tag:blogger.com,1999:blog-5298375373028147812024-03-12T17:23:08.350-06:00Excel-lensExcel-lens examines topics affecting cloud computing executives. Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.comBlogger29125tag:blogger.com,1999:blog-529837537302814781.post-37125752628206360812014-12-29T17:29:00.001-07:002014-12-29T17:29:31.013-07:00How to Win the Game of Trust<span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>Evidence suggests trust forms a barrier to churn</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">A competitor just introduced a new product that delivers significantly higher performance. Do you worry your customers will jump ship? If they <i>trust </i>you, there’s little to fear. A new study using collaborative games demonstrates people value trust far more than performance when choosing partners. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>New research</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Scientists at the University of Maryland recently conducted an experiment to see how feelings of trust guide decisions.<sup>1</sup> Test subjects first played an investment game in which they could keep or invest $10 with three other players. Participants learned by playing the game that one (benevolent) always returned slightly more than the player invested, another (greedy) never returned any investment, and a third (exploitative) returned slightly more than invested in first two rounds and then returned nothing. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJ8Pg8uaS8jwjSU3-nJths3BRvmY0qj-37Ut-28aAefjYUp2AocWTIrQ4cbC1VPO8KGKfh6ajUb2Fs8f8DNquk0xBiEBFFg84f86B9GJhcHJGo8jj5deANchu8euFZPDDo1GUv88fYUaQ/s1600/battleship.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJ8Pg8uaS8jwjSU3-nJths3BRvmY0qj-37Ut-28aAefjYUp2AocWTIrQ4cbC1VPO8KGKfh6ajUb2Fs8f8DNquk0xBiEBFFg84f86B9GJhcHJGo8jj5deANchu8euFZPDDo1GUv88fYUaQ/s1600/battleship.png" height="240" width="320" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Then researchers asked participants to play a second game, a team version of <i>Battleship</i>. Subjects would choose one of the three partners from the previous game to play with them. Scientists told participants that during the game, all players would select their targets at the same time, shots would be revealed simultaneously and shot sources kept hidden, so no player knew who shot at which target or which board. At the end of the game, winners would split a $50 prize. Subjects saw a chart indicating that some partners were significantly more skilled than others. Faced with the challenge of maximizing their winnings, players had to choose either a better player or one they trusted. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The scientists discovered that people were nearly eight times more likely to choose a poorly performing but trustworthy partner than an untrustworthy but highly capable one. It was as if skill didn’t matter at all; people’s subjective evaluation of trustworthiness far outweighed their objective evaluation of skill. The “halo effect,” in which one’s initial impressions of another’s character significantly influences later assessments of that person,<sup>2</sup> was clearly in evidence.</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5Uih-2SHRB4vc3Cz3Oai2YjxmyXBmye04qrFBDGi9A4OhFozspbNhEihqjC7_lRqLlSOeWzEGtSm85nhiX0-nUy-GAAm0RWzzb-YxpxUuzEoyGgVHovCiTKJZZVJEzsBuopswzNF-S_o/s1600/game+results.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5Uih-2SHRB4vc3Cz3Oai2YjxmyXBmye04qrFBDGi9A4OhFozspbNhEihqjC7_lRqLlSOeWzEGtSm85nhiX0-nUy-GAAm0RWzzb-YxpxUuzEoyGgVHovCiTKJZZVJEzsBuopswzNF-S_o/s1600/game+results.png" height="198" width="320" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>The game of business</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">This experiment suggests trust may inhibit customer churn in the event a competitor introduces a game-changing product. People are increasingly skeptical of marketing claims,<sup>3</sup> so given a choice of maintaining a trusting relationship or believing a sales pitch and taking a chance on an unknown supplier, customers are far more likely to stay than switch. There are limits, of course. According to prospect theory, customers seriously consider alternatives when promised benefits exceed 2:1,<sup>4</sup> and high churn may indicate <a href="http://se-partners.com/why-customer-defections-mean-things-are-worse-than-you-think/" target="_blank">things are worse than they appear</a>. But high levels of trust can buy companies precious time to catch up. When companies enjoy a base of trusting customers, simply sharing product roadmaps and allaying concerns about timelines may be all that’s needed to keep them from switching.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Conversely, the experiment shows just how detrimental betrayal can be. When companies use deceptive marketing practices, treat customers unfairly, or fail to keep promises, customers learn the company can’t be trusted and look elsewhere. This conclusion supports other research that suggests <a href="http://se-partners.com/why-trust-matters-for-customer-success/" target="_blank">trust moderates customer loyalty</a>. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Winning trust</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">People don’t immediately trust each other—they learn to trust over a series of experiences. It’s a process, and like all other processes, relationships can be continuously improved. Therefore companies can design and implement processes that increase customer attachment and lead to higher levels of trust. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi79H6C8PPRJKyxBk27WVXD5j71SZ-A0bTwR3gNg4rG91hx8h76yL4u2camXcsSaactzKavYmv0c8XzgSmffcScmfcg-1sV1Cd_JAeSlOu4m0udT3SGyU7U7EHpWlOi16ES_GGvp1K54N8/s1600/mindful+mapping.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi79H6C8PPRJKyxBk27WVXD5j71SZ-A0bTwR3gNg4rG91hx8h76yL4u2camXcsSaactzKavYmv0c8XzgSmffcScmfcg-1sV1Cd_JAeSlOu4m0udT3SGyU7U7EHpWlOi16ES_GGvp1K54N8/s1600/mindful+mapping.png" height="204" width="320" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Customer journey mapping is a handy tool for improving processes. First, managers determine the sequence of events that makes up the customer experience, from becoming aware of the company’s offering to purchasing, implementing, using, and eventually renewing or canceling the subscription. Managers then critique each touch point along the journey, looking to remedy frustrating or inefficient steps. When managers include <a href="http://se-partners.com/solutions/customer-experience-consulting/" target="_blank">mindful customer experience</a> techniques in the mapping process, they uncover hidden opportunities to strengthen customer bonds along the way. They learn that managing <a href="http://se-partners.com/five-critical-moments-in-the-customer-experience/" target="_blank">five critical moments</a> in the customer experience makes all the difference. As a result, companies systematically increase trust and customer loyalty. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Intense competition and fleeting technology advantages characterize the subscription economy, so executive should expect times when their offerings lag competitors. If companies make it difficult for rivals to dislodge their customers during these times, the countermeasures protect the company’s sustainability over the long run. Strengthening customer relationships then becomes a high stakes game, one companies don’t want to lose. Taking a systematic approach to building trust can separate the winners from the losers. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;"><u>Sources:</u></span><br />
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<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Buntain, C. and Golbeck, J. (2014). Trust transfer between contexts.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Thorndike, E.L.: A constant error in psychological ratings. </span><i style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Journal of Applied Psychology</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;"> 4, 25–29
(1920).</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Friestad, M. and Wright, P. (1994). The persuasion knowledge model: how people
cope with persuasion attempts. </span><i style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Journal of
Consumer Research</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">, vol. 21, No. 1, June 1994.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt; line-height: 115%;">Tversky A., and Kahneman, D. (1992). Advances
in prospect theory—cumulative representation of uncertainty. </span><i style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt; line-height: 115%;">Journal of Risk Uncertainty</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt; line-height: 115%;">, 5, 297-323</span></li>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-90169494316487433222014-12-03T15:16:00.000-07:002014-12-03T18:28:41.247-07:00Why Trust Matters for Customer Success<span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>Software usage is just one driver in customer loyalty</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">A widespread belief shared by Customer Success professionals is that promoting software use early after the sale leads to less churn. It makes sense. But usage is just one factor leading to customer retention. Studies show building trust is equally important for retaining customers and growing revenue. To generate high loyalty and more business, SaaS leaders must pay as much attention to <i>affective</i> processes as they do <i>effective</i> ones. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Usage: the good and the bad</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">We’ve all had the experience of canceling an unwanted magazine subscription. Perhaps we signed up impulsively after reading a good article on a plane, or subscribed as part of a fundraiser to help a favorite charity. We thought it was a good idea at the time, but eventually the magazines stacked up—we didn’t have the time or the interest to actually read them. Eventually when the envelope asking us to renew came in the mail, we just tossed it. Since we didn’t <i>use</i> the subscription, it had no value to us. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The same applies in software subscriptions. If customers invest in new applications but don’t use them, it’s hard to justify the ongoing expense. That’s why SaaS companies pay so much attention to user adoption. Customer Success teams spend much of their time onboarding new customers and helping them achieve early results. It pays off. Data from <a href="http://www.servicesource.com/scout-servicesource" target="_blank">Scout Analytics by ServiceSource</a> suggests that customers who use their new software at least once per week over the first six months are about 50 percent less likely to churn.<sup>1</sup> </span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">But high usage doesn’t necessarily equate to high retention. In the wireless industry, for example, heavy users are <i>more</i> likely to churn.<sup>2</sup> Why? Experts cite poor service quality (dropped calls in particular), price sensitivity due to high monthly bills, and preference for more advanced capabilities they find somewhere else. Similarly in the SaaS business, “power users” tend to be the most valuable but come with a downside. They’re the first to notice company “warts”—software bugs, system downtime, or poor customer service—and may be the first to leave.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Factor ignored?</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">SaaS companies frequently overlook an important loyalty dimension: <i>trust</i>. Researchers define it as the confidence business partners have in the reliability and integrity of each other.<sup>3</sup> Studies in technology markets show that high trust leads to affective commitment; in other words, people are inclined to stick with a supplier because they <i>want</i> to, not because they <i>have</i> to.<sup>4</sup> The lower the trust, the more customers revert to <i>calculative</i> commitment, considering other alternatives and spending time weighing product costs and benefits vs. the competition. Relationship factors are therefore as essential as product attributes and market variables when it comes to loyalty. Companies increasing trust increase loyalty. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXolqbCBUhxoqSqnQZq18DeS2UAQsykITInFpIWiOqDFTg2hByKo9_mXJ2QdRDi2raZ2NtV44XrUfWNbWklT9FSjUqsySpvbCjlVn0nwDb18zzVGrkGSVhWQCFMkwPqSYPIasSXbLAidI/s1600/trust.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXolqbCBUhxoqSqnQZq18DeS2UAQsykITInFpIWiOqDFTg2hByKo9_mXJ2QdRDi2raZ2NtV44XrUfWNbWklT9FSjUqsySpvbCjlVn0nwDb18zzVGrkGSVhWQCFMkwPqSYPIasSXbLAidI/s1600/trust.png" height="228" width="400" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Despite the numerous shortcomings of Net Promoter Scores (NPS®),<sup>5</sup> its fundamental question, “How likely are you to recommend our product to a friend or colleague?” offers a practical example of how we view trust. Recommending a vendor to a friend or colleague, for any of us, is a risky proposition. Our trust in the supplier’s ability to satisfy must greatly exceed the chance of impairing an important relationship. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Brain trust</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Neuroscientists say we learn to trust people in much the same way we learn about everything else. A part of the brain called the striatum specializes in social decision making, detecting and evaluating levels of fairness, cooperation, and reciprocity. Social learning begins with a bias, or cognitive “anchor,” which is surprisingly sensitive to what people say about others.<sup>6</sup> As we learn about people, we compare situational outcomes against our expectations and subconsciously adjust our mental anchors along the way. Through experience, feelings of certainty and fairness acquired from multiple interactions then grow into a generalized sense of trust, a bias which in turn influences our future decisions. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Our evolutionary biology explains why we developed the need for trust. Humans became the most successful species on earth primarily because of our ability to cooperate and learn from each other. But not all people work towards mutual interest. We subliminally perceive social deviations as threats, which in turn activate the ancient “fight or flight” mechanism in our reptilian brain. Low trust means high risk, prompting us to avoid the situation in the future. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>How to build trust</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Software companies can grow trust in a number of ways. When organizations carefully and consistently set and meet expectations, it creates harmony in their customers’ minds. When things go wrong, leaders taking responsibility, communicating frequently, and quickly resolving problems build confidence. And when administering policies, treating customers fairly helps, too. Since a customer’s trust perception is strongly influenced by what others say, companies must guard their reputations with the same vigilance as their intellectual property. SaaS executives should be especially concerned when they see low NPS scores, indicating trust is low and <a href="http://se-partners.com/solutions/saas-churn-reduction/" target="_blank">further investigation</a> is warranted.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Customer Success teams play a critical role as well. They can create more <a href="http://se-partners.com/solutions/customer-experience-consulting/" target="_blank">mindful customer experiences</a> that systematically build trust in addition to early usage. The trick is to examine the customer’s journey and design processes that satisfy a customer’s <i>effective</i> and <i>affective</i> needs. For example, besides helping customers learn new software, CSMs can sow the seeds of trust by simply making a personal connection during an onboarding call. Doing so increases a sense of relatedness which quells the customer’s natural, subconscious threat response when encountering new people. Customer Success teams that skillfully manage <a href="http://se-partners.com/five-critical-moments-in-the-customer-experience/" target="_blank">five critical moments</a> in the customer experience create conditions for strong, trusting relationships to form. Lower churn and greater revenue from up-selling and referrals result. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">SaaS companies must create and deliver value to be successful, but their loyalty efforts must extend beyond increasing software usage. It starts by understanding human nature and the factors that ultimately drive renewal decisions. Deliberately and systematically influencing these factors in turn makes SaaS subscription businesses thrive. </span><br />
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<i style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Service Excellence Partners</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Contact us</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;"><i>Net Promoter Score (NPS) is a registered trademark of Fred Reichheld, Bain & Company, and Satmetrix</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;"><u>Sources:</u></span><br />
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<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">http://research.scoutanalytics.com/churn/the-data-behind-adoption-and-retention-in-the-customer-journey/ </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Ahn, J.H., Han, S.P., Lee, Y.S.: Customer churn analysis: Churn determinants and mediation effects of partial defection in the Korean mobile telecommunications service industry. Telecommunications Policy 30 (2006) 552–568</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Morgan, R. M., and Hunt, S. D.: The Commitment-Trust Theory of Relationship Marketing. Journal of Marketing 58, 20–38 (1994).</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Ruyter, K., Moorman, L., Lemmink, J.: Antecedents of Commitment and Trust in Customer–Supplier Relationships in High Technology Markets. Industrial Marketing Management 30, 271–286 (2001)</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Sauro, J.: Should The Net Promoter Score Go? 5 Common Criticisms Examined. Measuring U. July 22, 2014 https://www.measuringu.com/blog/nps-go.php </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Fareri, D., Chang, L., Delgado, M.: Effects of direct social experience on trust decisions and neural reward circuitry. Frontiers in Neuroscience, 16 October 2012</span></li>
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<br />Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-73510449030381835532014-11-09T09:05:00.000-07:002014-11-09T09:05:10.697-07:00The Seven Systems of CSM Excellence<span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>Universal practices instill high performance</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">What makes some companies like Intel, Southwest, and Ritz-Carlton perennial performers? Is their secret charismatic leaders? Good timing? Grand vision? No. High performance isn’t about what organizations do, but how they do it. Customer Success teams can apply the same disciplines used by top-performing companies to dramatically increase results.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Jim Collins, author of <i>Built to Last</i> and <i>Good to Great</i>, says “dynasty” companies (those generating financial returns of at least 10x for 15 years or more) behave very differently than the rest. Unlike typical organizations, top performers are fanatically disciplined, empirically creative, and productively paranoid.<sup>1</sup> Laser-focused and utterly relentless, they eliminate distractions and drive continuous improvement everywhere. Rather than follow industry experts or imitate others, top companies engineer their own breakthroughs using empirical evidence, observation and experimentation. And they remain hyper-vigilant, watching competitors intently and adjusting their strategies to thrive in a constantly shifting landscape.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">High performing organizations like the ones Jim Collins describes depend on a set of interconnected, self-reinforcing management systems to instill their unique behaviors. Their management disciplines become embedded in the organization’s “operating system,” creating a culture of excellence in individual work areas and throughout the enterprise. The management systems they use are universally applicable, so Customer Success leaders can use them to realize similar benefits:</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Sensory System</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>What it does</i>: Methodically collects and interprets customer, market, competitive, regulatory, workforce, and technology trends to continually uncover new opportunities and threats.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Leading practices:</i> Use quantitative and qualitative analysis extensively for market and product definition and performance monitoring. Implement internal and third-party “listening posts” in multiple channels. Increase relevance and salience by interpreting findings according to market segment. Systematically analyze, review and prioritize feedback for company business reviews, product roadmaps, and process improvements. Reduce “blind spots” by periodically challenging underlying assumptions and measurement techniques.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Application in Customer Success:</i> Collect product usage, customer satisfaction, trouble ticket, and contact frequency statistics to generate health scores for specific customers and market segments. Utilize direct customer comments in CRM records and formal customer reviews for product and process deficiencies. Share discoveries via periodic, formal feedback sessions with development, sales, marketing, accounting, and operations leaders.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Planning and Review System</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>What it does:</i> Inputs information, prioritizes actions, defines objectives, goals, strategies, tactics, and owners, and aligns financial and personnel resources to promote successful execution. Evaluates progress formally and periodically, holding people accountable, adjusting plans, and promoting learning.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Leading practices:</i> Develop strategic (multi-year) plans that articulate long-term vision, objectives and goals, customer and market dynamics, competition, product and service roadmaps, value propositions, value delivery systems, staff development, risks, and financial pro-formas. Link strategic with annual plans and implement through product development and process improvement plans. Coordinate planning and review activities via calendars, and use scenario analysis to detect and quickly respond to environmental “triggers.” Involve all employees to build commitment for action.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Application in Customer Success:</i> Participate in enterprise planning activities, share customer intelligence and help set functional objectives, goals, strategies and tactics. Prioritize, define, implement and track account management and marketing plans along with process improvement projects. Review progress monthly and quarterly.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>People System</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>What it does:</i> Defines jobs, employee knowledge and skill requirements, and facilitates screening, hiring, training, performance feedback, career development and overall organizational change.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Leading practices:</i> Define short-term and long-term staffing and skills requirements as well as succession plans aligned with the strategic plan. Use structured screening, hiring, training, retention, and cultural indoctrination practices. Conduct both formal and informal performance reviews. Interpret quantitative job performance measures in proper statistical context. Collaborate to define and hold employees accountable for development plan execution.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Application in Customer Success: </i>Craft position plans, metrics, knowledge and skill requirements, and development plans for CSMs to build stronger relationships, deliver onboarding, and uncover and advance sales opportunities. Characterize and use personality traits, in addition to education and past experience, to screen new hires. Give regular feedback, formally and informally, and avoid ranking.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Work System</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>What it does:</i> Describes requirements and designs optimal workflows at a macro and micro level between customers, business partners, suppliers, company departments and work groups.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Leading practices:</i> Map processes to identify critical handoffs, disconnects, metrics, and process improvement opportunities. Periodically redesign processes for enhanced speed, cost effectiveness and increased quality. Protect and develop core competencies to promote strategic advantages. Use partnership management and supply chain management techniques to influence change and improvement with third parties.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Application in Customer Success:</i> Define the customer lifecycle linking onboarding, training, engagement, renewals, upselling and cross-selling activities using phone, e-mail, video, events, webinars, and social media contact as required. Define critical handoffs and feedback loops with sales, customer support, development, and accounting.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Metrics System</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>What it does:</i> Focuses managers and teams on the critical few cause-and-effect relationships that keep processes under control and promote beneficial end results.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Leading practices:</i> Deploy and manage daily operations across the enterprise via linked, balanced and aligned dashboards. List a critical few leading and lagging indicators in each dashboard to measure key business process performance, especially attributes driving competitive distinction and financial results. Calibrate dashboard signals using customer specifications or statistical process limits. Review periodically, take corrective action, and launch process improvement projects as signals dictate. Benchmark performance against competitors and “best in class” process references.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Application in Customer Success:</i> Construct dashboards measuring outcomes (renewal rate, new revenue, etc.) and process factors leading to them (conformance to contact schedule, 30-day adoption %, etc.) as appropriate to the defined CSM role. Use a total of ten or fewer metrics, rolling up individual statistics into overall team performance. Set “red,” “yellow,” “green” action limits based on historical performance or goals articulated in the annual plan. Make dashboards visible in work areas, review and discuss performance with team members at least monthly.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Continuous Improvement System</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>What it does:</i> Manages projects emphasizing customer focus, teamwork, and scientific methods to uncover root causes of problems, driving ongoing improvement in products, services and internal processes.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Leading practices:</i> Execute cross-functional improvement projects using formal methods such as Lean Six Sigma, process simulations, and predictive analytics to maximize results. Choose projects based on financial or strategic impact, including major initiatives linked to annual and strategic plans. Increase effectiveness and customer value and reduce customer dissatisfaction, cycle times, and inefficiencies in all products and processes. In SaaS companies, diminish downstream bug detection, remediation, and customer churn costs through better upstream product definition, software development and validation processes.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Application in Customer Success:</i> Implement formal methods to collect data and analyze processes to determine changes that increase customer retention and revenue and lower the Cost to Serve. Use statistical techniques such as logistic regression to study factors that impact customer churn, such as adoption rate, unresolved trouble tickets, or contact frequency. Design and execute experiments to test new ideas. Participate in company feedback loops to report software bugs and advocate for product and service enhancements.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Leadership System</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>What it does:</i> Provides strategic direction, prioritizes actions, engages and inspires employees to perform at high levels, learn, and enact changes.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Leading practices: </i>Articulate clearly and broadly communicate company mission, vision, values, goals and strategic plans. Engage the workforce and lead strategic change using formal processes. Model by example, recognize and reward high performance, and develop new leaders throughout the organization. Provide and receive performance feedback.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Application in Customer Success:</i> Define the team’s purpose, goals and values. Understand and align with what motivates individual team members. Recognize and reward performance and hold people accountable. Incorporate leadership effectiveness feedback from superiors and employees in personal development plans. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">When Customer Success leaders run their operations using the seven management systems above, their results rival the very best performers. Excellence becomes part of the culture, and customer churn, referrals and revenue relentlessly improve.</span><br />
