All of us'n that reside in the CRM universe or related dimensions, have a strong bias toward certain "terminology" shall we say? "Social" is an au courant word that embeds itself as deeply into our lexicons as as the need to be loved is embedded into the psyche of each and every human being. We hear of course "customer" all day long, "sales, marketing, customer support" and just a monster number of other terms that we are all using to the point of overkill.
But what we hear a lot less is "co-creation" (with the notable lovely exception of Graham Hill) and "value chain" and "collaboration" (except as sort of a hackneyed marketing phrase). So I'm offering up, for better or worse, a section of Chapter 12 of the 4th Edition of CRM at the Speed of Light. The Chapter, entitled, simply "Collaborative Value Chain" covers how to extend what was an enterprise value chain to the personal value chain of the customer which in conjunction is a collaborative value chain that works toward co-creation. Not an easy task at all. Because of the culture change necessary to even understand what it is, much less to actually accomplish it.
Of course, as always, we start with a Wordle of the entire chapter. I left this one as a black and white because of the way that the diagram organized itself with chain and value and customer(s) and business standing out - it was too good to pass up - even for color.
As always, I welcome feedback. This chapter is as yet unedited so it has some wiggle room to change things. Let me know. I'm sorry its limited to an excerpt so you may suggest something I've covered but do it anyway please.
Ecosystems Begin to Rule - Dinosaurs Roar and Die
By the time you get to this chapter, you, I suspect have realized that customers have become the dominant business force - so strong a controlling presence in the business environment that I think we should make customers a new species or at least a new genus. Ecosystems are beginning to rule the business planet and they demand value chains that incorporate all the elements.
By creating ecosystems, the business model shifts (see Chapter 6 for details).
- From the world of the corporation to the world of the customer.
- From separation of business from personal to the unification of the two - at least at an emotional and intellectual value.
- From value residing in the products produced and the services created to the customer themselves.
- From looking at the return at investment to seeing a return on customer.
- As we saw in Chapter 6, the business model has evolved too. From a business model where the company was the producer of goods and services to a model where the company is an aggregator of the necessary components to optimize a customer's individual experience.
Take a look, for example at a Microsoft acquisition reported in the NY Times on Monday February 26, 2008. They acquired Medstory that applies artificial intelligence to medical and health info in medical journals, government docs and the unstructured Internet through a sophisticated search engine.
Why in hell would Microsoft do that? Well, a little math - addition works here - is in order. Last year they purchased, and this is the real name, Azyxxi - which is either a software company or Superman's old nemesis - oh…software it is...that retrieves and displays patient information from multiple sources including documents, x-rays, MRIs, and ultrasound images.
Why?
The article explains the "why?" in two places. So patience will be rewarded, brothers and sisters:
"The Med story purchase," said Peter Newpert, vice-president for health strategy at Microsoft, "was a first step in a broader company strategy to assemble technologies that would improve the consumer experience in health care."
AND
"…these companies and others are seeking ways to build businesses on the Internet that profit from what is called consumer-driven health care. The notion is that shifts in demographics, economics, technology and policy will inevitably mean that individuals will want to, and be forced to, make more health care decisions themselves... Aging baby boomers, accustomed to personal choice and to technology, tend to want a say in their treatment decisions."
Does it make some sense for Microsoft to acquire those companies then?
Actually, not if you leave it at that. Why healthcare? They already have the XBox 360, Windows Vista, MSN Search, Office 2007, CRM Dynamics 4.0, ad infinitum and have penetrated both the personal and the work side of life. Do they need more than that?
Yes, but to see that, kick it up a notch.
It makes perfect sense if you are trying to create the all-encompassing environment that addresses all facets of business and everyday life. Health care attends to key portions of that personalized value chain - the individual's approach to gaining control over a hopefully rich and long life. In other words, with the availability of comprehensive sources of information previously only seen by health professionals ranging from the ability to find how one drug interacts with another to your direct health records to references for experts in a particular health field, an opportunity to get some control over your health issues is now extant and how it gets treated is more under your control, because you have the mechanism to get whatever information you need to do that.
