February 2010 Archives

I think at this point it might be helpful to discuss some of the issues of forming the group that is to incubate your Intimacy Engine™ business model.  I say incubate because like many new initiatives it must be kept apart - nurtured and protected from the normal processes, procedures and pressures of the organization. 

As we mentioned earlier there will be natural forces within the company that will work against its success - normal, but they can be destructive, as we saw in the case of Microsoft. Dick Brass' recent op-ed echoes the frustration of so many:

Unlike other companies, Microsoft never developed a true system for innovation. Some of my former colleagues argue that it actually developed a system to thwart innovation. Despite having one of the largest and best corporate laboratories in the world, and the luxury of not one but three chief technology officers, the company routinely manages to frustrate the efforts of its visionary thinkers.
Internecine warfare is common reaction you set about changing your business model. It's not simply a go-to-market adjustment.  When building a customer intimacy business model, their are several unique attributes that cannot, and must not, be compromised:

Similar to Consulting Firms - Like consulting firms the key people will be spending time advising clients and working with them in an intimate way - think trusted advisor. This means investing much more authority in field functions and less reliance on staff functions and a much flatter organization - more people doing, less people checking to see what they are doing.

Similar to the Army - The decisions are made on the battle field.  The general cannot be called every time a corporal must make a decision.  Further, like some consulting firms these businesses must deal with a large influx of people who must become experts rapidly in their career. This requires a level of constant training and development unknown in today's corporations.

Pull Through Product - Unlike consulting, the purpose of the intimacy is to differentiate the company and allow trusted advisors and True Solutions™ to pull through product.  Therefore the measures of success are different than consulting.

Rapid Growth - To make a difference to a large enterprise in a reasonable amount of time the business must grow very rapidly.  This means hiring many people - early in the growth curve and that is difficult for companies today who look to hiring people as one of the greatest risk they have.  Further, the business processes and procedures (which are often different existing processes) must be implemented at the start - these counterintuitive processes and procedures may go against the grain.
 
incubation.gifIt is important that the new group report appropriately in the organization so that that it receives frequent attention from senior management.  Many organizations believe this can be accomplished outside of the organization chart - and in some cases that is true.  

Ask yourself, in your company, how important is the organization chart? Is it the first thing discussed? Does it drive how we view who and what's important? If so, then organization placement of this initiative becomes critical to success.

Often the leader emerges from the effort to get the organization aligned on the vision and motivated to take action.  The very passion required to get the organization moving is also needed to keep the effort going.

The attributes of your leader are important:

1.    They must be respected by the organization
2.    They must be aggressive - this effort will require immense energy
3.    They must be flexible - like any new venture this effort will require many adjustments
4.    They should not be bureaucratic or rules-bound - the nature of new and the nature of solutions-led businesses is that they are flat organizations with much authority given to people lower in the organization.
5.    They must be determined - this effort requires 3 to 5 years to be completely successful, and the leader must be able to stay focused for the duration.

The initial portfolio during the "form" phase of the transformation to an intimacy business model (which we call the Intimacy Engine™) is crucial.  The dilemma is the need to develop True Solutions™ - which must address an important business opportunity or correct a business problem for your client - and have the ability to implement these solutions consistently.  

The structure of this new group will resemble a type of management consulting firm.  There will be practices for each grouping of offers (discussed a little later), a group that helps create offers, manages methodologies and trains the staff, and the junior consultants organized into a pool of resources.

incubation_oc.gif You'll notice that I neglected to denote all the staff functions normal to a product business - HR, Finance, etc.  It is not that these are not important, it's just I want to speak to them separately. Let's take each one of the denoted groups and explain their purpose:

Practices - this group holds the expertise of the offer - usually vertical in nature.  If the practice is to serve hospitals this group will have the experts that know how to sell and deliver to hospitals.  It is important to note that you may or may not have a sales organization for this business - there are reasons for both. But the ability to convince clients to buy the offer will live in the practice.

Methods - the ability to do the same thing many times is the mission of the methods group. These might include the following activities: hire, train, and on-board someone, or develop offers, or conduct steering committee meetings, etc.  These groups are made up of rotating people from the practices and the pool.  They must be able to do the work to understand how to build and maintain the methods that enable success. 

