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Co-Creation and Customization: An Interview

Recently, I had the pleasure of being introduced to ICFAI University, one of India's leading educational institutions, recognized for its skills in developing innovative educational programs and writing insightful case studies. It is also a leading publisher, 18 magazines and 46 journals, in areas such as marketing, finance, environment, and health care.

Effective Executive is the flagship magazine of the University. Started in 2000 and published monthly, it features articles on topics like marketing, strategy, sustainability, and innovation. Every issue also features interviews on these topics with experts. In the recent past, the magazine has interviewed globally renowned experts and intellectuals, like Philip Kotler, Michael Tracy, Pankaj Ghemawat, Vijay Govindarajan, and Dr.A.P.J.Abdul Kalam, a renowned nuclear scientist, and former President of India.

The magazine's latest issue is dedicated to the theme Co-Creation: the New Frontiers of Competitive Advantage. The issue features an interview conducted with me on my HBR article and on co-creation.

I would like to share two key topics covered by the interview. The first deals with the nature of co-creation, and the second with the difference between customization and co-creation.

Understanding co-creation

Often, the more people use an expression, the less certain we are what they really mean by it. It's as if usage guarantees understanding, and more frequent usage guarantees deeper understanding. But that's not true. Take expressions like Web 2.0, the new normal, or sustainability. People don't often explain or use these terms the same way.

In the interview, I explained co-creation not by defining it, but by decomposing it, to better explain its features and characteristics.

Co-creation, as currently used in the business and marketing world, has a very specific meaning. Rather than present a definition, my preference would be to explain co-creation by decomposing it, so we can better understand its characteristics. First, co-creation, represents interaction, and takes place between one or more firms, and one or more actual or potential customers. Second, this interaction is willing, purposive, and intentional. Third, this interaction is managed, either by the firm, or jointly by the firm and its customers. Fourth, the output of this interaction results in value for both the firm and for its customers. Lastly, the value created for customers may or may not be unique, and is derived through a variety of experiences, such as suggesting ideas, refining current value, designing new products, improving current designs, fixing defects, and consuming new products and services.

Customization and Co-Creation

I've blogged on this topic before when I interviewed Page Moreau. But its worth revisiting, since the two words are often used interchangeably, giving the impression that the two concepts are the same.

There is no doubt that in specific cases there is a blurring of boundaries, but customization and co-creation are not the same.

Let me answer the last part of the question first - do boundaries between customization and co-creation get blurred? Yes, they do. Part of the reason is that researchers and authors who introduce these terms are not always diligent in defining them, and differentiating them from other similar terms. Let me illustrate this for you with an example. Take a men's clothing company like Paul Fredrick, that sells its offerings through a catalog. If you want to order dress shirts, you have two options. You can either buy the color and pattern you prefer, in your size, based on all the shirts displayed in the catalog, or you can order a custom shirt. Customization allows you to mix and match the fabric, collar and cuff styles, fit, pleat style, pocket, among other things! But wait, there's more. You can also have the shirt personalized, by having your initials monogrammed in several different styles, in different colors, on either the cuff, or the pocket. Customization, personalization, or both! But is it co-creation?

What is important to realize is that customization and personalization are possible only within the boundaries of choices offered by the company. To go back to the shirt example, the only way I can order a shirt with kurta sleeves (an Indian style shirt with tubular sleeves) is if the company offers that option. If the company does not offer that option, then all that I can do is pick from the sleeve styles offered. This is in sharp contrast to co-creation. If the shirt were being co-created, then all options would be on the table, including kurta sleeves, because the starting point would be a blank canvas, not a menu of predetermined options and styles.

I am sure I'll blog again on the similarities and differences between customization and co-creation. We owe it to ourselves to keep our thinking fresh and focused.

Peter Drucker's Ideas and Legacy: A Centennial Celebration!

Cogito ergo sum - one of Descartes's most famous legacies - loosely translated as, I think, therefore I am.

Peter Drucker had a similar way of introducing himself - I write - is how he used to introduce himself. What Peter should have really said was - I think and I write, and I don't know which one comes first. An interesting chicken and egg problem, but not one you lose sleep over, especially if your writing borders on the prolific, and your thinking can stand the test of time!

November 2009 marked the 100th anniversary of Peter Drucker's birth and we should celebrate it. Universally acclaimed as a great management thinker and business guru, for over 50 years, from the early 1950's to the early 2000's his provocative and often controversial ideas dominated the business world.

The management kingdom is rediscovering him and finding him to be just as relevant as he was all those years ago.

