Strategy. Innovation. Brand.
Innovation, Persuasion, and Listening
I’m listening.
I struggle to be a good listener. When I’m engaged in an intense conversation, I’m often: 1) Framing my response; or 2) Thinking about a solution to the problem at hand. Of course, when I’m thinking about something else, I’m not really listening — I’m maneuvering. More importantly, I’m not being persuasive. If the other side thinks I’m not listening, they’re less likely to be persuaded to my point of view.
So I was pleased to find a recent McKinsey white paper by Bernard Ferrari titled “The Executive’s Guide to Better Listening”. (Click here). As Ferrari points out, “Listening is the front end of decision making.” If you want your company to be more innovative, you’ll need to make a number of critical decisions. If you’re a good listener, you’ll make better decisions and be more persuasive. That’s the best double play since Nellie Fox and Luis Aparicio.
So how do you become a good listener? Ferrari suggests three critical skills. First, show respect. Respect breeds confidence and trust. (This is essentially the same lesson that Greek rhetoric teaches — build trust first). If you’re a manager, you probably have a complex set of responsibilities. You can’t know everything about every facet of your domain. By respecting your teammates, you will naturally draw them into the conversation and learn from them. If you simply jump to a solution (as I sometimes do) you short circuit the entire process. Not only do you miss out on any advice about the current situation, you also teach your colleagues not to offer advice in the future. This doesn’t mean you should avoid incisive questions. Au contraire, the more the better to keep the conversation flowing.
Second, keep quiet. Ferrari suggest a variation of the 80/20 rule — let the other person speak about 80% of the time while you speak only 20% of the time. (This also works when you’re on a date — always encourage your partner to speak more than you do). This is a particularly hard one for me. I want to jump in and share my opinion because I know it’s … well, brilliant. But often times, I wind up answering the wrong question or chasing an irrelevant tangent because I’ve spoken too soon. As Ferrari notes, it’s important to take your time: “…if a matter gets to your level … it is probably worth spending some of your time on it.”
Third, challenge assumptions. This doesn’t just mean that you challenge other people’s assumptions. It also means that you encourage your colleagues to challenge your assumptions. As Ferrari writes, “… too many executives … inadvertently act as if they know it all … and subsequently remain closed to anything that undermines their beliefs.” Ultimately, “The goal is common action, not common thinking…” So, be explicit. Let your colleagues know that you don’t know everything and welcome their questions, especially the challenging ones.
I’ve found that it’s not easy to master these three skills. But when I do succeed, I learn more and, frankly, I have more fun. That makes me a better manager and a better teammate. And that makes my company more innovative.
Make a Brand Promise or Keep a Brand Promise?
I promise.
You have $10,000 left in your marketing budget. Should you use it to make a brand promise or to keep a brand promise?
It’s a tricky question and one that Bain & Company tries to answer in a newly released white paper. (Click here). As Bain points out, we often think of branding as a way to create an emotional attachment with a consumer. Bain suggests a different approach: we create brands to shift demand. With a strong brand, we may shift demand to higher prices or greater volume or, maybe, some of both.
As we build brands, we need to make brand promises. This often involves emotional advertising and direct marketing. On the other hand, for a mature brand in an established market, more advertising may deliver diminishing returns. Rather than shifting demand, we’re just spending money in a senseless arms race.
Bain gives four examples of fashion retailers that take very different approaches to brand promises. At one end of the spectrum, American Apparel and Benetton advertise heavily and often provocatively. In other words, they’re making promises. However, recent results — stagnant at best — suggest that they’re not keeping promises.
At the other end of the spectrum, Patagonia spends far less on advertising but has invested heavily in environmental causes. Patagonia’s strong word-of-mouth momentum focuses on promises kept. Similarly, the fashion retailer, Zara, does no advertising at all. Through smart locations, however, and short, fast production runs, they’ve built a strong company. The chatter about Zara also focuses on promises kept. For both Patagonia and Zara, the results have included faster growth and higher margins than almost all their competitors.
Bain argues that brand equity is really a brand’s power to shift demand. To illustrate, the authors review brand equity for 21 different product categories. (The research is based on discrete choice analysis, which I’ll describe in more detail in the near future). The research isolates different elements of the consumer decision — allowing us to compare the power of pricing, brand, and specific features. For MP3 players, for instance, the leading brand captures 38.5% of consumer choice based on brand alone. This compares to 13.9% for the second strongest brand. In other words, the leading brand was 2.9 times more powerful than the second brand in shifting demand.
Brands were powerful in both B2C and B2B categories. Many authors have suggested that brands are not as important in B2B categories — that B2B purchase decisions are not “emotional”. The Bain study suggests otherwise. As the authors write, “Companies have built strong brands even in … B2B … categories such as construction tools and medical devices. On construction sites, the loyalty to tool brands runs as deep as the passion that fashionistas demonstrate for their favorite jeans.”
Think about your brand — whether corporate or personal. Do you need to attract attention by making more brand promises? Or do you need to build loyalty by fulfilling brand promises? Either way, consider the power you have to shift demand simply by the way you behave.
Innovation: Five Trends
Good ideas. How do we integrate them?
We know a lot about what innovation looked like in the past. What does it look like in the future?
That’s the question that Arthur D. Little (ADL) researchers asked of more than 100 Chief Technical Officers and Chief Innovation Officers in a recently published white paper. (Click here). The ADL researchers identified five key trends that should drive innovation management over the next decade. Today, I’ll summarize the trends. In the future, I’ll to delve into each one in more detail.
The most important trend — as rated by the CIOs and CTOs –is customer-based innovation — “finding new and more profound ways to engage with customers and develop deeper relationships with them.” B2B companies have traditionally emphasized customer-based innovation. After all, B2B companies have relatively few but relatively deep customers relationships. According to ADL, however, even B2C companies are now focusing less on the product itself and more on the “ownership experience”.
