Social Business recommended reading

If you haven’t seen Oscar Berg’s blog and are remotely interested in Social Business then please head over to http://www.thecontenteconomy.com/, he summarized the research on Social Business during 2012 in this post

I’ve been looking at for example Point by Silkroad as system support, anyone with experience from implementing and gaining adoption of that let me know.

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Change Management step one

I wanted to merge two thoughts into a small post. One is Simon Sinek’s the Power of Why and the other one is Kotter’s 8-step process for leading change.

In my work in a rapidly growing organisation, change is business as usual. Is change management really needed among all these entrepreneurial, agile, change embracing people? I think so. All those entrepreneurial, agile, change embracing people are already keeping themselves very busy with changing other important stuff and won’t listen or do anything without a compelling reason. If you’re about to change something significant within an organisation and haven’t seen Kotter’s 8-step process, I suggest you go and read it, it’s a great way to drive change.

I wanted to write specifically about step 1. Creating a sense of urgency – a real sense of urgency. I really like this quote:

Guaranteed to Fail:  The problem in failed change initiatives is rarely that the case for change is poorly thought out, or not supported with sufficient facts. A solid business case that has a theoretically “compelling” rationale only appeals to people’s head and not their heart.

This is where Simon Sinek’s TED talk “Start with Why” fits in. The real Why, if connected to a purpose or vision, will get past the rationale and reach the hearts. Great first step.

50% of change initiatives miss out on this step.

Why? 😉

Breaking News: Multi-channel consumers are good in the music industry, too

Sorry for the ironic title.

Music Ally published an interesting piece Sony Entertainment Network talks Music Unlimited at Midem where  Sony Music’s brand new President of Global Digital Business and Sales, Dennis Kooker, had some interesting comments regarding Streaming services and so called Cannibalization.

If you’re new to the concept – it means that sales in one channel is hurting another channels sale, having a total negative impact. Not sure why that would be called cannibalization, I never heard of cannibals eating themselves, but then again I am not an expert on cannibals.

Some key quotes from Dennis Kooker:

“We are constantly watching our business very closely and looking at how different channels are affecting and impacting each other,” he said.

“At this point we don’t see any evidence that any one area is significantly cannibalistic to any other. Is there substitution? There is always going to be some as people move around and have choice. At this point there is no evidence that any one model is seriously danaging any other model.”

“Ultimately, what we see is that our business is growing in the areas where subscription services are the predominant player in the market, and as a result we’re very convinced that consumers ultimately want to experience music in different ways. Sometimes they want to own, other times they want to experience and listen. As a result of that consumer behavior, we are looking at growing the business overall.”

Happy to see a guy talking about consumer needs first. The thing with these quotes are that they completely mirror the discussions I’ve had a number of times on multichannel consumers for other industries. Retail consumers that are multi-channel are simply worth more than the traditional offline-only consumers. There are tons of research available on this, e.g.1 minute googling gave this here. Depending on industry, the consumer value differs, but typical numbers I’ve seen range from 30% to 100% higher spend by consumers. This is one of the foundations behind a business case for investing in good content online. Customer Lifetime Value is another (details of course depending on industry)

The question is why multi-channel consumers spend more? I don’t think there is a simple one-size-fits-all truth. There are probably many contributing factors, e.g. increased engagement & trust in a brand and many things that sums up to that the consumer feels well informed before making a purchase. (Knowing options, well met rational needs, etc etc)

Now, why would this differ in the music industry? It seems to be a reasonable hypothesis to start with, that consumers that get access to streaming services, builds playlists etc will have a higher propensity to go to a concert, buy a physical copy, buy a digital copy and synch to her iPod etc. The same digital consumer that spends 2x as much in a retail store, would all of a sudden show a completely different behavior when purchasing entertainment? I find that hard to believe without being presented with hard data. It seems by Kooker’s argument that the hard data is supporting the hypothesis.

Any argument against? Hmm. I’d expect some short to medium-term channel shift transients, but the long term trend should be total growth. And the artists / brands grabbing the opportunity now will come out better in the end.

Even if it was just a channel shift scenario, improving access to the content is a good thing. And for a product with a fixed one-time production cost and continuous eternal incremental revenue, revoking access to the product does not make sense to me.

The Constructal Law and access to content

I remember when I was a kid, and this great new invention came. The Movie Box! At the time, Video players were expensive and we couldn’t afford one. Movie Box solved the problem: You rented one, two or three movies, and you brought the movie box with you and connected to your TV at home, it worked for 24h. Awesome! We didn’t go to the cinema very often, so my guess is that the movie box at least quadrupled the amount of money our family spent on the movie industry.