Pools - the pool is where consultants stay as they learn the trade and develop what are called "major" and "minors" -  their specialization - vertical and/or type of work.

No one should believe that the transition to a customer intimacy business model is straightforward.  There are many stumbling blocks along the way. In our experience at McMann and Ransford, we find that only the most determined companies can make the journey without stumbling.
path2intimacy.gifDuring the first stage of the Customer Intimacy Journey it is important to create and deliver solutions that have a visible impact with your clients

As you know, terms like "solutions" and "customer intimacy" are overused in the management consulting industry, and I believe often mean too little.  In this blog, we'll try to distinguish our thoughts with not-so-clever use of the terms True Solutions™ and Intimacy Engine™.  I want to talk about what True Solutions™ are and how it is crucial to the building of the Intimacy Engine™ business model.

truesolutions.gifAs you can see by the chart as you move up and to the right you are both making a greater impact on your client and requiring greater intimacy ability to get them to buy and implement solutions.

True Solutions™ - represented on this chart as business solutions - must address a true important business opportunity or correct a business problem for your client.

It is not the bundling of your product and services, it is not adding professional services to implement your service or even assist in product selection (although all these are valuable and will be part of your portfolio).   Further, a True Solution™ should be focused above the Line of Safety in the clients business:

lineofsafety.gif
The problem or opportunity that the True Solution™ addresses must add something that is crucial to someone (hopefully more than one) above this line.  Also, you'll require their support and purchasing power to engage you on the problem.  Fall below the line of safety and you're easily replaced - by technology, price, or salesmanship. Stand above the line of safety and competitors will find it difficult to dislodge you.
 
This means developing True Solutions™ requires deep understanding of the business sector your clients occupy, and profound knowledge of the unique issues in that sector - not how they use your product! 

Over the last decade we have spoken to literally hundreds of senior executives on behalf of our clients, from all industries: Food and Beverage, Retail, Pharma, Insurance, Healthcare, Financial Services, Heavy Manufacturing, etc. - and the common requirement from this broad group is that they want to partner with experts in their industry who bring them new ideas and the staff to help them through the realization of the benefits of those ideas.
 
Too many companies think they understand their clients' business but in reality their investments tell the story. They are heavily invested in product-driven R&D, and their interactions are far too shallow to uncover real value. They invest in product focus groups, product user meetings, and low-level interactions with transactional salespeople.  The few executive interactions ave mainly "dog-and-pony shows" to show support and get feedback about what is irritating customers.   I'm not saying these are not important, but I am saying that this sort of engagement does not build a deep understanding of your customers' business - or the drivers, challenges and methods to solve key business issues. 

A case in point: I was once meeting with the CEO of one of the largest companies in the world and he stated that he had intimacy with his customers - he could meet with any of them for dinner at any time - it was just that others would not follow up on the promises he made.  This statement told me everything; he was not intimate at all; rather, they were being polite and leveraging the meeting for concessions.  Intimacy means actual daily presence in the trenches, solving real client problems.
 
Think through your own experience: who is your trusted advisor to you? Who do you reach out to for advice and help? Usually it is someone that understands your problems and issues and has proved themselves by providing impactful solutions in the past.  Remember, our goal is to become an extension of our clients' organization - to be treated as part of the body with no anti-bodies seeking us out and trying to exterminate us.

Let me tell you about a personal experience which illustrates my point:

I live outside of Houston, Texas and have large tract of land. I was building a house on the land and wanted to add some flower beds - nothing unusual.  I contacted three companies to come out and talk to me about it.
 
  • The first company spoke to me for about 30 minutes and focused on where you want the beds and how they were the best buy in town.
  • The second company came out and showed me some pictures of other work they had done and suggested different plants that would look good and a little work qualifying my willingness to invest.
  • The third company sent two people - one a land architect and one water architect and they brought a custom layout with pictures and video of what my land should be.  They took the approach that I had an opportunity to make this into something to be proud of and that it was important for me to understand and be educated about the many options and what they would say about me and my view of the land. They encouraged me to think of the native positives of the land and how the acres of trees need to be brought work in harmony with new meadows.  They encouraged me to build a natural looking acre pond for birds, etc.
The three companies saw the problem differently - I met with someone trying to solve a cost problem, someone trying to solve a color problem, and someone trying to get me to take advantage of an opportunity.  I chose the third company and have had a long (expensive) but rewarding relationship with them.  But, I must add, had they not used the proper approach to educating me and bringing me along, it could have appeared that I was being manipulated. I call that putting the client first: they genuinely wanted to show me what was possible for my family and were passionate about it.