HBR ran a special issue on Drucker in Nov. 2009 - asking What Would Peter Drucker Do?

Books like Inside Drucker's Brain are attempting to make him and his cutting edge thinking more accessible.

Paradoxically, in the West, where he made his greatest contributions, he is all but forgotten, pushed aside by gurus du jour. On the other side of the Atlantic, Drucker societies are still alive and flourishing. They assemble routinely to discuss his work and learn from his teachings.

It is impossible to compress a sixty-year career comprising over thirty books that have sold over 5 million copies and scores of articles, including some HBR classics, in a page or two. So, how about we take inspiration from Hollywood and present instead a 90 second trailer on the World according to Peter Drucker.

His signature idea - Management by Objectives; still relevant, especially as companies flounder with direction and purpose.

His committed and unwavering focus - the long term health and well being of companies, not short-term hits. He rarely blamed individuals, maintaining that it was always the underlying systems that were the root causes of failure. He believed organizations should constantly challenge their design and operations; he saw this as the key to long-term well being.

His favorite questions - What is your company's ultimate purpose? Who is the customer? What is your mission? What is it you should continue to do? What is it you should stop doing? Where has the obsession with the short-term undermined long-term effectiveness? Why aren't some younger people in the company earning more than the Directors?

His passions - writing, context-bound thinking, integrating ideas, processes not outcomes, urging companies to innovate and create the future, long-term corporate well being, nurturing future stars, and of course - the CUSTOMER!

What did A.G. Lafley, ex CEO of P&G, learn from Drucker?

In A.G.'s own words:

Over the years, I learned many things from Peter, but far and away the most important were the simplest:

The purpose of company is to create a customer.
A business is defined by the needs, wants, desires a customer satisfies when buying the company's product or service.
To satisfy the customer is the most important mission and purpose of every business.

No presentation of Peter Drucker's work is complete without sharing some of his memorable quotes and brilliant observations. A very brief, you might even say self-serving, sampling related to marketing, the customer, and innovation follow.

Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.
The customer rather than the manufacturer defines a market
Of course innovation is risky. But so is stepping into the car to drive to the supermarket for a loaf of bread. All economic activity is by definition 'high risk.' And defending yesterday - that is, not innovating - is far more risky than making tomorrow.

Paraphrasing Drucker and taking a few artistic liberties: since customers define markets, and market creation should be the fundamental focus of a company, and innovation is the primary fuel that drives this market creation - then what better world to be thinking, writing, and consulting in, than customer-driven innovation!

Happy 100th Peter! You are not forgotten.

AMA's Future of Marketing Report - Light on Customer-Driven Innovation

The American Marketing Association (AMA), Decision Strategies International, a global consultancy specializing in scenario planning, and a group of marketing leaders from industry and academics recently completed a project on the role of marketing in 2015 - Future of Marketing in 2015 - an American Marketing Association Special Report.

After nearly a year of secondary research, a survey of business and consumer marketers, and workshops with marketing leaders, the AMA developed four possible future states in 2015 and their potential impact on marketing in the organization. These scenarios are presented below. For each scenario, the project also created thumbnail sketches of key goals and objectives of professionals operating in each scenario.

The four scenarios and the CMO archetypes for each scenario follow:

CMO Archetypes:

While the effort of the AMA to peer into the future is laudable, I am personally very troubled by the output, and the lack of emphasis on some fundamental game-changing trends like customer collaboration, value co-creation, customization, and open systems thinking.

A useful tactic in evaluating the output of a future oriented undertaking is to study the inputs used. The report states that the scenario building process began with an identification of forces that might shape the role of marketing between now and 2015. The key issues and trends identified were:

Shrinking world, expanding relationships - increase in globalization and technology integration
Rise of new class, BRIC by BRIC - creation of new consumer markets
Innovation or Invasion - push back due to micro-profiling and and behavioral targeting
Command and Control becomes Cultivate and Create - two way conversations providing valuable information for new products/services offerings
Channel Convergence and Consequence - traditional media continues to be challenged
Talent Turmoil - increasing competition for valued skills and competencies
Pressure to Prove - Marketing is persistently challenged to prove strategic value and bottom line contribution.

Only one of the above inputs - "command and control becoming cultivate and create" - comes close to addressing how the concept and dynamics of value creation are changing. What could be more fundamental than the identification, creation, delivery, and nurturing of customer value? Yet not one of the archetypes presented above is obsessed with it.

