Voices: the CMB Blog

How many times have you looked at all of the to-do’s you’ve crossed off your list during any given week and wondered, “What do I actually have to show for it?” The fact of the matter is that the work day is a constant struggle to separate out the important from the urgent and from the importantly urgent so that we maximize our time on activities that are most likely to contribute to corporate metrics. We must be strategic about how we get through the day.

This same concept applies when growing a business. When it comes to growth strategies, most firms don’t suffer from a lack of ideas and paths to choose from. Conceptually, most business leaders understand that deciding what not to invest in is just as important as deciding what business opportunities to pursue. Yet many companies still find themselves stretched in many directions, with various product lines, strategies and consumer segments. Budgets, time and employee energy are spread across too many initiatives, many of which are low ROI activities

It’s hard to say “no” when opportunity—in the form of a potential revenue stream—comes knocking. But the irony in finding growth is the ability to focus and say “no” even when it means turning down a potentially exciting or even lucrative business initiative. Without this focus, businesses can’t make sufficient investments in the most high-priority initiatives. Management struggles because they are doing everything at once. A company’s best people are spread across different projects and can’t execute efficiently. And, in some cases, even finding time to meet and move projects forward is stymied by overcommitted schedules.

A business leader must find the courage to make decisions and focus their people and their funds on the goals that are most likely to get them ahead of the competition.

How do you get to “no”? For starters:

• Focus on one or a few key customer segments where your value proposition is most differentiated. Look at customer segments where you perform better than the competition and customers feel you truly—instead of marginally—meet their needs. This typically requires a robust market segmentation to guide your focus.

• Focus on your business’ core capabilities and strengths, and commit to investing only in these capabilities. Many companies run into trouble when they move away from their core in search of more attractive opportunities. Cisco’s Flip phone was an attractive idea, but turns out the fickle world of consumer electronics was too far afield from the company’s core business.

• Focus on balancing the needs of  your customer today versus your customer of tomorrow. A tech company, for example, will want to devote more of their investments (20-30%) on future customer needs. On the other hand, more mature industries such as insurance will dedicate most of their budget to current customer profiles and any directly adjacent capabilities.

Saying yes to everything makes it harder to achieve anything. How effective is your company at getting to “no”?

Rachel Corn is a Director at  South Street Strategy Group, she specializes in finding growth opportunities in new market segments, new products and businesses and innovative business models.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies. 

Geoff Nicholson, 3M ambassador and former vice president for international technical operations, was recently quoted as saying “Six Sigma ‘killed’ innovation at 3M.” His reasoning? The Six Sigma process requires a full-blown business case and even a 5-year business plan to get a new idea off the ground and into production. The result: a company once synonymous with innovation saw its new product introductions drop and ranking as a BCG innovative company plummet from number 1 to number 7 in four years’ time.

Nicholson describes a core challenge to scaling innovation: how do you institutionalize it 

without stifling it?

Frameworks like Six Sigma and Stage Gate rely on strict “go-no-go” decisions at key junctures, based on quantified metrics such as market size, market share potential, volumes, etc. Quantifiable approaches like this work best with incremental innovations, such as line extensions or expansions into adjacent markets.

But, breakthrough innovations—the Model-T, iPod, Post-It Notes—target new-to-the-world markets and demand curves that are hard to quantify.

An alternative approach to assessing demand for a new offering is to take it through a proof-of-concept evaluation. With a small budget, a team of individuals passionate about the idea can use small-scale testing or research techniques to understand whether the idea works and if people want it. One of our clients always sets aside 15%-20% of his funds for sussing out new, big ideas in just this manner.

Without a doubt, companies seeking to innovate should try to learn rather than re-invent the wheel with each initiative. That is one reason South Street recommends clients seeking to “institutionalize” innovation do so with a playbook, rather than a process. A playbook assumes there are some generally repeatable steps at a high level, but they can be re-ordered and prioritized/de-prioritized based on management discretion and the unique nature of the opportunity or challenge addressed. This requires a deeper knowledge of different methods, deeper thought and judgment on the part of participants and more institutional agility, but it also ensures that the right tools are used at the right times. As the 3M story illustrates, instituting a one-size-fits-all process for innovation actually erodes this very capacity.

Is process killing your innovation?

Rachel Corn is a Director at  South Street Strategy Group, she specializes in finding growth opportunities in new market segments, new products and businesses and innovative business models.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies. 

In recent years, innovation has become the latest catchword in US boardrooms, and even slow moving industries not normally associated with innovation suddenly see it as a capability critical to survival. Recently, however, a quiet backlash is forming as the word conjures up images of afternoons lost to brainstorming sessions and stickie-noted walls, with little to show for it in the bottom line.