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<i style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Service Excellence Partners</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Contact us</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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<span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Source:</span><br />
<span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">1. </span><span style="color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">J. Collins, M. T. Hansen, 2011. <i>Great by Choice: Uncertainty, Chaos and Luck—Why Some Thrive Despite Them All.</i> </span><br />
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<br /></div>Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-9214343432400808252014-09-23T21:29:00.000-06:002014-09-23T21:41:01.385-06:00Five Critical Moments in the Customer Experience<span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>Manage these situations well and customers will be yours forever. </i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Veteran salespeople know sales ultimately don't come from a prospect's logical evaluation of a product's features, advantages and benefits. They know people make decisions based on emotions and then use logic to justify them. What matters is not what the product <i>is </i>but what it <i>does </i>and how buyers <i>feel </i>about it. Time and again, what makes top salespeople successful is their ability to link product benefits with the personal impact they make. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">But closing the sale is just the beginning in recurring revenue businesses. Customers must remain subscribers for years before they become profitable. Like experienced salespeople, Account Managers and Customer Success professionals must go beyond software usage, good NPS® scores or satisfactory customer service to influence what makes customers loyal. They must create personal attachment throughout the subscription experience so their customers continue to renew. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Essential interactions</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">SaaS companies can systematically build affective bonds with their customers. It begins with knowing how the subconscious brain works, especially when it comes to subliminal needs for safety and security. When managers are attentive to the process and consistently orchestrate the following five encounters, they reduce fear and create ideal conditions for relationships to flourish. Customers are more than satisfied; they become loyal, raving fans. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">1.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Moments of Connection.</i> Humans naturally seek commonality. We engage in small talk, chatting about a bad call while sitting next to a stranger at a ball game or talking about the weather on a conference call with new vendors. When we have things in common, we sense we are among friends. We subconsciously gravitate to people like us because we feel safe with them. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">To create stronger connections, SaaS companies must set aside “zero touch support” and corporate façades and create warm, personal interactions early in their customer relationships. When customers feel they can relate to the people behind the brand, suddenly the company has a face. In the beginning, a friendly encounter with someone who seems familiar alleviates the customer’s subliminal anxiety. When a smart mix of personal and electronic communications follows, the relationship builds over time. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">2.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Moments of Power.</i> At times we have all felt powerless and out of control. For example, nothing rattles nerves more than driving in winter and sliding on a patch of ice. That gut-wrenching feeling is a natural defense mechanism that evolved over eons. Our emotional programming helps us avoid situations that put us at risk. In day-to-day life we compensate automatically by attempting to control outcomes, making us feel safer. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">SaaS companies can reduce natural anxiety by encouraging autonomy and choice. For example, customers can feel powerless learning how to use a new product. Customer Success Managers can lower tension using an onboarding process that helps customers quickly practice new skills and build proficiency. When the company allows customers options to choose from, customers also feel empowered. And as the adage goes, knowledge is power. Keeping customers informed is another easy way to soothe the psyche. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">3.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Moments of Proof.</i> Our deep hunger for certainty is another natural protection from our evolutionary heritage. Subconsciously we want to know what’s going on and what happens next, once again because it’s safer. We are comforted when things go as we expect and anxious when they don’t. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">SaaS companies can increase certainty in many ways, from demonstrating products to hosting quarterly business reviews to displaying system performance statistics. When the company makes promises and keeps them, expectations are met and customers become more confident. And when SaaS companies also prove that the business and personal outcomes they predicted came to fruition, they erase any remaining doubts in the customer’s mind. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">4.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Moments of “Wow!”</i> We cherish times when friends and family surprise us with simple acts of kindness, appreciation and gratitude. These occasions happen infrequently, but when they do, they leave profound impressions. Like all social animals, we reflexively evaluate our status and importance relative to others. Rank ensures we maintain a greater share of resources, which in turn increases chances for our survival. When someone surprises and delights us, we feel special and cared for—we find our prestige is greater than expected. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Solving a problem meets minimum expectations, but going the extra mile on occasion makes customers feel important and desired. For example, resetting a password is a mundane task for Customer Support. But when a technician also takes a minute to check the customer’s system configuration and makes a change that speeds up system response times, the customer is thrilled. Simple acts of kindness pay substantial dividends. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">5.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Moments of Truth</i>. Life occasionally involves crises. When we have no choice but to rely on others, we find ourselves in our most vulnerable psychological state. How others respond when we need them most can make or break a relationship. As they say, when the chips are down, you find out who your friends are. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">In business as in life, stuff happens. Sometimes the ball gets dropped, leaving a customer with mess. Other times, issues are widespread, such as the havoc caused by a major outage or security breach. When SaaS companies use an effective service recovery process, one that restores confidence along with service, customers regain trust. How the company responds reveals character and can quickly turn around a bad situation. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Product value and quality matters, but how SaaS companies create positive emotional experiences over time ultimately tips the scale when customers consider renewing their software subscriptions. Understanding and responding to customers’ deep psychological needs is the first step to building stronger relationships and creating loyal customers. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;"><i>Net Promoter and NPS are registered service marks, and Net Promoter Score and Net Promoter System are service marks, of Bain & Company, Inc., Satmetrix Systems, Inc. and Fred Reichheld.</i></span><br />
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<i style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Service Excellence Partners</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Contact us</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span></div>
Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-70711242294816617672014-08-10T06:46:00.000-06:002014-08-10T06:46:01.789-06:00Quash the “White Space” with Four Management Tools<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">You contact a company trying to get a problem solved and you find yourself passed between multiple departments. While people are sympathetic, their response is, “It’s not my job.” Despite multiple voice mails and e-mails, you get nowhere. Your issue has fallen into the company’s “white space,” the cracks between the boxes on the organization chart. </span><br />
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You’ve probably experienced white space issues inside your own organization, too. People perform departmental tasks smoothly, but there’s friction interacting with other groups. Processes don’t flow. Often things get “thrown over the wall,” there’s lots of finger-pointing, and it’s difficult to get things done. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXVOe5qi6DujpKP9Gda3OPWmk-5yey-NXICfWB7sQeYifw7ycB9KutSkplhfFJ_DrE9gwJ9S-G4Ntd0Xm-2Qe8bqm6o7iyZOOL49PdhBjvfCnu0wSgxXFnsczG3a0bnFboINfYVfAXW3g/s1600/white+space.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXVOe5qi6DujpKP9Gda3OPWmk-5yey-NXICfWB7sQeYifw7ycB9KutSkplhfFJ_DrE9gwJ9S-G4Ntd0Xm-2Qe8bqm6o7iyZOOL49PdhBjvfCnu0wSgxXFnsczG3a0bnFboINfYVfAXW3g/s1600/white+space.jpg" height="189" width="320" /></a></div>
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Functional silo-ism first rears its ugly head when companies reach about 40 employees. At this threshold, companies must departmentalize to increase technical capabilities and bolster management’s span of control. But priorities slowly begin to shift. Soon pleasing the boss becomes more important than making customers happy. As the firm continues to grow, functional barriers get larger and more entrenched. Left unchecked, departmental relationships can become adversarial, paralyzing new product development, service delivery, customer acquisition, and customer care efforts. </span><br />
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<span style="font-size: large;"><b>Four tools that reduce silo-ism </b></span></span><br />
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Progressive companies deploy countermeasures to mitigate the effects of white space behavior. Top organizations combine the four management practices below to substantially diminish internal friction and dramatically increase performance. </span><br />
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<b>1. Hoshin Kanri</b></span><br />
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<i>What it is: </i>Developed in the 1960’s at the Bridgestone Tire Company in Japan, <i>hoshin kanri</i> (literally translated “a bright, shiny needle”) is a rigorous, integrated system of planning, implementation, and review that points the way like a compass needle. Caterpillar, 3M, Toyota, Bosch and Danaher and many other leading companies use it. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhluJnN5R1bbEfpIA6zAVmb5xB4YwqvtVgCoiCcRMmTfdsFywWeA806X3ODwKYdy4YcyO2_F-C7xmwHXMi44mlfd3NelvdPQIzyS1rgzrVsmn0e7EsPLjdovGTDCl23AvhOMHZVUg8OL74/s1600/hoshin.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhluJnN5R1bbEfpIA6zAVmb5xB4YwqvtVgCoiCcRMmTfdsFywWeA806X3ODwKYdy4YcyO2_F-C7xmwHXMi44mlfd3NelvdPQIzyS1rgzrVsmn0e7EsPLjdovGTDCl23AvhOMHZVUg8OL74/s1600/hoshin.jpg" height="187" width="400" /></a></div>
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<i>How it works:</i> Senior executives collaborate to prioritize common issues, and then decide on a single breakthrough. The objective is then decomposed into a smaller set of strategies, each featuring its own executive owner and performance measure. Leaders cascade the plan throughout the organization, finally defining implementation plans at lower levels. Formal <i>hoshin </i>reviews then roll up progress, allowing executives to eliminate barriers that crop up. The method’s closed-loop system promotes intense focus, relentless execution, and forward momentum. </span><br />
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<i>Why it works:</i> Unlike the common Management by Objectives (MBO) approach, <i>hoshin </i>aligns the organization around <i>business</i>, not functional, imperatives. Leaders pass these priorities down and reinforce them across the company. As a result, teams work towards enterprise-wide goals that transcend parochial concerns. </span><br />
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<b>2. Process Mapping</b></span><br />
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<i>What it is:</i> A time-honored technique used to study workflows, process mapping reveals the “hidden factory” behind service work. Describing the process visually helps teams identify critical handoffs, gaps, rework loops, and queues. After pinpointing improvement areas, teams can then reduce errors, speed cycle times and reduce costs. Value Stream Mapping and Customer Journey Mapping are popular variations of the method. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8NwWoPJ-5Kgc8eqX9VyG2l2wW9P6aOa72123sl4Kd289iDQ4jmh9G6T92bXJ8iZq8nYxENKthIG06QZ4Ps2naU5ntWfc9SMFgjWQsc11933w_4wiMDcaz1-l4r6rwfz8nmr4T-StjTMk/s1600/mapping.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8NwWoPJ-5Kgc8eqX9VyG2l2wW9P6aOa72123sl4Kd289iDQ4jmh9G6T92bXJ8iZq8nYxENKthIG06QZ4Ps2naU5ntWfc9SMFgjWQsc11933w_4wiMDcaz1-l4r6rwfz8nmr4T-StjTMk/s1600/mapping.jpg" height="228" width="320" /></a></div>
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<i>How it works: </i>Teams define process suppliers, inputs, outputs, customers, and requirements. Then they brainstorm tasks that must be completed to convert inputs into outputs, typically using Post-it® notes and butcher paper to record the workflow. Along the way, mapping participants identify improvement opportunities. </span><br />
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<i>Why it works:</i> Mapping allows people to see the systemic nature of business—everything is connected to everything else, and what happens in one area affects all others. People quickly realize that fast, efficient, customer-pleasing workflows trump choppy, disconnected vertical structures. Top organizations assign executives to lead cross-functional, key business processes, holding them accountable for optimizing teamwork across, rather than inside, department boundaries. </span><br />
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<b>3. Enterprise Dashboards</b></span><br />
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<i>What it is:</i> The Japanese call an interlinked system of color-coded metrics <i>nichijo kanri</i>, or “daily control.” These displays help people at all levels manage the variables that lead to favorable business outcomes. Each manager’s dashboard typically monitors the key business process he or she oversees using 8-10 essential metrics that describe volume, time, cost, quality or other attributes. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_Jw3GW7TFTsrEiHpyhi_AJuGMa0xPk5fDAnCCBuxhZcXJ1auhSFMG9xgVWtrP98d5EBH7gNfxhqxkV4_mGF1s-m_cdl2fCxH3WhuL7aQerWL80Unzceju9GBh9rplmrJz4FRo3IWK7N8/s1600/dashboard.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_Jw3GW7TFTsrEiHpyhi_AJuGMa0xPk5fDAnCCBuxhZcXJ1auhSFMG9xgVWtrP98d5EBH7gNfxhqxkV4_mGF1s-m_cdl2fCxH3WhuL7aQerWL80Unzceju9GBh9rplmrJz4FRo3IWK7N8/s1600/dashboard.jpg" height="151" width="320" /></a></div>
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<i>How it works:</i> Leaders define the critical few measures that really matter by analyzing company processes, economic models, and Value Propositions. They calibrate indicators by determining ranges of acceptable values based on stakeholder requirements, process capabilities and business goals. Managers then collect data act appropriately on the signal: “green” means everything is good, “yellow” means keep an eye on it, and “red” means take immediate action. </span><br />
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<i>Why it works:</i> With the right metrics, managers and teams focus on the most essential aspects of the job. They keep things under control and prevent downstream chaos. At top companies, executive dashboards reflect measures tied to cross-functional processes. When reward and recognition is tied to systemic improvement, managers and employees have greater incentives to work with other teams for mutual benefit. </span><br />
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<b><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">4. Lean Six Sigma</span></b><br />
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<i>What it is:</i> Lean Six Sigma is the modern integration of two proven methods: lean production and six sigma quality. Lean (a technique pioneered by Toyota in the 1970s) emphasizes speed and helps identify and eliminate wasted time, motion, and raw materials. Six Sigma (a quality method named after an imperceptibly small error rate) aligns processes with customer needs and then reduces defects and excessive variation that causes dissatisfaction. Both have been used for years in manufacturing, and the combined approach is increasingly common in service environments. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9f8IkXvYmB54C2JIUWjbzKlqpcs_0exLCi6u13y1EiXYF34MWyayG9yQu5KD_jBdc7JIy_rQ9kJflVLwiATLGFKZ5KtUy16IFTGEa-oZ2qv9cfgr1nGCgGM2izxIB6rMIA8y7bRrDHqg/s1600/DMAIC.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9f8IkXvYmB54C2JIUWjbzKlqpcs_0exLCi6u13y1EiXYF34MWyayG9yQu5KD_jBdc7JIy_rQ9kJflVLwiATLGFKZ5KtUy16IFTGEa-oZ2qv9cfgr1nGCgGM2izxIB6rMIA8y7bRrDHqg/s1600/DMAIC.jpg" height="320" width="316" /></a></div>
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<i>How it works: </i>Teams use formal methods to characterize process performance, estimate financial impact, uncover root causes of problems, design solutions, and implement changes. DMAIC (Define-Measure-Analyze-Improve-Control) or RIE (Rapid Improvement Events) provide teams with structure and statistical tools to effectively manage projects. Since teams make systemic improvements, results tend to be more dramatic and sustainable.</span><br />
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<i>Why it works:</i> Teams are often made of up representatives from all functions involved in the workflow. By working together towards common business goals, team members learn to appreciate the challenges people face in other functional areas. Besides creating more effective and efficient processes, a broader “systems view” and stronger interpersonal bonds between people promotes greater cooperation long after the project is complete. </span><br />
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White space problems are a natural part of organizational development. All companies deal with it in one way or another. Fortunately, proven tools and techniques can help young companies arrest its impact and promote scalable growth. </span><br />
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-55872321620121988702014-07-06T10:41:00.000-06:002014-07-06T10:41:24.111-06:00Why SaaS Needs Lean Six Sigma<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The cloud computing industry loses about $10B every year due to customer churn, and in response, many executives launch improvement initiatives. They assign Customer Success teams to engage new customers, increase product usage and probe for sales opportunities. Other times, executives hold developers accountable for monitoring online customer behaviors and designing stickier user interfaces. Marketers sometimes get into the act, countering revenue losses through new customer engagement programs or by introducing renewal incentives. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">These isolated activities can incrementally reduce churn, but customer defection is a complex, enterprise-wide problem that requires joint effort. Customers leave when a number of deficiencies in sales, development, marketing, operations, and even accounting combine to frustrate them. Instead of assigning a single function or diluting efforts among multiple groups, SaaS companies should address customer attrition holistically with a disciplined and coordinated Lean Six Sigma approach.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Proven and unified</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">For decades, manufacturing and service organizations have used quality improvement techniques to satisfy customers, save money and increase revenue. Companies have shown repeatedly that relying on personal perceptions and making snap decisions leads to treating symptoms, not underlying causes. Using formal techniques, practitioners first explore difficulties from the customer’s perspective and then analyze data to uncover and resolve “root causes” of problems. As a result, improvements people make are dramatically better and more sustainable. Studies show that companies proficient in quality improvement practices consistently outperform rivals in growth and profitability by a factor of 2:1.<sup>1</sup></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Quality methods have evolved over the years to help teams be even more successful. Modern Lean Six Sigma techniques include rigorous financial analyses to target improvements and demonstrate monetary gains. Lean principles remove wasted time and effort, speeding cycle times in engineering, production, and service operations. But best of all, Lean Six Sigma espouses cross-functional teamwork instead of working independently. Ineffective, inefficient workflows and fumbled handoffs between departments are often the most significant obstacles. When greater customer focus and scientific methods combine with better coordination and cooperation, solutions transcend internal boundaries and deliver maximum impact.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Lean Six Sigma in action</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">A young firm introduces an app that allows people to capture and annotate photos taken on mobile devices. The software then automatically uploads images and links them with documents the user stores in the cloud. During early trials, the founders discover that the software has widespread appeal, so they introduce the product at a low price point, expecting it to sell in high volume. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKkkPQ1Ej6cxftv7h6d9xMuASMIsTRRwFzj9fhM-upAsG-ClkvTOdc-wH7t4zk2oisrYKOgCe9XJkLsnFAEO887N8dzxCBruGH6uDi_t-U9kuIlTTE5VW6ctZ51AUOySZ5U74u2GaojhY/s1600/DMAIC.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKkkPQ1Ej6cxftv7h6d9xMuASMIsTRRwFzj9fhM-upAsG-ClkvTOdc-wH7t4zk2oisrYKOgCe9XJkLsnFAEO887N8dzxCBruGH6uDi_t-U9kuIlTTE5VW6ctZ51AUOySZ5U74u2GaojhY/s1600/DMAIC.jpg" height="320" width="318" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">But after several months, the executives discover a problem. Monthly customer churn numbers run far above expectations. Rather than settling for myriad, piecemeal solutions, the executives form a cross-functional Lean Six Sigma team to address the issue from a broader and deeper perspective. The project follows DMAIC, the phased improvement process at the heart of Lean Six Sigma:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></span><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Define.</b> The problem is straightforward: 2.2% of users cancel their subscriptions each month, costing the firm $5M annually. The team establishes a goal to significantly reduce this number.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Measure: </b>Despite having extensive data on mobile and website usage patterns, the team realizes that little is actually known about their customer churn. Marketing had originally decided to capture only basic contact information in order to reduce sales “friction” during the sign-up process. As a result, there’s no data classifying behaviors by market segment. In addition, the team finds few customers complete the online exit survey upon cancellation, so the reasons why customers leave are unknown. The team hires a third party to collect the missing information. The vendor uses billing records to e-mail and call a sample of departed customers to ask questions about their experience. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Analyze: </b>The vendor finds that the company indeed attracts a wide range of customers, but after using Lean Six Sigma’s Pareto analysis, the analyst shows that just a handful of segments account for the majority of churn. Surprisingly, estimators at small auto body shops are the largest defecting group. Challenged with extensive visual inspections and impatient customers during peak times, auto estimators purchase the mobile app hoping to speed their quoting process by quickly capturing images and making shorthand notes for later documentation. But the estimators learn that the time they spend copying photos into their company quoting systems negates the time they save with customers. Getting assistance from the software firm to solve the problem isn’t easy. The company’s limited self-help resources and e-mail-only, 2-day customer response time prompts most estimators to abandon the idea after just a few months. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The team then examines internal factors. Investigating the technical issues, they learn that the company’s online database can’t exchange data in the formats commonly used by repair quoting systems. Customers buy software online and the firm provides no special attention or information to help estimators in the beginning. The company’s heavily burdened customer support team handles all tickets on a first-come, first-served basis, forcing customers to wait equally long periods for help. When estimators get into trouble, their options are few. It’s no wonder they’re leaving in droves. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Improve: </b>The team enhances the product and redesigns the process to make estimators more successful. Engineers research the most common exchange formats and discover they can develop an API that automatically imports images into quoting systems without the need for manual intervention. The plan calls for Marketing to add a single question during the sign-up procedure to assign each user to their respective market segment, allowing the company to better track behaviors. The team then proposes hiring a Customer Success Manager to reach out each estimator within a day of their subscription to help integrate the API, ensure the estimator gets the results he or she desires, and create a stronger working relationship. The team advocates “triage” (a Lean Six Sigma technique) in Customer Support to separate the estimators’ trouble tickets and deal with them first. Thanks to the use of simple statistical tools, the team calculates that the improvements will recover about $1.5M in lost revenue. Adding up the cost of implementation, the team finds the expense makes up a small fraction of the segment’s expected customer lifetime value. Management gives the go-ahead and the team coordinates and implements the changes. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Control:</b> </span><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Estimators are delighted with their new experience. Churn drops 82% in the segment and more auto shop estimators join based on strong recommendations from their associates. Overall, the company’s monthly churn drops by 38%, boosting topline annual revenue by $1.9M. What’s more, estimators who left come back, generating another $220K in revenue. Product managers notice new product and service opportunities in the market segment, promising to grow it even further. The Lean Six Sigma team then standardizes the approach and turns its attention to next group of departing customers. They repeat the DMAIC cycle and lower churn even further. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>It’s a better way</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Had each SaaS company function done what they naturally do and worked within their own silos, the results would not have been the same. They would have proceeded without an in-depth understanding of their customers’ challenges. Functional leaders would have prioritized their activities around their favorite projects or according to whatever was most pressing at the time. As a result, improvements would have been typically myopic and disjointed, failing to benefit specific customers or deliver clear economic gains. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Perhaps it’s time for a different strategy. The Lean Six Sigma method encourages SaaS functions to join forces, focus intently on customers, develop comprehensive solutions, and achieve more impressive results. A holistic improvement strategy may be just what the industry needs to retain more customers. </span><br />
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<i style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Service Excellence Partners</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Contact us</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Source:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">1. Hendricks, K. and Singhal, V. March, 2000. The impact of Total Quality Management (TQM) on financial performance: evidence from quality award winners. DuPree College of Management, Georgia Institute of Technology</span><br />
