Whether co-opting outsiders into helping you innovate as NASA does or getting creative with your ethnographic research as Moen did, we are seeing more and more members reaching out to their customers – and even their non-customers – for innovation help.  Already NASA’s Centennial Challenge Program has resulted in technological breakthroughs orchestrated by a “regular guy” from Maine working alone in his dining room as well as a group led by an undergraduate student at Worcester Polytechnic Institute.

Of course, just opening your doors to the outside world isn’t going to be a panacea that cures your innovation ills.  While we are seeing lots of companies succeeding via social media platforms that engage customers in idea sourcing (see examples from Starbucks and Dell), the best marketers are leveraging their “specialist users” over their “mass customers” to drive real breakthrough thinking.  From automotive companies to commercial paint manufacturers, we’re hearing more and more about the pursuit of customers with a unique skill set or unique need state that open more doors to innovative thinking that traditional research approaches – even one company that has successfully recruited “haters” of their products.

MLC members, are you curious about how the best companies identify and co-opt their specialist-user customers to jump start real innovation? Join us for more on this topic by attending one of our half-day Innovation Summits.  The next session, on July 22, is being hosted by W.L. Gore, makers of GORE-TEX, and will include a tour of their world-class innovation center (40 minutes outside of Philadelphia).  Curious about how your innovation efforts stack up against your peers?  Take our innovation diagnostic and find out.

“Make a list of the cultural trends that influence your consumers’ behavior.  Take your time; all of the items on this list will not be immediately apparent.  Stay with it, and you will gradually observe more and more.  Be a good observer.  Remove yourself from your own cultural perspective.  Look for the absurdities, the incongruities, the things that don’t necessarily make sense.  You will begin to laugh as you start to see the culture from the outside.  (Laughing is a good sign).”

Bogusky’s hypothesis underpinning this advice is simple: consumers are participants in a culture first and an economy second—they’re much more likely to spend their hard-earned dollars on culturally relevant products than culturally ambivalent products.  If a brand wins the cultural relevance game, they’ll likely see the economic benefits as well.

The passage also was timely as I’d just returned from Iconosphere 2010, the signature event for Iconoculture clients.  The two-day session was essentially a lightning round of the cultural immersion and consumer behavior mapping Bogusky recommends in Baked In.  The marketers who joined us were treated to in-depth analysis of the trends and values that are shaping consumer behavior today, accompanied by a healthy dose of practical advice for brands looking to stay relevant.

While the “you had to be there” cliché rang true for the Iconosphere event, the insights and ideas we talked about were very portable.  One sample topic: a deep dive into the changing values shaping Generation X behavior as that demographic approaches midlife.  We’ve captured a summary of this session’s key takeaways along with the presentation deck and an audio file for Council members here.

Stay tuned for more on the Iconoculture methodology and more insights from their team of cultural, demographic, and category experts.

Scientia potentia est

Just as the word “knowledge” is not qualified in this famous maxim, many people assume that more of any knowledge contributes to more power.  This fails to take into account that some knowledge is far more valuable because of its uniqueness or quality.  Or, perhaps even worse, it falsely assumes that all knowledge is worth the cost of consuming or managing it.   In most organizations, this remains a highly contentious subject.  For every white paper extolling the potential of knowledge management, I read or hear a story from one of our members about the unwieldy systems that fail to deliver.

I recently read a compelling article published in the Strategic Management Journal entitled “When Using Knowledge Can Hurt Performance” (Haas and Hansen, 2004) dealing with this very issue.  The paper concluded that utilizing a firm’s knowledge resources to complete important Selling tasks can backfire and undermine competitive performance.  The study explores how engagement teams at the pseudonymed management consulting company go about building proposals for new engagements.  In particular, they focused on how the team 1) used knowledge resources and internal experts to get up to speed on the topic; 2) developed an innovative approach for addressing the client problem, and 3) structured the proposal itself.  Some of the surprising key statistics published in the study include:

• The more the teams relied on their knowledge portal in developing the proposal, the less likely they were to win.
• As the level of team experience increased, an increase in usage of the knowledge portal decreased its chance of winning.
• As the number of competitors for a bid increased, an increase in usage of the knowledge portal decreased its chance of winning.

