reductionistic manufacturing systems. What is good for a part is not necessarily good for a whole (I could stand up in a theatre to get a better view but that won't work if everyone stands up) - jobs where performance is held at an aggregated systemic level and working in the interfaces are a whole lot harder to specify, given that legacy institutional structures have not been designed to work in that manner. And service systems are evolving as well. Future of services include manufacturing, as the future of manufacturing is also embedded in services, so future 'services' are a hybrid of things (manufacturing) and activities (services). What jobs? What skill sets? I am a big fan of simplification, but not to the extent that promotes false hopes and misunderstandings. Your article makes policy makers think there is a simple fix-it, or that manufacturing is somehow different from services. Bad manufacturing IS different from services but excellent manufacturers (such as Apple) would see much more convergence between the two. Therefore, while I commend your emphasis on activities to improve society's well being, suggesting 'investment in services' creates a false dichotomy and allow economists and policy makers to opt out of dealing with complexity, interfaces, boundaries and interactions between manufacturing and services, and endorsing the fundamental flaw of atomistic, reductionistic economic science that got us into this mess to begin with.
PS on article
Economics need to move towards complex systems science, a body of theory and science of connections, as opposed to conventional economic theory, which is concerned with static elements and states. Its not much of a point to say that markets will be efficient in the end. The current business and economic environment, with all its upheavals, is in need of a greater understanding of evolution, transition, and its ascent/descent to order, disorder, or chaos. We are in urgent need of a new economic systems science.
-- Posted from my iPhone
The link to the article is here
The phrase that I thought I'll blog about is:
"We have to transition out of manufacturing and into services that people want—into productive activities that increase living standards, not those that increase risk and inequality."
Nicely said, Professor Stiglitz but a little too simplistic. As someone who works in value, new business models and service systems, I would of course agree with you that the future is in services and I am pleased you are highlighting this. However, I suspect that the way you think about services might not the way I think about services and I do take issue with the way you have oversimplified it. Let me elaborate.
I argue that this 'investing in services' is more complicated you think. You intimate that the solution is to throw a lot of money into investing in skills for services when I don't think anyone can even specify what those skills are. Services behave as 'wholes' and to say that investing in skills for services might as well be saying that we should in invest in skills for the economy - it doesn't mean a thing. There is also the fallacy of composition when you decide to say 'services' because these 'wholes' (service systems) don't behave like reductionistic manufacturing systems. What is good for a part is not necessarily good for a whole (I could stand up in a theatre to get a better view but that won't work if everyone stands up) - jobs where performance is held at an aggregated systemic level and working in the interfaces are a whole lot harder to specify, given that legacy institutional structures have not been designed to work in that manner. And service systems are evolving as well. Future of services include manufacturing, as the future of manufacturing is also embedded in services, so future 'services' are a hybrid of things (manufacturing) and activities (services). What jobs? What skill sets? I am a big fan of simplification, but not to the extent that promotes false hopes and misunderstandings. Your article makes policy makers think there is a simple fix-it, or that manufacturing is somehow different from services. Bad manufacturing IS different from services but excellent manufacturers (such as Apple) would see much more convergence between the two. Therefore, while I commend your emphasis on activities to improve society's well being, suggesting 'investment in services' creates a false dichotomy and allow economists and policy makers to opt out of dealing with complexity, interfaces, boundaries and interactions between manufacturing and services, and endorsing the fundamental flaw of atomistic, reductionistic economic science that got us into this mess to begin with.
PS on article
Economics need to move towards complex systems science, a body of theory and science of connections, as opposed to conventional economic theory, which is concerned with static elements and states. Its not much of a point to say that markets will be efficient in the end. The current business and economic environment, with all its upheavals, is in need of a greater understanding of evolution, transition, and its ascent/descent to order, disorder, or chaos. We are in urgent need of a new economic systems science.