The Future of Marketing should be a paradigm shift, not a straight line extension of Marketing's current focus with selling, promoting, and packaging. Even more disappointing is that the above scenarios and archetypes do little to move Marketing from its current inward product focus to a more outward customer orientation.

Marketing needs a bolder different future, one that is obsessed with customer value creation. This bolder future can't be achieved by a functional focus alone, no matter how cleverly worded - network integrator, sales facilitator, etc. Because Marketing is not a function, it is a business orientation that shapes how a company creates long term, sustainable value for customers, for society, and for itself.

The Future of Marketing can't lie in peddling influence and shouting brand superiority. It must lie in making investments in consumption ecosystems, of which the company is only one small part. For the future of marketing to be viable, it must part ways with its incarnation of today. The scenario that is personally most exciting to me is one where an obsession with customer value makes marketing as we know it today obsolete and unnecessary!

That indeed would be a bright new future.

Leadership Missteps at Whole Foods and Hyatt Hotels: Listening Could Have Helped

Hyatt Hotel's has been in the news lately - for all the wrong reasons. As was the CEO of Whole Foods a few weeks ago! In fact, I could begin this blog the way I began my May 21 blog (What do General Mills and Finland have in common?) and ask - what do the Hyatt Hotel and the CEO of Whole Foods, John Mackey, have in common?

On August 11, John Mackey penned a op-ed on health care reform in the WSJ strongly aligned with right wing, conservative thinking. His opening quote makes transparent his personal leanings.

"The problem with socialism is that eventually you run out of other people's money." - Margaret Thatcher

On Sep. 17, Hyatt fired approximately 100 housekeeping staff in Boston. According to the Globe, Hyatt fired housekeepers at the Hyatt Regency Boston, Hyatt Harborside, and Hyatt Regency Cambridge, replacing them with workers from an Atlanta staffing company.

One can argue what's wrong with that. The constitution of the United States guarantees a person the right to free speech, and capitalism the right to a company to structure its labor force and its costs (most of the fired housekeepers were minority women, making $15 an hour; it is expected the replacement workers will make $8 an hour).

However, in today's networked, interconnected world, company's and CEOs are not just individuals or employers. They are symbols of what their companies stand for, and for what their customers stand for.

Customers who shop at Whole Foods are liberal, pro-environment, anti GMO, pro-organic food people. It is not that they want to deny John Mackey the right to his opinions; it is that they felt let down and violated. John's op-ed diminished the value customers derive from their association with the store and their shopping experience there. Take a look at the poll at wholeboycott.com:

Clearly, those who run Whole Foods have not spent enough time to understand the dynamics of today's interconnected networked world. The concept of customer value has changed. Customers don't just derive value from the products and services a store has to offer, they also derive value from what the company and its executives stand for.

Hyatt's case is no different. The outrage is not about whether it's a good business decision - its not about Hyatt's understanding of cost cutting and optimizing a housekeeping budget - its whether Hyatt has a good heart or not? The issue is also about whether I will get value by staying at a hotel chain that acts in such a heartless fashion.

A company or a CEO can't be so naïve as to ignore the context they operate in. There is still blood on the streets. A large number of people are struggling to get by and the evening news is full of heartbreak stories. We live in an era where Politicians are actually regarded as more trustworthy than Business Leaders! Don't believe me? Ask CNN!

Today's customers are talking to each other - in both the real and digital worlds. Though what they say in the digital world can often be more potent, due to the speed and ease with which digital opinion can whip up bystanders into a frenzy about issues they deeply care about. The environment is one such issue, health care is another, having a job and avoiding economic pain probably tops the list.

Are John Mackey and Hyatt not listening? Intelligent companies in touch with the realities of the digital market place don't just listen when customers talk to them. They listen even when customers are not talking to them or about them. Why? Because smart companies realize they don't control the conversation agenda, they are merely a part of it.

Urban Sustainability: A Testing Ground for Collaboration and Engaging Citizens

It's a good season for change! Sitting on the fence is not an option, especially when it comes to the environment.

The United States has reached the edge of deferment; it must now embrace sustainability and engage its citizens in green and clean initiatives. President Obama has promised $80 billion of the economic stimulus package for this cause. Furthermore, with the average American generating four pounds of trash per day and 10 tons of carbon per year, rhetoric alone won't do, we need action.

While the U.S. is rarely recognized among the greenest countries--in fact, it falls a dismal third from the bottom in its Environmental Performance Index category--it boasts a number of communities and states that are front runners when it comes to sustainability. In fact, if California were a country, it would qualify among the world's greenest with the world's largest solar power plant, wind farm, and geothermal installation.