You've been hearing for years that your organization must be client-focused - but the Intimacy Engine™ is the business model that actually makes that possible.  A common reaction from many of our clients goes like this: "We get the concept, they say, "but we do not have the ability to deliver these True Solutions™, even if we could identify them." They often want to start where they are and slowly move towards solving the more important issues.  There is truth in these statements.  As stated earlier in the blog, getting and maintaining support for the revolution is paramount and never ending.  But, there are multiple truths here:

1) as solution provider, we must find the key ideas that impact the client above the safety line, and, 2) we should take into account what results ave achievable today. 

We'll take up that question in detail later on this blog.
The Customer Intimacy journey requires focus for an extended period of time, and even when companies take the long view, living through the natural disappointments of this size of business model transformation can discourage the best organizations. 

Thus, the importance of gaining a shared view of the business cannot be overstated.

proservmm.gifDepending upon company culture, this may require buy-in from a few key executives, or, in today's climate, a much larger group. Further, the buy-in process requires persuasion at three levels: emotional, intellectual, and tangible (evidence-based results).
logosethospathos.gifThere is no consistent way for organizations to absorb and adopt truth. But, I think understanding what they need - depending on type of organization and driver of decisions - helps in gaining a shared view.  The following information is organized as discrete options but in reality you will probably combine several different approaches - firms don't fit neatly into the above matrix.

Also, the use of the word emotional in the diagram above refers to firms that have the ability to undertake action through an intuitive, inspirational, or gut-level understanding - they know the truth when they see it.  Surprisingly, many of the biggest and most successful decisions by the best run companies have been made this way.
 
Now, let's discuss a few ways to assist an organization in the analysis of the case for change (obtaining of the truth). By no means are these the only mechanisms available to an organization but hopefully they can help in organizing our thoughts about how to get a shared view within the business.

Again, beginning the Customer Intimacy journey with support from the organization is crucial; in my experience I find very few firms actually take the time to understand the decisions required and make them with the appropriate support. Indeed, this is one of the primary reasons why business model transformation initiatives fail.
 
1.    Hierarchical firms that make emotional decisions.  As stated, this process is about getting those who are trusted by the organization to make those leaps of faith to want to move to the Intimacy Engine™.  We have seen firms take executives on a retreats where the current reality is examined from a scenario point of view - what would happen if we can't change things with the usual methods, how would are business be different if we are viewed as an extension of our clients.  The use of a well organized retreat allows for the time to consider things differently than normal; above all, the retreat must be well planned and implemented.

2.    Hierarchical firms that are quantitatively driven. This is about understanding the benefits of moving to the model and risk of the journey.  This might be accomplished with an iterative process of resenting the story and related data in a more and more detailed fashion over a few meetings:
 
a.    What is the issue we are trying to address and how does this business model address it?
b.    What are the benefits - increased revenue, decreased costs, longer more valuable client relations?
c.    What are the risks - chance of failure, cost of failure, and ways to mitigate?
d.    What are the approaches for implementing and a proposed plan, decision gates?

3.    Hierarchical firms that need outcomes to commit.  These firms must see the output of a pilot of the model to fully get on board.  Pilots need much more discussion than can be provided here - but the choosing of the market/product/team for the pilot and the way it is monitored is obviously crucial.

4.    Communal firms that make emotional decisions.  These firms have strong cultures and require an approach that leverages the inclusive nature of the business.  This will require many events and outlets for different groups and levels of the firm to participate in examining and reacting to the idea and ramifications of the move to the Intimacy Engine™. Then representatives from each group (vertical or horizontal) would conduct a firm report out - usually requiring several cascading events.

 5.    Communal firms that are that are quantitatively driven.  This is a tough situation where many people must be convinced of the financial and risk assessment viability of an idea.  I have seen an approach to this where a case study of the business is created and then this is disseminated - adjusted, improved, and edited - in a company-wide co-creation process.

