Yesterday, Emily Chang from Bloomberg West interviewed Andy about her work with Steve Jobs. Of all the CEO’s that Andy has worked with, there are three in particular that left a deep impression, “I’ve worked with hundreds of CEOs in my lifetime but only two that I’ve worked with that I think embody some of the traits that he had. I think one is John Chambers from Cisco, and I think the other is Reid Hastings from Netflix. And there’s a third CEO, Brian Chesky, whom I’ve never worked with, from Airbnb, whom I have great admiration and respect for. They all do those three things well; they inspire their workforce, they stretch people beyond their limits, and they are really bold and really brave. They don’t care what other people think about them.
Part of SeriesC’s Statistically Speaking series Over the past 40 years, the Harvard Business Review (HBR) has studied how companies conduct business experimentation and they often find that companies fail to learn from their tests because they never adopt the true discipline of experimentation.
Using J.C. Penney’s costly and disastrous 2012 overhaul as a key example, HBR pointed out that – had CEO Ron Johnson established a proper set of experiments to test his ideas to do away with coupons, double down on upscale brands, and use technology to eliminate cash registers – he might have discovered how customers would revolt and push store sales down by 44% that year.
Too often these days we hear business leaders in CEO and CMO roles declare that they need to “test their hypothesis” or “run an experiment” in hopes of discovering whether a new business model or product will succeed. The trouble is, they don’t actually form solid hypotheses or conduct experiments correctly. The right way to experiment involves five scientifically sound steps: form a specific hypothesis, identify the precise independent and dependent variables, conduct controlled tests in which you can manipulate the independent variable, and then do careful observation and analysis of the effects, leading you to actionable insights. If you follow the steps, they’ll always present you with a valuable answer. So, where do many seemingly smart companies go wrong when it comes to business experimentation?
HBR posits that businesses can fall down at various stages when running a business experiment. Here, we’ve taken HBR’s Checklist for Running a Business Experiment and included what we’re calling Experiment Traps that you should recognize and avoid throughout the process:
- Purpose – HBR asks: Does the experiment have a clear purpose?
- The Hypothesis Hypocrisy Trap – did you and your management team agree that a test was the best path forward? Why? Is your hypothesis specific and straightforward (A good hypothesis clearly identifies what you think will happen based on your "educated guess" – what you already know and what you have already learned from your research)? If not, you’ve already fallen into the biggest experiment trap: Hypothesis Hypocrisy
- Buy-in – HBR asks: Have stakeholders made a commitment to abide by the results?
- The Cherry-Picking Trap – are you entering into this experiment equally prepared to be delighted or disappointed in the results? Will you avoid the temptation to cherry pick results that support your preformed ideas? Avoid this trap by sitting down and agreeing how your company will proceed once the results come in. If you see the experiment as part of a larger learning agenda that supports the company’s overall strategy, then you’re off on the right foot.
- Feasibility – HBR asks: Is the experiment doable?
- The Unsound Trap – HBR says “experiments must have testable predictions” but complex business variables and interactions or ‘causal density’ can “make it extremely difficult to determine cause-and-effect relationships.” Avoid this trap by knowing your numbers. Start by figuring out if you have a sample size large enough to average out all the variables you’re not interested in. Without the right sample size, your experiment won’t be statistically valid. Engage SeriesC’s analytics team to help you determine the right sample size for your experiment.
- Reliability – HBR asks: How can we ensure reliable results?
- The Corner Cutting Trap – when conducting your experiment you’ll be faced with challenges of time and cost and other real-world factors that can affect the reliability of your test. Resist the pull to cut corners by adopting proven methods from the medical field, like randomization, control groups and blind testing, saving you time in the design of your experiment and producing more reliable results. Or tap into big data to augment your experiment so you can better filter out statistical noise and minimize uncertainty.
- Value – HBR asks: Have we gotten the most value out of the experiment?
- The Wrong Impression Trap – don’t go to the trouble of conducting an experiment without considering and studying not only the correlations – the relationship between one variable and another – but also the causality. Causality helps us to understand the connectedness of certain causes and effects that usually aren’t as immediately obvious. Make sure to spend just as much time analyzing the data from your experiment as you did setting it up and executing it.