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-42426668974253017452014-06-20T18:48:00.001-06:002014-06-20T18:48:28.847-06:00Why Customer Defections Mean Things are Worse Than You Think<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">“A bird in the hand beats two in the bush.”</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;"><i>John Ray's A Hand-book of Proverbs, 1670</i></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Most SaaS executives assume customer churn rises the minute a company loses its competitive edge. Not so. If customers are switching to top rivals in appreciable numbers, executives should be especially nervous—the situation is already much graver than they think. Research suggests customers leave because they’re <i>long </i>dissatisfied and now view the competition is <i>twice </i>as good. Executives must heed the warnings and overcome their own biases if they want to turn things around.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Thinking that doesn’t add up</b></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi196QHFArnHizQtO_jGTfm9OxPGPqx9Luri35WyjsoLEB7cSynqTDpKGSRZtf_br6YaYioWvLs72B08VAtTpOw7Zg_IHjFuayF7cuSNgXs5UEwN2WflXamh-pcPp9fmgfGwM8XbCmPHpk/s1600/rodin.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi196QHFArnHizQtO_jGTfm9OxPGPqx9Luri35WyjsoLEB7cSynqTDpKGSRZtf_br6YaYioWvLs72B08VAtTpOw7Zg_IHjFuayF7cuSNgXs5UEwN2WflXamh-pcPp9fmgfGwM8XbCmPHpk/s1600/rodin.jpg" height="200" width="192" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Strangely, people tend to avoid loss even when they are faced with the possibility of larger gains. Research shows that people require more compensation to give up a possession than they would have been willing to pay to obtain it in the first place.<sup>1</sup> Even when all things are equal, repeated experiments show people subjectively weigh gains much differently than losses.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">In 1654, French mathematicians Blaise Pascal and Pierre de Fermat proved that the expected value (EV) of an investment depends on the amount (x) and the probability of its outcome (p):</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>EV = px</i></span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">For example, say a coin flip determines you collect $100 for heads and $0 for tails. Since the probability of obtaining heads using a fairly balanced coin over a large number of trials is 50%, the likely payout, <i>on average</i>, is $100 * 50% = $50. As shown by the charts, this relationship is true no matter the amount or the probability used in the calculation. Today many financial decisions are made using Pascal and Fermat’s expected value.</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcHnQDPE-u_S2rxKYuXIjt0Sf5azRXtxMGB72zvIHjL76kGFO5bKPgDROFYz7yYyp21qVPYn6wAg6n7WyI_mcfS5X1a5Dvz0azBEt-RJvIQIUUZb_uJZ3erFtsok2lXM0qWZsH4Z2iatM/s1600/EV.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcHnQDPE-u_S2rxKYuXIjt0Sf5azRXtxMGB72zvIHjL76kGFO5bKPgDROFYz7yYyp21qVPYn6wAg6n7WyI_mcfS5X1a5Dvz0azBEt-RJvIQIUUZb_uJZ3erFtsok2lXM0qWZsH4Z2iatM/s1600/EV.jpg" height="153" width="320" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">But that's not how most people make decisions. Faced with a choice of receiving $3,000 for sure or taking an 80% chance to win $4,000, most people will keep the money, even though the expected value for taking the risk is greater ($4,000 * 80% = $3,200). Prospect Theory in modern economics asserts that rather than apply logic, people instinctively determine value (V) by weighting differences in probabilities (p) and amounts (x) shown below:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>V(x,p) = w(p)v(x)</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The clean, linear function reflecting objective reality is suddenly replaced with this subjective, nonlinear aberration:<sup>2</sup></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLYNlkKQ5yHoqucWIohZvaALviHgZDtlgpJb9eA9JTBLIJysKfK_YUkdr6volQVkRXS3LRf4NiUoumU70eUaIyiHwc-BPTLNd5AH10IvrsMmK3mBpeVLqB7SSNkoT-ZYtkgftYJ8Cv4Cs/s1600/Vxp.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLYNlkKQ5yHoqucWIohZvaALviHgZDtlgpJb9eA9JTBLIJysKfK_YUkdr6volQVkRXS3LRf4NiUoumU70eUaIyiHwc-BPTLNd5AH10IvrsMmK3mBpeVLqB7SSNkoT-ZYtkgftYJ8Cv4Cs/s1600/Vxp.jpg" height="154" width="320" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Intuitively, the irregular curves hold water. People would rather take a 95% chance losing $100 than pay $85 for sure because amounts “feel” equally painful and 95% probability “feels” less than certain. On the other hand, people will take a 5% chance to win $100 instead of choosing $13 cash because $100 seems a lot more than $13, and 5% seems like a realistic chance.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Scientists also discovered that when they tested 50-50 win-loss scenarios, subjects said the following ratios equally attractive to when compared with receiving nothing:<sup>3</sup></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgvJtgl66xD8atLbb2LbhVI54_uRpIbj10KVBY0kANXCToekNGy0gP95l9iPEYQ3ZzHRx7TH_FKrpPmk8z8gx5hu6LtoBfkcKVbdEqBpm_2EKX4r_Mq00TK_6LL5EDzg2xoPHMmgRGMxlw/s1600/table.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgvJtgl66xD8atLbb2LbhVI54_uRpIbj10KVBY0kANXCToekNGy0gP95l9iPEYQ3ZzHRx7TH_FKrpPmk8z8gx5hu6LtoBfkcKVbdEqBpm_2EKX4r_Mq00TK_6LL5EDzg2xoPHMmgRGMxlw/s1600/table.jpg" height="188" width="320" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">In other words, <i>faced with even odds, most people want 2:1 upside before taking a risk.</i> A bird in the hand is indeed worth two in the bush!</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Why do we think this way? Most scientists believe it’s a vestige of our human evolution. In prehistoric times, survival probably depended upon playing it safe when we had resources and taking risks when we had none. In the modern age, however, our success depends on scientific and social advances, situations requiring thoughtful reflection instead of impulsive action. But since our complex reasoning evolved relatively recently, it often takes a back seat to our more primitive instincts, even when the consequences aren’t life or death. Despite today’s advances, subconscious emotion, not conscious logic, often rules the day. This explains why regardless of the odds, we continue to buy lottery tickets.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Tip of the iceberg</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Evidence shows people are far more likely to stay in a bad situation than pursue a better one. What this means for SaaS companies is that once customers subscribe, they are likely to stay. But when customers switch, it’s very serious. Their actions show<i> </i>they’ve <i>already had enough</i> and customers realize competitors offer <i>significantly </i>greater advantages.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">As humans themselves, executives likewise have a choice. They can either look logically at their company’s performance gaps and do something about them, or scoff at their customers’ subjectivity and do nothing at all. Like their customers, executives must overcome their own, natural inclination to preserve the status quo even when things are going south. If they can see the advantages of change and take risks to improve organizational performance faster than their customers get fed up and go elsewhere, churn reduction has a fighting chance. Otherwise, perhaps, companies with more evolved thinking will be the survivors.</span><br />
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<i style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Service Excellence Partners</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Contact us</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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<span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"><br /></span></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Sources:</span><br />
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<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Kahneman, D., Knetch, J. L., and Thaler, R. H. (1990). Experimental tests of the endowment effect and the Coese theorem. <i>Journal of Political Economics</i>, 98, 1325-1348.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Kahneman, D., and Tversky, A. (1979). Prospect theory: an analysis of decision under risk. <i>Econometrica</i>, 4, 263-291</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Tversky A., and Kahneman, D. (1992). Advances in prospect theory—cumulative representation of uncertainty. <i>Journal of Risk Uncertainty</i>, 5, 297-323</span></li>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-25493524886107547892014-05-19T17:57:00.000-06:002014-05-19T17:57:05.793-06:00Why a CSM's First Impression Means So Much<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">“My good opinion once lost is lost forever.” </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">― Jane Austen,<i> Pride and Prejudice</i></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhl-VI8v0VjAOgVe-v9Qsbg6Qf8oCGFMj_SaWZI_ssP0mdMtgIfQnUgOCQDykPqhO-qlVRp0agFE2tkKfbWe1HdMWiQPCGAX3c03ip3Uy4zY0dbyy2HYk8PMbQaNGvoHjoAmolVccKgJtU/s1600/handshake.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhl-VI8v0VjAOgVe-v9Qsbg6Qf8oCGFMj_SaWZI_ssP0mdMtgIfQnUgOCQDykPqhO-qlVRp0agFE2tkKfbWe1HdMWiQPCGAX3c03ip3Uy4zY0dbyy2HYk8PMbQaNGvoHjoAmolVccKgJtU/s1600/handshake.jpg" height="133" width="200" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Eye contact. A smile. Friendly conversation. We all know first impressions mean a lot when we meet someone new or interview for a job. The same is true when it comes to customer interactions. How things go at the outset makes a big difference in the final outcome. Research offers intriguing insights why getting off on the right foot in the SaaS business is so important for reducing churn and building customer loyalty down the road. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Most managers, including many prominent Customer Success consultants and authors, assume that all customer interactions have equal importance. Science, however, suggests that some carry far more weight than others. While the ultimate goal may be continuous improvement at every point along the customer journey, managers should start by concentrating on the critical few areas that yield the greatest impact. And the most essential exchanges occur in the very beginning. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>What starts right, stays right</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Research from the wireless industry shows that first encounters matter.<sup>1</sup> Investigators studying wireless subscribers hypothesized that customers “anchor” their satisfaction and value perceptions based on their service history, incrementally modifying their beliefs by incorporating new information after each interaction. They found that customers who had many months of positive experiences early in the relationship weighed them more heavily than they did later experiences. But if new customers had early disappointment, they became particularly vulnerable to churn. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Creating positive outcomes from the beginning yielded significant financial impact. The study found that one in four longer subscriber durations could be attributed to a series of satisfactory experiences. Doing a better job right from the start made a big difference. Simply having agents spend twenty additional minutes helping wireless customers activate and successfully use their phones cost the company $888K more each year, but the revenue increase due to churn prevention was estimated to be a whopping $4.48M. This represented gain of 2% in company profits, or an ROI of about 4:1.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Roots in biology</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Neuroscience explains how anchoring works on a cognitive level. Our minds use reward prediction error (RPE) to gain new knowledge and skills because it is the fastest and most efficient learning method.<sup>2</sup> The brain subconsciously encodes differences between how rewarding something is compared with how rewarding it was expected to be. The brain then recodes expectations after each experience, and with successive cycles, outcomes eventually match expectations. RPE therefore serves as the anchor by which the brain evaluates its next learning experience. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Learning is a mentally costly and permanent process. The brain consumes a great deal of energy building new circuitry by releasing neurotransmitters, firing millions of neurons, and modifying synaptic weightings. Given the high resource burden it places on the body, the brain is selective about what it learns, and it creates efficiencies by constructing new neural connections upon old ones. As a result, neural architecture has intrinsic latency. Once the mind learns, the underlying neural patterns are difficult to change, which explains why perceptions linger. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">When circumstances are unique, however, our expectations are undefined, and our protective evolutionary biology kicks in. In these cases, RPE is very high, and the brain subconsciously reacts to the increased uncertainty. We perceive novel situations as risky, and our cave man brain releases a neurotransmitter called norepinephrine, a stress hormone that increases attention and concentration and facilitates learning. The amygdala, the part of the brain responsible for encoding and evaluating our emotional responses, is on high alert. Norepinephrine also catalyzes our autonomic “fight or flight” system, readying us for possible action. Just like our primitive ancestors, new situations put us on edge, grab our attention, and sharpen our senses. We’re ready to learn quickly because our survival may depend on it.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Learning is rarely a matter of life and death in the modern world, but our brains are conditioned to respond to new situations in much the same way. Faced with uncertainty, the brain sets the first and most impactful cognitive anchor upon which all subsequent learning is based. Our neurobiology therefore predisposes us to automatically place more importance on first impressions. Subsequent learning then reinforces our initial experiences, and in time our cumulative perceptions evolve into long-term biases. First impressions are meaningful because it’s how our brain works on a fundamental level. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Getting off on the right foot </b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Customer Success Managers face a challenge to make their customers’ journeys optimally productive and enjoyable from the outset. Customers’ tendency to quickly judge the value of the product and the quality of the relationship means onboarding must go smoothly. CSMs should do their homework, researching the customer and their business and reviewing account history during the sales process. During the call, the CSM should take the time to understand and respond to the customer’s cognitive state, both <i>effectively </i>(meeting utility needs) and <i>affectively </i>(meeting emotional needs). When CSMs are <a href="http://www.se-partners.com/MindfulVideo.html" target="_blank"><b>mindful</b> </a>of conversations that gratify both conscious and subconscious needs, they not only solve problems but promote the conditions that lead to stronger relationships. If action items must be addressed after the call, prompt follow-up and follow through are critical because the customer is primed to learn if the CSM can be trusted and relied upon. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">As the customer learns to use their new software, they continue to refine their understanding about the nature of the relationship, too. The CSM should check in frequently in the early stages, helping the customer overcome obstacles in a friendly way. In the first few months, customers will not only come to appreciate the value of the product, they will do the same with the CSM and the company they represent, and the positive effects will stick. If the findings in the wireless industry are any guide, the financial outcomes are dramatic.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Contrary to popular belief, science shows not all interactions are created equal—first impressions really matter. Research from another industry and advances in neuroscience confirm the effects and demonstrate the financial impact. For CSMs, doing things right from the beginning sets the stage for stronger relationships and significantly lowers customer churn.</span><br />
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<i style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Service Excellence Partners</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="background-color: white; color: #888888; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-decoration: none;" target="_blank">Contact us</a><span style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Sources:</span><br />
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<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Bolton, Ruth N. “A Dynamic Model of the Duration of the Customer’s Relationship with a Continuous Service Provider: The Role of Satisfaction.” <i>Marketing Science</i>, 17 (1), 1998, 45-65.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Frank, M., Munakata, Y., Hazy, T., and O'Reilly, R. (2012). <i>Computational Cognitive Neuroscience</i>, Kindle Edition.</span></li>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-78307206029857872782014-04-21T07:46:00.000-06:002014-04-21T09:01:38.146-06:00Are CSMs Taking a Critical Process for Granted? <span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>It’s time to view relationship-building from a new perspective </i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Studies have shown that people switch vendors for three reasons:<sup>1</sup> </span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">1.<span class="Apple-tab-span" style="white-space: pre;"> E</span>xpectations for quality and value go unmet</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">2.<span class="Apple-tab-span" style="white-space: pre;"> Customers l</span>ack personal attachment to the supplier </span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">3.<span class="Apple-tab-span" style="white-space: pre;"> </span>It’s easy to switch </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">When all three factors are present, churn results. Factor 3 above depends on product complexity, cost to change, and competitive pressures. Customer Success teams address the first factor, building value through software usage, answering questions, and demonstrating the benefits promised during the sales cycle. But the second factor, building personal attachment, rarely gets the attention it deserves, yet it’s a major driver affecting churn. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Now wait a minute! Everyone agrees that building customer relationships is important. It’s intuitively obvious that better customer relationships lead to greater retention and loyalty. After all, people prefer to do business with people they know, like, and trust. But many companies take relationship-building for granted. They believe it happens on its own—simply hire friendly front-line employees, give customers what they need, and better relationships will somehow result. But if relationships are so important, why leave them to chance? Is there a better way? </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Relationship is a process</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Psychologists say relationships have a beginning, middle, and sometimes an end.<sup>2</sup> Think about how you became friends with someone. You met, discovered you had a common background and shared interests, and you found each other likeable. Something “clicked.” You connected because the person showed empathy and realness, and you immediately felt comfortable with them. After subsequent contacts, your relationship deepened through mutual connection, caring, confiding, and trust. You found you were helping each other achieve goals and deal with daily frustrations. You maintained your relationship through periodic social get-togethers or by enjoying common interests. If you’re fortunate, this person is still in your life. But as you know, friendships can lull when the other person gets busy, goes through life changes, or moves away. Friendships can also abruptly dissolve due to a “falling out.” </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheaqXzhdpNkuBkMyxhq7pVN1yCdaaLI8ioLwnXQlj6YPjZk-8Q5MUa07aG_DXY8zmddKzAsHZrXJFT8zj1wxpjJ6X9ENw5vy2-VwJ0bN-RPyG5mlRS5_lS4zlGpkPirvZv4YIYeFsjrG8/s1600/relationship.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheaqXzhdpNkuBkMyxhq7pVN1yCdaaLI8ioLwnXQlj6YPjZk-8Q5MUa07aG_DXY8zmddKzAsHZrXJFT8zj1wxpjJ6X9ENw5vy2-VwJ0bN-RPyG5mlRS5_lS4zlGpkPirvZv4YIYeFsjrG8/s1600/relationship.jpg" height="67" width="400" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Imagine if all your business relationships could be close friendships. Most will never be, but all relationships follow the same pattern of initiation, maintenance and dissolution. Relationships, like all processes, occur in a sequence of steps, and outcomes obey the laws of cause and effect. The strength and quality of the relationship that develops depends on a number of factors, some of which can be controlled and others cannot. For example, people can't change their basic nature and few will ever become best friends. However, it is possible to become more likeable. Since some relationship factors <i>are </i>controllable, influencing them improves relationships. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Relationship factors</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Subconscious social signals lie at the heart of our relationships. David Rock, founder of the NeuroLeadership Institute, distilled neuroscientific research and social evolutionary theory into a simple model to describe the reflexive behaviors all humans share.<sup>3</sup> His SCARF model outlines the core psychological drivers hardwired into our subconscious:</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>Status—how we perceive our importance relative to others</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>Certainty—our ability to predict the future</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>Autonomy—our sense of mastery and control over events</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>Relatedness—our connection and sense of safety with others</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>Fairness—our perception of equitable exchanges </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">These factors influence relationships positively or negatively. For example, consumers who call technical support complain when technicians make them feel stupid. The customer subliminally perceives the interaction as a <i>status </i>threat. In extreme cases, the conversation provokes anger and causes customers to terminate their contracts. “You’re not treating me like a valued customer!” they exclaim. Most of the time provocations are unintentional and subtle, but even minor comments at the wrong time can leave lasting impressions. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Conversely, SCARF techniques can promote positive encounters that lead to stronger attachments. For example, a Customer Success Manager begins an onboarding call saying, </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">“I saw on your LinkedIn profile that you’re from Chicago.” </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">“That’s right. I grew up on the South Side, 120th and Pulaski,” the customer says.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">“No kidding!” the CSM exclaims. “I’m from Orland Park!”</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAiWTLNCnnbcZuAC5Jtmxn_b9k8p7e_smWgAsgAfZwoK-WGpViKG9-EMqBABPR3uVaETrg4UIuraoHPS0wTswFHBag3D_NVZLgfh-NvkjeUx0EeCpnzmLpQfIfRxsbfniywX7mmSBDHnQ/s1600/agent.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAiWTLNCnnbcZuAC5Jtmxn_b9k8p7e_smWgAsgAfZwoK-WGpViKG9-EMqBABPR3uVaETrg4UIuraoHPS0wTswFHBag3D_NVZLgfh-NvkjeUx0EeCpnzmLpQfIfRxsbfniywX7mmSBDHnQ/s1600/agent.jpg" height="150" width="200" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The CSM is building <i>relatedness </i>right from the start, sending a subliminal signal that she’s a friend, not a foe. After the small talk, she says she will help him get his account set up and it will take only fifteen minutes. This creates a sense of <i>certainty </i>in the customer’s mind. By proactively sending these and other signals, the CSM produces warmer, friendlier interactions.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">In a similar manner, CSM leaders should look closely at how interactions occur throughout the customer lifecycle. They can do this by mapping the experience from the customer’s perspective and by identifying the customer’s practical (<i>effective</i>) and emotional (<i>affective</i>) needs at each step. Then, executives can close performance gaps by implementing process improvements and measuring the impact on customer churn. Often simple changes in the right places can make significant improvements through training, website revisions, and e-mail edits. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMGh60w_kQEwGJ_agqgRK-64aNKIgo1ro8c6eN1sJLMsybYb_opc-T10bJwRWUGTBvWv1zn0-LXEelo12z7tmN926QAKEavbiwjsKfjmqKtzJeQHhDz_ipOf8_3iRdwKhrodavArk6rSg/s1600/mcx.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMGh60w_kQEwGJ_agqgRK-64aNKIgo1ro8c6eN1sJLMsybYb_opc-T10bJwRWUGTBvWv1zn0-LXEelo12z7tmN926QAKEavbiwjsKfjmqKtzJeQHhDz_ipOf8_3iRdwKhrodavArk6rSg/s1600/mcx.jpg" height="204" width="320" /></a></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">SaaS companies tend to take the process of building relationships for granted. Like all processes, however, those better designed and managed produce better results. CSMs should be more <i><a href="http://www.se-partners.com/MindfulVideo.html" target="_blank">mindful</a></i>, both in what they do and how it impacts the customer’s brain. Proactively and systematically creating the conditions for friendly attachment leads to stronger relationships and reduces churn. </span><br />
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<i style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Service Excellence Partners</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Contact us</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Sources:</span><br />
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<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Gremlera, D. and Brown, S. (1996) <i>Service Loyalty: Its Nature, Importance, and Implications</i>, University of Idaho and Arizona State University, USA</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Blieszner, R. and Roberto, K. A. (2003). <i>Friendship across the lifespan: Reciprocity in individual and relational development</i>. Also in F. R. Lang and K. L. Fingerman (Eds.), <i>Growing together: Personal relationships across the lifespan</i> (pp. 159-182). Cambridge, U.K.: Cambridge University Press.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Rock, D. (2012) “SCARF: a brain-based model for collaborating with and influencing others.” <i>Neuroleadership Journal</i></span></li>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-83951609104387691732014-04-06T17:39:00.000-06:002014-04-09T11:12:53.403-06:00Cohort Analysis Done Right<span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>Use a p-chart to properly monitor shifts in customer churn</i></span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></span><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Let's say you run a Customer Success team and your manager asks you to perform cohort analysis in order to better understand customer churn behaviors. Your customers renew on a monthly basis, and you’re interested in measuring their initial fallout rate. Using data collected over the past year, you count the number of users who canceled their subscriptions after the first 30 days and divide that number by the total number of new users during each month.<sup>1</sup> Your Excel spreadsheet table is shown below:</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGneDKLD93o25MjJqlO7krhL_bAi_IqFq_CJGsoE5EqAchnj-tcaS0vII3OFqLbwrotr9CWBHfuSZtUcudj7TA_J-NILsqS8U7rz1dL8vj_xm34NxTY0KHGXr3yAMpVhpr_0LRx_podbA/s1600/churn1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGneDKLD93o25MjJqlO7krhL_bAi_IqFq_CJGsoE5EqAchnj-tcaS0vII3OFqLbwrotr9CWBHfuSZtUcudj7TA_J-NILsqS8U7rz1dL8vj_xm34NxTY0KHGXr3yAMpVhpr_0LRx_podbA/s1600/churn1.jpg" height="60" width="400" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">You then plot the data:</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAlgqSgW1CUmv_1AhIlrzGpdUX-UNQ4usyZqoRyAllZbxvPeqgqU7EokTIjuHh0b0yozH5CWtcnB-FRVeTWMlbSR2e-0axtrUN0ojCV1xOj1UKGJr_Fk1upYFEOhZFluwR_ApfXdIWTJ4/s1600/churn2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAlgqSgW1CUmv_1AhIlrzGpdUX-UNQ4usyZqoRyAllZbxvPeqgqU7EokTIjuHh0b0yozH5CWtcnB-FRVeTWMlbSR2e-0axtrUN0ojCV1xOj1UKGJr_Fk1upYFEOhZFluwR_ApfXdIWTJ4/s1600/churn2.jpg" height="240" width="400" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The results concern you. Although the data points vary somewhat, it appears your 30-day churn rate has been increasing all year! Using the trend line function in Excel confirms it—the first month’s churn rate has grown from about 2.2% to 3.2%!!</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg27HpZdmgUNj6g3cgwR4HoVU5S9gVMOXCrVX_ZXRUevC1OdSM1NyUGKbFD5D1yI_4x8Vz-ZH5VE3aIH_fGr_c7fAS8V5etaU5jVVug8X2BxiNSwqqlMUSZwn-ybIYHjVvIOVyU2nHiMKE/s1600/churn3.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg27HpZdmgUNj6g3cgwR4HoVU5S9gVMOXCrVX_ZXRUevC1OdSM1NyUGKbFD5D1yI_4x8Vz-ZH5VE3aIH_fGr_c7fAS8V5etaU5jVVug8X2BxiNSwqqlMUSZwn-ybIYHjVvIOVyU2nHiMKE/s1600/churn3.jpg" height="241" width="400" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">You share this information with your boss and she’s not happy. Clearly your Customer Success team is not doing the job. She expects immediate improvement. <i>Or else.</i> </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Simple, obvious... and wrong</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">But hold on a minute—you’ve made a serious mistake. You haven’t managed your team poorly. You’ve analyzed your data improperly!</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Your error has to do with statistical sampling. Randomness occurs in all data, and experimenters must be careful to separate the “signal” from the “noise.” Statisticians warn of two types of experimental error: </span></div>
