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Eighty-eight percent of all CEOs say getting closer to the customer is the most important dimension to realize their strategy in the next five years.  According to an IBM study, "The most successful organizations co-create products and services with customers, and integrate customers into core processes. They are adopting new channels to engage and stay in tune with customers. By drawing more insight from the available data, successful CEOs make customer intimacy their number-one priority."

This is not news for anyone who views customer intimacy as a business model and not just a sales technique. One of the key tenets of a superior customer intimacy practice is to constantly maintain a tight linkage between service delivery and value creation.  In fact, by definition, you can't have real customer intimacy if you're not solving your customer's most strategic issues.


The diagram above makes the following point: there must exist an optimal balance between your promise and your delivery, i.e., you gotta walk the talk.  Further, the value proposition you bring to your client must impact your customer's value drivers in a perceptible way.  Once you have convinced the customer that your idea will in fact deliver value (idea selling), then you must in fact deliver what you promised.  In our case, we say that you must offer True Solutions™ and be an intimate partner in solving problems and bringing new ideas to your clients. Of course, you also have to keep in mind that your ideas or propositions must be screened to ensure they meet your criteria for fostering customer intimacy.

If your solutions don't deliver on your value proposition, you're guilty of marketing hype.  This can be a fatal mistake.  Far too many companies believe their own marketing propaganda, and don't know how to deliver on their marketing promises.  90% of the time, this is why customer intimacy gets a bad rap.

Now, a few words about customer value drivers. We're all indebted to the academician Jag Sheth's theoretical model that explains the five values that drive customer choice:

1. Functional value: the perceived utility that derives from a product's physical, utilitarian, or functional attributes.
   
2. Social value: derived from an alternatives association with an identified demographic, socioeconomic, cultural, or ethnic group.
   
3. Emotional value: derived from the ability of an alternative to arouse an emotional or affective state.
   
4. Epistemic value: acquired by an alternative as the result of its ability to arouse curiosity, provide novelty, and/or satisfy a desire for knowledge.
   
5. Conditional value: derived from the specific situation or context of the purchase decision. 

At McMann & Ransford, we help our clients build True Solutions™ that meet all five customer values.  Unfortunately, far too many companies are focused on functional value alone, a classic symptom of the product-driven company.  In our next post, we'll look at an industry which is addicted to innovation and examine the consequences of this behavior.

Today I want to examine the HP Let’s Do Amazing campaign:

First I want to congratulate HP on the campaign. They highlight the power of solutions - to differentiate themselves with a powerful, substantiated message, and keep the commercials interesting and novel.  From a practical point of view, this is an excellent example of explaining to the world the power of  True Solutions™ that pull through HP hardware and software. 

Although we have all seen companies produce ad-campaigns that place their company’s solutions ability ahead of their reality - in this case HP created, sold and implemented the solution.

Let’s first discuss the power of the ad campaign. What does it do?

• Differentiation. The campaign places them above many other technology providers - Dell, Sony, Toshiba etc. as having more to offer.  So many conversations in the major-account technology sector that HP plays in are about price/discounts etc.  HP is stating that for its major B2B accounts it is something different.  They offer True Solutions™ and are an intimate partner in solving problems and bringing new ideas to the accounts.
• Intimacy. Reveals a level of intimacy with clients - they solved a true issue or provided a new opportunity.  The ad shows that HP is working with the account to solve real problems not just selling existing products to the account.  You get the feel of a partnership facing the world of competition together.  
• Vertical/customer-centric business model. Shows that HP has industry expertise in business and can provide concrete ideas to solve real problems.  Further, it shows an outside-in strategy.  Finally, the success was driven not by great sales but by great account intimacy (trust us we know and care), consulting (finding the answer) and delivery (making it work).
• Repositioning. Places HP’s B2B business offerings as a worthy IBM, Accenture competitor.  Once you are successful in the Intimacy EngineTM and have a successful portfolio of solutions you want to reposition your company away from old competitors towards the people you want to be compared to.  Get prospects to think: “We should consider HP.”
• Credibility. Provides a halo-effect for other vertical account discussions, an intro for further solution discussions across industries. It gives credibility to HP’s solution business.
  