The bottom line: why go with gut and intuition and past experiences that aren’t apples-to-apples when you could be informed by relevant and tested knowledge? Steer clear of these experiment traps in your process and you’ll avoid inefficiency, unnecessary costs, and useless results. Embrace the proper process and you’ll learn something valuable, increasing your chances of success. Statistically speaking.
In August 2013, Accenture published a detailed report titled "The CMO-CIO Disconnect," about the importance of marketers and information leaders collaborating, and the un-stellar level to which they're doing that in enterprises today. Enterprise marketing leaders and CIOs at the U.S.' largest 2,000 companies probably gobbled up the report. I would bet, though, that very few CEOs of growth-stage tech start-ups have paid any attention to it. It's not marketed to them, not considered relevant. They probably don't even have CMOs or CIOs yet. Listen up, entrepreneurs. You should pay attention to the report. Its wisdom is absolutely relevant to you.
Here's why: A CEO of a growing tech start-up has all of the upside to gain from aligning IT and marketing interests early in the company's evolution -- combined with none of the legacy baggage that makes the alignment difficult to achieve. Start-ups enjoy a nimble agility that enterprises don't have. Only 1 in 10 enterprise marketing and IT executives interviewed by Accenture say the level of collaboration is where it needs to be. You want to disrupt a larger competitor as you vault your company through its growth phase? Knock this alignment out of the park from today forward.
Let me summarize the three strategic imperatives from the report that strike me as most relevant to CEOs of start-ups, especially if there's no CMO or CIO in your company yet.
1. "Identify your CMO as your Chief Experience Officer. "
Okay, so you don't have a CMO yet. That's fine.... as long as the CEO -- or someone -- is passionately stewarding the quality of your customers' and partners' experience in using and interacting with your company and its products. Who is looking out for things like:
- how easy it is to find what you have, understand it, try it, and buy it?
- how easy it is to use it, from the day of purchase until it's time to replace it with something else?
- how easy it is to support and sell it, and to collaborate with you, for your channel partners?
- how easy it is to transact and collaborate with you, for your supply chain partners?
- how these external stakeholders' point of view is represented in your brand, your communications, your strategic decisions?
If no one in your company owns this critical function today, get it assigned, preferably to someone who brings a passionate point of view to it. (The responsibility can get passed down to a marketing leader later in your evolution.) Then, move on to the second bullet point below.
2. "Agree on key business levers for marketing and IT alignment."
In other words, decide what drivers will govern who prevails if marketing and IT have conflicting needs. This may seem far ahead of where you are if you're a growth-stage start-up, but you're designing now the architecture that is going to become your "legacy" later -- with all its benefits and limitations. Anticipate that IT and marketing conflict will tend to converge most at two intersections:
1) Where marketing's need for transparency of customer and company data will intersect with IT's need for information security.
2) Where marketing's need for third-party, best-at-what-it-does software intersects with IT's need to control system standards and protect the sanctity of its infrastructure.
Here are some questions your CEO and leadership team can ask yourselves today, to ensure what you're building will meet your needs as you scale and reap new and loyal customers and partners:
- What kind of customer data, and how much, will our company eventually need to exploit to gain new customers and keep existing customers? To deliver on that great experience we're designing for them?
- What kind of company data will our company eventually need to make transparent in order to support the ideal experience we are creating for our customers, channel partners, and supply chain partners?
- What third-party software demands are we going to have in marketing this business -- keeping in mind things like mobile marketing and mobile service delivery, mobile payments, targeted marketing campaigns, customer relationship management, information management, etc? How will emerging trends like NFC and biometrics impact these needs?
- Given the countries in which our target market exists, what kinds of data security and consumer privacy legislation are we subject to? How is the legislation evolving in these countries?
- Where do we fall on the spectrum of conservative to aggressive when it comes to data privacy and infrastructure standards? Are we certain we can scale, market, and interact with customers and partners effectively and profitably given our answer?
3. "Change the skill mix to ensure that both organizations are more marketing- and tech-savvy."
