TRIUM Graduation!

TRIUM Graduation

It is done. The class of 2006 has completed its course of work and its graduands have processed.

And how we processed!

The day in London enjoyed splendid weather of almost Los Angeles beauty. Lincolns Inn was as grand and Harry Potter-esque as ever, with coats of arms all around and portraits of UK's most powerful. At one point, a colleague said, "Is that Maggie?", referring not to our lovely, bright classmate Magdella, but to a portrait of Margaret Thatcher, who no doubt was at least an honorary member of the Inn.

There was a string quartet, brief but spot-on speeches from the academic deans of LSE, HEC and NYU, champagne at the outdoor reception, a delicious lunch, many of my esteemed and beloved colleagues, and especially my lovely bride Angela and my father, who goes by many names. I call him Buster.

It was a grand day. Bravo, TRIUM, and felicitations to all of my colleagues.

ASEAN Treaty Signed

Unified Market?

CNN just announced that ASEAN signed a trade pact with the United States. "Southeast Asian trade ministers signed an expanded trade and investment agreement with the United States on Friday that calls for a mechanism that allows U.S. imports easier access to the region. The Trade and Investment Facilitation Arrangement, or TIFA, was signed by U.S. Trade Representative Susan Schwab and trade and commerce ministers from the 10-member Association of Southeast Asian Nations."

For a region with a half-billion customers, this seems like good news. And there are indeed a number of countries with rich economies in the region, including Singapore, Malaysia and Brunei.

This agreement should help simplify customs arrangements, a critical need in a multi-country region (the same problem persists in Central and South America). As such, it should help any number of countries do business in the region, since such uniformity -- or at least rationalization -- of customs arrangements will be supported inevitably by technolog. This technology, in all probability, will have an effect that will be scaled and improved over the next decade. (Just in time for other transformative changes in the region, including a bigger free trade zone called AEC, targeted for 2015.)

US exports to the region are rising fast. FDI was up 48 percent in 2006, the same levels seen before the 1997 Asian financial crisis (see "Foreign Investment in ASEA Rises 48 Percent to 38 Billion in USD," AFX-Asia, 8.21.2006), in which a web of corporate and bank debt caused a collapse -- even contagion -- that sent ripples throughout the global economy.

A big question is the effect that China will have on the region. China already is a powerhouse there, taking advantage of proximity to keep its relative cost of goods low. Nevertheless, ASEAN has not included South Korea, Japan and China formally, instead relying on annual meetings of the so-called "ASEAN Plus Three" to frame the issues of regional cooperation. What's the role that China will play?

Some thoughts include ASEAN remaining as it is, with other regional countries forming their own multi-lateral trade agreements. Candidate groupings have included China and India, or even China and Japan (despite recent problems between the two countries regarding purported Japanese nationalism, which is probably overstated).

Examine the chess game, then: The US approaching ASEAN from the Pacific, China, India and Japan joining in some way to trade locally with ASEAN ... the key consequence I can see is that US companies will be forced to increase their FDI into China and ASEAN countries to reach cost parity.

And even then, the challenge for US companies is actually understanding the markets. This is the big rub for US companies. The range of customers is diverse, culturally, geographically, linguistically, economically ... just in the case of Malaysia and Singapore, one can find vast differences in religion, education, culture, income and world view.

Which companies will have the customer data and instincts needed to market, innovate and operate well in the region? Sure, the customs paperwork may become simpler soon, but the customer paperwork is about to explode.

Photograph Copyright (c)2006 by Paul K. Ward.

WTO Talks Off

Doha Collapses - Good or Bad?

Ah, the anti-globalization people are rejoicing in the streets and the pro-globalization people are either doom-and-gloom about how this will make Africa suffer and hit consumers in the wallet, or hopeful that the talks might be revived like Lazarus (or perhaps like Dracula when the sun sets, from the point of view of anti-globalization activists).

Just as Orwell once said (and I am paraphrasing from "Politics and the English Language") to beware the politician who leans over the podium grasping his lapels and repeating, "Freedom! Freedom! Freedom!", beware trade liberalization people who say that something will hurt Africa and consumers.

I tend to favor globalization, even the hideous version that gets called "globalization' when in fact there are many ways to globalize. However, there are always two key issues I keep in mind when I'm trying to evaluate a proposed WTO initiative or multilateral trade agreement:

1. How will capital be concentrated?
2. How will free trade damage the culture and values of a region or country?

In the first case, we get a clue to who might be pushing behind the scenes to get a decision. Usually, of course, the concentration of capital favors big multi-nationals. That might open up competition, but it doesn't necessarily mean lower prices, nor better quality or choice for consumers. In short, the concentration of capital can just as often work AGAINST the intentions of trade liberalization.