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<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Type 1: <i>False Positive</i>—a result is determined when in fact there’s only randomness </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Type 2: <i>False Negative</i>—randomness is determined when in fact there’s a valid result</span></li>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Without using the proper statistical methods, people can easily jump to the wrong conclusions. Overly simplified, standard tools in Excel make the situation worse. As a result, managers tend to over-react, seeing a problem that isn’t there and making changes that can do more harm than good.<sup>2</sup> Managers can also under-react, missing the cues to make changes when it’s time to do so. Most businesspeople lack a strong analytical background, so statistical errors are quite common, often leading to disastrous consequences. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Using the p-chart</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Fortunately, manufacturers have been using powerful statistical methods for years, and these practices can easily be applied in software companies. Lean Six Sigma, a quality improvement method, incorporates a broad range of tools that ensure teams properly analyze data and reach valid conclusions. You can use these techniques to your advantage. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The control chart is a handy Lean Six Sigma tool helping managers avoid Type 1 and Type 2 errors. Control charts are used to determine if a process is in a state of statistical control, i.e., if the observed variation is due to randomness and not any particular cause. There are many different types of control charts depending on the type of data involved, but all follow the same basic structure. The p-chart (or proportion chart) uses the binomial distribution. It is the most appropriate control chart to use in this example because there are only two possibilities (the customer cancels or renews) and results are expressed as percentages.<sup>3</sup> </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The control charting procedure is as follows:</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">1.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Determine rational subgroups. </i>A rational subgroup is a homogeneous set of data that provides a representative sample, such as a batch of parts manufactured during a shift. Many SaaS companies define their subgroups as monthly “cohorts,” the set of new customers who sign up for software during a given month. Usually there’s nothing different about a customer who subscribes in January versus one who subscribes in February, and for the purposes of evaluating churn, it’s more accurate to use sequential, fixed sample sizes instead of varying sample sizes.<sup>4</sup> In order to calculate the mean with reasonable accuracy, statisticians recommend using around 25 subgroups. In this case, we’ll choose fixed sample sizes with 168 customers in each of 24 subgroups (4032 customers/24 subgroups = 168 sample customers/subgroup).<sup>5</sup> Below is your new sample set:</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgicZBRwcaDEw0lwbt2Jb5rzP7ugltKlidBPN6o7lZrtrWqD2WF2aolA3h_sL2es6EDBlpf76cXN1WDMNe8hTkfb5WuB9ub5P2Sj4VYlQKAlra-JQVfxWwXJKQFLH1syp3bXBBRuLMJyo8/s1600/churn4.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgicZBRwcaDEw0lwbt2Jb5rzP7ugltKlidBPN6o7lZrtrWqD2WF2aolA3h_sL2es6EDBlpf76cXN1WDMNe8hTkfb5WuB9ub5P2Sj4VYlQKAlra-JQVfxWwXJKQFLH1syp3bXBBRuLMJyo8/s1600/churn4.jpg" height="60" width="400" /></a></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">2.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Plot the dots.</i> As you can see, the shape looks a little different, but it still appears there’s some trending in the data. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghtdDmQy-RAsy54VPTiE7Q7tWoxi8JNtJxcC_i2w_dN-TkGCfXHVQlsE7iflqQp151Fhy2JTEIatowcLrZhG3ubZAMUb5AbaVy_MZEnKYDDvBiwE8yPqUD-_9sB4GbZ84muRMj3jTiiLg/s1600/churn5.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghtdDmQy-RAsy54VPTiE7Q7tWoxi8JNtJxcC_i2w_dN-TkGCfXHVQlsE7iflqQp151Fhy2JTEIatowcLrZhG3ubZAMUb5AbaVy_MZEnKYDDvBiwE8yPqUD-_9sB4GbZ84muRMj3jTiiLg/s1600/churn5.jpg" height="240" width="400" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">3.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Calculate and apply the center line and control limits. </i></span></div>
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<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Compute <i>p-bar</i> (or average proportion) for the data set. In this example, 114 out of 4,032 customers churned after the first 30 days, a <i>p-bar</i> of 2.8% (114/4032). Draw this line on the chart. </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Calculate the upper process control limit, UCL. This line shows the mean plus three standard deviations. The line is important because the probability of finding a data point more than three standard deviations away from the mean by chance is less than 1%. The UCL calculation for a p-chart is:</span></li>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>UCL = <i>p-bar</i> + 3 * Square Root {<i>p-bar</i> * (1 – <i>p-bar</i>) / <i>n</i>}</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">where <i>n</i> is the fixed subgroup sample size</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">In this example, UCL = 0.028 + 3*SQRT {0.028*(1-0.028)/168} = 0.0662 = 6.6%. Add this line to the chart.<sup>6</sup> </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgir4Hdr1lrdPhSvCdaATR2ABvhkwiG2K9ZG8iPKA2wVJ4C1yUutqLtM6PUkHh3H33bi3MF0LEl-qbeYjFJHenSUUu3Zfcj-GWiwxD7e8wfuoQ2P_eD8LfLxAexgxufkTlhlJodIZqJXGU/s1600/churn6.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgir4Hdr1lrdPhSvCdaATR2ABvhkwiG2K9ZG8iPKA2wVJ4C1yUutqLtM6PUkHh3H33bi3MF0LEl-qbeYjFJHenSUUu3Zfcj-GWiwxD7e8wfuoQ2P_eD8LfLxAexgxufkTlhlJodIZqJXGU/s1600/churn6.jpg" height="240" width="400" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">4.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Interpret the results. </i>As you can see, most data points fall in the vicinity of <i>p-bar</i> and none exceed the upper process control limit, UCL. This is your first indication that observed variation is likely due to randomness and not any special causes or shifts in your process. For good measure, add lines at +/-1 and +/-2 standard deviations (probabilities of data points in these ranges 68% and 95% respectively) and add them to the chart. Mark zones “C” between the centerline and 1 standard deviation, “B” between 1 and 2 standard deviations, and “A” between 2 and 3 standard deviations from the mean as shown below.</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiebgwfqUbV59OP1-31E_9mIIj68mPLzys-aTxy8KhwVzqO9XIT05yQtTpk5bJJAUtCMZTajP2H7igRRISrPUkTW8ZPL9HXmLgj0VTpZ9Ge1ofmBZgv1KFm2aEauatQvKgk7l3c3xmR_1s/s1600/churn7.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiebgwfqUbV59OP1-31E_9mIIj68mPLzys-aTxy8KhwVzqO9XIT05yQtTpk5bJJAUtCMZTajP2H7igRRISrPUkTW8ZPL9HXmLgj0VTpZ9Ge1ofmBZgv1KFm2aEauatQvKgk7l3c3xmR_1s/s1600/churn7.jpg" height="240" width="400" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Then apply three additional statistical tests to rule out any possibility that something is amiss:<sup>7</sup> </span></div>
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<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Nine points in a row in Zone C or beyond on one side of the center line?—NO </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Six points in a row steadily increasing or steadily decreasing?—NO </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Fourteen points in a row alternating up and down?—NO </span></li>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Congratulations, you can breathe a sigh of relief! You’ve correctly established that despite appearances, there’s no trending in the data, contradicting what you originally thought. You explain to your boss that nothing has changed and results are due exclusively to randomness. The data shows that your onboarding process is in a state of statistical control and will routinely produce 30-day churn averaging about 2.8%. What’s more, you can accurately predict that 2/3 of the time future churn will be measured between 1.5% and 4%, 1/3 of the time less than 1.5% or over 5%, and only on rare occasions will it ever exceed 6.6%. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Next steps </b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">You can continue to add new data points and monitor process stability using the limits you calculated above and by applying the same interpretation procedure. If any of the four statistical test results are positive, take immediate action and determine the underlying cause. You can use p-control charts to investigate customer defections at other periods of time, such as subscriptions after 60 days, 90 days, or upon annual renewal. Several Lean Six Sigma statistical packages are commercially available online (many of which are SaaS), making control charting much easier. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Once your Customer Success process is stable, it’s possible to systematically improve it. Although keeping things under control is always your first priority, making things better is your end goal. In my next blog, I’ll describe how Lean Six Sigma methods can be used to help you improve customer retention.</span><br />
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<i style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Service Excellence Partners</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Contact us</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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Notes:<br />
<ol>
<li>Technically, calculating ratios when denominators vary causes an “average of the average” problem in which comparing percentages between periods introduces significant measurement error. This discussion was deleted for brevity. </li>
<li>Human over-reaction to Type 1 errors is a fascinating subject, one with neurobiological and evolutionary explanations. It’s beyond the scope of this blog, but humans are preconditioned to see patterns and jump to the wrong conclusions, hence the need for robust application of the Scientific Method. </li>
<li>Note that p-control charts can be used with varying sample sizes under certain circumstances (computing average n or using multiple control limits), and that other types of attribute control charts can be used for smaller sample sizes. For simplicity, this discussion was omitted.</li>
<li>Homogeneity extends to type of customer, including the market segment and associated value proposition, as described in my previous <a href="http://getamity.com/2014/04/03/loyalty-begins-value-proposition/" target="_blank">guest blog</a>. If churn behaviors vary significantly by customer type, you should stratify your data and chart each segment separately. </li>
<li>A rule of thumb is to choose subgroup sample sizes for attribute data such that np>5; in this case, churn is about 3%; n>5/0.03 or n>167</li>
<li>Note that in this case, the lower process control limit is negative and can be neglected; this is a “single sided” investigation where the minimum churn is 0.0% and we are interested in detecting a shift upward.</li>
<li>Montgomery, D. C. (2005), <i>Introduction to Statistical Quality Control </i>(5 ed.), Hoboken, New Jersey: John Wiley & Sons, ISBN 978-0-471-65631-9, OCLC 56729567</li>
</ol>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-22030431342985432002014-03-19T08:37:00.000-06:002014-03-20T07:47:19.612-06:00Software Adoption is a Matter of Habit<span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>Six tips to increase user adoption by capitalizing on human nature</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">In the SaaS industry, customer retention rates depend heavily on the extent to which customers engage with their product, especially during the early stages. The more they use it, the more value they find in it, which increases the chances that they will continue to subscribe. In fact, data from Scout Analytics indicates that customers who use their new software at least once per week over the first six months of their subscription are about 50 percent less likely to churn.<sup>1</sup> Understanding this well, most Customer Success operations focus their churn reduction efforts on encouraging product usage. However, this approach is insufficient by itself because it overlooks human nature, the most influential factor of all. SaaS companies must change customer <i>habits </i>before product adoption is fully realized. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Creatures of Habit</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">How many times have you driven to work, but upon arriving, had no memory of the commute that got you there? Clearly, driving is complicated. You get into your vehicle, fasten your seatbelt, apply the brake, start the engine, put the gear selector in reverse, look behind you, back out, turn the wheel, apply the brake, close the garage door, put the car in drive—and that’s just getting out of your driveway. You process thousands of stimuli, decisions, and actions in a typical commute, yet it can all be done without much conscious thought.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">How can something so complex become second nature? Our magnificent brains help us simplify life. Because cognition demands so many resources, our subconscious creates habits to increase efficiency. Although the brain accounts for only 2 percent of body weight, it consumes 20 percent of the body’s total energy.<sup>2</sup> To streamline, the basal ganglia recognizes patterns and creates shorter neural pathways to get the same job done faster and with fewer resources. The brain automatically rewires itself, enabling reflexes to perform tasks that once required more cognitive power. This subconscious rerouting happens all the time. By some estimates, about 40 percent of what we do every day is habitual.<sup>3</sup></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>The Habit Cycle</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Habits are made up of four things: a <i>cue</i>, a <i>routine</i>, a <i>reward</i>, and an underlying <i>craving</i>.<sup>4</sup> </span><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">A cue is something in the environment that triggers the behavior, the routine is the action, the reward is the positive outcome, and inner cravings are the motivation.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Let’s say you want to start exercising habitually. We’ll assume you want to shave off a few pounds because you don’t like how you look in the mirror. A better self-perception is your underlying craving. Next, to create the new habit, you follow a cue-routine-reward cycle. First, you set up a recurring reminder in your calendar (cue) and then go to the health club every time you schedule it (routine). After the first few workouts you'll start to notice newly toned muscles (reward). It may be difficult to repeat the cue-routine-reward cycle, but if you stay disciplined and patient, your brain rewires itself. Pretty soon, exercising regularly will be automatic. Simple enough.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The problem is that old habits are notoriously stubborn. This is because our brains always take the path of least resistance. Having been more efficiently converted and stored in the subconscious, habits become easier for the brain to recall and execute. Once neurons have been wired together during the learning process, the connections become permanent, so the brain must now expend more energy to substitute a new habit. Conscious repetition causes neural connections to strengthen, forcing the subconscious brain to eventually choose the new wiring over the old. If repetition is lacking, the brain simply defaults to the old reflexes. That’s why reinforcement is so important for creating habits and why change is so difficult. The more entrenched our behaviors, the harder and more frequently our brains must work to replace them.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Making Product Usage Habitual</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">You should view software adoption within the context of changing habits. Upon subscribing to your service, customers are essentially trying to replace one behavior with another, such as using your online database rather than an Excel spreadsheet to track their information. Your customers’ brains are wired to repeat their former behaviors, so the key to success is to be patient and vigilant, while smoothing their path to change. The following six tips can help: </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">1.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Promote the Motivation</i>—People ultimately change their behaviors because they are inspired to do so. In cases where a department head makes the software purchase decision, it is likely that many users won’t feel personally connected to the motivation behind it. Be sure to repeatedly reinforce your benefits with all users. Cultivate their desire to adopt new habits, such as explaining how the new software saves them significant time and effort.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">2.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Chunk Large Processes into Small Cue-Routine-Reward Cycles</i>—Any process can be reduced to a series of repeatable steps, and stringing together smaller routines allows the brain to learn, adapt, and reuse skills more efficiently. Running a new financial system is a daunting task, but “paying a bill,” “reconciling a bank statement,” and “running a month-end report” are more accessible and easier for the brain to make into habit.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">3.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Implement Recurring Cues</i>—Recall that every habit needs a sensory cue to initiate the autonomic behavior. You can provide simple triggers through e-mail reminders with embedded links to start transactions. For example, Facebook and LinkedIn constantly send updates to revisit their website and reconnect with friends, family, and business associates. If you identify and map the routines involved in using your product, you can associate a cue to enact each step. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">4.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Reward Frequently</i>— Don’t leave progressive adoption to chance. It is essential to track, display, and reward it at every turn. Recognize customer successes via web pages or e-mails when new users accomplish milestones. Note their “moments of proof,” drawing attention to the improvements that using your software yields. Be sure to recognize both initial and repeat successes to promote habit formation.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">5.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Leverage the Support of Others</i>— Rewiring the brain is difficult and takes conscious effort. Use your cohort’s shared experiences to encourage fellow users. Whenever possible, train people in groups and let them interact. Just like Alcoholics Anonymous and Weight Watchers, social groups provide a safe environment and unmatched support for people undergoing changes in habit. User groups also increase perceived value and builds affective bonds between the company and its customers, which further reduces churn.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">6.<span class="Apple-tab-span" style="white-space: pre;"> </span><i>Be Mindful</i>—Above all, be patient. Experts estimate a new habit can take from 22 to 60 days to form, depending on complexity, entrenched current behaviors, level of motivation and reinforcement frequency, and even the age of people involved. It’s a process that requires intense focus in the beginning, and typically includes false starts and frustrations along the way. Once the habit is established, however, it tends to stay for the long haul.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Software adoption is about changing habits. To maximize usage and minimize churn, your SaaS company should look a step beyond software features, focusing more on the human beings who use the product and the new habits their brains are attempting to form with it. </span><br />
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<i style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Service Excellence Partners</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Contact us</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Sources:</span><br />
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<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Scout by ServiceSource <a href="http://research.scoutanalytics.com/churn/the-data-behind-adoption-and-retention-in-the-customer-journey/" target="_blank">blog</a>. </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Swaminathan, N. (2008) “Why does the brain need so much power?” <i><a href="http://www.scientificamerican.com/article/why-does-the-brain-need-s/" target="_blank">Scientific American</a>.</i></span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Duhigg, C. (2012) <i>The Power of Habit: Why We Do What We Do in Life and in Business. </i>Random House, New York. ISBN 978-0-679-60385-6</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Ibid.</span></li>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com1tag:blogger.com,1999:blog-529837537302814781.post-66811058284518537882014-02-23T07:19:00.000-07:002014-02-23T07:19:41.397-07:00Is Your Customer Success Team a QA Department in Disguise?<span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>A revolutionary change may be at hand.</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Many Customer Success teams work with customers to help them learn and deploy new software in order to increase usage and build relationships at a critical time in the customer lifecycle. Others perform an important account management role, providing ongoing support and generating renewals. Often, however, CSM teams fill their days responding to customer complaints or being pressured to push upgrades to compensate for high churn. If CSMs spend most of their time mending frayed relationships or engaging in retention heroics, managers should be concerned—perhaps the Customer Success function is really there because the company <i>lacks </i>successful customers. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Sound familiar? Take heart. This situation is reminiscent of the transformation that occurred in manufacturing Quality Assurance departments not long ago. The important lessons they learned can help you lead your SaaS organization out of the problem-solving dark ages and into a problem-prevention renaissance. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Learning from the Quality Movement</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Reeling from tough economic times in the late 1970’s, Americans needed answers. Japanese brands Sony and Panasonic had decimated the American consumer electronics industry, while Toyota, Honda, and Nissan were busy thumping the Big Three auto makers. The Japanese produced significantly higher quality, lower cost goods, and consumers everywhere snapped them up. From the Rust Belt to Silicon Valley, the once-dominant American manufacturing industry was in crisis. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_UBDKqHwpFVHPPDr8c_jyDsa-RbrcXWJLbFf9wFP_gQ13vS_jV6UXL6WCOW5DvwHKqEpEDpMaAnUNFHrYfGO_mdDTzQMFnNQAkrFAcmmff0JMrOC2Rh6J7l6DAxguoZzwTVYZA8ouQFs/s1600/inspection.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_UBDKqHwpFVHPPDr8c_jyDsa-RbrcXWJLbFf9wFP_gQ13vS_jV6UXL6WCOW5DvwHKqEpEDpMaAnUNFHrYfGO_mdDTzQMFnNQAkrFAcmmff0JMrOC2Rh6J7l6DAxguoZzwTVYZA8ouQFs/s1600/inspection.jpg" height="238" width="320" /></a></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Then in 1980, NBC News ran a program entitled, “If Japan can… why can’t we?” The show revealed how the quality improvement methods we taught the Japanese after World War II helped them beat us at our own game. Dr. W. Edwards Deming’s work with the Japanese challenged conventional notions that high quality must come at a high cost. Their global success proved that high quality meant far less waste and rework, lower costs, more reliable products, and happier customers. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">American industry got the message. After losing its way during the post-war boom, it was time for a new start. Led by Motorola, Alcoa, Ford, and many others, manufacturing rebounded by rediscovering quality methods, revamping operations, and regaining lost market share. Today, defects are no longer measured in percentages but in parts per million. It’s all due to a fundamental shift—manufacturers now achieve high quality not through inspection and remediation but by designing it into products and processes in the first place. Gone are large “test and fix” Quality Assurance operations, thanks to robust product designs, high capability production lines, and responsive supply chains. The modern, lean Quality function no longer requires scores of repair technicians but a select few quality consultants working upstream to ensure improvement never ends. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Enlightenment in Customer Success</b></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh7fkb704k_9iRWQe86uhfpt-LPAr5iImEWjYVVQkKTHayo6uSMT2bWiha0uh2Iet7rCBk7czuZsZvre2IVrR96WWAK1U2Q88f5V2hkX5hZ_n59ZmAJepZH8kdY7JnuUc1dC5k8mY43zVk/s1600/why+they+switch.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh7fkb704k_9iRWQe86uhfpt-LPAr5iImEWjYVVQkKTHayo6uSMT2bWiha0uh2Iet7rCBk7czuZsZvre2IVrR96WWAK1U2Q88f5V2hkX5hZ_n59ZmAJepZH8kdY7JnuUc1dC5k8mY43zVk/s1600/why+they+switch.jpg" height="320" width="320" /></a></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Just as manufacturing defects crippled manufacturing companies, experiential defects now rob SaaS companies of millions in revenue each year. Too often after buying SaaS offerings, customers find features lacking, software difficult to use, information hard to find, and support frustrating and unresponsive. This leads to churn.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">When your Customer Success team becomes a de facto “save desk,” it’s behaving just like the Quality Assurance department of old, reacting to problems rather than adding value from the start. Worse, factors affecting churn can appear at multiple points in the process, but these problems get funneled to the Customer Success team in the name of “efficiency.” As a result, the team spends its time solving avertible problems at great expense. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">To remedy the situation, SaaS leaders must shift their focus to prevent churn in the first place:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>Create better products </span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>Deliver better services</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>Strengthen customer relationships </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">To accomplish these goals, it’s critical to address the negatives that make customers leave <i>and </i>the positives that make them loyal. Leaders must dig deeper to uncover the cause-and-effect relationships that lead to better results. Doing so eliminates frustrations, saves time and money, and grows revenue through more successful installed-base sales campaigns. Given relatively low barriers to entry and increasingly crowded markets, companies that <i>keep and grow</i> hard-won market share will be the survivors when SaaS markets inevitably shake out most of the competition. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Joining the Renaissance</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The spark that ignites change is close at hand. Now more than ever, SaaS executives and investors understand the financial consequences of customer churn, emphasizing continuous improvement and analyzing customer use patterns and satisfaction data to drive software revisions. Executives are also beginning to look beyond the technology and to the people using it, placing greater importance on the overall customer experience. They see that the art of up-selling, cross-selling, and referral selling begins with a clean canvas of happy customers. As helpful visualization and predictive analytics technologies arrive on the market and teams adopt time-tested process improvement disciplines, your SaaS company can build customer loyalty that transcends software development and involves <i>all </i>aspects of the business. </span><br />