6.    Communal firms that need outcomes to commit.  This process must take into account both the need for a successful pilot but also the need for a broad range of people within the firm to participate.  This can be accomplished by broadly exposing the organization to the pilot throughout its life.  The interaction must be factual even blunt and open to all criticism.
 
A note of warning. One other approach we have seen used is the under the radar program. Although this requires much less upfront effort, it often fails because the people involved have not bought into the change.  This approach to change management is rarely financed appropriately and when difficulties arise they're shut down because it's much easier to fail when most of the firm is indifferent or against the program.

The takeaway: the Customer Intimacy journey begins with employee buy-in.

The challenge for any significant change initiative is maintaining motivation and focus throughout the effort.

Most change initiatives fail because of this very issue. Both individuals and corporations suffer from this phenomenon - personal improvement (like weight loss) is difficult because the change in habit must be maintained for a long period of time without seeing results immediately.
 
A large enterprise has even more difficulty undergoing a significant change, particularly when the change is as radical as business model migration.

Business model change impacts more aspects of the business than any other change initiative, and therefore requires a longer period of time to accomplish. We all know that is extremely difficult to move a significant initiative forward because few are truly dedicated to effort and its success although in the company's interest does not easily align with individual's interest.


changethoughts.gifLet's look at the different constituencies:

  • First, you have individuals who will suffer the normal challenge in any type of change. They will have to be bought in to the reasons and be able to align it to their career and compensation.
  • Second, you have the leadership in charge of accomplishing this effort - they are naturally concerned about how this is going to affect their career and want to minimize whets expected of them. 
  • Third, you have the senior executive group - many times they are forced to live in an ADD type world which works against a continued focused effort. And, can sometimes force efforts to focus on outputs to early and skill key infrastructure or process steps.   
  • Finally, you have all the naysayers and the people not involved in the initiative.  They rarely see they value and because of their needs - staffing, funding and other support - they find themselves (sometimes inadvertently) undermining the effort.

Now let's look at the customer intimacy journey itself: 

proservmm.gifThere are many factors that must align in order for a company to build and operate their Intimacy Engine™.  This will be accomplished by examining the four phased journey - form, commercialize, scale and dominate.

Let's introduce them now and examine them in greater detail as we go.  I will say after assisting over 40 companies through the journey, the process is more art than science and the sooner we understand this the better. 

Form  - As the name implies this stage is about forming a new business.  This phase also includes getting the Companies head around the need for the new business model and selecting the leader of the effort.  Further, selecting the target focus - be it market, or product group, or customer segment. This includes building the initial True Solutions™ sets for the target, gaining initial talent and taking the solutions to market.   Much of this effort should be considered R&D - even though GAAP rules do not recognize it as such. Finally, this phase includes protecting the effort from the organization.

Commercialize - You know you are in this stage when you can predict outcomes from the business unit.  This phase includes expanding the initial offerings into a robust portfolio of solutions.  Further, this phase demonstrates the ability to pull through product and harvest accounts (explained later) - thereby fundamentally changing the relationship those accounts have with the Company. Additional targets can be added during this Phase.  Finally, this phase begins to change the market's perception of your brand and abilities.

Scale - This phase begins the re-integration with the broader business.  For this to be achieved the unit must develop critical mass and have completely adopted the skills necessary to be effective in the new business model - this cannot be over emphasized -  running an Intimacy Engine™ business is much like the military - everyone must know their role and be able to adjust to client situations.  Unlike traditional hierarchical businesses - the person at the client makes the call - there is little time to call corporate and gain approval.  Also, at this time the full extent of the Intimacy Engine™ for this business should be understood and all True Solutions™ sets should be either developed or being developed.

Dominate - This Is the Phase where the entire business operates in the new model.  This often requires reorganization and final adjustments to the staff organizations that support the business.  Marketing is dedicated to the new True Solutions™ sets and key executives come from the new business and management development comes through the new business model.

In the next set of entries, we'll dive into the details of each stage - the activities, key abilities etc. and we'll look at the broader perspectives in customer intimacy business model transition, including where to start, how to protect the initiative, how to guide the initiative, how to fund the initiative, leveraging an organic change model, and more.

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