What does it tell us about HPs journey to the Customer Intimacy Engine™ Business Model?


Again, we do not suggest any firm build an ad campaign ahead of its ability to deliver on the True

Solutions™ promise. But if we take the HP ad and determine their position we might find things that help you on your journey.
 
Are they in the Form stage?  The Form stage is all about early success.  Getting your company comfortable with the new model (getting out of its way if you will), producing success in getting market participation strategy, selecting an initial portfolio and offer, taking it to market and getting some success to build upon - a pilot if you will.  Clearly HP has chosen key or major accounts within verticals to focus upon. Further, they have successes to show case and the broader company must understand the Customer

Intimacy Engine™ business model or the idea of the ad campaign would never have got momentum within the company.  So we can easily determine that they are not in the Form Phase.

Are they in the Commercialize phase?  This phase is all about proving that the model makes commercial sense for the company - building a critical mass of solution creation, delivery, and account management resources to drive meaningful revenue (at least in sections of the business) and pull through their other products - the ones they push to market today.  Clearly HP can pull through hardware and software; the ads show this explicitly. Also, they have the critical mass for the vertical and the key accounts but they have more - they have accepted the business model as the way they do business for at least the major accounts of HP.  Therefore they are further along than the Commercialization phase.

Are they in the Scale phase?  The scale phase is about making this the way you do business (at least for the appropriate segments of your business).  The account management, R&D, business management, go to market, HR, Finance functions have all aligned in the business model and there is no more internal fighting about should we do this and will this work and why is this different etc.   Further, it is about fast growth of the model to be the driver of traditional product sales throughout the segments that are affected.  HP appears to be on top of these issues and has made the decision about business model and is confident enough to reposition its B2B business accordingly.  Therefore I think they are firmly in the Scale phase and are trying to move to the Dominate phase.

Again, I believe HP has put together a very impactful way to announce to the world in clear and interesting fashion where they are and where they are going.   Also, you should look at your company to see where you are and determine if you can move faster to the safe and profitable ground the HP appears to have found.

I'm often asked by senior executives about how they should assess their company's progress on the Customer Intimacy Journey.
A quick Customer Intimacy Assessment can be done by answering the following set of questions. Executives should be familiar with the key milestones for each phase, and, most importantly, they need to be as objective as possible in order to come up with their next set of actions.

Getting Started

• Does your organization understand that this is a business model and not a sales technique?
• Does the executive team understand what it takes to be successful?
• Do you have buy-in for the long term transformation?

Forming the Business

• Do you have ideas that are strictly applicable to the niche (vertical market) you want to compete in?
• Do you have proof points to differentiate your company?
• Are you selling to the key executives in your target market?
• Can you upsell more solutions to the executives you currently serve?

Commercializing the Business

• Can you save disaffected accounts?
• Do you add new accounts through solutions?
• Are you pulling through significant product deals?
• Do you have a portfolio that touches several key executives in the vertical?
• Can you grow rapidly?

Scaling the Business

• Do you have integrated verticals where key accounts are run by a Customer Intimacy business model?
• Do you have large transactions sold without sales activity?
• Have you eliminated some corporate cost by leveraging solution teams to do them?

Dominating the Market

• Are you running the company/business in a new way?
• Have you changed your performance metrics?
• Are you still running to business models - old and new?
• Are you promoting Customer Intimacy leaders to top leadership jobs?

At McMann & Ransford we guide our clients throughout the Customer Intimacy Journey - from getting started to dominating the market. Do you know where you stand?  

When developing Service Chains™ it is important to evaluate their business value and your ability to implement them in the market. At McMann & Ransford, we recommend tracking the following criteria to help foster customer intimacy:

1. Strategic Importance
2. Financial Importance
3. Market Attractiveness
4. Demand & Delivery Potential

Please keep in mind that each criteria directly relates to the overall portfolio. As your business grows you will want a portfolio of True Solutions™ that a) builds intimacy with key executives above the safety line, and b) builds critical mass of the solution business, and pulls through product directly.

Thanks to those of you who asked me to elaborate on how to get a company motivated to embark on the customer intimacy journey, especially if you are not the CEO or the executive with the authority to directly move the organization. 