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<i style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Service Excellence Partners</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Contact us</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span></div>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-57483536864464846562014-02-10T06:01:00.000-07:002014-02-10T06:01:11.633-07:00Customer Loyalty Problem Solving<i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;">A three-level model helps focus improvement efforts. </span></i><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Customer retention is critical for companies with business models that rely on recurring revenue. The “leaky bucket” that is customer defection robs </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRM-nx1zvO-4aRfrfLVidBYnz-5Xosr_yfF5Mw65cQdSY6wPyY0MR6gmFA906fwCVuImWI6mKim3TQSxV871l5PfZVdzExvNuUxcvERznD-s6jsigvMOSigbEi1BCHxg5H1R87W6xc5R8/s1600/bucket.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRM-nx1zvO-4aRfrfLVidBYnz-5Xosr_yfF5Mw65cQdSY6wPyY0MR6gmFA906fwCVuImWI6mKim3TQSxV871l5PfZVdzExvNuUxcvERznD-s6jsigvMOSigbEi1BCHxg5H1R87W6xc5R8/s1600/bucket.jpg" height="252" width="320" /></a></span></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">companies of precious revenue and profit. In cloud computing, cutting customer churn in half over the typical customer life cycle doubles company cash flow and gross margin.<sup>1</sup> Even a small churn reduction pays off in the long term when millions of dollars in revenue are in play.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Obviously, improving customer loyalty is the key, but how? Where should managers start? I propose a simple, three-level model to concentrate on the customer benefits that lead to loyalty: <i>Implicit</i>, <i>Explicit</i>, and <i>Experiential</i>.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Implicit Benefits</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Customers take certain things for granted, such as reliable wireless phone service, accurate bank statements, and bug-free software. People assume basic attributes come with the service, and when companies fail to deliver on these minimum expectations, customers have little patience. Chronic problems providing what quality expert Dr. Noriaki Kano calls “must-be” quality<sup>2</sup> leads to customer defections in every industry. In Software-as-a-Service (SaaS) companies, churn can lead to the loss of half of a firm’s customer base during each renewal cycle. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">This is why managers must make delivering the fundamentals a company’s first priority. In cloud computing, that means system uptime, secure data, error-free code, and basic product support. SaaS executives must get and maintain control of their technology development and operations processes or prepare for a rapid demise.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Explicit Benefits </b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Companies promise things during the sales cycle. When deciding between competitive options, customers evaluate each company’s “value proposition” and choose the best option. If promises don’t materialize, customer expectations go unmet. For example, a SaaS company may state that their software creates a certain type of report, but the customer later discovers it can’t. Customers may not return if the issue is severe and the dissatisfaction high enough. If a competitor offers comparable benefits, and changing providers is simple and cheap, potential for churn grows. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Marketing masters Michael Lanning and Lynn Phillips say companies should make strong value propositions their strategic foundation.<sup>3</sup> First, managers must <i>choose </i>a winning value proposition, one that focuses sharply on a target market and offers a compelling alternative. Second, executives must <i>deliver </i>the chosen value proposition by translating it into design requirements, bringing it to market, and then providing it in day-to-day operations. Finally, the company must <i>communicate </i>the value proposition clearly and consistently in marketing, sales, and customer service. When promise-making and promise-keeping are in close alignment, customer expectations are reliably met and churn is reduced. An effective <a href="http://www.se-partners.com/SMS-Defined.html" target="_blank">strategic management system</a> ensures value propositions aren’t empty promises. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Cloud computing companies competitive in delivering <i>Explicit </i>and <i>Implicit </i>benefits will typically retain 80-85% of their customers from one renewal cycle to the next. But to raise performance to world-class levels of 95% or higher, companies must become proficient delivering a third type of benefit.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Experiential Benefits</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Customers prefer to do business with people they know, like, and trust. <i>How </i>a company does business is as important to customers as the product or service they receive from them. When customers have lackluster experiences, churn increases. Just one unhelpful tech support interaction can end a business relationship, especially when the customer feels ignored, devalued, or unfairly treated. On the other hand, service companies that form strong relationship bonds enjoy significantly higher customer loyalty.<sup>4</sup> </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Customer Experience Management (or Customer Journey Management) is a technique used to analyze and improve customer interactions. Managers collect data on myriad customer “touch points” (website visits, phone calls, e-mails, blog entries, social media, etc.) and plot each interaction against time. Patterns emerge where gaps and problems exist, and managers can use <a href="http://www.se-partners.com/Process-Improvement.html" target="_blank">process improvement</a> techniques, such as Lean Six Sigma, to resolve them.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">While addressing functional gaps is the first place to start, research suggests a more <a href="http://www.se-partners.com/Mindful.html" target="_blank"><i>mindful</i> </a>approach is the secret to achieving the highest levels of customer loyalty. Underlying all human </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">relationships are reflexive responses to subtle, social cues that can have a profound effect on conscious feelings and decisions.<sup>5</sup> For example, our subconscious mind is sensitive to <i>certainty</i>, the ability to predict the future. When a Customer Success Manager begins an onboarding call by saying, “We’ll have you up and rolling in just fifteen minutes,” she provides subliminal assurances to the customer, producing a rewarding dopamine burst in his brain. If additional, beneficial cues accumulate during the call, the brain assigns a positive marker to the memory.<sup>6</sup> Later, the brain reactivates the marker as it recalls the experience, allowing subliminal emotions to “weigh in” on the evaluation. When companies understand and proactively manage simple social cues through employee training, refined user experience (UX) design and other means, the resulting positive interactions lead to richly satisfying relationships and more loyal customers.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Loyalty troubleshooting is easier when managers focus on <i>Implicit</i>, <i>Explicit</i>, and <i>Experiential </i>benefits. When customer turnover is high, executives should attend to the basics. When it’s moderate, the priority becomes clearly articulating and consistently delivering competitive distinction. And when managers strive for world-class loyalty, being mindful of the customer experience is the path to success.</span><br />
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<i style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Service Excellence Partners</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. We increase customer loyalty and business performance in the cloud computing industry. </span><a href="http://www.se-partners.com/contact.html" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Contact us</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Sources:</span><br />
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<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Skok, David (2013). “SaaS Metrics 2.0 – A Guide to Measuring and Improving What Matters,” <a href="http://www.forentrepreneurs.com/saas-metrics-2/" target="_blank">For Entrepreneurs</a> blog</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Adapted from Noriaki Kano, Nobuhiku Seraku, Fumio Takahashi, Shinichi Tsuji (April 1984). "Attractive Quality and Must-Be Quality" (in Japanese). <i>Journal of the Japanese Society for Quality Control</i> 14 (2): 39–48. ISSN 0386-8230. </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Lanning, M. and Phillips, L. “Building Market-Focused Organizations,” (Gemini Consulting White Paper, 1992).</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Gremlera, D. and Brown, S. (1996) “Service Loyalty: Its Nature, Importance, and Implications,” University of Idaho and Arizona State University, USA</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Rock, D. “SCARF: a brain-based model for collaborating with and influencing others,” <i>NeuroLeadership Journal.</i></span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Damasio, A. R. (1996) “The somatic marker hypothesis and the possible functions of the prefrontal cortex,” <i>Philosophical Transactions of the Royal Society B</i>, 351, 1413-1420. </span></li>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com1tag:blogger.com,1999:blog-529837537302814781.post-72323897244159593252014-01-01T14:09:00.000-07:002014-01-01T14:09:04.144-07:00Start 2014 With New Customer Insights<span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>Three changes to your annual customer satisfaction survey can better focus your improvement initiatives</i></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEiQIzzP27leWDuAM7eVIHtwS98B1ri_0PMwKxl6hSCA_75k9ZFlbhawkRE8H4Vz111m9ubfjBxNAZeEIFxzTM3lmMag6zeK2ztKKGiUI9-O3PlcCuJHdHRVTHxsCh3yiRdQWhdcAt8qQ/s1600/survey.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="163" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEiQIzzP27leWDuAM7eVIHtwS98B1ri_0PMwKxl6hSCA_75k9ZFlbhawkRE8H4Vz111m9ubfjBxNAZeEIFxzTM3lmMag6zeK2ztKKGiUI9-O3PlcCuJHdHRVTHxsCh3yiRdQWhdcAt8qQ/s200/survey.jpg" width="200" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Many organizations conduct comprehensive customer satisfaction surveys this time of year in preparation for their annual planning exercises. Surveys aid decision making for process improvement initiatives and can also be used to test new product and service ideas. But most companies miss easy opportunities to gather valuable information along the way because they fail to do three things:</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b><i>1.<span class="Apple-tab-span" style="white-space: pre;"> </span>Ask segment identification questions.</i></b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Surveys typically ask customers for demographic information (age, gender, income, location) or company-specific information (products or services purchased, account size, salesperson) to categorize and compare responses. But these questions tend to be driven by whatever is easy to measure, not by what’s most essential to know. Asking respondents to identify themselves by market segments allows companies to align their products, services, and process improvements with the benefit of greater context.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">For example, let’s say a travel company identified three distinct segments in their customer base: families vacationing on school holidays, seniors enjoying their retirements, and corporate group travelers celebrating successful sales years. While all may purchase travel services, each customer set values what the company does differently: holiday availability may be more important to families, while low travel cost may be more important to retirees. The company may also determine that some customer segments are more profitable than others or represent opportunities for growth. In this example, the company could ask, “Which statement best describes you?” and offer descriptions of the three segments.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">When data are analyzed according to cleanly defined segments, suddenly results have far greater strategic impact. Prioritization becomes much easier when improvements can be traced to potential top-line revenue or bottom-line profit by customer segment. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b><i>2.<span class="Apple-tab-span" style="white-space: pre;"> </span>Ask what’s important.</i></b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Many organizations use the same survey questions they’ve always used, which allows them to track customer satisfaction changes over time. This certainly makes sense, but doing so blindly eliminates the chance to verify what’s relevant. The Importance-Satisfaction (I-S) survey technique adds the question “How important is this to you?” along with a rating scale (e.g. 1= not at all important to 5 = extremely important) to track customers’ current and changing tastes. Collecting both importance and satisfaction provides a handy measurement of the gap between the two.</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQGfinFKJ4TqOtQgUYEZ9CYFWj8es8ysAfkhfPfSCJNhtITmihmVTg1DBIbYGJ7t7HOxtn-RA0rnbc1fi6Gly24tBk3LIQYzS3rYBoqyASEqLHPzM7lyzgo3d8gwamUuWRH67b6IPlmsE/s1600/ritz-carlton.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQGfinFKJ4TqOtQgUYEZ9CYFWj8es8ysAfkhfPfSCJNhtITmihmVTg1DBIbYGJ7t7HOxtn-RA0rnbc1fi6Gly24tBk3LIQYzS3rYBoqyASEqLHPzM7lyzgo3d8gwamUuWRH67b6IPlmsE/s200/ritz-carlton.jpg" width="164" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">High-performing organizations periodically challenge their understanding of customer preferences. After receiving the prestigious Malcolm Baldrige National Quality Award a second time in 1999, Ritz-Carlton CEO Horst Schulze remarked:</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>“During our implementation of the Baldrige Criteria, I’ve learned that although the sparkle of the chandeliers is important, it is not the only priority of our guests. It doesn’t matter that the petunias are perfect if the valet dents your car or your bill is wrong. We’ve learned to make our customers’ priorities our priorities… We’ve shifted from looking ‘out’ from our own perspective to looking ‘in’ from the customer’s.” <sup>1</sup></i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Besides asking customers the right questions to determine areas of most concern, eliminating questions deemed unimportant allows organizations to make surveys shorter, which in turn increases survey response rates.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b><i>3.<span class="Apple-tab-span" style="white-space: pre;"> </span>Analyze correctly.</i></b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Most companies use very basic calculations which can lead to the wrong conclusions. Managers typically compare average satisfaction scores from one period to the next or between one group and others. For example, if average satisfaction was 4.3 in 2012 and is 4.4 in 2013, managers often conclude satisfaction has improved 0.1. This may not be true—the determination has not accounted for experimental error, and the difference may actually be due to randomness. Student’s t or Analysis of Variance (ANOVA) is the correct approach when comparing sample means between two or more groups. Technically, if data are not normally distributed (most satisfaction data are skewed, not bell-curve shaped) or respondents select from a set of discrete ratings (e.g. categories 1-5 on a Likert Scale or 1-10 for Net Promoter Scores®), contingency tables with chi-square analysis then becomes the correct approach. To properly separate the “signal” from the “noise,” the analyst must calculate p-values to determine if differences between sample means are statistically significant.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Most executives want to understand cause-and-effect relationships and make predictions, not just make comparisons. For example, call center managers may want to know, “Which will have a greater impact on overall customer satisfaction: reducing call hold times or resolving issues on the first call?” In this case, analysts use multi-way cross-tabulation tables, but when evaluating four or more factors, the analyses are more elaborate (correspondence, classification trees, log-linear). The right methods can uncover a wide range of new insights, but managers should ask qualified statisticians for help.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Collecting customer feedback is a healthy first step for annual business planning. Adding segment identification, importance-satisfaction questions, and proper statistical analysis can then make a substantial impact on what is decided during business planning.</span><br />
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<i style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Service Excellence Partners</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. Our unique approach helps founders at early stage companies better scale operations and manage growth. </span><a href="http://www.se-partners.com/contact.html" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Contact us</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Source:</span><br />
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<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif;">James Hunt, Elaine Landry, and Jay Rao, 2000. “Case Study: The Ritz-Carlton Hotel Company, 1992 and 1999 Malcolm Baldrige Quality Award Winner,” <i>Journal of Innovative Management</i>, Fall 2000. GOAL/QPC.</span></li>
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Net Promoter Score (NPS) is a registered trademark of Fred Reichheld, Bain & Company, and Satmetrix</span><ol>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-89612383605680199232013-12-20T02:17:00.001-07:002013-12-30T09:04:31.174-07:00Will Kindle Fire's Mayday Spark a Service Revolution? <span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>Amazon warms up the customer experience</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">One of the hottest Christmas gifts this season is Kindle Fire HDX. It’s a souped-up tablet that includes a new feature garnering a lot of attention. It’s the Mayday button, and it connects you to a live customer service agent over a video link. Press the button, and within fifteen seconds an agent appears on your screen offering help. You can see and hear them, but they can only hear you. The agent has full access to your device, so they can view screens, take control, demonstrate capabilities, or troubleshoot problems. Mayday is available 24/7, 365 days a year, free of charge, and with no time limits on how long you and the adviser chat. Amazon CEO <a class="g-profile" href="http://plus.google.com/108398895279899983627" target="_blank">+Jeff Bezos</a> says the company goal with Mayday "is to revolutionize tech support."<sup>1</sup></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMX-u5QfA_5xBO2yX3J8wx8C2AJDHbVZOjLcwXNg9mSVFFmauGV_NgudxVFUkGyK2B6BltwUoCez-9sz5QiuIyCrnrOGo7zTUXwW1oWnhRZSgKFNBgenrPCt2h_sPbDNagEuPJEmlArgg/s1600/bezos.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMX-u5QfA_5xBO2yX3J8wx8C2AJDHbVZOjLcwXNg9mSVFFmauGV_NgudxVFUkGyK2B6BltwUoCez-9sz5QiuIyCrnrOGo7zTUXwW1oWnhRZSgKFNBgenrPCt2h_sPbDNagEuPJEmlArgg/s320/bezos.jpg" width="320" /></a></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">It’s a smart move, and only part of Kindle’s simple three-part strategy.<sup>2</sup> Amazon’s first strategy is to sell premium products at non-premium prices, and the second is making money when people spend on Amazon books and videos. In other words, give away the razor but make it up on the razor blades. The third strategy is fostering customer delight with Mayday. It becomes an important differentiator, especially with Kindle’s target buyers—older, less tech-savvy, avid readers. Amazon handles the burden of helping tech-challenged users, so the new Kindle just may be Santa’s perfect gift for an elderly mom or dad.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b><i>The devil is in the details</i></b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">But along with innovation comes ironing out operational wrinkles. Generally reviews are very positive, but some customers report technical glitches, while others are suspicious about agents having full access to everything, including passwords (Amazon notes screen sharing can be paused).<sup>3</sup> Sharing privacy concerns, many corporate IT departments have disabled Mayday links on company Wi-Fi’s to prevent Amazon agents from seeing potentially sensitive documents.<sup>4</sup></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">A variety of other issues have yet to reveal their consequences and only time will tell. Christmas Day customer service demand will likely be off the charts as new customers unwrap and try their new toys, which means Amazon may be hard-pressed to meet their promised 15-second service level response time. It’s also not clear how Amazon will deal with multiple languages or serving the hearing impaired. Then there’s the issue of creepy customers, although Amazon says agents are trained to terminate sessions that go off track. Will being telegenic become a job requirement for technical support?<sup>5</sup> Not all agents have the stunningly good looks of the actors portrayed in Amazon’s TV spot, and unlike call centers, agents’ facial expressions and body language are suddenly under scrutiny on every interaction. How does all this play with labor laws and employee feedback?</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgA2BCI9FCP4Y3I8hMickx3sYPc9BhGbhZZItNsvwK49p5GblxFQtkAcRJAo9Qy7enuK0rZqQzZluCC49sNvpgz5eKEX918kk4emEkp2UC91a_WxXvWgYFeA_vFWW-qIGub_-GL_XTcXy8/s1600/brain.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgA2BCI9FCP4Y3I8hMickx3sYPc9BhGbhZZItNsvwK49p5GblxFQtkAcRJAo9Qy7enuK0rZqQzZluCC49sNvpgz5eKEX918kk4emEkp2UC91a_WxXvWgYFeA_vFWW-qIGub_-GL_XTcXy8/s320/brain.jpg" width="320" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Despite the challenges, putting a live, smiling face on customer care is revolutionary. Seeing faces, even those of total strangers, affects us in subtle but profound ways. Neuroscientists </span><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">have known for years that our first skill as babies is to recognize faces, but they’ve recently discovered that our brains are wired far more extensively for social connection than they previously thought. Experiments show our brains activate reward centers when we see photographs of people who want to chat with us online. Surprisingly, the effect holds true even if the people are total strangers and we’re not that interested in talking to them.<sup>6</sup> Experts believe our hunger for human connection is a primary driver in how we think, feel, and act, and simply viewing faces satisfies some of those needs. Tapping this deep psychology and delivering a helpful service experience creates a uniquely positive memory with the device and the brand. Amazon’s step toward replacing impersonal call centers with Mayday’s new paradigm could indeed raise the bar on a key factor that drives customer loyalty.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b><i>Mayday catches fire</i></b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">While some techies scoff, saying it is nothing more than a sales gimmick, others think Mayday opens up new frontiers in customer service. They see it as a new era of data integration that will enhance the customer experience.<sup>7</sup> Software help desk tool vendors are already buzzing about imitating Mayday-like capabilities in future releases.<sup>8</sup> And industry watchers are thinking about Mayday as a method to collect customer feedback, encourage usage, offer advice, and upsell.<sup>5</sup></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Assuming Amazon can work out the details, making customer care more personal with video can have profound effects on customer loyalty by connecting with our basic human nature. Whatever the outcome, the new Kindle Fire HDX has set the service world ablaze imagining the possibilities. </span><br />
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<i style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Service Excellence Partners</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. Our unique approach helps founders at early stage companies better scale operations and manage growth. </span><a href="http://www.se-partners.com/contact.html" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Contact us</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Sources:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">1.<span class="Apple-tab-span" style="white-space: pre;"> </span><a href="http://www.theverge.com/2013/9/25/4767996/amazon-mayday-virtual-genius-bar-kindle-fire-hdx-remote-support" target="_blank">Dan Seifert</a> on September 25, 2013, “Amazon launches Mayday, a virtual Genius Bar for the Kindle Fire HDX: Amazon is including live tech support with its new tablet, no pants required” <i>The Verge.</i> </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">2.<span class="Apple-tab-span" style="white-space: pre;"> </span><a href="http://www.geekwire.com/2013/jeff-bezos-explains-step-amazons-strategy-hardest-coolest-part/" target="_blank">Todd Bishop</a> on September 25, 2013. “Jeff Bezos explains the next step in Amazon’s strategy — the ‘hardest and coolest’ part” <i>Geekwire</i>. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">3.<span class="Apple-tab-span" style="white-space: pre;"> </span><a href="http://www.huffingtonpost.com/2013/10/02/kindle-fire-hdx-review_n_4025501.html" target="_blank">Timothy Stenovec</a> on October 2, 2013. “The Mayday Button May Actually Convince You To Buy The Kindle Fire HDX” <i>Huffington Post.</i> </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">4.<span class="Apple-tab-span" style="white-space: pre;"> </span><a href="http://www.computerworld.com/s/article/9242714/New_Kindle_Fire_HDX_s_tech_support_button_could_push_IT_to_yell_Mayday_" target="_blank">Matt Hamblen</a> on September 26, 2013. “New Kindle Fire HDX's tech support button could push IT to yell 'Mayday!'” <i>Computerworld</i>. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">5.<span class="Apple-tab-span" style="white-space: pre;"> <a href="http://www.softwareadvice.com/" target="_blank">Software Advice</a>,</span> December 11, 2013,<a href="http://csi.softwareadvice.com/is-mayday-support-right-for-your-organization-1213/" target="_blank"> “Is Amazon’s Mayday Support Model Right for Your Organization?”</a> <i>CSI: Customer Service Investigator.</i> </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">6.<span class="Apple-tab-span" style="white-space: pre;"> </span>Matthew D. Lieberman (2013). <i>Social: Why our Brains are Wired to Connect,</i> Crown Publishers, New York. ISBN: 978-0-307-88909-6</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">7.<span class="Apple-tab-span" style="white-space: pre;"> </span><a href="http://www.nojitter.com/post/240161959/did-amazon-just-fire-another-shot-heard-round-the-world" target="_blank">Neal Schact</a> on September 29, 2013. “Did Amazon Just Fire Another Shot Heard 'round the World?” <i>Nojitter</i>. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">8.<span class="Apple-tab-span" style="white-space: pre;"> </span><a href="http://mspmentor.net/help-desk-and-noc-services/amazon-kindle-mayday-button-can-msp-help-desks-respond" target="_blank">Joe Panettieri</a> on November 26, 2013. “Amazon Kindle MayDay Button: Can MSP Help Desks Respond?”<i> MSPMentor </i></span><br />