This one's easy to adapt to growth-stage tech startups. Just change the sentence to read: "Hire people who are both marketing- and tech-savvy." Be smart. Build the team right from the ground up.
When it's time to bring on a CIO or similar functional leader, ask candidates for their point of view on how their job intersects with marketing needs. Ask them for their point of view on how digital marketing is most effectively enabled, and what it might look like within your organization.
When it's time to bring on a marketing leader, ask candidates what they need from their IT partners in the organization. Ask them for their point of view on how the balance should be struck between data access and information security.
You can download and read the full Accenture report here, if you want to know what other recommendations .... and the data that shows how your enterprise (future) competitors are performing against them.
True story: A wise CFO was meeting with the rest of his small start-up team, eighteen months (and a few pivots) into the group’s journey as a business. He was about to report to them on the firm’s financial situation. “Everything we do is about increasing value for all our stakeholders,” he began. “Let me show you how we measure that we’re doing that.”
Up came a slide with sixteen simple words:
- Revenue growth
- Cash flows
- Ability to obtain new business and deliver it profitably
- Intellectual Property
He landed there only briefly, just long enough for the team to grasp the five obvious and easily measured items the slide contained. Then he flipped to a second slide.
“And then there are the less easily measured, more subjective value drivers,” he said.
The team read the long list together:
- Size, depth, and breadth of the sales pipeline
- Share of potential market penetration
- Quality and depth of the customer portfolio
- Volume and breadth of the customer portfolio
- History of repeat and loyal clients
- Skills, experience, and specific expertise
- Contacts and network of the team
- Delivery methods and operating efficiency
- Succession plans
There were nods all around the room, a stated appreciation for the holistic approach to defining value, and some good discussion about the group’s resulting priorities.
My immediate impression on seeing this list was to write it down and share it here as a strong example of a business measurement scorecard – applicable to both start-ups and the largest enterprise teams. (Mind you, I’d only moments before it read Paul Graham’s good thoughts on the importance of start-up teams’ focus on doing things that do not scale, so holistic nurturing was on my mind, anyway.)
Are you measuring the health of your business – and the value you deliver to every stakeholder you serve – in terms of this extensive list? Are you pausing from time to time as a team to discuss performance across the span it represents, and not just looking at cash flows?
Do you have a recommended amendment or addition to this list?
Leaders in enterprises, is "disruption" keeping you up at night? If so this post is for you. Sometimes it feels as though the only companies getting attention these days are startups. That today's established companies are dinosaurs and, except for a handful of large companies who are consistently succeeding – the rest are increasingly at risk. If you fear that you are drifting toward the latter category, this blog is for you. It might require a change in how you look at your people and how you get things, especially product development, done. I am here to offer encouragement.
Let's start with three fundamental truths:
- First, I hope we can all agree that the primary role of a company is value creation. Yes, companies need to create products and services. Yes, they need to engage and 'delight' customers -- even build communities of interest sometimes. But these are all business model decisions in the context of some value creation system. He or she who creates and monetizes the most value wins.
- Second, barriers to creating value have never been lower. If your company's value is either created or enhanced "digitally" ( its becoming increasingly difficult to find one that isn't these days), your world has been changing around you. You have to move - fast.
- Third, the path to end-users has never been more direct. Almost everyone has a smartphone. Almost everyone is a part of LinkedIn, Twitter, Facebook, Instagram - pick one or two. And they all get the news and information they want from Google. There is no longer good reason to allow others between you and those for whom you are creating value.
What does all this mean? Well, for one, small companies -- startups, more specifically -- have some important inherent advantages over big ones. They have not institutionalized business processes made obsolete by today's "401(k) world," as Thomas Friedman calls it. In his recent NYT opinion piece, Friedman says that, "more people can start stuff, collaborate on stuff, learn stuff, make stuff (and destroy stuff) with more other people than ever before." As Friedman points out, this has all happened in the last ten years or so, and many of us are not well suited to succeed in these new operating conditions.
Startups don't have to "unlearn" or "work around" the old ways of doing things. They can pivot quickly on feedback gleaned from real prospects in real purchase situations in real-time.
So, what's a large company to do?