I want to believe there is a way to make knowledge more powerful.  If you think you’ve solved this one, we’d love to hear about it.  Based on our initial exploration in this area of knowledge management in Sales and Marketing, and especially given our findings around the importance of knowledge management in supporting commercial teaching efforts, we think it’s a major component in smoothing the working dynamic between Sales and Marketing.

One of the ways exemplars are driving results is by using social to embed the brand into customer routines—the recurring “jobs” we do in our personal and professional lives.  These brands are using social to aid the customer across a whole range of sub-tasks that go into completing a routine. Here are a few examples:

• Nike+: routine = train for and run a marathon
• Best Buy’s Twelpforce: routine = choose, set-up and make the most of a multimedia home network
• AMEX Open Forum: routine = organize backoffice paperwork (for small businesses)
• TI’s E2E community: routine = solve a technical challenge (for engineers)

And it’s no wonder this approach is delivering strong results.  We saw in MLC’s 2009 loyalty work that tying a brand into consumer routine delivers a 9% lift in loyalty (second only to establishing a differentiated emotional connection with the consumer).

Brands haven’t always been able to get to this level of embedment in customer routines.  However, social networking has changed the economics of aiding customers in their routines.

With social, it’s easier (and less expensive) to spot when a consumer is doing a routine (lots of them are broadcasting it!). Social search has made it easier for consumers to find information that supports their routine—whether from a brand or a peer.  And social has enabled consumers to have a two-way conversation (with each other or with brands) to get helpful information or even emotional support in accomplishing their routines.  Prior to social, for a brand to scale these kinds of aiding activities would generally have been economically unfeasible.

As we’ve looked deeper inside of the brands that are using social to embed in routines, we’ve found that the most compelling examples require some kind of extensive cross-functional collaboration.  Why?

No function in the typical large enterprise has evolved to carry out embedding, in a scalable way, across the range of tasks in a consumer routine.  The implication is, to do this kind of embedding, executive leadership is required to break down silos and accelerate fusion of 1) the right knowledge with 2) the arms and legs around (or even outside of) the enterprise.  We believe the CMO is ideally suited to step up and be the executive catalyst for cross-functional collaboration here, because she is best positioned with knowledge of the customer and the firm’s differentiating capabilities.

MLC B2C members: we hope you’ll join us at an upcoming MLC executive retreat, where we’ll dive much deeper into the CMO social leadership imperative and embedding in routines.  This signature work represents the culmination of our 10-month inquiry into social media.  The intended audience is the seniormost marketing leader and the head of social media efforts.  Find more information on these sessions (including registration) here.

MLC Annual Executive Retreat Dates

17 June | New York

14 July  | Chicago

25 August | Sydney

21 September | London

12 October | San Francisco

This may sound like an obvious first step but, more often than not, Sales and Marketing aren’t on the same page when it comes to having a common understanding of customer needs.  We often hear tales of Sales accusing Marketing of being notoriously slow and impractical when analyzing customer needs, while marketers argue that Sales “manages by anecdote” and misses broader trends across segments. This tension ultimately hampers the organization’s ability to truly meet customer needs and capture new opportunities as they appear in the marketplace.

So how can sales and marketing teams get this right?  It comes down to effectively sharing customer knowledge between the two functions and then building consensus around the most pressing customer pain points and how the company will address them. This affords the broader commercial enterprise the flexibility to respond to changing customer behaviors while, most critically, clarifying how the company differs from competitors in a meaningful way.

Arriving at shared customer understanding breaks down into three components:

1. Understand customer needs.

Deep understanding of customers allows Sales and Marketing to develop, position, and deliver competitively differentiated offers that resonate with target customers.  Start by establishing a common framework.  Many organizations will use voice of the customer (VOC), though increasingly we’ve seen these approaches supplemented by efforts to surface unarticulated customer needs and underlying objectives.  Needs- and outcomes-based approaches provide commercial teams with greater opportunity to arrive at differentiated customer insights.