In the second case, the answer can help us understand the non-monetary, apolitical objections of a country. And, after all, WTO cannot (and patently does not) function just as a shill for corporate interests. Some pundits, including Sally at my alma mater LSE, seem to want to restructure the WTO to make it a bit more of such a shill. So, who objects to free trade, for example, in agricultural goods? Those countries and regions where the quality and character of their goods will likely be damaged by free trade. And given that cultural identity is often a complex thing that is rooted to the land, or to history, what's at stake is not just free trade, it's identity. Think of it this way: When you can get products from major multinationals anywhere you go in the world, what does it matter anymore where you actually ARE?

Is the failure of the Doha round a catastrophe? No. If the pushback on agricultural subsidies is a sticking point, the answer is not to restructure the WTO to make sure that the sticking point can be "worked around" (as Sally suggests). The answer is to dig a bit deeper and ask why this is a problem in the first place. Sure, the answer is partially pure protectionism for the sake of softening the blow that globalization makes to certain sectors. But the answer may be deeper than that.

And certainly, if we want to help Africa and lower prices, the WTO has plenty of other options. But, honestly, I don't see the WTO having a legacy of doing anything much more than lowering trade barriers for MNCs (oh, yes, and anyone else, too). Just because WTO now has a larger and more inclusive governance structure, don't be fooled. It's lipstick on a pig. The WTO's lack of success is neither disaster nor success. It's mostly just part of the balancing act between the forces of concentrated capital and the forces of conservative cultures.

Global CRM

Upcoming World Affairs Council Talks

As a member of the World Affairs Council, I'm constantly impressed at the timeliness and quality of their speakers -- even when they're shilling books. Hey, one day I'll be doing that. So I don't hold it against them.

This Wednesday, July 19, WAC offers a great chance to hear about the politics of Iran (nuclear, democratic and global). The book he's written, "Confronting Iran: The Failure of American Foreign Policy and the Next Great Conflict in the Middle East", gives historical and speculative future context to what's happening in geopolitics (petropolitics, too) and how national and international policies might make a difference.

For info, go to WAC's site.

Digital Dashboards

Digital Dashboards

Ouch! Here's a terribly glib article on executive dashboards for marketing and CRM. A couple of major problems: the article claims that executives should specify the information they need so that they are not overwhelmed with the "wrong" data; and that data should be continually reported so that marketing people can see how well they're performing.

These don't seem like problems to you?

Consider:

1. Executives at most companies don't know about customer value management, perceived value, measuring brand equity in the new digital network economy, and so on. These metrics are all precursors to sustainable revenues. Instead, most executives are interested mainly in revenues as the metric because they have stockholders and analysts to answer to. So, they'll look for revenue data and maybe profit or ROI. But most won't look for return on the customer relationship.

You can easily make your revenue goals in marketing by doing silly things like deep discounting. You can even make a lot of profit by selling a lot of cheap things at a high price in a one-off kind of way. But you cannot sustain either in a free market economy where customers talk. You are destroying brand equity and hacking up the net present value of future customer earnings. So, I ask you: Who should determine the information that executives get? The answer is NOT "executives" if they're obsessed with the quarterly report.

2. OK, let's talk about continuous reporting. Don't get obsessed with the short-term. Don't compensate performance on the short-term only -- or even primarily. Don't constantly rejigger things because you're nervous about results. For example, if you put out a promotion and it doesn't do well, how far do you look for the root cause? Do you only look to change the things you can immediately control without understanding first what might have caused poor campaign performance? You've got to think about the entire value chain for the customer to find out why you're underperforming. Maybe the campaign needs time (so don't fire the agency). Maybe the campaign landed on deaf ears (because the value prop was terrible, since you're out of touch with customers). Maybe your prospects had a better deal from your competition (what? you're not tracking competitive choices?).

Continuous reporting can be your enemy because it can make you a nervous wreck. Look for trends, look for creating consistent customer value, look for how your success or failure impacts your entire company.

Here's a story about how revenues and great quarterlies are terrible. In the late 1990s, Calvin Klein went ballistic when Warnaco, a licensee of his, struck a deal to sell his designer jeans -- at Costco.

Warnaco: Hey! Great revenues this week! Celebrate!

Not, said Klein. You're destroying my brand! I want the license back!

With these thoughts in mind, read that article to see if I'm right. Is it glib?

You tell me.

Customer Ecosystems

The Net is the Computer?