-- Posted from my iPhone
Sunday, 4 December 2011
The 4Ps in marketing - revisited
I've been hearing a lot about how the 4Ps are dead, and how the 4Ps are alive and well so I thought I'll blog my version of 4Ps and join the debate.
The 4Ps are alive and well. But perhaps not the way we think about it. In a sense, 4Ps have always been rather firm centric - its about the price the FIRM charges, the place the FIRM sells its offerings, the product that the FIRM offers, the promotion that the FIRM has to undertake. So I thought I'll have some fun and turn things on its head..... in a co-creation sense of course. (if you need to understand value co-creation, check here).
1. Price
Yes, there is still money to be charged, but increasingly, 'price' is no longer a consequence of a sequential activity. Its not what I get for what I pay for anymore. I mean, how do pay for google, or facebook? or how do I really 'pay' for getting the nutritional attributes of food in the supermarket when i scan the barcode and read it off an app? There is money floating around somewhere but increasingly, the revenue is being distributed, just as value creation is distributed within the system. Also, it's not what the 'price' we give firms now, it's what we get back, as SDLogic will always say, we are resource integrators, we integrate resources and money is just another resource. But I actually argue further - that we are getting multiple outcomes for one 'price' - e.g. paying for broadband and a computer and then getting so many different types of outcome from social networking, surfing the net etc. so I would argue that the monetary system is becoming less and less relevant in achieving outcomes through systemic collaboration and distributed intelligence and information. My favourite theory is that money, because it is so generic a resource, is increasingly 'devalued' - so an outcome for outcome exchange (I walk your dog, you cook me a meal) has greater 'goodness' or 'value' than if it went through a market which is why as technology increases efficiency matching needs from connectivity, money may be increasingly irrelevant for societal happiness. Very far fetched, I know, but as a business economist, its currently my pet theory. I'll model it if I just had some time :(
2. Promotion
oo.... let's get a little creative here. Companies still promote - a lot. The ads on google, proximity marketing through foursquare; groupons etc. they are all there - just using a lot of technology. But there is a subtlety that many have not noticed. Instead of taking their products as given and 'promoting' their offerings, companies are starting to change their offerings too.... drug companies realise they are not just about medicine, there is nutrition, well being etc. so they are co-creating value in constellations that are not just about the physical, but about their meanings. From music (bands), to perfumes, firms are dematerialising their 'products' (see blog post on dematerialisation), co-creating value through identity, culture and families. the new world of promotion is not just about firms influencing customers, but customers influencing firms' offerings' design, and customers influencing customers through social networks and creating systems of shared values.
3. Place
You know where I am going with this from the previous promotion bit. Place is not just physical space of course, but virtual space. and its not about channels of purchase, its about channels of influences, experiences, meanings, symbols, and again, the firm dematerialising the product so that it can be in multiple 'places' in different forms, creating new and interesting business models. this is beyond plurality in channels or buying channels. this is the firm being the true organiser of value co-creation, and understanding what resource or information is needed for different channels.
4. Product
I am starting to sound like a broken record. but to quote previous posts, technology liberates us world from the constraints of time (when things can be done), place (where things can be done), actor (who can do what) and constellation (with whom it can be done). The PRODUCT, in ALL of that, can be better designed to allow when it can be used, where it can be used, who uses it, and with whom it is shared with. Requirements of the future is looking at technologies from quantum information to artificial intelligence, composite materials that are light to nano technology that create multiple forms of use value, we will start making things that connect better, that can be mobilised differently, can be sent differently and can be used across time and space.
So that's my quick take on the Marketing 4Ps.
And I can't wait for the future. Oh wait. it's here. :D
Monday, 28 November 2011
Dematerialisation and Density: New Business Models
So I spent my last post on things in context which will now lead me to talk about how we create value in context. This is quite a complex post so bear with me.