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-82907711716833748102013-12-12T14:31:00.000-07:002013-12-12T15:48:47.491-07:00Aristotle's Approach to Startups<span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>How an ancient practice keeps entrepreneurs from deluding themselves and their investors </i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Thousands gathered this week in San Francisco at the <a href="http://leanstartup.co/" target="_blank">Lean Startup Conference</a> to hear industry luminaries share their expertise on how to launch successful startups. Conference hosts blogged about how innovative “Lean Startup” methods can reduce risk by rejecting the traditional path of extensive business planning and huge upfront investments. Instead, today’s top entrepreneurs <i>formulate and test hypotheses,</i> adjusting their new offerings quickly and cost-effectively with fast development cycles. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisjBcgHx-_NQB4nW4DhU-8RAUVUj-6MnrjcL6r69Pdb29kFOd2DnL6TetIR-TR0UjbdthcLe2h2rO62oUIq4ALOcnXA_LMlsBbtpWeVMCRVNjJVCdV2SQJJ8S-mpISP5GOwvNC3XY_rMc/s1600/aristotle.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisjBcgHx-_NQB4nW4DhU-8RAUVUj-6MnrjcL6r69Pdb29kFOd2DnL6TetIR-TR0UjbdthcLe2h2rO62oUIq4ALOcnXA_LMlsBbtpWeVMCRVNjJVCdV2SQJJ8S-mpISP5GOwvNC3XY_rMc/s200/aristotle.jpg" width="185" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">That’s right, the heart of today’s hottest management trend is a 2,500-year-old idea that you first learned in grade school. It’s the <i>scientific method</i>, one of Aristotle’s lasting contributions to humankind. He promoted the radical idea that new knowledge can be gained from empirical study of the natural world. Throughout the ages, Ibn al-Haytham, Roger Bacon, Descartes, and many others went on to perfect the concept. (1) Eventually, a 19th Century scientist and philosopher named William Whewell defined the five-step method commonly used today: formulation of a question, a hypothesis, a prediction, experimentation, and analysis of data to confirm or reject the hypothesis. (2) </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i><b>Lean Startup is the scientific method </b></i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Today’s Lean Startup approach employs the scientific method to answer essential questions about new products, business models, and early market demand. Rather than generating lengthy market research reports, entrepreneurs list their hypotheses on a one-page<a href="http://businessmodelgeneration.com/canvas" target="_blank"> “business model canvas.”</a> Then, applying agile development techniques, founders work closely with customers to quickly test hypotheses and refine product features, pricing, marketing, and delivery. Following this path helps entrepreneurs prove that their products, key business processes, and economics all work on a small scale before they seek funding for rapid expansion. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">This approach is not just for startups. Big companies General Electric, Toyota, and Comcast all use Lean start-up practices to develop new products and services with small teams, (3) an <i>intrepreneurial </i>practice that helps them avoid the bureaucracy inherent in large organizations. Many leading firms run ongoing, low-cost experiments, and then learn all they can from them, only committing massive money and resources when and if the business ideas demonstrate traction. <a href="http://www.jimcollins.com/" target="_blank">Jim Collins</a>, author of <i><a href="http://www.amazon.com/Good-Great-Some-Companies-Others/dp/0066620996" target="_blank">Good to Great</a></i> and <i><a href="http://www.amazon.com/Great-Choice-Uncertainty-Luck--Why-Despite/dp/0062120999/ref=sr_1_1?s=books&ie=UTF8&qid=1386883621&sr=1-1&keywords=great+by+choice" target="_blank">Great by Choice</a></i>, calls this “firing bullets, then cannonballs.” He says following this critical discipline can help companies outperform financial benchmarks by a factor of ten or more over the long term. (4) </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Angel investors and venture capitalists can also benefit from Lean Startup methods. It’s estimated that as many as 90% of new high-tech ventures fail, (5) meaning investors typically waste billions every year on ideas that go nowhere. The new approach limits risk for investors because it helps them methodically validate ideas using someone else’s (the founders’) boot-strapped funds. Financiers then avoid investing in ideas that arise from hopes and dreams alone, and substitute them with scientifically proven models based soundly on “dollars in and dollars out.” </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b><i>Pass the pie in the sky</i></b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Perhaps the scientific method’s greatest contribution to startups is helping entrepreneurs overcome their own human shortcomings. All people suffer a cornucopia of flawed thinking—<a href="http://en.wikipedia.org/wiki/List_of_cognitive_biases" target="_blank">Wikipedia </a>lists no less than 92 decision-making, belief, and behavioral biases. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhDuOdt5uy5x8ZKZjzKKWYSmGyNm8FhWOm99DU8bsBlaUBEpSlsLlLnu3e0S03g6oRIlxaS4bPcmRp-EDBeNQNrqqYZmHv8AkdTeSJo6Eag6BzrPwlkGiavzmv5A8p-C63N5wyn0iTcH2k/s1600/bias+table.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="171" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhDuOdt5uy5x8ZKZjzKKWYSmGyNm8FhWOm99DU8bsBlaUBEpSlsLlLnu3e0S03g6oRIlxaS4bPcmRp-EDBeNQNrqqYZmHv8AkdTeSJo6Eag6BzrPwlkGiavzmv5A8p-C63N5wyn0iTcH2k/s400/bias+table.jpg" width="400" /></a></span></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Unfortunately, entrepreneurs tend to be in a class by themselves when it comes to bias. Being an entrepreneur often involves a steadfast belief in an idea that will be bigger than Google, regardless of what anyone else thinks. While that level of confidence is admirable, even infectious, it’s almost always self-deluding. Whether applied in the physical sciences or in business, the scientific method helps minimize bias and errant conclusions through repeated experiments, rigorous peer reviews, and credible evidence. In the end, objective reality always trumps subjective belief. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">After a history of bad decisions and so much money wasted on dead ends, entrepreneurial approaches are changing. Increasingly, investor’s say “Prove it” when entrepreneurs claim to have the Next Big Thing. Thanks to the scientific method, the Lean Startup approach can do exactly that.</span><br />
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<i style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Excel-lens</i><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> is a publication of </span><a href="http://www.se-partners.com/" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Service Excellence Partners</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">. Our unique approach helps founders at early stage companies better scale operations and manage growth. </span><a href="http://www.se-partners.com/contact.html" style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;" target="_blank">Contact us</a><span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;"> today.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Sources:</span><br />
<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif;">De Lacy O'Leary (1949), <i>How Greek Science Passed to the Arabs</i>, London: Routledge & Kegan Paul Ltd., ISBN 0-7100-1903-3</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;"><i>History of Inductive Science </i>(1837), and in <i>Philosophy of Inductive Science</i> (1840)</span><span style="font-family: Arial, Helvetica, sans-serif;"> </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Lean Start-up Conference program, http://leanstartup.co/full-program </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Jim Collins and Morten T. Hansen (2011), <i>Great by Choice: Uncertainty, Chaos and Luck—Why Some Thrive Despite Them All,</i> USA: HarperCollins Publishers, ISBN 978-0-06-212099-1</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Max Marmer, Bjoern Lasse Herrmann, Ertan Dogrultan, Ron Berman. <i>Start-Up Genome Report Extra</i>. s.l. : Stanford University, 2012.</span></li>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-4954092461232390002013-12-05T09:11:00.001-07:002013-12-05T09:12:33.282-07:00Discipline, More Than Creativity, Fuels Growth<span style="font-family: Arial, Helvetica, sans-serif; font-size: 14pt;"><i>Most entrepreneurs shun formality, but structure at the right time enables faster growth.</i></span><br />
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipSLz0nYgybPQZ-iGDzrrUf4wQ0fBhGQrPggtRrvD6jNzqbrgwpkr8O-r-DoHOljHRy587IZspsScxD4Rhg7VnCjpNuuSoLCxoyfDMOLlcxYKojt9UptQi0PeDnrHFO-Lc1pgsFK4H3Pw/s1600/Zappos.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="212" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipSLz0nYgybPQZ-iGDzrrUf4wQ0fBhGQrPggtRrvD6jNzqbrgwpkr8O-r-DoHOljHRy587IZspsScxD4Rhg7VnCjpNuuSoLCxoyfDMOLlcxYKojt9UptQi0PeDnrHFO-Lc1pgsFK4H3Pw/s320/Zappos.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="font-family: Arial, Helvetica, sans-serif; font-size: 8pt; text-align: center;">Zappos is known for its creative workplace</td></tr>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Inside most start-ups, free-wheeling innovation and agility abound. The fewer the rules, the better. And why not? Unencumbered by bureaucracy, entrepreneurs can let their imaginations run wild, create breakthrough products, and make tons of money. Most entrepreneurs scoff at rigorous planning, analysis, or financial modeling found at larger companies—it just slows them down.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Thought leader, entrepreneur, and consulting associate professor at Stanford University Steve Blank agrees, saying today’s “lean start-ups” require less formality. (1) Rather than spending months on research and business planning, entrepreneurs list their educated guesses about the business opportunity and then validate them with prospective customers. Instead of old-fashioned project management that delivers a finished end product, engineers in start-ups practice “agile” development, constructing products incrementally through frequent iterations and customer feedback. Lean start-up approaches favor less structure, smaller teams, and highly creative environments.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">But early traction does not guarantee long-term success. Once a new product shows potential, it must be property marketed, delivered, and supported at scale. The company must generate positive cash flow to be sustainable, and eventually pay a return to investors. These activities are very different than those taking place during the early creative process.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Stanford’s Start-Up Genome Project offered entrepreneurs a roadmap for successful company development. (2) After studying thousands of new ventures, researchers identified four distinct “Marmer Stages,” each with its own challenges and milestones:</span><br />
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<a href="http://blog.startupcompass.co/tag/lean%20startup" target="_blank"><img border="0" height="545" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0ZBj1jsL15SlOBrAA8D0zRVtr6ZtIghOUTcMahKtymyGQeUm0O3o3xWZOlLTe4zbQz2P81SioGf5bEkRPYHFCv5k8eybDGbIAgjiK3owPK1tTdQUL-fFh6_IdibI7TBt2R9t47h1Bd4g/s640/Marmer.jpg" width="640" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The Discovery and Validation stages match the creative process described by Steve Blank: quick development and refinement of ideas, leading to early sales. But things change during the Efficiency and Scale stages. After verifying market acceptance of their initial product, founders must hone their business models, customer acquisition processes, and delivery processes. They must get funding, hire staff, and build infrastructure to support fast growth. Instead of spending “right brain” time imagining and creating, entrepreneurs must now spend “left brain” time analyzing and structuring.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Eventually all companies must evolve their management systems if they want to continue growing. (3) Informal management styles that worked well in the beginning break down as the company expands out of the entrepreneurs’ personal span of control. (4) Founders soon realize they can no longer do everything themselves; they must delegate tasks and coordinate the work of multiple groups. At this point, disciplines they implement serve to make organizational goals explicit and stable. Effective management systems facilitate goal alignment, resource allocation, accountability, learning, and control.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Surprisingly, it's not creativity that rockets a start-up to success. Instead, research shows that greater discipline accelerates early-stage growth. Studies at Stanford and the University of California Berkeley concluded that deploying management systems associated positively with successful, high-growth start-ups. (5) Studying seventy-eight firms over a five-year period, they showed new ventures that implemented management systems grew at three times the rate of those that didn’t:</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>“Think about a car: the faster it goes, the more sophisticated the technology required to keep it under control. At the very elite racing levels, Formula 1 teams have highly complex and extensive systems infrastructure both on and off the tack. The same logic applies to growth with start-ups. The faster they need to go, the more management systems infrastructure they need.”</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">But timing is crucial. The Start-Up Genome Project found one of the most frequent causes of early business collapse was “premature scaling,” that is, ramping up before sales traction supported it. (2) Examples included hiring too many specialists, managers, and salespeople too quickly, and spending too much on marketing before validating the product-market fit. Just as entrepreneurs must adopt new disciplines to scale the business, they must also be disciplined about when to do it.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">It seems counter-intuitive, but discipline, not creativity, is what ultimately drives growth. Creating and validating ideas is essential in the beginning, but a shift to effective and efficient execution at the right time becomes paramount. Entrepreneurs must understand this critical transition and adjust accordingly if they want the wild success that compelled them in the first place. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;"><i>Excel-lens</i> is a publication of <a href="http://www.se-partners.com/" target="_blank">Service Excellence Partners</a>. Our unique approach helps founders at early stage companies better scale operations and manage growth. <a href="http://www.se-partners.com/contact.html" target="_blank">Contact us</a> today.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Sources:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">1. Blank, Steve. Why the Lean Start-Up Changes Everything.<i> Harvard Business Review.</i> May 2013, pp. 65-72.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">2. Max Marmer, Bjoern Lasse Herrmann, Ertan Dogrultan, Ron Berman. <i>Start-Up Genome Report Extra. </i>s.l. : Stanford University, 2012.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">3. The Five Stages of Small Business Growth. Neil C. Churchill, Virginia L. Lewis. May-June, 1983, <i>Harvard Business Review,</i> pp. 1-11.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">4. Edward Lowe Foundation. <i>The Significance of Second Stage.</i> Cassopolis, Michigan : Edward Lowe Foundation, 2012.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">5. Antonio Davila, George Foster, and Ning Jia. Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator. <i>California Management Review. </i>May 2010, pp. 79-105.</span><br />
<br />Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-15901798675276822802013-11-25T13:33:00.000-07:002013-11-25T13:33:24.039-07:00Reduce the Finger-Pointing... Naturally<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Where do organizational “white space” problems come from? Our DNA. But we can also use our genetic predisposition to solve them. </i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Chances are you’ve experienced it. When you call a company for help, you get the proverbial runaround. After explaining the problem and hearing “That’s not my department” several times, you’re transferred endlessly, leaving voice mails that go unanswered. It’s totally frustrating. Nobody takes responsibility because your issue falls between the cracks--into the "white space." </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">You may work in an organization that behaves this way. Within your group, people perform tasks smoothly, but there’s friction with other groups. All too often, work doesn’t flow. Stuff gets “thrown over the wall,” there’s finger-pointing when things go wrong, and customers pay the price. The “white space” between the boxes on the organization chart is usually where the ball gets dropped.<sup>1</sup> </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">White space issues can paralyze. Legendary for silos, General Motors’ white space issues led to long, costly product development cycles and poor quality. Rather than cooperating, some departments wouldn’t even speak to each other. Flawed management philosophies such as Management by Objectives and pay-for-performance made the situation worse, causing sub-optimization—an insidious game of “I win, we lose” between functions. In a failed attempt to change, GM implemented a complex, matrix-management scheme that confused who was in charge, diluted accountability, and put the company in decline.<sup>2</sup> And GM isn’t alone. So widespread are white space effects in industry that quality master W. Edwards Deming highlighted them in point nine of his famous Fourteen Points for Management: “Break down barriers between departments.”<sup>3</sup> </span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Experts cite the lack of a “systems view” as the cause for white space problems. Most managers perceive the organization’s work as vertical and functional rather than horizontal and cross-functional. Consultants Geary Rummler and Alan Brache observed, “(Managers) often don’t understand, at a sufficient level of detail, how their businesses get products developed, made, sold, and distributed.”<sup>4</sup> Author Peter Senge observed the same, noting, "we tend to focus on snapshots of isolated parts of the system, and wonder why our deepest problems never seem to get solved."<sup>5</sup> Hence, lacking a broader understanding, managers concentate on activities within rather than between groups, and chasms slowly form. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">But the root causes may go much deeper than a lack of perspective. Psychologist Jonathan Haidt believes moral judgment is based on automatic, not conscious reasoning.<sup>6</sup> Buried within the human psyche is hardwired social behavior that influences our choices and actions. Haidt identified five behaviors:</span><br />
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<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Caring/harm</b>—deep fondness for people with whom we have biological or social attachments, and the violence we can do to those we don’t</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Fairness/reciprocity</b>—our need for mutual exchange and even-handed application of punishment and reward </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>In-group/loyalty</b>—close association with our tribe’s identity and suspicion of other tribes</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Authority/respect</b>—our tendency to obey those in positions of power</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Purity/sanctity</b>—our desire for social order through conformance and control</span></li>
</ul>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjYvV3wLbYlojW0Ms11J_DxMd98QH4cFRx5E6qUoIjHs2Wj8X6HYHvCujNxZytZxtseaIRuFsVNsWpSbzS-1LenHaUiyMMuomm74Bf2L5XG0LCuR2_t_yrCpsy4iDgmIx0r663KaB7R_qk/s1600/caveman.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="218" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjYvV3wLbYlojW0Ms11J_DxMd98QH4cFRx5E6qUoIjHs2Wj8X6HYHvCujNxZytZxtseaIRuFsVNsWpSbzS-1LenHaUiyMMuomm74Bf2L5XG0LCuR2_t_yrCpsy4iDgmIx0r663KaB7R_qk/s320/caveman.jpg" width="320" /></a></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Where did these innate responses come from? Evolution. Our survival as a species depended on our ability to live in groups and cooperate with one another. Imagine the outcome if we had never learned to hunt, share resources, or protect our kin through collaboration. These five moral threads made possible group cohesion, coordination, and harmony. During a millennia of natural selection, they became our operating system for creating ever larger and more successful organizations—first tribes and clans, and then nations and empires. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Our evolutionary success, however, has sown the seeds of our modern-day destruction in business. We create white space problems because it’s natural for us to do so. When firms get larger and competition for internal resources becomes intense, the organization splinters. Our survival instincts take over. We subconsciously revert to our evolutionary roots and protect our own tribe at the expense of the larger community. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">It takes many generations to evolve even the smallest biological changes. But if our core behaviors are intrinsic and immutable, how can we solve the white space problems we create? One solution is to introduce new tribes within the organization to counter their effects. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Process management methods use cross-functional teams to traverse the white space. For example, leading manufacturers create new product introduction teams including representatives from R&D, manufacturing, product marketing, finance, and customer service. Often these groups are project-centric, small (7-9 people), co-located, headed by a strong leader, focused on transcendent goals, and adherent to disciplined processes. A senior executive carefully forms the team and supports their efforts through high-level reviews and behind-the-scenes functional diplomacy. Through deliberate process design, the five underlying social threads are present—bonding with fellow group members, fairness in equal representation, forming an in-group with its own identity, obedience to powerful leaders, and conformance to an orderly process. By following natural tendencies, individuals in the new tribe execute a smoother process across functions, suppressing the effects of white space between their tribes of origin.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">We can’t change our DNA, but if we understand it, we can use it to our advantage. Capitalizing on our innate behaviors, we can mitigate white space issues by using new process management techniques. Doing so subverts silos and streamlines workflows for the better. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">Sources:</span><br />
<br />
<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Rummler, G. and Brache, A. (1995)<i> Improving Performance: How to Manage the White Space on the Organization Chart, </i>Jossey-Bass Publishers. ISBN 0-7879-0090-7</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Whitacre, E. (2013) <i>American Turnaround: Reinventing AT&T and GM and the Way to Do Business,</i> Hachette Book Group. ISBN 978-1-4555-1300-0</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Deming, W. E. (1982) <i>Out of the Crisis, </i>Massachusetts Institute of Technology Center for Advanced Engineering Study. ISBN 0-911379-01-0</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Rummler, G. and Brache, A. (1995)</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Senge, P. M. (1990) <i>The Fifth Discipline: The Art & Practice of the Learning Organization,</i> Doubleday. ISBN 0-385-26094-6 </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Haidt, J. (2012) <i>The Righteous Mind: Why good People are Divided by Politics and Religion,</i> Pantheon. ISBN 978-0307455772</span></li>
</ol>
Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-41632402033087663512013-11-18T21:36:00.002-07:002013-11-19T05:29:03.390-07:00Is your Company Leading or Firefighting?<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Some companies never seem to have their act together. Others run like well-oiled machines. How does yours operate? </i> </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Organizational behaviors exist on a continuum. </b>From most chaotic at the base to most disciplined at the apex, the maturity pyramid shows where companies tend to fall. It was conceived by quality guru Philip Crosby<sup>1</sup> and later used in various forms by Hewlett-Packard,<sup>2</sup> the Baldrige Performance Excellence Program,<sup>3</sup> and others. Where does your organization fit? </span><br />
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<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b><i>Firefighting</i>.</b> The organization is highly reactive, relying on heroics to get things done. Success depends on circumstances, individual strengths, and plenty of luck. Getting sales is the primary focus, and any customer who buys is considered valuable. While the environment may be very creative, there’s typically a lot of stress and finger-pointing, customers are often disappointed, and mistakes are frequently repeated. The company does little to no planning, except possibly annual budgeting, and has limited employee training. </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b><i>Control</i>. </b>The organization becomes more aware of processes and<b> </b>takes steps to ensure consistency and repeatability.<b> </b>Checklists, inspection points, and reviews begin to appear, and more often groups coordinate their work. Sales qualification gets better as the company understands some customers are more valuable than others. Some metrics are in place, and annual planning begins to include goals and key initiatives. Execution is spotty, but improving. The company considers employee training important and screens new hires. </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;"><i style="font-size: 12pt;"><b>Continuous Improvement.</b></i><span style="font-size: 12pt;"> The organization uses formal techniques to systematically improve products, services, and the processes that produce them. Managers and staff are mostly </span><span style="font-size: 12pt;">proactive</span><span style="font-size: 12pt;">, with the exception of dealing with the occasional hiccup. Metrics are aligned and used extensively, and planning includes a clear vision with short-term and long-term goals. The company </span><span style="font-size: 12pt;">successfully </span><span style="font-size: 12pt;">executes about half of its planned initiatives.</span><span style="font-size: 12pt;"> Market segmentation begins to drive development, marketing and sales strategy, and offerings get consistently better. Training is structured and delivered enterprise-wide. Executives carefully construct and manage supply and distribution chains. </span></span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i><b>Optimization.</b></i> The organization’s plans and processes are well aligned and integrated, and potential risks are often identified and resolved in advance. Through a history of continuous improvement and targeted innovation, the company has developed “core competencies” that create competitive advantages and open up entirely new markets. Despite its size, the organization is customer-focused, agile, and routinely introduces successful products and services. Enterprise-wide change initiatives are executed effectively. The company plans and manages human capacity and capability over a multi-year horizon. Cross-functional teamwork is high and organizational learning is methodical and widespread. </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i><b>Leadership.</b> </i>A market-maker, the organization uniquely balances the "yin and yang" of creativity and discipline. The company experiments incessantly with breakthrough ideas, carefully evaluating the ones that work, and only then scales up and introduces them. Competitors struggle to keep up. The press lionizes the company’s methods as “best practices." Despite perennial successes, the company remains on guard against complacency. It quickly detects disruptive shifts in technology, world events, and competitive innovations and mounts strategic responses. </span></li>
</ol>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">It’s probably no surprise that firefighting produces erratic outcomes. These companies tend to be new, small, or niche players, and they must fight to survive. Organizations with control orientations experience better success rates. Their customers are more often satisfied and buying again, and results are stable and predictable. These companies are “up-and-comers.” Firms doing a good job of continuous improvement are gaining ground, responding to market changes and becoming top competitors in their industries. Studies have shown that over a five-year period, these firms grow revenues and operating incomes <i>twice as fast </i>as those with control or firefighting behaviors.<sup>4</sup> Companies optimizing performance are highly regarded and generally maintain top market positions. Examples include Boeing, IBM, Fed-Ex, and Toyota. Finally, a very small number of leading firms dominate their markets for fifteen years or more, producing at least <i>ten times</i> the return on shareholder equity than anyone else in the sector.<sup>5</sup> They include Southwest Airlines, Intel, and Progressive Insurance. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Where do you see your organization? Be honest! Chances are you rank your company towards the lower end of the pyramid. That’s where the majority operate. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">So what does it take to move up? As it is with individuals, healthy organizational behaviors are the result of good habits, born of discipline. When the right disciplines are combined into an effective <b><a href="http://www.se-partners.com/SMS-Defined.html" target="_blank">strategic management system</a></b>, excellence soon becomes a matter of habit. Along the way, greater discipline does not suppress creativity, but gives it necessary direction and boundaries. Senior leaders who progressively implement just enough structure at the right time, in the right place, and for the right reasons create beneficial habits and<b> </b>relentless progress.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;"><br /></span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">Sources:</span><br />
<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Crosby, P., 1979. <i>Quality is Free.</i> New York: McGraw-Hill. ISBN 0-07-014512-1. </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Hewlett-Packard Process Consulting services, 1999. </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Baldrige Performance Excellence Program, 2013, <i>2013–2014 Criteria for Performance Excellence</i> (Gaithersburg, MD: U.S. Department of Commerce, National Institute of Standards and Technology, http://www.nist.gov/baldrige/publications/business_nonprofit_criteria.cfm).</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Hendricks, K. and Singhal, V. March, 2000 “The Impact of Total Quality Management (TQM) on Financial Performance: Evidence from Quality Award Winners” DuPree College of Management, Georgia Institute of Technology</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Collins, J. and Hansen, M. T., 2011. <i>Great by Choice: Uncertainty, Chaos and Luck—Why Some Thrive Despite Them All. </i>Cumulative stock returns, dividends reinvested. Invest $10K on 12/31/1972 and hold until 12/31/2002. © CRSP, Center for Research in Security Prices, Booth School of Business, the University of Chicago.</span></li>
</ol>
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Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-83711440054394530142013-11-06T20:42:00.000-07:002013-11-06T20:42:12.786-07:00Remembering HP: Habitual Performance<div class="MsoNormal">
<i><span style="font-family: Arial, sans-serif; line-height: 115%;"><b><span style="font-size: large;">“It’s just how we do things around here.”</span></b><span style="font-size: small;"><o:p></o:p></span></span></i></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">I still recall the conversation
between the Hewlett-Packard worker and the Tellabs manufacturing VP. It was 1993, and we were on trip to HP’s
Loveland Manufacturing Center, a key production facility in northern Colorado.