I have discussed how to make the case for change earlier, but getting employee "buy-in" is just the beginning.

I believe there are three things to consider:

1. Determine where your company is in the journey,
2. Identify your next specific steps in the journey, and
3. Motivate the organization to take action.
   

I am not minimizing the effort to accomplish this by trying to discuss all three in one blog post.  Further, this discussion is not indented to be exhaustive, but I wanted to at least provide an introduction to the topics and  some guidelines to assist those of you who asked.

Where Are You on the Customer Intimacy Journey?
Of course you must understand where you are in the journey before you begin to motivate the organization.  As you know not all companies are starting the journey without some experimentation with the concepts - many have taken tentative steps even if they do not fully understand the journey.  As you know, companies have been struggling with the drug of innovation for a long time. 

The following are a few simple questions to assist in assessing your progress on the journey. The point of these questions is to help you understand the scope of the transformation.

• Have we undertaken the effort to determine if the Intimacy Engine™ is the appropriate business model for the evolution of our company?
  
• Are we (as a team) interested in the future state model and do we have consensus on a shared-vision going forward?
  
• Do we know what the journey requires to be successful?
• Are we are willing to undertake the effort (resources, time, commitment) required?
• Have established a competent professional services group? 
• Is the professional services group growing at a sustainable, expected level?
• Is the professional services pulling through enough product revenue? 
• Are we focused on the right industry segments?
  
• Have we developed key insights to the level to drive ideas or Service Chains™?
  
• Have we added bundling and product-related solutions?
• Have we moved up the impact/intimacy scale with our target clients?
  
• Are we implementing some form of solution-selling and has it impacted the business in a significant way?
  
• Is our product "pull-through" strategy predictable and repeatable?
  
• Are we still working in two different business models?

The Next, Specific Steps
This is much more difficult than determining where you are in the journey. It is not simply the effort of determining which phase you're in; this is a much more specific activity.  Remember this will be used to motivate the company to take action - therefore it must be specific, actionable, and important enough to capture the attention of the organization.

Examples of these are:

• Evaluating and deciding upon potential move to Intimacy Engine™ model
• Trying different customer relationship in key market
• Leveraging our professional services group to pull through product 
• Determining the segments that should be in the Intimacy Engine™ model
• Develop detailed plans for the "Form" phase of the effort
• Embark on pilot
• Leverage pilot milestones for educating the rest of the organization
• Determine post pilot next stage roll out - verticals, markets, etc.
• Integrate the sales force into new business model
• Reorganize the go to market business units 

Motivating the Organization to Take Action
Let's assume you have a clear objective - for the next phase of your company's journey - and you want to get the organization on board.  Either the change-champion is the key executive with the authority to take action or more commonly the champion is someone who must influence the organization to take an interest in the idea. 

The champion may be a key executive but not necessarily the one with the authority to make the decision, or she might be the staff executive that sees the organization more broadly and knows what must be done, or the champion might one of several roles but knows in their hearts that the Intimacy Engine™ must be evaluated as a possible road map for the company.  

I believe the process of getting the organization moving is in stages:

1. The viral stage - This is educational and interactive.  Others you respect must begin to share your views.  This can be accomplished by getting them into the discussion - reading what's being said about the Journey and its benefits, or conducting knowledge-sharing events (see earlier blog entry). 
2. The pro-draft stage - This is about getting the executive audience - usually the few key executives that can affect the organization into the discussion and turned on to your view.  This is accomplished by getting them into discussion and educating them about what you all are thinking, then commissioning a quick what would it look like benefits analysis.  By asking them to let you undertake an action you are gaining an understanding of their motivation,
3. Get the organization behind you stage - Get the broader audience - spread the discussion liberally through the broader organization - use all means available - discussion boards, new letters, blogs, wikis, etc  This makes again makes the effort more real and prepares the organization for action.
4. Draft a strategy stage - Get the key executives to entertain a proposal of drafting a strategy, planning document on the benefits, risks, etc of the idea. The specifics of the document must align with the way your company examines opportunities.
5. Executive focus stage - get the executive team focused on the idea in an in-depth way.  The best approach is to get them away for a couple of days - to first fully understand the idea of  Intimacy Engine™, then present your findings, then do a working session selecting where to pilot the concept.  This provides them a detailed understanding - strategically, tactically and the work session allows them to guide the pilot and buy-in.
6. Get agreement to proceed to the pilot planning phase - Close stage 6 with the direct proposal of planning the pilot - budget, time-frame etc.