A couple of years later, VHS was mainstream, and the movie box died. It had fulfilled it’s purpose and was outcompeted by something smarter. Today video recorders are replaced by Netflix, Blu-Ray players and whatnot.

This brings me to the topic of this post. Providing access to services. There is an interesting theory about what governs the generation of designs (patterns) in nature called The Constructal Law. It tries to explain design phenomena in nature, e.g. why do trees look like trees, why do rivers meander etc.

Alternative representation of the movie box's destiny. It was meandered and left only as a parentheses in the flow of content to end users

The Constructal Law states:

“For a finite-size system to persist in time (to live), it must evolve in such a way that it provides easier access to the imposed currents that flow through it.”

And I was thinking to myself, if you apply this to an industry or a company, for a second accepting the assumption that it fits the definition of a finite-size system, and we see the flow of currents as the distribution of services it provides, what does it tell us? It says that to continue to live it needs to improve the way it provides access to its service.

I’ve worked before as an eCommerce consultant, it is easy to draw parallells to the advent and acceptance of eCommerce as an established sales channel, and in the later years mobile access. By necessity, companies have to improve the access to their flows, or die slowly.

Kodak just went belly-up, why? They invented the digital camera in 1975, but failed to provide access to the masses. It seems to me like it was a conscious strategy to impose restrictions and try to control the access to the service, protecting it’s old analogue “core” business.

Applied to the music industry, it’s all about access to content. There are some really great posts out there that really helps visualize the current trends in terms of revenue streams, for example this one. The flavor of the day is streaming services, the CDs, LPs etc will slowly become more and more irrelevant. It is easy to argue that the growth of music piracy got a strong start much due to the resistance in the music industry to innovate and evolve in the digital space. Hopefully piracy, that started the competition with CDs, will become a meander due to the improved access of streaming services, iTunes and the likes. And the future will find a way to improve or replace the streaming services.

I am happy to see that streaming services now make up more than 50% of the revenues in Sweden. Pretty awesome. Maybe it will get to the 95%-or-so that CDs once had. But then something else will come. Eventually. The Constructal law will place it in the history, just next to the movie box.

With the above in mind, it seems like a sensible strategy to any business to look at how to improve access, and don’t settle for short term protection of old revenue streams. You’ll risk becoming a meander like Kodak eventually did. Talking about old industry structures, it seems appropriate to end with a quote from the movie Jurassic Park: “Life, it seems, always finds a way out”.

New direction for this blog

This blog has not been updated in a while, but I aim to change that. A couple of reasons: Spring and summer was spent rebuilding our house, and since September I have a new job. I left Sapient after almost 5 years, and are now working at Spotify with the technology organization.

As I wanted to use this blog to formulate my thoughts on anything related to my professional challenges, I will now switch focus from e-commerce and focus more on organisations, culture and leadership. Stay tuned.

Example of a poor multichannel consumer journey (DIY)

Authors note: This spring we bought a house, and that is partly the reason why I haven’t blogged much. This post has been a draft for a very long time, and I thought I should finish it and finally get it published. State of their websites is from this summer, hope things have improved since. The rebuilding project went well 🙂

I am currently (summer 2011) rebuilding my house and as a somewhat reluctant DIY I wanted to share my experience of the Swedish DIY market and the state of their digital presence. I’ve interacted with brands such as Bauhaus, K-Rauta & Fredells and there is a lot these companies could do to acquire customers if they used online better. 

When I think about channel usage, I try to understand the context of the user. To set the scene, I’ve found myself in three very different scenarios

1. At home, planning the work, choosing products & services
2. At the construction site, with a specific and immediate product need, e.g. running out of concrete
3. At the construction site, need information on the process of using a product, best practices etc

None of the brands are doing a good job online. K-Rauta as an example have a great offering with a personal shopper that will guide you through your DIY project, but the help is not available online in forums, chat or how to articles. They are not able to drive me into their store (via website, via google), they are not able to satisfy my information needs, and they are doing a poor job in the mobile. I get the feeling it has been designed without analyzing the user context I outlined above in mind.

Every time I went to a store, I could not be sure that I would return to my project with all the products required to complete my task. How many of your friends have complained about having to go back and forth because they forgot to buy something? There, that is an opportunity to solve.