Value is created through interactions, through acting on someone or something. We integrate resources available to us, available in context and available through the thing. These resources available in context allow us to enact out the value creating practices. These practices could be to realise what the thing is for (e.g. watch TV) or even to manipulate the thing itself and modifying it, not physically, but in terms of altering its function to what it can afford (enable) in context. A simple example would be to put a few books under the overhead projector to get it to project at the appropriate location (functional affordance) so the individual harnesses the book's material agency to achieve his outcomes. Another more complex example is the social and subtle battle between managers to locate the photocopying machine as far away as possible from their offices not because of noise etc. but the lowered social status associated with the office being closest to the photocopying machine (we've all been there before?)... you can read all about sociomateriality from Wanda Orlikowski's work.
So back to the point. We can harness the thing and people around us for resources to be integrated to create value but what is the value? In my earlier posts, I talked about emotional, practical and logical dimensions of value but value, to me, is some form of 'goodness'. We co-create value in use because it's good for us and we are better off because of it right? But being good for us may not just be functionally good, it could be some emotional good. So let me give you a very concrete example around a project we are in the middle of. This project can be seen here (EPSRC Co-production of Physical Products and Value Co-creation - Scalability in the Wild). The topic..... CHOCOLATE .......the BBC coverage of our work is here, the Telegraph coverage is here. Essentially, Exeter engineers have developed a chocolate 3-D printer which allows design and printing of chocolates as gifts. This is great. My job - what's the business model?
The answer is tricky because business model has to think about demand (i.e. what is the need fulfilled) as well as supply (how do we scale that fulfilment). The 3D printer isn't very scalable so if suddenly a million people wanted chocolates printed in their own customized way, there is no way that printer can do that. Also, chocolate is a complex product - hedonistic in many ways.
So what did we do? Before I tell you that, let me give you description of the thinking behind our chocolate project and explain dematerialization and density.
Dematerialization and density are the concepts introduced by Normann (2001) to illustrate the possibilities and opportunities to rethink the logic of value creation through reconfiguring value constellations. Technological development liberates us from constraints of time, place, actor and constellation in terms of value creation. We can separate information in terms of activities from physical world and assets and allow it to be easily moved about. This is one mechanism referred to as ‘liquification’. We can also separate activities from the well-defined existing time/space/actor units and assets (unbundleability) and then relink these activities, new time/space/actor units and assets (rebundleability) to create new value configuration. This is another mechanism of ‘dematerialization’ termed as ‘unbundeability’. Thus, dematerialization refers to the two mechanisms (liquification and unbundleability) to further promote rebundleability to create new densities (Normann, 2001). ‘Density’ is described as the best combination of resources mobilised for a particular context such as a particular customer at a given time and place. (summary above thanks to my postdoc Susan Wakenshaw. Tks Susan!)
With that description, here is what we did.
We went and conducted a series of interviews about what is so good about chocolate (consumption practices, ethnographical study). We found 10 major practices of chocolate and we also deconstructed the meaning and value of chocolate in these practices. Then we separated out the physical from the information. What does that mean? Out of the 10 practices, only 3 really needed the actual physical chocolate. The other 7 were practices that didn't really require the physical chocolate as a resource e.g. nostalgia, sharing - they required emotional, past memories to co-create some of the meanings but not the actual physical chocolate.
What we did next. We then separated the information of the chocolate (the 7) and are now creating a new website as a chocolate co-creation platform for individuals to co-create the meaning of chocolate. In other words, we are translating the physical practices of chocolate into virtual practices of chocolate. However, there are still 3 that need the physical so we have to ensure that the platform that enacts the 7 physical-to-virtual practices (pvp) interact with the 3 physical practices by having the chocolates designed and printed out on 3D and sent/eaten. But the business model has to make sure that the 7 pvps platform can be fully scalable while rationing demand for the 3 physical value practices (not so scalable). Not going to give you the gory details but it's really interesting for me who works in understanding value and using it to derive new business models. It is also interesting as we start moving towards greater connectivity and technology how we need to understand value creating systems and what value is created where, with whom and how, and more generic frameworks around it. We also have to think about recreating contexts, and resources that can be enabled in context by the platform. Fun stuff!