Which begs the question, if a few communities and states can achieve this state of awareness and action, why not the entire country? The true goal has to be effective and active engagement of citizens on a broader national scale, not just in self-contained, isolated pockets. It's not going to be easy; USA's population is 12 times that of Scandinavia--the established leader of the green movement. Add to it the burden of the recession and an argument could be made as to why an average citizen may not be as amenable as in more prosperous times.

But there is hope and energy as a select group of cities like San Francisco (changing the way we think about recycling) and Portland (spearheading the mass transit revolution) lead the charge toward the New Economy.

Long the capital of American architecture, Chicago has emerged as a leader in green architecture and landscaping as well. Its "Forward Chicago" initiative engages companies and citizens in improving the city, while also strengthening its bid for the 2016 Olympics through the following measures:

Recent establishment of a citywide "Challenge" that offers citizens $800 for reducing their carbon emissions.
Conversion of 4 million square feet of public and private roof space into gardens, saving thousands of dollars in energy costs.
Citizen contributions to city "greening" efforts, planting more than 500,000 trees and helping convert 200 acres to park space.

Minneapolis empowers its citizens to fight climate change by using a system of mini-grants. Neighborhoods, individuals, and community groups can submit innovative ideas to receive grants ranging between $1,000 and $10,000. Funds have been used on projects ranging from the installation of at-home power consumption monitors to "block parties" that focus on how neighborhoods can fight global warming. Many grant recipients also sign up for the Minnesota Energy Challenge, which encourages residents to make significant lifestyle changes and reduce their carbon footprints. In 2007 and 2008, the grants collectively aimed to reduce carbon dioxide emissions by 10.9 tons and save $1.33 million in annual energy costs.

When it comes to renewable energy, Austin, Texas--also home to Whole Foods--attracts international attention. Austin Energy is the country's largest provider of renewable energy, and the City of Austin aims to become carbon neutral by 2020. With such lofty goals, they use a combination of positive and negative reinforcement to engage their citizens:

Resident rebates for energy-efficient home improvements; at-home solar panels subsidized at 50%.
Discounts throughout the city on rainwater barrels and low-flow toilets.
Home energy audits required prior to putting a house on the market.

San Francisco strengthens its hold on its title as the lead recycler in America with a new mandate for composting food scraps. With a goal of keeping 75% of recyclable material out of landfills by 2010, residents face a $500 fine should they fail to compost.

Will these measures close the gap, as San Francisco moves toward a waste-free city?

And finally, there's Portland--the city that many recognize as the greenest in America. Portland stands alone as an example of holistic green urban planning. Its sustainability plans reach back several decades and have involved its residents at every stage of the process.

A few examples of what the city and its residents have jointly accomplished are presented below.

Investments in mass transit and trail development rather than highway construction result in 25% of Portland residents commuting by bike, carpool, or mass transit. They've also contributed to a nascent biking industry based in Portland.
State tax credits for businesses and residents using renewable energy are encouraging a fast transition in power sources. Currently, 50% of the supply derives from renewable energy, with a goal of 100% by 2012.
The city's land-use policies and urban growth boundaries have motivated citizens and politicians to commit to becoming a "20 Minute City." This means that residents will soon be able to travel wherever they need to go by walking or cycling for 20 minutes.
Through the "Portland Composts" program, more than 200 city restaurants have begun composting their food waste--and encouraging their patrons to do the same.

Despite its bad rap, the United States boasts several cities with admirable green initiatives. However, what's missing from the resume is a single model city representing a comprehensive and complete eco-success story.

Some may argue that the foundation for such a model eco-city has been laid on the West Coast, and it's only a matter of time as progressive practices spread from Seattle down to San Diego. That said, a more significant commitment to holistic urban planning, that relies not only on legislation, but an extensive engagement of citizens and residents across all dimensions of sustainability--can only help accelerate the creation of a model American eco-city.

Collaboration and Co-Creation of Social Value: Government, Citizens, and Sustainable Cities

The next few years are likely to witness numerous environmental initiatives around the globe. For starters, the 2009 UN Climate Change Conference is expected to update the Kyoto Protocol. Additionally, several countries are looking to green policy stimulus packages to pull them out of the current recession.

At recent G20 conferences, Japan and South Korea trumpeted their stimulus plans as Green New Deals, while China has earmarked $30 billion of its package for environmental programs. In the United States, the Obama administration continues to emphasize its commitment to the environment, dedicating $80 billion of its $800 billion package to support green projects.