Okay - Interlude
Before all you 1984-readers and privacy paranoiacs get up into Microsoft's face about controlling your life and fulminate about the implications on privacy of this strategy, take a deep breath here. Remember a few things
- Microsoft provides tools - not ankle shackles, Technology tools. These actually can help you.
- YOU CONTROL YOUR LIFE, no one else. Not even Steve Ballmer or Larry Ellison....
- Use reason, not hyperventilation.
Okay. Deep breath. Now, back to the show.
Microsoft's acquisitions are wise moves for them because they provide a full featured environment that aggregates the knowledge that you individually need for your health - making you want to use the one-shop-stop resources (at this phase, in principal) that are powered by Microsoft because of a powerful incentive - convenience. If you remember your chapter 6 test questions, aggregation is the model that's powered by convenience.
But all that we've looked at to date - the back and front office integrations, the partners and vendors, the acquisitions, the customer involvement are the elements to build a collaborative value chain that drive customer engagement. How do you build it? Then who is the best at it? That's what we're going to answer in the next episode of "Who Do You Trust to Handle Your Agendas?"
Building the Collaborative Value Chain
I'm now presuming we're in agreement that we have to be willing to go beyond the "ordinary" extended value chain of company, partners, suppliers and to the CVC when appropriate. That means engaging customers and remembering that there are other experts who need to be a part of effort.
If that's true and I'm not blowing smoke, then I'm going to outline the steps to prepare the way for a collaborative value chain - what has to be in place to make it happen.
Steps to the CVC
Step 1: Make sure that the internal processes, technologies, metrics, and corporate structure are aligned appropriately. If there is something that's internally broken, then the effort will be doomed from the start.
But this isn't the typical alignment based on efficiencies. Many companies will use processes like Six Sigma or lean manufacturing to design their systems to both reduce deficiencies and align based on purely internal criteria. Even though I'm speaking of internal alignment, it's in conjunction with customer focused objectives so it isn't purely agnostic. For example, if you have an accounting process that is efficient and saving the company thousands of dollars a year, but its impacting customers negatively - which this meets a possible Six Sigma objective, it doesn't meet a CRM objective - which is to provide positive impact to your customers - or minimally, not impact them badly. Even if you lose the savings by changing or discarding and replacing the process to make it work in a more customer-positive way, it's worth it. The alignment of all internal objectives is painted with brush of the customer's expectation.
Step 2: Make sure that you have all the processes and technologies associated with external interactions working well. Typically, this is going to take the form of web-based activities. That means that the communications media - blogs, wikis, podcasts and the more "traditional" like email have to be working effectively amongst the elements of the internal ecosystem and for the customer. You need to also have processes, procedures and governance in place for how you and your customers or your partners will share intellectual property and information that ordinarily is considered competitive. Agreements need to be in place and the rules of the game have to be defined clearly.
This is probably the most important single part of the first two steps. The reason is that you might be doing collaborative forecasting or joint scheduling with your partner, or you might be handing over product design documents. You might be sitting down with a customer who is reviewing the product that you and they just developed. There are clear hurdles that need to be overcome when it comes to how you participate with each other and what kind of legal considerations have to be given.
This isn't that unusual. Its Neanderthal manifestation was software companies providing customers with beta software for them to implement and test for free. In return for the participation in the beta program, the customers got to use a licensed pre-release version of the software prior to its release.
But that wasn't just a matter of installing it and then starting to use it. Since it was beta software and being put into a laboratory environment by a rather bold customer, liability had to be assessed; agreements that took that liability or lack thereof into account had to be signed. Non-disclosure agreements (NDA) had to be executed so that the nature of the new version wouldn't be leaked to the press or competitors. The software needed to be in a specific environment which may have forced some investment by the company.
In other words, the t's were crossed and the i's dotted before the program got underway.