The fact is, most corporate innovation initiatives—regardless of industry—will fail. And the seeds of that failure are often contained in the lack of clarity on what innovation is and how it will help the company achieve corporate goals. For any business leader, innovation must be viewed as a means to an end. In our experience, the best innovation programs are focused growth initiatives with clear business goals or at least parameters, not a free-for-all of ideas. Thus, we define innovation as the process of finding new and better ways of helping customers achieve their goals in a way that creates value and growth for the company. It’s all about creating value for the customer, and capturing that newfound value to increase the bottom line for the company.

Using this definition, innovation need not be as far-reaching as a new branding campaign or a shake-up-the-industry product in order to be a success. In fact, for most companies innovation is less about coming up with new ideas and more about re-purposing or combining existing ideas into a better solution. Uncovering these opportunities requires a multi-method approach we call Focused Innovation, which is based on the belief that the strongest innovation strategies are built on superior market insights and a laser-like focus on customers’ goals.

How “focused” is your innovation strategy?

Posted by J. Mark Carr, Mark is co-founder and managing partner of South Street Strategy Group.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies. 

Join us, in Boston, May 6th-8th at The Front End of Innovation Conference for: Focused Innovation: Creating new value for a legacy brand

Come enjoy visions of distant lands and mouth-watering adventures as you learn how Tauck Worldwide, an 85-year old tour company, applied the principles of focused innovation to successfully reinventing its core offering for a new audience: the affluent baby boomer.

Speakers:

• Jeremy Palmer, Vice President; General Manager TWD Land, Events & New Ventures, Tauck

• Judy Melanson, VP, Travel and Hospitality Practice, Chadwick Martin Bailey

• J. Mark Carr, Managing Partner, South Street Strategy Group

As with many financial services firms, SunTrust Bank has had to re-consider its strategy over the past several years. My colleagues at Chadwick Martin Bailey (CMB is South Street’s sister company) and I had the privilege of recently working with the company as it shifted into a decidedly customer-centric approach to the way it designed its products and services.

Next Thursday, I am pleased to be co-presenting a webinar with Jeff VanDeVelde from SunTrust and Rich Schreuer from CMB. We’ll be covering SunTrust’s use of customer segmentation to drive its shift to customer centricity.

What’s a strategy consulting firm doing talking about segmentation, you might ask?

Well, strategy is as much about saying “no” as it is about saying “yes” to opportunities for growth. Being able to identify, understand, and then remain true to your target customers is at the core of any good strategy. Clarity around target market segments helps businesses crystallize and rally around the strategies that will drive the most value for their best customers, profitably.

At some point, all our projects hinge on being able to answer the question: will this product feature/marketing message/overall initiative/etc meet my most valuable customers’ needs? Because we believe customer-centric strategy and innovation leads to more profitable growth, all our work contains a strong foundational element of re-grounding the client in the market and their best target segments – for today and the future.

We hope you will join us to learn more on the 28^th, and please drop us a line to let us know what you think! Click here to register.

Posted by J. Mark Carr, Mark is co-founder and managing partner of South Street Strategy Group.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies.

A version of this post was published in Loyalty 360's Loyalty Management Magazine

My colleagues can tell you that although we're well into fall in New England, I still love the garden as loyalty program metaphor. That's because loyalty programs, like gardens, are living entities that require ongoing monitoring and periodic refinements to ensure they grow stronger, continue to operate at peak performance, and deliver the results you need for your business. Here are the four steps to getting your program ready to support growth:Step 1:  Review your goals and the (competitive) landscape

Before you tackle the issue of “what” and “how much” to offer to members to incent their behavior, take time to review:

Desired behaviors:  Are you trying to encourage members to visit more frequently?  Spend a bit more?  Advocate to friends and family?
Customer’s needs:  What goals are your members trying to realize?  What activities are they passionate about?
Brand alignment:  How well does your program reflect the unique selling point or values of your brands? Where are the misalignments? 
Program goals:  What key metrics do you measure to report on program success: member acquisition or retention, e.g. the percent of customers who redeem?
Competitive activity:  What outcomes are these programs focused on?  How differentiated is your program from theirs? 

Determining which, and how many, rewards to give your customers, requires careful consideration of multiple factors. Before you proceed down a “program optimization” path—test the soil.  It’s impossible to build a successful garden if you’ve chosen the wrong plants or haven’t added the nutrients your soil needs to support them.    