To maximize the benefits from these investments, local governments must successfully engage their citizens to influence their thinking and behaviors. Indeed, it is no coincidence that the most significant innovations occur within distinct cities or communities, as local governments can more easily interact with citizens, soliciting their feedback on key initiatives and working with them to execute policy.

The greenest communities share some common characteristics - energy-efficient buildings, renewable energy sources, widespread recycling, efficient and comprehensive mass transit, and substantive nature trails/green space. But that's just the cost of being green!

At the end of the day what they excel at is actively involving their residents in implementing green initiatives--the same way as corporations like Whole Foods do (discussed in the previous post). Two shining examples of innovative community initiatives are Curitiba and Malmö.

Curitiba, in Brazil, developed a holistic urban plan in the 1970s and 80s to preserve green space, establish a recycling program, and reinvent its public transportation system. However, given Curitiba's limited resources, it relies heavily on its residents to execute its initiatives.

Watch Brazilian urban planning guru, Jaime Lerner explain his philosophy of how to make life better for people by making cities more livable.

Curitiba's Cambio Verde program enables low-income citizens to exchange their metal and glass waste for fresh produce and bus tickets. Due to this program and widespread recycling of all residents, the city has emerged as Brazil's number one recycler, reusing 70% of its waste.
Curitiba used existing roadways to develop a rapid transit bus system that links all areas of the city. Investments in a high-speed, high-capacity bus network increased ridership by 400% in over 20 years; now 60% of urban travel occurs by bus. While citizens are more likely to own cars than other Brazilians, they use 25% less fuel per capita. Furthermore, 41 cities, ranging from Los Angeles to Bogotá to Seoul, are in the process of replicating Curitiba's transit system.
The city's Technology Street showcases 24 different homes, each built to spotlight sustainable construction materials, such as bamboo, or homes operating with renewable energy. The city encourages prospective homeowners to meet with the architects of these residents prior to starting any new construction.
Mandates for dedicated green space have encouraged residents to independently plant more than 1.5 million trees on city streets. A city-appointed shepherd and his flock of 30 sheep trim the grass in many of the nation's parks!

Malmö, Sweden, an industrial city in which the economy crashed and burned in the 1990s, has reinvented itself as a pioneer in sustainable development as an Ekostaden, or eco-city. Currently, Scandinavia receives more recognition than any other region for its sustainable living practices, with Sweden alone supporting more than 60 "eco-cities." How have they done it? A combination of bold politics, experimentation, and community empowerment.

Several key initiatives have enabled the city to achieve the following:

Widespread solicitation and implementation of citizens' unique ideas. One resident developed a plan for a new storm water system that captures 70% of rain water in one area of the city.
A community (Western Harbour) in which the government encouraged innovation from architects and planners to enable 100% renewable energy from the sun, wind, hydropower, and biofuels generated from organic waste
A mandate for increased green space, resulting in one of the largest developments of botanical roof gardens in the world with which citizens can insulate their homes, plant their own herbs and vegetables, and reduce the city's carbon dioxide emissions
A transportation system dominated by cyclers and mass transit. The city worked to make the cycling paths and bus network aesthetically pleasing to encourage shifts in citizen behavior.

Collaboration and Engagement are potent platforms for the co-creation of value, whether commercial or social. In both the commercial and social arenas, companies and institutions are only just beginning to truly understand the power of WE. Appropriately harnessing it and leveraging its power is still a few horizons away.

The old way of doing business is dead for business and marketing executives. It is dying fast for those who run countries and communities as well.

Continue reading Collaboration and Co-Creation of Social Value: Government, Citizens, and Sustainable Cities.

Flu Trendwatch: The Collective Intelligence of Web Search Logs

The Internet is a key source of information for millions around the globe. Not surprising therefore that search engines, like Google are one of the first places people turn to for information on topics ranging from movies (Slum Dog Millionaire), overnight sensations (Susan Boyle), and threatening pandemics (swine flu).

The sheer numbers of people who use the Internet for search or Google's dominant share of search engines is exciting at a mere wow level. More exciting is the fact that on-line search behavior of individuals litters the electronic highways with digital crumbs and telltale clues, leading to the obvious question - are they related to events in the real world and can they predict off-line behavior?

A team of researchers from Google and the CDC answer this question in a most compelling and topical way in the February issue of Nature. The authors were able to accurately model the outbreak of flu epidemics by tracking search engine query data. Their research tool, Google Flu Trends, has a warm intuitive basis to it - people are more likely to be searching for sunscreen during summer months and for flu remedies and prevention tips during the flu season.