MLC members can learn more about surfacing customer outcomes in our 6-minute video tutorial.

2. Compile a customer information inventory.

Information about customers is typically scattered throughout the organization. Sales and Marketing must tap CRM data, market research, and even the tacit knowledge of internal business partners to establish an accurate baseline of what is (and what is not) known about existing customers.

Populating a learning agenda catalogues existing knowledge while also exposing areas where additional information is needed in order to portray a holistic view of the customer.  Synthesizing these disparate pieces of information in a disciplined manner creates a common view of customers that spans both Sales and Marketing.

3. Facilitate dynamic knowledge-sharing.

Given that customer behavior can change dramatically based on market dynamics, Sales and Marketing need cross-silo sharing tools and platforms that allow them to enrich the customer knowledge baseline in an ongoing and easily consumable way.  Embedding motivational drivers and simplifying input requirements to CRM systems can go a long way as far as encouraging both Sales and Marketing to contribute to and draw from more complete customer information.

MLC members, check out our new Shared Customer Understanding resource center for case studies, tools, and templates to help your sales and marketing teams get on the same page.

Not because of the leading companies on the list – the old standbys of Apple, Google, Microsoft, and IBM still head the class. What was more startling was that 11 companies had declining revenues and 17 companies had declining margins across the 2006-2009 survey period. You can play devil’s advocate with the recession all you’d like, but in a top 50 list of innovators, more than 20% falling shy of growth raises an eyebrow.

What moves these results from head-scratching to startling to flat-out frightening is the methodology BCG uses to calculate the ranking. A survey sent to 2,000+ senior executives around the globe accounts for 80% of the final ranking. My conclusion: leading executives are awarding innovation points to companies that are fundamentally missing the goal of innovation – to better satisfy customer needs in a manner that grows the business. Declining revenues aren’t quite the signal an executive should look for when judging innovation.

Caveat time: I don’t know the precise questions BCG asked or whether revenue performance would have been worse without the identified innovative spirit. Yet throughout the article, the word ‘customer’ is notably absent. For those familiar with MLC’s jobs and outcomes framework, the goal of innovation properly defined is to devise ways to help customers get their jobs done better. Certainly companies can sink millions into research and development, streamlining supply chains, or building new distribution channels, and those may be the right moves to cut costs or expand footprints. But unless those innovation dollars are spent in the service of better meeting customer needs, they are innovations without purpose.

Renowned consultant Peter Drucker once quipped that, “There is only one valid definition of business purpose: to create a customer. Therefore, any business enterprise has two – and only two – basic functions: marketing and innovation.” As innovation budgets open up, marketing executives should own the innovation engine, working back from customer needs to produce products and services that boost acquisition and loyalty. Without innovation, those revenue numbers will continue to fall – and we’ll be stuck with a 2011 list that looks less innovative and more sclerotic.

MLC members, be on the lookout for an upcoming diagnostic designed to help you benchmark your innovation capabilities. We’ll also be kicking off a breakfast meeting series on (revenue-generating) innovation in cities across the country beginning in May – stay tuned!

But frankly, this too often turns retailers into myopic, proximity-biased incrementalists in their customer strategy (too harsh again?). Imagine my encouragement when I see retail CMOs begin to tout the very elements of customer-focused strategy their CPG peers have long known.

This new focus on the customer take two forms: organizational structure and marketing communications execution. Take Express, for instance. Organizationally, Express CMO Lisa Gavales (follow her on Twitter here) now owns all e-commerce activity. From a communications perspective, every touchpoint – be it on the store floor or the web homepage – displays the same visual branding. Express is Express, no matter where the customer encounters it. While a recent development at Express, MLC research would clearly indicate that customer-focused, channel-agnostic marketing communications will yield far higher returns to the whole portfolio than category- or channel-specific campaigns.