The second trend is proactive business process innovation. I read widely on innovation and almost everything I see has to do with product innovation. ADL says this is changing but that “there is still much to be done to develop a convincing innovation management approach that is sufficiently systematic and repeatable to generate new, innovative business models.” The first objective is to deliver “thick value” — long-term relationships with multiple touch points as opposed to “thin value” transactions.
Third is frugal innovation which may be better known as reverse innovation. Rather than innovating in high-value (and high-cost) knowledge economies, frugal innovation uses low-cost emerging economies to create products with “less” rather than “more”. Developing a new idea in India, say, will often result in a lower cost product than developing the same idea in Europe. Frugal innovation often changes entire supply chains rather than individual products.
Fourth is high speed/low risk innovation. The CIOs and CTOs say they expect even more time-to-market pressure in the next decade. Additionally, they think that product life cycles will continue to accelerate. At the same time,the customer’s ability to identify and publicize flawed products has expanded dramatically. So, even as the pressure to accelerate continues, the pressure to deliver flawless products also increases. How do you deliver high quality products in ever faster cycles? You change your business process. ADL expects to see more gradual product rollouts coupled with more pervasive and proactive post-sales service.
Integrated innovation is the last major trend ADL identifies. The idea here is to take innovation processes out of the New Product Development (NPD) domain and integrate them into all business processes and strategies. Among other things, this requires collaboration across traditional functional divisions. Organizational development experts will focus on building horizontal layers to replace vertical silos. Creating an Enterprise Architecture (EA) to manage knowledge and information could drive this trend.
So, five trends in innovation management – each is interesting in and of itself. Over the next few weeks, I’ll delve into each one in more detail and identify the prerequisites for success in each one. Stay tuned.
Innovation: Boeing versus Airbus
To innovate successfully, you need a strong vision of the future. What will your customers want in ten or 20 or 30 years? If you can picture that, you can start creating innovations today that will put you in the right place when the future arrives.
That’s one of the reasons I’m fascinated by the dogfight between Boeing and Airbus. They clearly have very different visions of the future of commercial aviation. Different visions produce very different airplanes.
Let’s start with what they agree on. Both Boeing and Airbus believe that the future belongs to the efficient — as measured by cost per passenger mile. Boeing has chosen to work on numerator — operating cost — while Airbus is focused on the denominator — passenger miles. This produces two very different airline experiences: point-to-point for Boeing versus hub-and-spoke for Airbus.
Let’s say I want to fly from Denver to Brisbane, Australia. There’s some demand for travel between the two cities but it’s not huge. So how would the experience differ on Airbus versus Boeing? In the Airbus scenario, I would fly to a regional hub — maybe Los Angeles — and then join 800 other passengers on an A380. The huge number of passengers dramatically lowers the cost per passenger mile. I would then fly the A380 to another regional hub — say Sydney — and then transfer for a short flight to Brisbane.
Boeing takes a different tack. Boeing essentially says, if there’s not much demand, let’s build a smaller plane that airlines can operate profitably on “long, thin routes”. Thus, the Boeing 787 — a light weight, twin engine, long distance plane. In the Boeing vision, I would board a 787 in Denver and — 15 hours later — get off in Brisbane. I can fly from point to point rather than transferring in mega-hubs.
Personally, I prefer the Boeing vision. But that’s not really the point here. The point is that your vision leads you to the type of innovations you deliver. Boeing and Airbus clearly have different visions of the future. Thus, they’re building very different planes. It may be that one is right and the other is wrong. Or maybe there’s room for both. No matter how it plays out, both Airbus and Boeing are making bet-the-company gambles on their visions.
So what’s your vision of the future? What will your customer want in one year? Or five years? Or 20 years? You can’t predict the future — at least not the details — but you can create a strong vision of what services and products your customers will want. That can help you create the innovations that will get you safely to the future.
By the way, the first long, thin route from Denver starts in mid-2013 — a non-stop flight from Denver to Tokyo on a 787. That’s a flight that Suellen and I need to take.
How Does a Southpaw Orient Himself?
You got a problem with southpaws?
In the United States, we sometimes call a left-handed person a southpaw. The term comes from old-time baseball. Before we had bright lights, we played baseball in the afternoon, when the sun was in the west. To protect the batter’s eyes from the bright sunshine, baseball stadiums were always oriented to the east. In other words, the batter was facing east while the pitcher was facing west. If you’re facing west, your left hand is on the south side of your body. Hence, left-handed pitchers became southpaws. Why we don’t call right handers northpaws, I’ll never know.
But what about the term, “oriented to the east”? Isn’t that redundant? After all, the orient is the east. The term to get oriented also comes from olden days. Before compasses were in widespread use, it was difficult to figure out where you were in relation to the four cardinal directions. This was especially true if you were on open water or in the vast grasslands of the central United States. You had no landmarks to relate to. Without a compass, the easiest direction to find is the east. All you have to do is get up early and watch the sun rise. If you miss the sunrise, you can look for afternoon rainbows — they’re always to the east. Either way, if you can figure out where east is, you’ve got yourself oriented.
One of the (many) nice things about Denver is that the mountains are very visible to the west. If you’re lost, just look for the mountains — then you’ll know where west is and you can figure out the other cardinal directions. So, we orient ourselves by looking to the … occident. It seems like we should be saying that we occident ourselves.
And then there’s our baseball stadium in Denver. It’s oriented to the occident — so fans can look west and see our majestic mountains. So that means southpaws are now northpaws. It’s all very confusing. Maybe that’s why our baseball team lost 98 games this year.
I like to study word origins and the history of language and I’ll write about these topics occasionally on this website. If you have good word stories, please share them with me and I’ll write them up.
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