The research team observed that some search queries tend to be popular exactly when the flu season is in full swing. A few examples:

flu complications, syptoms
cold/flu remedy
antibiotic/antiviral medication

By observing and counting the frequency of these search queries the authors are able to accurately estimate how much flu is circulating in various regions of the United States.

The CDC also tracks influenza across the United States through their Influenza Sentinel Program, which relies on a network of approximately 2500 doctors who see 16 million patients each year. The doctors keep track of and report the percentage of their patients who have an influenza-like illness (ILI).

The CDC publishes national and regional data from these surveillance systems on a weekly basis, typically with a 1-2-week reporting lag. In an attempt to provide faster detection innovative surveillance systems using indirect signals of flu and flu-like activity like call center volume and sale of OTC drugs have been adopted recently.

While the CDC innovations are laudable, it is difficult to top the value of Google search queries as an early warning system for epidemics and pandemics. They can be counted automatically, quickly, results can be made available daily, and can be consistently published 1-2 weeks ahead of CDC ILI surveillance reports.

Early detection and rapid response are not just mantras for the commercial world. They are just as important in the worlds of institutional and government action. With over 90 million adults searching online for information about specific diseases or medical problems each year in USA alone, web search queries are an important line of defense for preventing and containing epidemics, before they become a pandemic.

It is in that spirit, that after conferring with US and Mexican health officials Google Flu Trends has created and released experimental flu activity estimates for Mexico based on aggregated search data. With the WHO raising the alert level concerning swine flue twice in the last three days, elevating it to one notch below a full-scale pandemic, all available data needs to be brought into play, regardless of whether its been validated against actual flu cases or not.

During difficult times like this, with the financial gloom still hanging heavy and swine flu threatening, it is encouraging to find social media being used to promote social well being, not just the goals of a few corporations with the right technology.

Web search logs, whether generated by Google or some other search engine, represent the collective intelligence of millions of Internet search users. We already have an example of how its being used intelligently for the early detection of influenza. Perhaps it can also be used to tease out early signals of a much-needed economic recovery!

What digital crumbs should we be looking for - search for air-fares, travel and holiday destinations, home prices, marriages and honeymoons?

Experimentation: Critical to Customer-Driven Innovation Success

In the Feb. 2009 issue of HBR, Tom Davenport offers advice on how to design smart business experiments. His main assertion is that in too many companies business innovations are launched on a wing and a prayer.

Tom's focus is on rigor, and knowledge, and valid conclusions. No arguments there; but there is even a more fundamental issue - a company's willingness to embrace experimentation.

Several thinkers, like Eric von Hippel, Stefan Thomke, and Michael Schrage have discussed the benefits of experimentation. Going beyond the obvious links with innovation, they discuss how experimentation can help companies create new value for customers faster and more effectively.

Experimentation is an essential ingredient for customer driven innovation. Getting companies to embrace it enthusiastically is key, if the true potential of co-creating value with customers is to be realized. So, the critical question then becomes: How do we get companies excited about experimentation in the context of value co-creation?

Here are a few prescriptions with extremely positive side-effects:

Recommendation 1: Get over the Steve Jobs syndrome

Too many companies suffer from the White Knight and the one omniscient, omnipotent decision maker syndrome. As brilliant as Steve Jobs is even he could not have predicted that the backbone of iPhone's mass appeal would be their multitude of diverse open-source apps. Even their latest ad speaks to this phenomenon.

In an environment where it is difficult to predict where users will take an innovation, involving a larger group of interested users through experimentation is even more critical. And before you dismiss this as being applicable only to technology products - think Arm & Hammer! It did not start off in our refrigerators and toothpastes, but it sure did show up there.

Recommendation 2: Lose addiction to control

All addictions thrive on the addict's perceived sense of loss, if the addiction were to be given up. Behavioral economists will have a field day with the psychological addiction companies have to control. Their gain-loss equation is totally focused on what they will lose; not what they stand to gain. Those that have - Mozilla Firefox, Dell, P&G, Hallmark, Under Armour - can testify that less company control often translates into more value for the customer, because you can engage in more "what-if" thinking. In short, you can experiment more, something that Mitchell Baker points to in explaining the success of Firefox in her interview with The Mckinsey Quarterly.

Recommendation 3: Redefine success

For most companies failure is the deviation from what was expected or planned for. Not so in the world of experimentation, where failures are often the proverbial stepping stones to success. In the world of innovation, experiments that fail can actually have a large number of positive side effects, such as speedy elimination of unproductive alternatives, rapid learning, and building on that learning through more rapid testing. According to Stefan Thomke, early failures can lead to more powerful successes faster; a sentiment that IDEO echoes when they talk of failing often to succeed sooner!