As product-based companies embark on the customer intimacy journey, their success largely depends on how attractive the value propositions for their services are and how well they are presented to clients to convince them to buy. Unfortunately, far too many companies remain relatively opportunistic in their approach to the marketplace.

Service chains are a key building block to becoming less opportunistic and more deliberate in your go-to-market approach.

Let's examine what we mean by the term service chain.

A service chain is a pre-planned set of offerings that have an entry offering with linkages and methods that pull-through the other offerings. Service chains formalize implied client value propositions by providing a framework to aid in the transformation from an opportunistic selling approach to a pre-planned, deliberate selling approach that delivers to clients the total value proposition offered by your company.



The service chain framework consists of the following sequence:

Entry Offering: a compelling idea that should apply to the client is presented,

Project 1: Proof that the idea impacts the client is developed and quantified,

Project 2,3...: The client's problem is fixed,

Managed Services: Ongoing support to manage the fix.

Service chains provide for greater client intimacy resulting in long-term, trusted advisor relationships. They maximize the pull-through of streams of work and minimize the sales investment, thereby enabling the sales team with pre-planned outcomes and predictable client revenue.

Here are some considerations based on our service chain framework:

General

• It's in the client's best interest for us to provide our services over a long period of time.
  
• It's the only way for the client to realize our total value proposition.
• Clients buy based on industry. Therefore, service chains must always be industry focused, even though the actual services provided may well be 80-90% horizontal in nature.
• One exception to the previous point regarding industry focus is pure technology services sold to the CIO organization (example - certain Microsoft services).
• Initial projects in the chain, including the entry offering, should start relatively small and lead to very large "fix it" and deep "support it" engagements.
• As a going in position, all service chains should lead to managed services engagements if that is the company's strategy.
  

Idea - Entry Offering

• Ideas must be expressed in business terms, not technology terms. They must address a key business problem.
• Ideas must be industry specific.
• Results of the idea must "scream" for the client to take action.
• The entry points into the client must be at the highest level, preferably the C-level, and the idea must speak to what they will be interested in - again, not technology.
• Entry offerings do not need to be projects in a traditional sense. They can be white papersexecutive briefings, seminars, etc. Consideration should be given to what forum best fits the particular industry.
• As a going in position, entry offerings should be paid for by the client. If their interest is peaked by a great idea, they will be willing to pay.
• Thought should be given to legitimizing your idea by having an independent, recognized name in the field speak or comment on the idea.
  

Proof - Project 1

• The proof must not only prove that the idea applies to the client, but it must quantify the results he/she will realize as a result of the fix. This serves as the linkage to the next, much bigger project.
• Assessments are often very good proof projects. However, unless the idea is extremely unique and revolutionary, the proof project should not be named an assessment.
• Assessments have been popular for over a decade and the business world is tired of being assessed. Think of unique, idea-specific names for proof projects.
  

Fix It - Projects 2,3..x

• Fix it projects are often defined based on the methodology used to deliver the solution. Example - Architecture leads to design leads to construction leads to implementation.
• Within the parameters for managing risk on large projects, it is usually best to minimize the number of fix it projects as the client often gets weary of too many phases.
• Pilot projects are often excellent ways to deliver solutions, not only from a methodology standpoint but also from a service chain linkage standpoint. Value demonstrated in a pilot naturally links to much larger rollouts.
• Additionally, pilots open up the opportunity to link to a managed services opportunity. Often, pilot projects are disruptive to a client's normal business infrastructure. If this is the case, you can offer to host the pilot for the client. This gives you the entrée to link to hosting the full rollout.
  

Support - Managed Services

• Managed services is a logical extension to the fix it projects for companies with a managed services strategy.
• In such companies, for every service chain the Practice Principal must challenge himself/herself to find a way to link to a managed services offering.
  