Step 2:  Focus

“If you persist in trying to be all things to all people, you will fail. The alternative, then, is to be something important to a few people.” – Seth Godin, in We Are All Weird

The focus of your program may be on high-value members and that’s okay.  Today’s high value customers are fairly easy to identify; they’re the ones who buy higher margin products, visit often, and spend in multiple departments and categories.  But concentrating solely on these customers means that you may be missing an opportunity to lay the foundation for future success.  Consider identifying customers who have high value potential (via predictive modeling) and nurture those relationships as well.  In addition, you may find, upon reviewing your goals and objectives, there are certain other segments of customers that matter as well – and for whom you need to focus activities and attention.  For example:

• Caesars Entertainment’s re-launched its Total Rewards program to celebrate its position as the country’s leading entertainment loyalty program.  The new program offers additional offerings and experiences designed to appeal to Entertainment Seekers (in addition to the core avid gamer); their relaunch included concerts by Cee Lo Green, Mariah Carey, P.Diddy and Gavin DeGraw. 

• Best Buy gave select members of its Reward Zone loyalty program a ‘surprise and delight’ reward, a ticket to the Twilight premier.  Sales remain the driving force behind their points-based loyalty system, but in surprise-and-delight programs, marketers can choose consumers who might be major spenders but also because they're passionate or the kind of people who drive incremental buzz online. They’re using this approach to build greater engagement among high-value customers and create more PR-worthy and effective programs in a crowded loyalty space.

Bottomline: focus on the people that are aligned with what you are trying to do. 

Step 3:  Differentiate and innovate

Colloquy’s report on the state of the loyalty industry finds the average US household has 18 loyalty program memberships.  Eighteen! 

If your program is purely a frequency-based program, differentiation isn’t your goal.  However, dialing up program innovation to differentiate from competitors may prove valuable if your desire is to create loyalty, drive incremental spending, stronger customer engagement, and additional brand advocacy.

I love home-grown vegetables, and the varieties I pick are those that do well in my garden and that I can’t buy in a store.  Although I love to garden – if the only product I could grow was one that I could easily buy, I may reconsider the time I was willing to invest.  My pride in this activity would decrease and I’d tell fewer people about my garden. 

For the members you’ve decided to focus on, differentiate your program from competitors.  Give your members a reason to return— pride in their association with you and something to talk about!

Step 4:  Optimize program benefits

You’ve reviewed your objectives and the competitive landscape.  You’ve targeted specific members and have embarked on a program to identify innovative ways to differentiate yourself in the marketplace.  What now? 

To justify changes in your program, you’ll need to articulate the incremental value additional benefits will deliver.  You’ll need to do that if the additional benefits require additional investment – or if you are working with franchisors who demand financial justification to justify additional investment! 

Over the last ten years, we’ve worked with industry leading programs to analyze the cost-benefit of program benefits to support program development or refinement.  Here are a few examples where we conducted quantitative research using advanced analytics (like Discrete Choice):

• A leading upscale hotel chain, needed to figure out an on-property benefit it could provide in place of a guaranteed suite upgrade since some the upgrade wasn’t a viable option at some of their hotels.  An alternative was identified and members are given the choice at check-in. 

• As it develops and acquires new brands, this hotel loyalty program needed to identify the right type and level of benefits to offer at to guests at its extended stay hotels – benefits that would be of value to guests who stay, on average, for two weeks at the hotel

• A leading luxury retailer wanted to optimize structure to drive incremental sales and refresh benefits to incorporate more brand-relevant experiential elements for the refresh of its flagship shopper loyalty program

Discrete choice is a great tool for loyalty program optimization because it allows us to:

1. Optimize programs based on client’s goals:  By examining member interest in thousands of alternative benefit packages – and calculating the cost of providing those benefits – we can identify the best programs in terms of profit (‘high customer value’ and ‘low cost’), or for other key outcomes like member acquisition, increasing take rate from competitor’s customers, etc.

2. Estimate shifts in market share that could result from changes to your program benefits

3. Examine incremental spend - attributable to program benefits - from a couple of different angles

If you’re looking to optimize your loyalty program resources to get as much benefit as possible, following this four step plan may cause you to think differently about your program, the benefits it offers and the potential that exists.  Focus on what, and who, is most important and pruning back where you may be over-delivering can help ensure that your program grows stronger, operating at peak performance, and delivering the results you need for your business. 

Judy Melanson leads the Travel & Entertainment practice and loves collaborating with clients on driving customer loyalty.  She's the mom of two teens and the wife of an oyster farmer. Follow Judy on Twitter at @Judy_LC