Recommendation 4: Get serious about play

Most companies have tired ideas about work and play. The unrelenting focus on tasks, processes, and narrowly defined outcomes are a major stumbling block to turning people loose. And you can't experiment if you don't invite your people to play.

Inviting people to play lures them to play innovative "what-if" games and turns passive stakeholders into active collaborators - as Dell did with its customers, Boeing with its engineers and designers on the 737 assembly project, and Toyota with its suppliers.

Experimentation is essential to customer-driven innovation not only because it enables faster development of products and services better suited to customers' needs, but also because it enables innovations that companies alone can't imagine!

Companies that don't enthusiastically embrace experimentation forego this opportunity to start new conversations on innovation and value creation. All that remains - to paraphrase George Orwell - is a huge dump of worn-out metaphors, recycled as new and improved thinking.

Barriers to Customer-Centricity

Have you heard Branford Marsalis' rendition of I heard you twice the first time?

That's what you feel like telling most companies when you hear their claims to be customer-centric. It is difficult to pick up an annual report without hearing loud assertions of customer-centricity and customer value focus.

But few companies have started the journey in earnest, and fewer still can claim proficiency.

A Gartner Group report informs us that by 2007 fewer than 20% of marketing organizations among the Global 1000 enterprises had evolved enough to successfully leverage customer centric processes and capabilities.

The same Gartner report offers companies a performance tip. It advises that marketers that devote at least 50% of their time to advanced customer marketing processes and capabilities will achieve marketing ROI at least 30% greater than their peers who lack such an emphasis.

But this kind of thinking and exhortation is not new. In the 1950's and 1960's thinkers like Peter Drucker and Ted Levitt were urging companies to focus on the customer and customer needs - customers don't buy ¼" drills, they buy ¼" holes.

For several years now marketing scholars have been advocating firms to shift their thinking away from a brand-centered way of thinking - managing product portfolios, to a customer-centered way of thinking - managing customer portfolios. Recent research has demonstrated quite conclusively that customer value is an excellent proxy for firm value and that companies investing in customer-centric initiatives enjoy higher financial returns.

The question that naturally arises is: "Why haven't more companies become addicted to a customer-centric way of life?"

After all, customer-centricity sounds right, it feels right, it even does right (higher financial returns). Why then the lag in evolution?

If we want to go beyond the usual suspects of culture and leadership, we will need to check our assumptions. Quite a few of them are not true, the most notable being that strategy failures are due mainly due to failures of conceptualization and implementation. But as I like to explain in my strategy courses, organizations are people, and most strategy failures are human failures.

Three human failures:

1) insufficient appreciation of a significant other,
2) the inability to visualize an alternate reality, and
3) the lack of will,

provide a non-traditional explanation why the signal to noise ratio for customer-centricity is so low.

Do companies really value their customers?

As ridiculous as the question sounds, it must be asked, given all the evidence we are surrounded with. Simply put, if they did, companies would behave differently, in a more customer-centric way. If the customer was a significant other of a company in a social sense, the two would have got divorced and stayed permanently divorced.

How do we explain this? Prayer offers an interesting analogy. For the majority of human beings, prayer is still an exercise of the lip affair, not the heart. Similarly, for most companies, customers are a lip affair, not a heart affair.

For companies to become customer centric, customers must become a heart affair. As long as companies value their personal odyssey for the next round of higher profits and higher sales more than they value customers, this will never happen.

Type in the words "customer centric" in Google, and the first thing you find is customer-centric selling. Not customer-centric innovation, not customer-centric product development, not customer-centric strategy. Just selling.

The bare truth is that for most companies, the customer is a mere invisible means to an ever-increasing end; sales, market share, and profits. And the end is invariably more valuable than the means.

Can companies visualize the separate reality that customer-centricity represents?

Jack Nicklaus reportedly never played a golf shot without first visualizing it in his mind's eye. Research conducted by brain scientists and cognitive psychologists affirms that the ability to visualize positive outcomes increases the probability of those needs becoming reality

But what if the company can't visualize what it really means to be customer-centric? After all they can see tangibles like products, sales, and revenue charts on a daily basis. And while it may not be ideal or optimum, it is real!

What if this alternate reality is really more hype than substance, what then? And since most companies can never quite answer this question satisfactorily, the alternate reality stays locked and companies stay home, foregoing the customer-centric journey, despite its promise of greater prosperity and riches.