Back then I sold HP test equipment in Illinois, and we were hosting a group of
Tellabs executives on a benchmarking visit. My sales colleagues and I were building
relationships and sharing manufacturing “best practices” with the hopes it
would motivate them to buy more HP gear. <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">We were touring the
production area and one of my customers pulled aside a passing worker, asking
him about some charts hanging on the wall. The guy stopped for a few minutes and
pointed to the diagrams, describing what each meant. “This one shows the count
of defects by type. It looks like they were having a problem with the solder
application. And over here, it looks like the adjustment dropped the defect
rate by about 30%.” <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">A bulletin board labeled
“PDCA Storyboard” prompted the interaction. A management presentation
earlier in the day talked about the division’s Total Quality Management
journey. HP used “Plan-Do-Check-Act” as its corporate improvement method, and
the PDCA Storyboard showed the step-by-step progression. The presenter had made
the bold statement that the quality practice was everywhere. It had become entrenched
in the division’s operating system.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">The Tellabs VP smiled and
said, “So you’re saying you don’t work here but you can tell what this operation
is doing?” <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">“Yeah. I’m on one of these quality
teams in my area. We use PDCA to increase our yields, too.”<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"><br /></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"> “Come on. You’re not just a ‘plant’ walking
by, an expert trying to impress us?” the executive chided him. <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"><br /></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">His response was working-man
authentic. “No,” he said, shrugging. “It’s just how we do things around here.” <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">I could tell my customer was
satisfied. He shook hands with the worker and thanked him. Without saying a word,
I knew what he was thinking: <i>It’s true. HP
really is this good.</i> <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">As a company HP was well
respected, but it wasn’t because it was the most inventive. It didn’t come up
with SPC or kanban or anything else the Tellabs executive hadn’t heard of. It
wasn’t because HP only used the most advanced technology. The tour showcased
some shiny, new equipment, but most was conventional and well used. It wasn’t
because the company didn’t make mistakes. Over the years, the exec had dealt
with the occasional HP hiccup. But where Tellabs and others would talk about fundamental
change, HP would do it. And do it well. <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">HP had great people and
great discipline. The company had a knack for studying something interesting,
trying it on a small scale, refining it, rolling it out consistently, and
making it all natural. Author Jim Collins calls this <i>empirical creativity</i> matched with <i>fanatic discipline</i>; direct engagement and practical experimentation
followed up with utterly relentless execution in accordance with consistent
aims, performance standards, and methods.<sup>1</sup> HP’s behavior, like other dynasty companies Collins studied, allowed it to dominate the test equipment industry
for nearly seventy years. <o:p></o:p></span></div>
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<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Things have changed since
1993. The HP division became part of the Agilent Technologies spin-off, the
manufacturing unit was offshored, and the HP brand has lost some of its luster
since the time of “Bill and Dave.” Tellabs also changed. After heady growth,
the company suffered from the telecom bubble burst; painful cutbacks,
management changes, and eventual renewal as a networking products company. <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"><br /></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">I’ve changed, too. A career
in sales led to marketing and operations, eventually leaving HP to start three
companies and work for two more. Sparked by my time at HP, I spent many years exploring
why some organizations performed consistently better than others. I learned and
applied lessons in my own companies and others through the Baldrige program and
the occasional consulting gig. <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">I’m convinced high
performance boils down to simple, disciplined management systems that make people,
planning, execution, and learning all more effective. It's true for organizations large and small, no matter the sector. But success always
depends on great leadership and the tenacity to see it through. When excellence
becomes a matter of organizational habit, long-term success is assured. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">And that’s what reminded me lately
of the wisdom and discipline of a great company. Years ago they made it all happen,
captured in one simple remark:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"><br /></span></div>
<div class="MsoNormal">
<i><span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">“It’s just how we do things around here.”<o:p></o:p></span></i></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: x-small;">Footnote:</span></div>
<div class="MsoNormal">
<span style="font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -0.25in;">1. Collins, J. and Hansen, M. </span><i style="font-family: Arial, Helvetica, sans-serif; text-indent: -0.25in;">Great by Choice: Uncertainty, Chaos, and Luck--Why Some Thrive Despite
Them All. </i><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -0.25in;">Harper Business, 2011. ISBN 0062120999.</span></span></div>
<div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<o:p></o:p></div>
Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-73673975027805501512013-10-31T21:08:00.000-06:002013-10-31T21:08:22.760-06:00Scaling Up? Think Hamburgers.<div class="MsoNormal">
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlhGPI0PpFxKDfJ1fptP1eS3G7uZag-7N3xRDp60NpdOEnXmQ6XxWSTdyIBB1p3BdpEfTb_n0NJgXgX9s8aKZe5Gicp9hROpDqqq4ZTqJBMlV-cQ-1-yjp9uB8pYtePdrmBlKRrCRRHlU/s1600/Burger.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="137" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlhGPI0PpFxKDfJ1fptP1eS3G7uZag-7N3xRDp60NpdOEnXmQ6XxWSTdyIBB1p3BdpEfTb_n0NJgXgX9s8aKZe5Gicp9hROpDqqq4ZTqJBMlV-cQ-1-yjp9uB8pYtePdrmBlKRrCRRHlU/s200/Burger.jpg" width="200" /></a></div>
<i><span style="font-family: Arial; font-size: 12pt;">Your new venture is catching fire and
you need to ramp up operations quickly to handle demand. Where should you look
for pointers? Try McDonald’s, Burger King or Wendy’s. <o:p></o:p></span></i></div>
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<i><span style="font-family: Arial; font-size: 12pt;"><br /></span></i></div>
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<span style="font-family: Arial; font-size: 12pt;">The Start-Up
Genome Project analyzed thousands of high tech start-ups and found that <b>successful companies progressed through
four predictable phases.</b> Dubbed the “Marmer Stages,” each involved a
different set of objectives; Discovery was crafting and testing the idea, Validation
was refining product features and generating initial orders, Efficiency was making customer acquisition and delivery processes repeatable, and Scale was ramping up and generating aggressive growth.<sup>1</sup> A successful mantra
was <b>“nail it, then scale it”</b>—confirming that the product, marketing strategy, and business model all worked <i>before</i> stepping on the gas with big
capital, staff, and infrastructure investments. <o:p></o:p></span></div>
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<div class="separator" style="clear: both; text-align: center;">
</div>
<span style="font-family: Arial; font-size: 12pt;">So what
happens when the time comes for a start-up to scale in a big way? Suddenly the
game changes from “tinkering” to “ramping,” generating volume quickly to
establish market position and cash flow. It may sound silly to high tech
entrepreneurs, but <b>fast food franchises
offer unique insights</b>—they’ve made scaling up a science. Intel CEO Andy Grove
looked closely at McDonald’s. In the late 1970’s, he believed Intel’s success
depended on making their embryonic microprocessors as reliably as hamburgers,
saying “We have to systematize things so we don’t crash our technology.” He
kept a hamburger box on his desk with a mock logo, <b><i>McIntel</i></b>, to remind
everyone of the strategy to grow with profitable scale.<sup>2</sup> <o:p></o:p></span></div>
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<b><span style="font-family: Arial; font-size: 12pt;"><br /></span></b></div>
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<b><span style="font-family: Arial; font-size: 12pt;">Franchisers offer four great lessons</span></b><span style="font-family: Arial, sans-serif; font-size: 12pt;"> for quick and efficient early-stage expansion:</span></div>
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<span style="font-family: Arial; font-size: 12pt;"><br /></span></div>
<span style="font-family: Arial, sans-serif; font-size: 12pt; text-indent: -0.25in;"><i><b>1.<span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span></b></i></span><b style="text-indent: -0.25in;"><span style="font-family: Arial, sans-serif; font-size: 12pt;"><i>Simplicity</i>.</span></b><span style="font-family: Arial, sans-serif; font-size: 12pt; text-indent: -0.25in;"> Ordering “off-menu” may be fine for
high-end restaurants, but fast food stores limit choice to what’s on the menu. Subway’s
deli-style assembly and Burger King’s “Have it your way” only apply to a narrow
range of options. <u>Lesson</u>: To scale, new companies must <b>limit choices in the product offering</b>. In
the Validation stage, start-ups often “pivot,” experimenting with the product
and pricing before they find something that sells. But every new version comes
with added complexity, time, and hidden cost—documentation, training, software,
accounting, and support. Pick your target; <b>you
can’t be all things to all people</b>, so choose ONE profitable segment and
stick to it. Rationalize your product line so that at least 80% of your sales
come from just a few versions, and resist the temptation to add more. Product simplification
is better for sales, too. Studies show <b>too
many choices confuses people</b>, slows decision making and lowers
satisfaction.<sup>3</sup></span><br />
<div>
<div style="text-indent: -24px;">
<span style="font-family: Arial, sans-serif; font-size: 12pt;"><br /></span></div>
<span style="font-family: Arial, sans-serif; font-size: 12pt; text-indent: -0.25in;"><b><i>2.</i></b><span style="font-family: 'Times New Roman'; font-size: 12pt;"><b><i> </i></b>
</span></span><b style="text-indent: -0.25in;"><span style="font-family: Arial, sans-serif; font-size: 12pt;"><i>Standardization</i>.</span></b><span style="font-family: Arial, sans-serif; font-size: 12pt; text-indent: -0.25in;"> In the fast food world, uniformity in
supplies, equipment, training, software, and work processes promote consistency
and quality, no matter where the franchise is located. Standardization also
leads to <b>economies of scale</b>, which
allows franchisers to improve performance and lower costs in their supply and
distribution chains. <b>Customers value
predictability</b>, which causes repeat visits, recurring revenue, and brand reinforcement.
<u>Lesson</u>: As sales gain traction, consistency becomes essential to grow
profitably and keep customers coming back. In the Efficiency stage, further refine
product specifications, value propositions, and delivery processes, documenting
best practices. <b>Redesign if necessary</b>
to meet financial targets. Implement standard metrics and process checks to
ensure consistency and quality. <b>Consolidate</b>
anything that gives you purchasing leverage.</span></div>
<div>
<div style="text-indent: -24px;">
<span style="font-family: Arial, sans-serif;"><br /></span></div>
<span style="font-family: Arial, sans-serif; font-size: 12pt; text-indent: -0.25in;"><i><b>3.</b></i><span style="font-family: 'Times New Roman'; font-size: 12pt;">
</span></span><b style="text-indent: -0.25in;"><span style="font-family: Arial, sans-serif; font-size: 12pt;"><i>Leadership</i></span></b><span style="font-family: Arial, sans-serif; font-size: 12pt; text-indent: -0.25in;">. An industry expert states that if a
franchise has a proven business concept with sound training and support, 40% of
a franchisee’s success will come through their own hard work and talent.<sup>4</sup>
McDonald’s is renowned for<b> careful
selection and training</b> of its franchise owners. Applicants must demonstrate
past business success and financial resources (a new store typically requires a
$1M+ investment). If they make the cut, they spend three days in a McDonald's
restaurant, working and learning about the business. If they advance, franchisees
must then spend a nine months at Hamburger University before opening a store.<sup>5</sup>
<u>Lesson</u>: Good leadership and development are essential for ramping up. Growing
companies tend to promote from within and <b>skimp</b>
on management training. As a result,
teams struggle and <b>executives spend valuable
time</b> <b>firefighting</b>. In the Scale
stage, look beyond top technical skills and <b>choose leadership experience or attributes </b>instead. Then, take <b>sufficient time to</b> <b>develop</b> the knowledge and skills required for good management.</span></div>
<div>
<div style="text-indent: -24px;">
<span style="font-family: Arial, sans-serif;"><br /></span></div>
<span style="font-family: Arial, sans-serif; font-size: 12pt; text-indent: -0.25in;"><b><i>4.<span style="font-family: 'Times New Roman'; font-size: 12pt;">
</span></i></b></span><b style="text-indent: -0.25in;"><span style="font-family: Arial, sans-serif; font-size: 12pt;"><i>Strategic Management Systems</i></span></b><span style="font-family: Arial, sans-serif; font-size: 12pt; text-indent: -0.25in;">. Opening new stores is a key business
process for franchisers, meaning they take a <b>systematic approach</b> to planning, screening, contracting,
implementing, and supporting new franchises. They deploy advanced Point of Sale
(POS), staffing, and inventory management systems in each store to track real-time
metrics, fill work schedules, and optimize supply chains. Visibility to rich data in turn <b>facilitates learning and
adjustment</b> at corporate headquarters. Effective management and
communication methods also promote execution across a distributed network. Many
franchisers use regional or district managers to continually communicate,
coordinate changes, and resolve issues with franchisees. <u>Lesson</u>: Entrepreneurs
must develop mature management systems to support expansion during the Scale stage.
Create a deployment plan and <b>develop the
right infrastructure</b>. Define a small set of the most important metrics and
implement systems to track, analyze, and report them. Develop <b>enterprise-wide planning, execution, and
review</b> practices to align the increasingly complex organization, drive
changes, and institute continuous learning and improvement. </span></div>
<div>
<div style="text-indent: -24px;">
<span style="font-family: Arial, sans-serif;"><br /></span></div>
<span style="font-family: Arial; font-size: 12pt;">Start-ups are
by nature quick-moving and creative, but adopting disciplines like those used
by fast food franchises makes growth rapid and profitable. </span><b style="font-family: Arial; font-size: 12pt;">Making this transition is critical</b><span style="font-family: Arial; font-size: 12pt;"> for early stage companies, and
high volume operators can offer important lessons for every growing enterprise.</span><br />
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<span style="font-family: "Arial","sans-serif";"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Footnotes:</span><br />
<span style="font-family: Arial, sans-serif; text-indent: -0.25in;">1.<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><span style="font-family: Arial, sans-serif; text-indent: -0.25in;">Compass
blog: cracking the code of innovation, 2012. <a href="http://blog.startupcompass.co/tag/lean%20startup">http://blog.startupcompass.co/tag/lean%20startup</a></span><br />
<span style="font-family: Arial, sans-serif; text-indent: -0.25in;">2.<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><span style="font-family: Arial, sans-serif; text-indent: -0.25in;">V.
McElheny, 1977. “High Technology Jelly Bean Ace,” <i>New York Times.</i></span><br />
<span style="font-family: Arial, sans-serif; text-indent: -0.25in;">3.<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><span style="font-family: Arial, sans-serif; text-indent: -0.25in;">B.
Schwartz, 2005. <i>The Paradox of Choice:
Why More is Less</i>, Harper Perennial, ISBN 0060005696.</span><br />
<span style="font-family: Arial, sans-serif; text-indent: -0.25in;">4.<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><span style="font-family: Arial, sans-serif; text-indent: -0.25in;">G.
Nathan, 2012. “Best Practice in Franchisee Selection,” Franchise Relationships
Institute. <a href="http://www.franchiserelationships.com/articles/BestPracticesinFranchiseeEvaluation.html">http://www.franchiserelationships.com/articles/BestPracticesinFranchiseeEvaluation.html</a></span><br />
<span style="font-family: Arial, sans-serif; text-indent: -0.25in;">5.<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><span style="font-family: Arial, sans-serif; text-indent: -0.25in;">L.