It all begins by remembering that the only reason for your existence is to create value. In this context, your role as an organization is to efficiently do two things:
1. identify and qualify new value-creation opportunities, and
2. rapidly deploy the business models to monetize them.
How to identify new value creation opportunities
With respect to the first imperative, large companies do have an advantage: a highly attuned sensory network of employees and partners, all focused on today's business, channels, customers and everything we do to create value for them.
Think of them as thousands of iron filings through which a big magnet has been pulled. No other company has a collection quite like yours. And it got you where you are today. You just have to employ it more efficiently in the context of identifying and qualifying business opportunities.
This is where 'innovation crowd-sourcing' or 'social problem-solving' comes into play. Treat these communities as an idea-generating asset - one which can be systematically harvested for new value-creation ideas. They are smarter and more attuned than you think. In other words, the time when all the good ideas come from the strategy team at HQ is well behind us.
How to rapidly develop new business models
On the second imperative, big companies need to harness the principles of Lean Startups:
- Trade in 3-year business plans for Lean Canvases.
- Cultivate a culture of Testing Hypotheses.
- Quickly deploy Minimum Viable Product prototypes.
- Employ the Build=>Measure=>Learn cycle.
- Encourage fast failure and know how and when to Pivot.
In short, start treating your employees like entrepreneurs. Give them the tools, training and environment to behave like a part of your value-creation system. (We can help.) Remember, the world hasn't changed in favor of more nimble start-ups. What has changed are the conditions for success. There is nothing keeping you from being a part of that change, right?
A lot has been written about how marketing and IT are coming closer together. With social media, customer behavior can be tracked, vast quantities of data can be mined for patterns and correlation, and marketing can become more of a science than it has ever been. This is both welcome and undeniable. Quant rules! But wait. There is a corollary to this change. And it, too, is based on the rapid adoption of social media. And, ironically, it is almost the opposite of "Quant rules!" It's about the soft stuff. Yes... the future of brand management is one much more co-mingled with human resources. Yes, HR.
Because, with social media comes much greater transparency. And, in a world of increasing transparency, more touchpoints. More employees are now in a position to engage directly with customers. Brand impressions increase exponentially. And managing these impressions becomes increasingly complex.
Here are some things to think about:
- Real-time brand experiences - Like contact centers, social media engagement is creating impressions in real-time. More ‘real-time’ translates to less controllable and more instinctive. Hiring for consistent personality types will become more important than training.
- Deeper engagement - As the number of employees with direct customer access expands, so does the toolkit made available to each of these employees by IT. What might begin as a webclick can easily migrate to a webchat, to a direct conversation and perhaps even a videoconference. Each level requires more competency and certainly more subtle training in order to keep the engagement a positive one.
- More third-party impressions - Of course, social media adoption has already expanded the gross impressions generated about your brand. The challenge is that most of this growth has come in the area of others talking about you. How can you better influence things that are happening or being discussed outside your walls?
Managing your brand moves from managing marketing materials to managing employee behaviors. Ultimately, brand management will be about hiring, promoting and incenting the right types of people to deliver the right experiences consistent with your brand. In short, managing your brand will be about managing your culture.
Implications for marketing going forward:
- Monitoring and managing employee engagement will be a critical leading indicator of brand success
- Customer service training will go well beyond message management to include examination of verbal and visual cues and eventually behavioral and psychological training
- Attracting and keeping the right people will become as important to brand management than training and incentives
Can you think of some companies that are already behaving this way? Are you already moving in this direction? If so, what are you doing? What's working... and what hasn't worked?
South by Southwest Interactive has now closed, and I am left feeling a bit ambivalent. While five days worth of gadgets, geeks, and parties sounds incredible, it is also exhausting. And downright frustrating when you run into someone dressed as an Oreo Cookie - at least for me. Sure, it was cute, and I love Oreos (seriously, love those things), but I don't come to SXSW for Wal-Mart's equivalent of Disney Land. I come for the tech. I come for the geeks, the nerd, the inspiration, the passion, and the creativity.
Increasingly, major corporations with less creative ideas or radical innovations - and more marketing campaigns and sales pitches - have been dominating the SXSW stage. This has forced some of the old guard developer meetups and forums to move increasingly out of the main conference center and even off of the main SXSW Campus.