At Macy’s, you practically have CMO Peter Sachse committing marketing treason, saying, “What we don’t need to do is get new customers.” Yet he’s right, because he too has placed the customer at the forefront of marketing’s strategy, rather than a distant second to classic merchandising techniques. And what better way to do this than. . .wait for it. . .asking the customer! Sifting through NPD Group data, interviewing shoppers as they left the store, all in an effort to generate customer centricity. Much like Express, the end result is an inevitable broadening of Marketing’s scope of control (which of course we as marketers enjoy). Sachse states specifically that the web should be the brand’s hub, which can lead to innovative uses of the web as a marketing communications vehicle, as in this recent Macy’s campaign.

Yet for many retailers, the transition to a customer-driven marketing organization may not be as simple as having charismatic leaders like Gavales and Sachse. That’s where MLC research can help build the business case for customer focus:

• See how Tesco created an annual customer plan to implement improvements to the shopping experience grounded in customer insight.
• Read how Food Lion co-opted cross-functional partners by pre-committing them to next steps on customer-focused projects.
• See how Victoria’s Secret filters all customer-focused investments to ensure alignment with the brand and target customer.

The trend toward customer focus in retail is more urgent and necessary than ever before, as the sector seeks to reinvent its offering coming out of the recession. Those that fall behind in satisfying customers’ needs will likely get trampled in the next Black Friday rush.

One thing we can all agree on is that it will be tough for marketers to predict precisely how the new laws will affect consumer and stakeholder behavior.  Simply put, the sheer complexity of the US healthcare system makes prediction difficult.  Moreover, legislation this sweeping will almost certainly yield unintended consequences, thereby increasing the levels of unpredictability.

How should marketers cope?  Try these two tools. 

Tool #1:  Scenario planning—A few important points:

Click to Enlarge | Scenario Planning Do's and Don'ts

• Do not count on scenario planning to predict the future
• Rather, look to scenario planning to foster a greater sense of managerial comfort with previously unconsidered future outcomes—it can shift managers perceptions from negative to positive, which will help speed of action as opportunities emerge
• As well, scenario planning will provide a structure for pretesting ideas and decisions—it can thereby improve the quality of those decisions

MLC Members, you’ll find a solid primer on scenario planning in the replay of the webinar, Taming Uncertainty.

Tool #2: Stakeholder jobs/outcomes assessment—Focus maniacally on understanding the jobs and outcomes that various stakeholders are trying to accomplish. 

We like this tool for a couple reasons:

1. The fundamental jobs consumers are trying to accomplish are reasonably stable, which will help focus marketers’ efforts in an otherwise very noisy, distracting and complex environment.
2. By staying close to the basic outcomes that consumers desire (e.g., decrease complexity in accessing reliable providers), marketers can better anticipate how consumers (and other stakeholders) will react to the new rules as they come into effect.  There will be great opportunity for innovation and stealing a march on competitors for organizations that apply this methodology.

Blue Cross/Blue Shield of Florida applied the jobs/outcomes approach, which led it to breakthrough innovation such as its Florida Blue retail storefronts.  MLC Members, read the case study detailing how BCBS of Florida applied the jobs/outcomes methodology to manage a complex and unpredictable healthcare environment.

So, let’s bury the hatchet, and start working as marketers to cope with the change afoot for consumers (and please choose a stump, not a political nemesis, as your chosen hatchet burying locale).

“Customers have ‘jobs’ that arise regularly and need to get done…They look around for a product or service that they can ‘hire’ to get the job done.  This is how customers experience life…Companies that target their products at the circumstances in which customers find themselves, rather than at the customers themselves, are those that can launch predictably successful products.”

–Clay Christensen Professor and Author, The Innovator’s Dilemma

The Communications Executive Council, our sister program for heads of corp comms, has posted a helpful top-line overview of the legislation here.  Definitely worth the three-minute read.

A few weeks ago, I pulled 10 nuggets from The Economist’s special report on social media. Fittingly, The Economist followed that this week with a special report on managing information.

Managing and making best use of all the data trails that consumers create via digital and social media is critical for marketers (see this prior post on managing information richness). This capability is one of a few that will separate winning marketing functions (and even enterprises) from losing ones in the next 3-5 years.

So, without further delay, here are 10 of my favorite takeaways from the report.