In summation, the service chain is a key driver of go-to-market activity for customer intimacy. It represents the best way to sell and deliver your company's value propositions to clients. When the model is properly executed, the results are:

• increased pull-through revenue;
• larger, repeatable deals;
  
• reduced sales costs;
  
• more profitable operations; and many more
  

Once again, service chains are opportunities to build long-term relationships with clients. They are the ingredient that will allow services organizations to scale and gain the critical mass they need to become dominant leaders in the industry.

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.

 
It 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.

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.

During 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.

As 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:


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 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.


Let'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.

What's wrong with driving your business using the historic S-curve (innovation) model?  The innovation model has virtually dominated all literature, organization design, sales training, and investment strategies since the world economic boom following World War II. This is the common and erroneous management belief that we can continue to grow our business by improving current products and/or continuously making breakthrough innovations. 

We call it the Drug of Innovation.

Many of the great B-to-B brands that appeared during the last century were created riding a breakthrough innovation - copiers, computers, etc. The ability of these companies to differentiate their brand through their products and drive significant margins  -  as their products were first adopted by the market then improved for the markets - was a very long cycle. 

To understand how much that's changed and will continue to change look at the PC life cycle - introduced by Apple, then quickly dominated by IBM - then a free for all with many entering, exiting and dominating (rags to riches to rags) changing all the time.  Today leadership oscillates between a few players with cost becoming the driving factor, as important, if not more important than product innovation. 

For the few firms that ride a breakthrough technology to market, the innovation model should be the dominant business model and can be effective for a time.  But for many established companies particularly in North America and Europe, the ability to differentiate a product or product line through feature enhancement has a very limited life cycle that is being ruthlessly compressed as more global product players come on-line particularly from China and India.  Furthermore, unless you happen to be Steve Jobs, the ability to predict breakthrough technologies that create whole new markets is virtually impossible.

We find the diagram below almost always describes a company's experience with innovation.



As we all know price differential begins to be pressured after a time for new products or product enhancements.  The issue for most firms is that this compression of price differential comes ever more quickly.  Soon firms and often entire industries are trapped in a no-win game of musical chairs as they take turns leading with ever-fleeting advantages based on product innovation.  Not only does commoditization rapidly effect their valuations but the musical chairs inevitably causes firms to innovate past their customers' real needs - thereby sinking hundreds of millions into products that few need at any price.

Question: When should firms get off this Drug of Innovation?

I believe the first step for most companies is for someone (sometimes anyone) to accept that the musical chairs cycle of innovation will slowly strangle the business.   This is so important - someone must see clearly that the emperor has no clothes.  Then they must accomplish a couple of things:

1) gain an understanding what the business model options are, what the correct direction is and become familiar with journey,
2) build a community within the business coalescing around these truths.
 
This in itself is very difficult - as I mentioned before, the innovation model dominates our business culture - we are prisoners of our mindsets.

We believe that an understanding of the business model choices immediately helps a business see its few options.  Historically there have been three distinct business models that have been successful - Innovation, Low cost, and Intimacy. 

That is not to say that each component is not pursued but that the business model used is driven primarily by one of these components.

Let's define customer intimacy as a business model: organizing business efforts to identify ideas to address true customer problems/opportunities at the highest level, bring those to the customers, and living with them to take advantage of those ideas. 

It is a complete integrated model - not a sales program.  At best, customers see you as an extension of themselves.

This blog is dedicated to the importance of this topic and the how of getting there -and there is much how. But let's, for a moment, take one aspect of it for illustrative purposes.

If we are going to be preoccupied with identifying/creating ideas that fundamentally help our clients (and lets call them clients - customers buy things, we serve the best interest of clients) then more of our R&D spend must be about those ideas.  Let me give an example:  let's say you provide some complex equipment for hospitals.  Some R&D spend must be on the broader Hospital problems - how to lower error rates in the hospital, how to get patients through faster.  You must bring better ideas to the client then the consulting firms they deal with today.  I know this seems impossible and it's not clear how it helps sell your current products - I assure you it's not impossible (in fact it's relatively straightforward) and it fundamentally impacts sales of current products.  We'll be discussing this as we move forward.

UP NEXT: The Customer Intimacy Journey.