It's almost a technological gentrification that I have a strange compulsion to compare to the hipster migrations to Williamsburg (and Brooklyn in general), or from parts of San Francisco to Oakland. As popularity and presence grow (and therefore the potential dollars to be derived from advertising and sales) the associated costs go up, often driving out the most primal creators of art and inspiration.
A selection of others opinions can be found below, but whether you be attendee or spectator, what are your thoughts? On the Movement? On its Value?
Hey product managers and engineers: Do your customers complain about your product releases? Does sales suck up your time trying to deal with how to explain the point of the announcement? Does customer support dread new releases? Is the marketing department failing to get you the "buzz" you know you deserve for the great new stuff you've launched? If it's yes to one or more of the above, it might be your product launch process that's broken.
When you think of product launch, what is the first thing that comes to mind?
- What the press release will say and where you want to see coverage?
- Updating your Facebook page?
- Previewing your app with "influencers" who you hope will write about it?
- The launch meets the product/feature goals of the release
- The company is ready to market, sell and support the release
- The market is properly "primed" or ready to receive the product
- The current customers are ready to understand and use the product.
Too often, product launches focus just on # 1 and #2 above. Product management takes item #1. Product marketing is pulled in like a tactical partner to tackle #2, viewed as the department in charge of putting a nice bow on the pretty release and generating the "buzz" about it. When that happens, service and sales tends to get sent into reactive mode, having to scramble to try to manage through #3 and #4 as best as they can.
To be successful, product launches must be planned like a symphony, with marketing, account management, and sales involved and engaged.
So, how can you best build a holistic preparedness launch process?
1. Begin at the beginning. Collaborate with product marketing at the earliest planning stage to craft a go-to-market plan, rather than waiting to do so when the release is being put into production. Incorporate the goals of the launch in that early plan -- get precise on metrics.
2. As deliverables and milestones are scheduled and tracked to completion in engineering, so should they be in marketing. In fact, in the meeting that product management and engineering decides on a go/no-go decision, marketing's progress on its plan should be a part of the evaluation criteria.
3. Work as a team. In the end, what matters most is that putting these activities together facilitates collaboration between marketing and R&D. Marketing cannot be effective without being a part of the process, especially in high tech. If you treat marketing as a facade for your product, that's probably all you're going to get.
"Thriving enterprise seeks Chief Marketing Officer to drive Big Data strategy and manage the bulk of our IT spend." Wait. What? It's not irrational anymore. Relevant CMOs are increasingly becoming the equivalent of CIOs -- or, at least, intimate partners to CIOs, within their organizations. Irrelevant marketing executives, the ones who aren't keeping up with marketing technology and data science, are a threatened breed.
Peppers & Rogers Group's 1:1 Media is in the midst of a two-part series on "The Evolving Role of the CMO" in B2B and B2C enterprises. In it, author and CMO Grant Johnson reveals insights from his conversation with three other CMOs -- insights that so far include the urgency of CMOs' adeptness in data science and marketing technology. (Johnson quotes Gartner's eyebrow-raising prediction that by 2017, CMOs will spend more on IT than CIOs do.) nFusion CEO John Ellett, author of The CMO Manifesto, puts it this way: "CMOs must now drive how technology is utilized, just as they drive marketing strategy and tactics, to ensure their company can successfully engage with the more empowered, digital, and social customer."
One could argue that it has always been true that CMOs have had to earn their right to a power seat at the executive table -- and that doing so has required expertise in how to quantify impact, use data and analytics, master emerging technology, and be a partner to the traditional power-holding CTO, CIO, and CFO. Heck, McKinsey called that CMOs would need to be more data-technical in 2007, three years before "Big Data" would become a household phrase.
What's new here is a required skill set. Power CMOs must understand how relevant communications are fueled by network architecture, middleware, and apps. They must not only understand how big data flows and works, but thrive as stewards of it -- pumping analysis of the market and customers into the organization to inform decisions, and reacting symbiotically with it in outbound activities. They must make IT recommendations that promote the CIO's goals, because today, the CIO's and the CMO's goals are converging.