By the way, I need a whole community of beta testers so keep in touch on twitter and we'll let you know when it's up!
Monday, 21 November 2011
Dematerialisation & Density: The Value of Things in context
We hear it all the time and I've certainly said it again and again. Value comes from use, value is in context but why is it we still hear firms talking about value as the money they get for their things, and we still hear how they firms 'add value' as though the things in themselves have value?
So I really want to blog it to set things right. It's also the first of a series of blogposts around Dematerialisation and Density because it leads up to my current research projects. So let's start.
THINGS HAVE NO VALUE IN THEMSELVES. repeat after me. ok. then you go back to business and start talking about getting more value from the things, keeping the factories open, keeping the jobs coming in and you have forgotten what you said. so let me join the dots for you.
THINGS HAVE VALUE BECAUSE YOU IMAGINE IT'S USE. so basically, its not the thing you value, its what you THINK the thing is going to do in your life. that iPad has no value, you are imagining reading a book, checking emails... you are attaching the use of the thing in the context of living your life that is of value.
so.....WHEN YOU IMAGINE ITS USE, YOU IMAGINE THE CONTEXT. so not only do you think about what the thing is doing in your life, you had an imagined scope of where and how and when the thing is used for (the context). that's why you think the thing is good. you are really thinking thing-in-context is good, which you believe means the same thing (wrong)
YOU IMAGINE THE CONTEXT IS CONSTANT BECAUSE THE THING IS CONSTANT. yup, so when you buy an iPad, the iPad doesn't change its form, get moody, or become a different iPad at different times so you believe the context of use can stay the same too........so when you buy the iPad, you are thinking about lying in bed, reading. when you're thinking of buying that apple, you are thinking about eating it in the next hour, the toaster and the warm toast etc. etc. etc. so when you're buying something, you're actually evaluating the value of the THING thinking that it is a THING-IN-CONTEXT
here's the bad news, firms don't manufacture context. they manufacture things.
and the good news? YOU 'manufacture' the context. and then magically, they come together and it is good.
that's co-creation for you.
but CONTEXT changes. context comes with contextual resources for you to be able to use, experience the thing. From simple contextual resources such as light to read, quietness to talk on the phone, to more complex 'emotional states' that lend resources such as mood (to enjoy a glass of wine), or composite combinational resources created by you and your environment, CONTEXT is not a simple concept. And context exist in layers as well - from a micro to a meso to a macro level (see Chandler and Vargo, 2011, Marketing Theory). Also, context is not external to you. YOU are part of the context. So is the thing. So the value creating system is YOU(ACTIVITY)-THING-ENVIRONMENT - that's context. change one, change all. change the 'goodness' created. change the value of the thing.
so what do firms mean when they talk about 'adding value'? well, ahem, they just assume you will do your part right? just like you thought the thing was constant and you decide to manufacture all sorts of contexts to use the thing, the firm thinks YOU are constant and they decide to make better stuff (we hope). and they call that adding value because they want you to pay more NOT because they are giving you more 'goodness' (how can they do that, when they dont control the context?). what firms DON'T often get is when they change the thing, they often change the context that you need to 'manufacture' as well. example. mobile phones morphing into life-enabling-thing.
why does this matter? The world of connectivity is starting to enable different contexts, we can now 'see' context better, measure better (you see me talk a lot about context in my research into systems and how we are collecting 'verbs' etc. as measurement of contexts, I have an EPSRC research project on contextual invariances in energy consumption and business model). also, you see the rise of data analytics because the visibility of experience and consumption is giving rise to a new strategic lever for changes in behaviours and society - strategies surrounding CONTEXT. you also see things and contexts interacting at design stages.
so... for all those who really want to know what is value, how it's created and why people buy at higher or lower prices etc...........IT'S THE CONTEXT S****D.....
lol, i've always wanted to say that. next blog post (soon i hope).... more on contextual value...I will soon come to dematerialisation but these are a series of blog posts that would lead up to it.