Magloff, 2013. “What You Need to Open a McDonald’s,” <i>Chron</i> <a href="http://smallbusiness.chron.com/need-open-mcdonalds-10513.html">http://smallbusiness.chron.com/need-open-mcdonalds-10513.html</a></span></div>
</div>
Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-1412682617618912982013-10-22T17:04:00.000-06:002013-10-22T18:25:58.125-06:00The Best Meeting Agenda<div class="separator" style="clear: both; text-align: center;">
</div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><i>Planning is easy. Execution is hard. How can a monthly meeting keep an organization persistently on track to achieve its goals? </i></span><br />
<b style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></b>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJeRR_VXBchKyt4pmzgmYfFLgD7dtIDP-UHjPjpI0TO5rEhEKfVhX7c3d2fvfsauoDO9CHGThNLy2QKNuyUQEQNdSLAcELRwaIZC3mjGhREYYbCDioESrmsbYgsE3jQ5_aLDW6F3zU8Lc/s1600/Meeting.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="228" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJeRR_VXBchKyt4pmzgmYfFLgD7dtIDP-UHjPjpI0TO5rEhEKfVhX7c3d2fvfsauoDO9CHGThNLy2QKNuyUQEQNdSLAcELRwaIZC3mjGhREYYbCDioESrmsbYgsE3jQ5_aLDW6F3zU8Lc/s320/Meeting.jpg" width="320" /></a></div>
<b style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Nobody likes meetings</b><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">, including me. People perceive them as time-wasters. Many have gone to “no PowerPoint” talks, got rid of chairs, or eliminated meetings entirely. In my view, these are extreme measures. Meetings serve a purpose. They provide important venues to communicate, learn, and make decisions. Yes, cut back on the number of meetings, but </span><b style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">make the ones you keep more productive. </b><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">I think the best meeting agenda is called a Monthly Business Review (MBR). It’s a formal meeting (yes, preparation is required) designed to check progress on key plans, projects, and business performance. What makes it the best? Unlike other meetings, the <b>MBR ensures the organization <i>executes </i>its business plan.</b> The alternative, of course, is to do what most companies do: make a plan, and after a few weeks just go back to what people were doing before the planning session. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">For an MBR, all functional heads and the CEO attend. A scribe and a timekeeper are assigned. Each manager has 15 minutes and may present <b>only three slides.</b> During the meeting, the scribe records issues and ideas that come up on a flip chart, and unless something requires immediate resolution, the topic is parked until the review is complete. The timekeeper also plays an important role. He or she prods managers to stay on topic lest the MBR lose focus and become interminably long. Here’s the agenda: </span><br />
<br />
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Welcome and Opening Remarks (CEO, 5 minutes) </b></span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Company-wide Dashboard Review (CEO, 10 minutes) </b></span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Functional Round-Robin (15 minutes each VP): </b></span></li>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Dashboard Review</b></span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Updates</b></span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Successes</b></span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Needs</b></span></li>
</ul>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Hoshin Review (15 minutes for each strategy owner)</b></span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Action Items (15 minutes)</b></span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><b>Other Items/Wrap-Up/Schedule Next Review (10 minutes) </b></span></li>
</ul>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1RX5z9f1S1XEV35Uvw4Q7VD69nucmKZqgjOr8w5LqAuNMQVPFskjrNx5vxN9J3_5F6hwB5rVxxNDIBCrqu6EIApXLuS-eohsYeyINj0xPdKa8DgiJ9OJhovjNMwnz1_2YzZajt_X8gbY/s1600/BFT.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="108" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1RX5z9f1S1XEV35Uvw4Q7VD69nucmKZqgjOr8w5LqAuNMQVPFskjrNx5vxN9J3_5F6hwB5rVxxNDIBCrqu6EIApXLuS-eohsYeyINj0xPdKa8DgiJ9OJhovjNMwnz1_2YzZajt_X8gbY/s320/BFT.jpg" width="320" /></a></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The first essential element is the </span><b style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"><a href="http://www.se-partners.com/Enterprise-Metrics.html" target="_blank">dashboard</a></b><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">, consisting of the top ten metrics at the enterprise level and for each function. The company-wide dashboard may list things like revenue, expenses and customer satisfaction, whereas the marketing dashboard may include impressions, web visits, and lead conversion rate. </span><b style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Each measure is color-coded:</b><span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;"> green says everything is going well, yellow indicates things may be going off track, and red means take immediate action. Red signals get special attention; the manager describes the problem’s root causes and the actions being taken. Dashboards show <b>cause-and-effect relationships</b>, allowing managers to view the organization as a living system. The review also <b>keeps managers focused</b> on keeping the fundamentals under control. It provides context for decision making; if a new idea or initiative doesn't positively impact a key metric, it’s probably not that important. </span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUew0ZSU1PyVBQYC9ADgfU0C1HQYznoH_DwOKAnGdw_IJwF9LDxkq3SpVKgXnz_XrGyiFEMiN6PuIA_xmVHP63iEvSjDQMFr1e643EramO8y8VToFIVyt-AmG-n98zWFDPczYT_jmXziI/s1600/Hoshin.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="141" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUew0ZSU1PyVBQYC9ADgfU0C1HQYznoH_DwOKAnGdw_IJwF9LDxkq3SpVKgXnz_XrGyiFEMiN6PuIA_xmVHP63iEvSjDQMFr1e643EramO8y8VToFIVyt-AmG-n98zWFDPczYT_jmXziI/s320/Hoshin.jpg" width="320" /></a></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">The second essential element is the <b>Hoshin Review</b>. <a href="http://www.se-partners.com/Planning-and-Review.html" target="_blank">Hoshin kanri</a>, a Japanese breakthrough improvement method, is an incredibly powerful tool for driving organizational alignment and change. During annual planning, the executive team collaboratively defines a <b>mission-critical,
breakthrough objective</b>, along with supporting strategies, owners, and performance targets.
An example hoshin objective may be, “Transform the sales process from a direct to a channel marketing and sales model” with goals to “increase annual revenue by 3x and reduce customer acquisition cost by 50%.” The objective is broken down into 3-5 major strategies and goals, such as “Recruit, contract, and implement third-party marketing relationships; goal of 3 by June 1.” Assigned strategy owners then form cross-functional teams and develop implementation plans. During the MBR, the Hoshin Review checks status, surfaces and <b>removes any barriers to execution. </b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Order is important: business fundamentals before hoshins. Why? If the basics are out of control, working on more advanced initiatives makes no sense. <b>Make sure the foundation is solid</b> prior to reaching for the breakthrough. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Towards the end of the session, the scribe reviews any issues or ideas surfaced on the flip chart during the meeting, distilling them into action items, owners, and deadlines. Any outstanding action items from previous meetings not already addressed are also checked to make sure nothing falls through the cracks. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Obviously some meeting preparation is involved. Functional<b> leaders meet with their teams in advance</b>, rolling up data, interpreting signals, and planning actions for their dashboard metrics. Hoshin strategy leaders check progress on their project plans. The CEO must also prepare. He or she must review the top-level, enterprise-wide metrics and be ready to <b>help executives prioritize</b> next steps. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">Work behind the scenes is also important. If the CEO notices chronic red signals or sluggish execution on hoshin strategies, he or she should meet separately with executives for 1-on-1 coaching sessions. <b>Accountability </b>for progress and results is important to maintain, but CEOs should avoid calling out individual struggles during the actual review. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 12pt;">So what do you think? If you had to arrange a meeting, wouldn't an MBR be one of the most valuable? If the goal is moving the organization forward, perhaps <b>there’s no better agenda.</b></span>Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com2tag:blogger.com,1999:blog-529837537302814781.post-74829035118969813512012-06-15T08:12:00.000-06:002012-06-15T08:15:02.526-06:00Tech Check: Apptegic<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhrI93owprvjFIJY4KynNHnqD6M6etUL5eJr-IPU3wuHNkVo9ZBkcajez_QIdP7T8dX3xbPg9d3mGgoVBpM4aniIYagk6OlOeH0ggBDkujhhyiQNBnez6YTC5nQ8qbRRq9hPO2WIsEKsek/s1600/Apptegic.png" imageanchor="1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" pca="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhrI93owprvjFIJY4KynNHnqD6M6etUL5eJr-IPU3wuHNkVo9ZBkcajez_QIdP7T8dX3xbPg9d3mGgoVBpM4aniIYagk6OlOeH0ggBDkujhhyiQNBnez6YTC5nQ8qbRRq9hPO2WIsEKsek/s1600/Apptegic.png" /></a></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">Boston-based start-up <a href="http://www.apptegic.com/" target="_blank">Apptegic</a> formally launched its new offering at TechCrunch Disrupt NYC conference last month, <b style="mso-bidi-font-weight: normal;">officially joining the fray</b> in the emerging customer engagement measurement market.<span style="mso-spacerun: yes;"> </span>Given the very high cost of customer churn on revenue and profitability, tools such as those offered by Apptegic allow cloud computing companies to <b style="mso-bidi-font-weight: normal;">proactively monitor and respond to customers</b> in an effort to reduce or prevent churn. </span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">Apptegic is similar to competitors <a href="http://www.jbarasoftware.com/" target="_blank">JBara</a> and <a href="http://www.totango.com/" target="_blank">Totango</a>. Like them, Apptegic’s mission to help firms understand their customers in order to keep them, make them successful, and sell more to them. Each examines customer visit frequency and online behaviors, helping software engineers identify product changes and enhancements. Each enables Customer Success Managers to identify trends and personally respond to “at risk” customers, or identify those who may be receptive to up-sell or cross-sell opportunities. </span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">But <b style="mso-bidi-font-weight: normal;">Apptegic does some things differently</b>. The company offers greater depth of understanding by collecting more data and adding the ability to score interactions against essential Key Performance Indicators (KPIs). By analyzing more data than simply which product the customer purchased or how often they used it, the application allows better conclusions to be drawn about specific customer segments and behaviors, enabling <b style="mso-bidi-font-weight: normal;">more relevant, context-dependent decisions</b>. Reporting capabilities are correspondingly more advanced, allowing analysis over different periods of time and with greater stratification (e.g. by user, account, and segment) which can better assist product and service improvement efforts. Apptegic then delivers more sophisticated filtering capabilities to <b style="mso-bidi-font-weight: normal;">generate responses in real-time</b>, directly and automatically from the customer’s application. Online actions can include sending tailored customer support or marketing messages that automatically and intelligently guide customers to their next steps. </span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">Apptegic’s product offers potentially greater advantages for many cloud computing companies by promoting better targeting, scalability, and predictive modeling. In circumstances where less information is collected or known about target customer segments during the sales process, Apptegic <b style="mso-bidi-font-weight: normal;">allows more ways to analyze and segment users</b> according to common needs, value, and profitability after the fact. Through greater automation, customer service and success management <b style="mso-bidi-font-weight: normal;">can be less manually intensive</b> and more productive, allowing companies to focus their more expensive human resources on market segments and accounts that truly justify them. Having more variables also enables <b style="mso-bidi-font-weight: normal;">more robust churn modeling.</b> Companies can design and run statistical experiments, testing and optimizing customer “treatment” strategies even further, resulting in approaches that have the greatest impact on customer retention at the minimum cost. </span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">Apptegic’s early clients include Constant Contact, Vela Systems and Dyn. <a href="http://www.apptegic.com/pricing" target="_blank">Pricing</a> varies from $200 to $4,000 per month according to account structure, number of unique users and events per month, and number of Apptegic users at the customer site. The company offers <b style="mso-bidi-font-weight: normal;">a free trial period</b> for those who want to kick the tires. For more information, visit <a href="http://www.apptegic.com/" target="_blank">Apptegic</a>. </span></div>Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-52353918983188595412012-05-22T15:45:00.000-06:002012-05-24T14:19:59.865-06:00CSM Performance Management Done Wrong<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1JMXJyYvYk1JIxx1Hx8DeZ3Z91ruBFCcHNGeBxv44JPARHtzSgKC77nvLKlUiHOlXcQQe2dq_Ji9DWspQHaKkylb2iEvH79_MNEUdHpRCG5-yz0iIKYnvd-_7oUjncU0-wznCQvvNGSE/s1600/carrot-and-stick-2.jpg" imageanchor="1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" qba="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1JMXJyYvYk1JIxx1Hx8DeZ3Z91ruBFCcHNGeBxv44JPARHtzSgKC77nvLKlUiHOlXcQQe2dq_Ji9DWspQHaKkylb2iEvH79_MNEUdHpRCG5-yz0iIKYnvd-_7oUjncU0-wznCQvvNGSE/s1600/carrot-and-stick-2.jpg" /></a></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">Managers often perceive differences in how individuals perform sales and customer service, implementing management practices that make things worse. Faced with the challenge to improve results, many establish numbers-based, “pay-for-performance” systems to reward good employees and punish bad ones. Motivating by<b style="mso-bidi-font-weight: normal;"> comparing, ranking, and paying people according to their individual results just makes sense.</b> After all, prestigious business schools and prominent corporate leaders espouse meritocracies. The “carrot and stick” approach is so widely used that it <em>must</em> be right. But <b style="mso-bidi-font-weight: normal;">this philosophy is flawed and counterproductive</b>, especially in operations like Customer Success Management<b style="mso-bidi-font-weight: normal;">.</b> Why? Supervisors wind up focusing on the wrong things and demotivating their employees. </span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">Call centers are a case in point. Managers keep detailed statistics such as call handle time, call quality and conversion rates. Most then rank agents based on their numbers. A pep talk might sound like, “Bill, I see you are near the top on quality, but you’re only about average on your call handle time. Keep up the good work, but you need to go faster!” In addition to coaching, call centers use a variety of bonuses and awards to single out and further motivate agents, believing it’s the answer for achieving high service performance. </span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">How well does it work? The fundamental question is to what extent performance can be attributed to the <em><a href="http://www.se-partners.com/Process-Management.html" target="_blank">process</a></em> (i.e. technology, workflow, customers, training, policies, etc.) or to the <em>people</em>. <b style="mso-bidi-font-weight: normal;">We studied this question</b> examining average handle times (AHT) and quality scores (QA) for a group of 55 agents over several months. If performance was due exclusively to process factors, individual rankings would be decided by chance alone. If people factors entirely determined results, ranking would always be same, month after month. </span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">Using statistics no more complicated than the probabilities of flipping a coin, we found that<b style="mso-bidi-font-weight: normal;"> individuals played a role, but nowhere near as much as managers expected.</b> In the agent population, only 13% exhibited non-random behavior for QA and 22% for AHT. Combining both metrics, we showed less than 6% of agents had performance that could be attributed to something other than chance. Clearly, rewarding and recognizing individuals for outcomes dominated by systemic variation was a waste of time—and many agents knew it. <b style="mso-bidi-font-weight: normal;">Management time was much better spent improving the process than motivating the people.</b> </span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">Surprisingly, experts have shown that <b style="mso-bidi-font-weight: normal;">reward systems can be demotivating</b>, especially when it comes to tasks people enjoy. Psychologists classify motivation as <i style="mso-bidi-font-style: normal;">intrinsic</i> (doing something for its inherent satisfaction) or <i style="mso-bidi-font-style: normal;">extrinsic</i> (doing something in anticipation of a separable, dependent consequence). Ask people in customer service why they do the job and most will say it’s not the money but because they like helping people. In other words, service people tend to be intrinsically motivated. Years of scientific analysis confirms that <b style="mso-bidi-font-weight: normal;">virtually every type of reward that is contingent on task performance undermines intrinsic motivation.<sup>1</sup></b> The flip-side is also true—management threats, deadlines, directives, and competitive pressures also backfire. Quality guru W. Edwards Deming felt so strongly about the obstacles caused by ranking people according to the numbers that he insisted leaders eliminate it in his famous “Fourteen Points for Transformation of Western Management.”<sup>2</sup> </span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">So does this mean employees shouldn’t be rewarded or held accountable for their work? Absolutely not! In any distribution of people, some will excel and others will struggle. Leaders must help everyone do a better job, and for statistical outliers “manage up or manage out.” But leaders must also understand <b style="mso-bidi-font-weight: normal;">better results come from better processes</b>, and should make <a href="http://www.se-partners.com/Process-Improvement.html" target="_blank">process improvement</a> their primary focus. They should also set aside relative ranking and competitive reward systems, choosing instead to <b style="mso-bidi-font-weight: normal;">practice <a href="http://www.se-partners.com/Leadership-Process.html" target="_blank">leadership</a> and</b> <b style="mso-bidi-font-weight: normal;">instill teamwork</b>. And not all extrinsic motivation is bad. We found that service employees respond very favorably to team-based goals and incentives that promote cooperation and process innovation—enhancing, not hindering, their natural inclination to serve customers and each other.</span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">And what about CSM functions <strong>mixing sales and support?</strong> In these cases, small, individual sales commissions may be appropriate, but great care must be taken to <strong>balance and clarify</strong> <strong>job expectations and goals.</strong> Many times employees view sales and service to be at odds, and for good reason: customers don't want to be "sold to," but appreciate assistance making a decision. Framing the task as identifying needs when they surface and helping customers decide in a subtle, consultative way tends to be much better received than pressuring CSMs to meet monthly upgrade and renewal quotas at the expense of good service. </span></div>
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<span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;"></span><span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;"></span><span style="font-family: "Arial", "sans-serif"; font-size: 12pt; line-height: 115%;">Often the road to hell is paved with good intentions when it comes to performance management. With great service increasingly the market differentiator and a primary driver of customer retention in subscription-based revenue models, <strong>managers can’t afford missteps.</strong> Spending time unproductively improving service performance or lowering front-line employee satisfaction and engagement can be disastrous. Using <b style="mso-bidi-font-weight: normal;">a more enlightened approach to <a href="http://www.se-partners.com/Performance-Management.html" target="_blank">performance management</a> avoids pitfalls and pays much higher dividends.</b> <span style="mso-spacerun: yes;"> </span></span></div>
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<span style="font-family: "Arial", "sans-serif"; line-height: 115%;"><span style="font-size: x-small;">Footnotes:</span></span></div>
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<span style="font-size: x-small;"><span style="font-family: "Arial", "sans-serif"; line-height: 115%; mso-fareast-font-family: Arial;"><span style="mso-list: Ignore;">1.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><span style="font-family: "Arial", "sans-serif"; line-height: 115%;">Ryan, R. and Deci, E. (2000). “Intrinsic and Extrinsic Motivators: Classic Definitions and New Directions,” <i style="mso-bidi-font-style: normal;">Contemporary Educational Psychology</i>, issue 25, pp. 54-67. <span style="mso-spacerun: yes;"> </span></span></span></div>
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<span style="font-size: x-small;"><span style="font-family: "Arial", "sans-serif"; line-height: 115%; mso-fareast-font-family: Arial;"><span style="mso-list: Ignore;">2.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><span style="font-family: "Arial", "sans-serif"; line-height: 115%;">Deming, W. (1982). <i style="mso-bidi-font-style: normal;">Out of the Crisis</i>, pp. 70-85, MIT Center for Advanced Engineering Study, Cambridge. ISBN 0-911379-01-0 </span></span></div>Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com0tag:blogger.com,1999:blog-529837537302814781.post-54298870907857634802012-05-15T14:43:00.003-06:002012-05-15T15:29:15.604-06:00Best Practices of Practice Fusion<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEiN6lMUzYYum-reTFY-JaFjO7qyqgmulzx7SfpJNB5aFWZDPF_XXKMUyyFI-VuDboFBKdnWUrKlyCQAwR6d7vkKrofYnio-MNQ4_jXkq4K82PqGxMRqfytn6Sa9F8yvSuOE6e5DHTl_M/s1600/practicefusion.png" imageanchor="1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="90" kba="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEiN6lMUzYYum-reTFY-JaFjO7qyqgmulzx7SfpJNB5aFWZDPF_XXKMUyyFI-VuDboFBKdnWUrKlyCQAwR6d7vkKrofYnio-MNQ4_jXkq4K82PqGxMRqfytn6Sa9F8yvSuOE6e5DHTl_M/s320/practicefusion.png" width="320" /></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“I just signed up for this new software package,” my friend Dr. Grace Alessi said over Margaritas at a family outing on Mother’s Day. <b style="mso-bidi-font-weight: normal;">“It’s incredible!”</b> </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Formerly an internist at a family medical group, Grace started an independent medical practice in town two months ago. It’s called<strong> </strong><a href="http://www.balancedwellbeinghealthcare.com/" target="_blank"><strong>Balanced Well-Being Health Care of Fort Collins</strong></a>, Colorado</span><span style="font-family: Arial, Helvetica, sans-serif;">. She and I were catching up, and I told her I was doing work in cloud computing these days. Grace proceeded to <b style="mso-bidi-font-weight: normal;">RAVE</b> about how wonderful the cloud concept was and how much she liked her new web-based application. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">When opening her new office, she had considered buying a software license to manage medical records through her former practice, but the cost would have been $15,000 right out of the box. It was well out of her budget for just getting started. Instead, she discovered <b style="mso-bidi-font-weight: normal;"><a href="http://www.practicefusion.com/" target="_blank">Practice Fusion</a></b></span><span style="font-family: Arial, Helvetica, sans-serif;">, <b style="mso-bidi-font-weight: normal;">a freemium SaaS offering</b> that manages Electronic Health Records (EHR) for medical offices. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">She couldn’t believe how easy it was to set up and use. “They said, ‘Live in Five’ and they weren’t kidding!” Practice Fusion advertises that any new customer can be up and charting patients in five minutes. Grace said they solved a browser issue on her computer right away and she was rolling, as promised. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“I have a dedicated assistant, Jason, who’s fantastic. I can call for him help any time. He always answers, ‘Yes, Dr. Alessi, how can I help you?’” Practice Fusion boasts over 170,000 users and says it’s the fastest growing EHR application. <b style="mso-bidi-font-weight: normal;">Clearly the company has found a way to keep an intimate feel while scaling operations quickly. </b>They understand the personal touch makes customers raving fans, and they’ve implemented the technology, staffing, and processes to make it all work. <b style="mso-bidi-font-weight: normal;">Can they keep it up?</b> The robustness of their <a href="http://www.se-partners.com/SMS-Defined.html" target="_blank">strategic management system</a> will ultimately determine that; how well their practices enable planning, execution, and learning amidst rapid growth. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Grace said she didn’t know how Practice Fusion could make money with a free price tag, and commented that after a while she didn’t even notice the ads scrolling at the bottom of the screen. She said she would have paid $100/mo. without blinking since it was still a fraction of what she would have spent. <b style="mso-bidi-font-weight: normal;">Do the math. </b>With over 170,000 subscribers, that’s a cool <b style="mso-bidi-font-weight: normal;">$17M per month run rate</b> if everyone felt the same way. I’m left wondering if advertising to physicians brings in anywhere near that number. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">If being free, easy to use, and HIPAA compliant weren't enough, Practice Fusion further differentiates by publishing ‘three nines’ of availability in their <b style="mso-bidi-font-weight: normal;">Service Level Agreement (SLA)</b>. In the medical industry, system reliability is obviously a concern. The contract offers service credits if the company doesn’t deliver. Grace didn’t mention this, but to me <b style="mso-bidi-font-weight: normal;">it’s always impressive to make a customer promise and hold yourself accountable to it.</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Looking at what I’ve written above, I need to clarify: I’m a management consultant, NOT a paid spokesman for Practice Fusion. Neither is Grace. But <b style="mso-bidi-font-weight: normal;">her enthusiasm is contagious</b>—to use a medical term. And like recognizing the attention to detail that distinguishes Ritz-Carlton, a two-time recipient of the <a href="http://www.nist.gov/baldrige/" target="_blank">Malcolm Baldrige National Quality Award</a> and perennially successful in the commodity-driven hotel industry, I appreciate rare SaaS companies like Practice Fusion that understand <b style="mso-bidi-font-weight: normal;">unparalleled service is the key to low customer churn, higher referral rates, and maximum profitability. </b>After all, SaaS stands for “Software as a <b style="mso-bidi-font-weight: normal;">SERVICE</b>.” Sure, some IaaS and PaaS vendors may scoff, saying SaaS providers serving end customers are the only ones needing to worry about good service, but last I checked the acronym applies to them, too. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“I don’t know why anyone would buy anything else. <b style="mso-bidi-font-weight: normal;">What’s going to happen to the other software companies?</b>” On that cloud computing observation, Grace asked the most important question of all. From their actions, it's clear Practice Fusion intends to be here for a while. </span></div>Anonymoushttp://www.blogger.com/profile/08155719409715433338noreply@blogger.com3