Do companies have the will to put in the hard yards that living a customer-centric life demands?

By all accounts customer-centricity is hard to build and sustain in large organizations. It requires a significant investment in people, training, resources, realignment of structure and processes, and breaking down information and power silos, to name just a few. This is hard work and could test the will of even the most determined CEO.

A few years ago I was in Athens, attending a global managers meeting for a large agency. On the last day a great ritual was staged. In the old Greek tradition we threw plates in the air (they were paper plates, throwing real china plates is banned), to symbolize a break from the past. We committed ourselves to our customers, to innovation, and went home. On returning home nothing changed, everything stayed exactly the way it was.

Most companies want to win at customer-centricity. They want the customer to love them more than their competitors. But rarely do they have the will to do whatever it takes to earn the customer's love. Up to a point, and no more.

We don't need more analysis to understand why there is such a huge chasm between what companies claim by way of customer-centricity and how they actually conduct their businesses.

All that we need is to acknowledge a cold and brutal fact:

customers are not # 1!

And as the good bard said - "...ay, there's the rub"

P&G Collaborates with Google, Facebook, MySpace, and Twitter

There's something about champions that sets them apart from the rest of us. They never stop challenging themselves to grow, to become better, to get to the next level of performance.

Walter Payton, the Chicago Bears running back standout was a true champion. In his book - The New Dynamics of Winning - Denis Waitley tells the story that during off-season Payton would train by running up a steep hill in a Chicago suburb. Sometimes other pro-footballers would join him, but Walter would go a few more times, after they had stopped totally exhausted. And then when he felt he had enough, he would go, one more time.

One more hill, always one more hill.

Procter & Gamble is a very durable champion; they've been around for over a hundred years. And rather than toot their Hall of Fame status, they continue to challenge themselves. Not satisfied, even after all these years of stardom and glory. This time the company is challenging itself to understand and master the emerging world of on-line social media.

According to the Cincinnati Enquirer, P&G will host a meeting of digital minds next month at its downtown headquarters. Senior executives from the emerging world of online social media will meet with marketing executives from the Cincinnati-based company. Early reports indicate that executives from major online companies - Google, Facebook, MySpace and Twitter - will be attending the March 11 event.

In classical P&G style, the company is in no hurry to divulge the full guest list. Martha Depenbrock, the company's spokesperson informs us that about 100 marketing and media professional from the worlds of advertising, branding, and technology are expected to attend. About 20% of the attendees are from digital companies.

The event will provide senior marketing executives from P&G a first-hand opportunity to gain familiarity and hands-on experience with understanding and using social-media tools; the most rapidly growing form of online communication in the US. According to a Forrester Research study, about 75 percent of adult Internet users in the U.S. now use social tools such as Facebook to connect with each other. This number, up from 56% in 2007, is expected to continue to increase.

The increase in social media users presents a potentially attractive opportunity for advertisers, like P&G, to connect with consumers. However, questions concerning ROI, effectiveness metrics, and best-in-class strategies to leverage the power of this medium still need to be figured out. P&G's executives want to figure all that out and more. But first the basics - learning how to use digital forums to advertise the company's category topping brands - at the March 11 meeting of minds summit.

P&G wants to be ahead of the curve, it wants to get there early. One more hill, this time before the others wake up and get their act together.

This is not new thinking at P&G. Earlier, we learned that Google and P&G swapped employees to learn from each other. In a networked world, where not just consumers but companies are connected as well, value creation occurs differently than in a traditional, bounded world. It is co-created. And this co-creation takes place when businesses engage any relevant part of their ecosystem, not just when they engage with their consumers.

In today's world no company can go the distance alone. Value chains have long given way to value constellations. Not for all companies though. Some companies still live by the maxim - Not Invented Here. And like all markets, this market for B2B collaboration and co-creation is segmented as well. At least three types of companies come to mind:

Asleep and Unaware - indigent both in concepts and imagination
Aware but Catatonic - attached to rhetoric; immobilized by the thought of living differently
Active Seekers - ready to jump on a ship and set sail, because they are convinced that answers lie somewhere else; where, they are not sure, but they are willing to travel far and wide to find them (a very workable definition for out-of-the-box thinking and action).

The question to challenge the little grey cells: Google + Facebook + Twitter + P&G = ? We don't know yet, we'll find out soon. However, this we do know - definitely, more than what P&G could have created alone.

Thank you P&G! For searching, for pushing your executives to learn, and for starting yet another lab for customer-driven innovation.

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