We hear it all the time and I've certainly said it again and again. Value comes from use, value is in context but why is it we still hear firms talking about value as the money they get for their things, and we still hear how they firms 'add value' as though the things in themselves have value?
So I really want to blog it to set things right. It's also the first of a series of blogposts around Dematerialisation and Density because it leads up to my current research projects. So let's start.
THINGS HAVE NO VALUE IN THEMSELVES. repeat after me. ok. then you go back to business and start talking about getting more value from the things, keeping the factories open, keeping the jobs coming in and you have forgotten what you said. so let me join the dots for you.
THINGS HAVE VALUE BECAUSE YOU IMAGINE IT'S USE. so basically, its not the thing you value, its what you THINK the thing is going to do in your life. that iPad has no value, you are imagining reading a book, checking emails... you are attaching the use of the thing in the context of living your life that is of value.
so.....WHEN YOU IMAGINE ITS USE, YOU IMAGINE THE CONTEXT. so not only do you think about what the thing is doing in your life, you had an imagined scope of where and how and when the thing is used for (the context). that's why you think the thing is good. you are really thinking thing-in-context is good, which you believe means the same thing (wrong)
YOU IMAGINE THE CONTEXT IS CONSTANT BECAUSE THE THING IS CONSTANT. yup, so when you buy an iPad, the iPad doesn't change its form, get moody, or become a different iPad at different times so you believe the context of use can stay the same too........so when you buy the iPad, you are thinking about lying in bed, reading. when you're thinking of buying that apple, you are thinking about eating it in the next hour, the toaster and the warm toast etc. etc. etc. so when you're buying something, you're actually evaluating the value of the THING thinking that it is a THING-IN-CONTEXT
here's the bad news, firms don't manufacture context. they manufacture things.
and the good news? YOU 'manufacture' the context. and then magically, they come together and it is good.
that's co-creation for you.
but CONTEXT changes. context comes with contextual resources for you to be able to use, experience the thing. From simple contextual resources such as light to read, quietness to talk on the phone, to more complex 'emotional states' that lend resources such as mood (to enjoy a glass of wine), or composite combinational resources created by you and your environment, CONTEXT is not a simple concept. And context exist in layers as well - from a micro to a meso to a macro level (see Chandler and Vargo, 2011, Marketing Theory). Also, context is not external to you. YOU are part of the context. So is the thing. So the value creating system is YOU(ACTIVITY)-THING-ENVIRONMENT - that's context. change one, change all. change the 'goodness' created. change the value of the thing.
so what do firms mean when they talk about 'adding value'? well, ahem, they just assume you will do your part right? just like you thought the thing was constant and you decide to manufacture all sorts of contexts to use the thing, the firm thinks YOU are constant and they decide to make better stuff (we hope). and they call that adding value because they want you to pay more NOT because they are giving you more 'goodness' (how can they do that, when they dont control the context?). what firms DON'T often get is when they change the thing, they often change the context that you need to 'manufacture' as well. example. mobile phones morphing into life-enabling-thing.
why does this matter? The world of connectivity is starting to enable different contexts, we can now 'see' context better, measure better (you see me talk a lot about context in my research into systems and how we are collecting 'verbs' etc. as measurement of contexts, I have an EPSRC research project on contextual invariances in energy consumption and business model). also, you see the rise of data analytics because the visibility of experience and consumption is giving rise to a new strategic lever for changes in behaviours and society - strategies surrounding CONTEXT. you also see things and contexts interacting at design stages.
so... for all those who really want to know what is value, how it's created and why people buy at higher or lower prices etc...........IT'S THE CONTEXT S****D.....
lol, i've always wanted to say that. next blog post (soon i hope).... more on contextual value...I will soon come to dematerialisation but these are a series of blog posts that would lead up to it.
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