10 Nuggets from The Economist’s Special Report on Managing Information

1. Decoding the human genome, which involves analyzing 3 billion base pairs, took 10 years the first time around in 2003. Now, it can be completed in one week. 

2. The amount of information in the world is growing at 60% compounded annually

3. The human brain can retain seven pieces of information in its short term memory, and can hold only four concepts at once. More information, or greater complexity, generally leads to confusion.

4. “A wealth of information creates a poverty of attention.”–Herbert Simon, economist

5. A new kind of professional is emerging— the Data Scientist—who combines software programming, statistics and storytelling/artist skills to extract insight from mounds of data

6. “What we are seeing is the ability to have economies form around the data—and that to me is the big change at a societal and even macroeconomic level” –Craig Mundie, head of research and strategy at Microsoft

Example: Microsoft’s Farecast examines 225 billion airline pricing data points to tell customers whether they should act now or wait to buy the lowest price airfare for a particular itinerary

7. According to Wal-Mart (and its gigantic purchase database): Leading up to hurricane strikes, people buy flashlights and batteries (no surprise)—and PopTarts (!!) PopTarts are an easily ported and consumed survival food.  Nimble, data savvy businesses can spot and seize opportunities to stock shelves just-in-time with the right goods.

8. By crunching numbers, Cablecom (a Swiss telecommunications firm) has reduced churn from 20% to 5% of subscribers annually. How? In sifting through data, it found that customer defections peak in the 13^th month, but customers decide to leave four months earlier (on average). Cablecom identified likely leavers, and made them special offers in month seven to pre-empt the month nine moment-of-truth.

9. “Understanding turns out to be overrated, and statistical analysis goes a lot of the way” –Edward Felton of Princeton University. In other words, if there are mountains of user data available, it can be used to augment the algorithms programmers normally rely on to execute a complex task.

Example: Google’s spellcheck program was effectively crowdsourced: using the millions of search queries with spelling errors, and offering a correct spelling (which searchers accept or don’t), allows Google to zero in on a statistical technique for spotting and fixing spelling errors.

10. Remember when “terabyte” was the term used to convey gobs of information beyond what most of us can comprehend? Well, beyond terabyte, you have petabyte, exabyte, and zettabyte (the total information in existence this year is believed to be around 1.2 ZB). Beyond zettabytes lies the realm of yottabytes—too big for us to imagine at this point.

MLC Members: See our work on Digital Marketing. As well, stay tuned for an upcoming webinar, slated for May 4^th, on Creative Uses of Social Media Data.

1. Savvy social media-ites can cite their business objective clearly and succinctly. All members of the social media team know what their efforts are designed to achieve.

2. You’ve made principled decisions on your target audience. You know which customer segment to pursue and what social media vehicles they’ve adopted.

3. You know your customers’ outcomes and how social media facilitates the achievement of those outcomes better, faster, and cheaper than other methods.

4. You act on the intersection of customer outcomes and your organization’s broader unique strengths, creating strategic social media advantage within your competitive set.

5. Fast-cycle test-and-learn experiments comprise your tactical social media endeavors. Each experiment is hypothesis-led.

6. The team holds hands and pre-commits to next steps based on each social media experiment’s result. This facilitates buy-in upfront and limits time lost to analysis paralysis post-experiment.

7. Teams lay out required resources for each experiment to boost transparency for budget owners and pave the way for measurement clarity.

8. With ROI still a mirage for many, social media winners link transactional metrics to attitudinal and behavioral objectives that the broader organization knows have an impact on financial performance.

9. Social media teams don’t hide the ball. They are upfront with the risks each project faces, and utilize RACI methods to mitigate them.

10. Social media teams tell other marketing teams how much more fun they’re having working on this topic. What, you thought all ten were going to be serious? And I’m only somewhat kidding.

MLC Members can put these 10 habits to work in our upcoming workshop in Dallas, Texas on Thursday, March 4th. You can register here.  In this workshop, you’ll actively develop your company’s social media strategy based on these proven best practices, with facilitation by MLC experts and input from your peers. If you’re responsible for social media initiatives and execution at your organization, this is an event not to be missed. We look forward to seeing you there.