I think all of our DIY brands should have a look at this awesome blog post and start thinking about it:

http://www.ronnestam.com/future-integrated-communication-from-a-digital-perspective/

A couple of things they could do to improve:

• Get proper product catalogue out online so I get there through google. (Try e.g. flytspackel) If you win on google, you’ll win me going to your store. That K-rauta is losing to the forum minhemmabio.com on “flytspackel” is … not good.
• Help me choose, there is an abundance of products out there and I am starving for knowledge
• Get availability information out online, I will be very unhappy if I go to your store and what I need is not available
• Support the process – e.g. what other stuff do you need to complete your task? Help me get all I need in one go and I’ll brag about your brand in front of all my friends
• Understand that I at times – especially when looking for usage / how-tos / product information is at a building site, accessing your site from a mobile device over 3G
• Engage in the communities out there, e.g. http://www.byggahus.se that have filled the void your content could have filled
• Get a loyalty program going, sign me up for it, and start communicating with me via email (Fredells is sending me snail mail only, K-rauta is slightly better)

Interestingly Jula is stopping their e-commerce initiative (swedish link) and will just be using their website to improve the experience in the store, by providing shopping lists with guides on where the products are in store, and in stock information. Not sure if that is future proofing their brand, but if they do that right they could at least win in a poorly developed digital market short term.

 

Connecting Store pick-up with Web sales

Wanted to write down a great multi-channel customer journey I had the other day, and elaborate a bit on the brick-and-mortar companies challenges with online pure play competition. I’ve previously written a bit on channel strengths focusing on call centre vs web, but not much about the brick-and mortar stores. One key strength is the delivery without the middleman, the freedom for the customer with an urgent need to pick up the goods (caveat for opening hours & location of course). Another is the superior ability for skilled salespeople to up- & cross-sell compared to the web.

Picture of a middle man working hard to deliver the goods bought online quickly and efficiently to the waiting customer

So our vacuum cleaner broke down after 13 years of good service (thank you Electrolux). Panic! This is Saturday afternoon, having guests on Sunday and in a desperate need to clean. Given that regular mail is not delivered on Sundays in this country, I realized I had to visit a store.  I was unhappy with that.

My customer journey: Like most people nowadays I started doing online research to understand the options and what it would cost me. I used sites such as Prisjakt to compare options. I found a best-in-test site and decided to go for the test winner.

I eventually ended up at Elgigantens product page for the vacuum cleaner, wanting to see if it was in stock and where I could go to buy it. Lucky me, just next to the Buy button I see two key things.

1. It is in stock
2. I can collect it in store. Within one hour! Great!

Screenshot from Elgigantens product page

At this point, I am so focused on completing my task that I don’t even bother to check other stores. The convenience and certainty I feel that I will get a good product at a decent price, within my time constraint, is enough to convert me into a customer. An hour later I pick up my purchase, the salesperson upsells me on accessories (another 10% revenue probably at good margins), and I’m going home happy. And now the customer journey ends with a positive blogpost about the product & customer experience. Good work online Elgiganten!

Switching focus to the business side, there is some good reading on how Nordstrom is connecting stores inventory to online.

Inventory was a big issue, too. If Nordstrom.com did not have the item someone wanted, it was not as if the customer would wait for the company to restock it, Mr. Nordstrom said. “If we don’t have it, you’re going to go back to Google and say, ‘Who else has it?’ ” he said. “We have 115 full-line stores out there — chances are one of them has it.”

I am not sure if Elgiganten is doing that already.

More good information from the article – apparently an impact on Nordstrom’s call center load as well:

Nordstrom began overhauling its online approach two years ago, adding the option to shop and buy online and pick up the item in a store. “It was the first thing that we did, because the No. 1 call we got at our call center was, ‘Hey, I’m looking at this item online, can I look at it at my store?’ ” Mr. Nordstrom said.

In addition to the great customer experience this creates, note that the time constraint I was under ruled out the somewhat cheaper online pure players from the competition. Price was not my main driver, completing the task was.

To summarize the key things that created a great customer experience and persuaded me

• Pick up within one hour, great benchmark for others going this route
• Visible placement, next to the buy button before entering the checkout process
• Clear information on the website about the feature
• Inventory status visible – I knew it would be there
• I could choose where to pick it up

Not bad.

What could Elgiganten have done better with this feature? I think they could improve three main things.

• The in-store experience. It was unclear to me where to pick up my goods in the store, I felt confused and stood in the wrong line waiting for 10 minutes. The information on the web & in the order email was clear, but when arriving at the store I could not recall the details. I had just noted down the order number on my iPhone.
• Post-purchase communication. I should have received an email thanking me for using the website and directing me to their online customer service for the product I bought, FAQs for the product or similar. Check out this example (in Swedish)
• Advertising the feature of Collect@Store in the store was lacking. Visible in-store advertising would also raise awareness for their offline customers on what the website can offer.

As discussed above, it is also probably possible to try out for example tactical campaigns around weekends to compete with online stores for customers in a hurry.