This is no different except that if there is a jointly held asset, how that manifests has to be worked out from the get go. Who owns what for how long and what the expected uses are has to be considered in the preparation.
Once these things are done, then the final step can be taken.
Step 3: PricewaterhouseCoopers has a lovely description of the third step, though that's not their third step. This comes from Matt Porta in an article in Cygnus Supply and Demand Chain on what is a maturity model for the collaborative value chain:
"They recognize the potential of the new business model enabled by the Internet and collaboration. They have a track record of applying new processes and using technologies in new ways. They are moving beyond collaboration with supply chain partners and are starting to include customers and the sales and marketing processes into their collaborative value chain. These companies seek to link the entire customer-driven value chain in a new way to improve their competitive position, to drive customer loyalty and to improve profitability."
Step 4: Make sure that you have clear management for the CVC - someone who will be the facilitator and have decision-making power. The reason is that there are substantial and complex decisions that have to be made. The CIO is actually a good choice for this because of the impact on business rules, IT and processes - in addition to the social aspects of the CVC. That's a first. I never thought I would see the CIO as a viable choice for anything in CRM. Regardless of who is chosen ….they should be a champion for the idea.
Step 5: Remember that the CVC requires not just your customers, vendors, partners and suppliers, but also industry and other expertise. As you'll see below SAP has MyVenturePad.com as a place to access this industry experts so that the benefit of third party knowledge can be realized.
Needless to say, this isn't meant to be the exhaustive guide to creating a CVC - just an indicator of what it takes to bring together the internal and external resources that are necessary to align the processes, technologies and social interactions in an exhaustive way so that innovation and collaboration are encouraged and customers in particular are engaged in creating what is important for them and other customers. I didn't really elaborate here on the cultural issues involved in this kind of effort. If interested, check out Chapter 21 where I discuss how SAP, in particular, made those cultural changes - in fact more effectively than any other company that I can recall.
Great post, i've already subscribed to your feed.
thanks
Posted by: renda extra | August 01, 2009 at 09:21 AM
Thanks for sharing these thoughts - well put and good advice. I particularly applaud the warning you offer in Step 1, that efficiency often is achieved at the expense of the customer experience. In our work, we have seen multiple examples in which cost concerns have led to a commoditization of the customer relationship.
As I was reading the excerpt, however, it occurred to me that your audience here is probably corporate types who are working to deliver differentiating customer experiences, rather than the customers who are having them. It raised a question about how this advice might look different if it were offered for customers and not companies (or even BY customers!). Based on our extensive experience in this area over the past 25 years, I suggest that there might be three areas in which the perspective from the outside-in might be useful (and different!).
First, I wonder if the "Collaborative Value Chain" would be recognizable to the customer as anything other than an idealized model. In our experience, the inside-out definition of customer activity is often portrayed as sequential, neat and tidy, with one step inevitably leading to the next. From the customer's point of view however, their life is rarely linear, but instead is characterized by fits and starts, full of messy and iterative loops. And the most important parts of that lifecycle almost always happen before, between and after their touchpoints with any one firm.
Second, I expect that customers would have little interest in process governance, leadership and alignment, but would be more interested in accomplishing what was important to them. As the CEO of a hand tool company was reported to have said: "Our customers are not interested in drills. They are interested in holes." There is no doubt that the steps identified here are important, but I wonder if they fall more into the category of drills (i.e., HOW we deliver the experience) rather than holes (i.e., what the customer is trying to accomplish).
Finally, I think that customers would say that the first step for any company would be this: Know me, don't just know about me. Don't just know what makes me similar to other customers, know what makes me different. Understand what I am trying to accomplish, not just what I am doing. As one of our clients is wont to say, knowing the customer is the ultimate competitive advantage.
Hopefully, these observations from the outside in complement the excellent thoughts presented in this excerpt.
Posted by: Chris O'Leary | May 04, 2009 at 03:16 PM