When Scott McNealy of Sun Microsystems presciently said that the network is the computer, he knew that the Internet was going to shift the way people thought about the box on their desks. Sadly for Sun, he was right. Schwartz, the new CEO of the high-tech computer hardware company (McNealy just stepped down), is laying off people in unprecedented numbers. (You can link to the story here.)

The reason that the network is the computer is simple. We get the most value from things we don't know. The stuff on our computers is stuff we know (or at least know about). When we have that "moment of truth" when we really need to know something to make a decision, we rely on external information. (Ping me if you want to see the research on this.)

So any company that makes the search for external information seamless, fast and useful is bound to have more potential marketability than companies that sell boxes on desks. The boxes become a commodity. It's the nature of the knowledge we get through connectivity to a digital network that creates value.

So, Sun is down. And Google, famously, is up. And, ironically, some of Google's new efforts with Ajax include software derived from Sun Microsystems. The J in Ajax stands for JavaScript, a simple version of Sun's Java language. Sun has made its mark. Perhaps that mark will ultimately be just a fingerprint on the side of Google's rocketship.

But now that you have a sense for why we're looking upward not at the sun but at the search engine, you can ask yourself: How am I helping my stakeholders and customers make better decisions with information they don't currently have? The answer to that question could well keep your company from becoming a black hole.

Hosted CRM

salesforce, NetSuite, RightNow

Holy moley. I've known for a couple of years that the hosted CRM segment was going to explode. This is part of a general trend towards outsourcing processes, but it's also an acknowledgement that the battle for the top is over: Big iron CRM deployments built from scratch just do not constitute a market that companies are willing to compete for. They want the big mid-market, and the mid-market doesn't want the nightmarish complexity and expense of custom-from-the-ground-up CRM solutions.

Ah, but there's the rub. The key to success nowadays is to create a DIFFERENTIATED multi-channel experience for and relationship with your customers. How are you going to do that without a custom-from-the-ground-up strategy? You can't. So, are the hosted CRM solutions for you? Only if they provide you the business process customizability that gives you strategic advantage.

Unless, of course, your goal is to do CRM "tactically". Fine. Pull in an analytics module, a call center module, and so on. Don't risk a lot of money. Don't force a big culture change on your company. For some companies, this can work for a while. For an even smaller number, these tactics can even swing some marketshare to you that won't leave you when your competitors finally wake up. Good for you.

But the downside of hosted CRM is that it is cheap and lower risk, which means anyone can do it, and that means any move you make can be quickly copied by your competitors.

Software always has this characteristic: Over time, it does the same stuff, better and cheaper. The scale attribute of hosted CRM has pushed costs down even faster.

The conclusion? You must choose a CRM strategy that gives you sustainable competitive advantage over a long enough time horizon that you get a better return than your competitors can.

That's a bigger chunk of work than just choosing your next hosted CRM vendor. And guess what? It'll be expensive, and probably require a culture shift at your organization.

Darn. No such thing as a free lunch.

And the same is true of CRM vendors. Luckily, a good number CRM companies are smart marketers and have aggressively differentiated themselves win sustainable marketshare. (Check out SearchCRM's good article on recent moves by RightNow and salesforce.com here). This actually lets you match your strategic needs with a specialized hosted CRM offering. The downside is that the same option is open to your competitors.

Saleforce.com, I believe, has made a good step in fixing this problem by making its basic offering extensible through what amounts to being an "on demand development environment," as SearchCRM aptly puts it. Others are competing on hosted business rules services (RightNow, a great company that gets it) and better dashboards for decision makers (NetSuite). Where will the CRM initiative win at your company: in IT, in the C-suite, or in an more integrated approach that spans all channels and many departments? The answer may help you pick a vendor.

Creation nets: Harvard Nails It

What McKinsey Missed. And risk.

As soon as I shoot a cannon across the bow of McKinsey because they left customers out of the creation net, I pick up the April issue of Harvard Business Review to find an article called Manage Customer-Centric Innovation -- Systematically by Larry Selden and Ian MacMillan.

They recommend a handful of steps to get customers involved. The "extend" part of their prespcription is a big challenge. You must extend both your capabilities and your segments. How do you do this without disrupting your business model and finances? There may be no way to do this, particularly if you are at a cross-roads with your company or with your sector. In fact, disruption is probably inevitable.

But you will want to manage that disruption. First, look at how others, beyond direct competitors, have succeeded in extending their capabilities and segments. Essentially, you're gathering business intelligence about your (direct and indirect) competitors' creation networks. How have other companies accessed and serviced your markets and do they define their markets differently?

Next, look at your partners and suppliers. What markets and capabilities work for them? Why?

One key insight is that an innovation strategy is risky, so you have to move the costs of those risks somewhere -- in your pricing or your financial structure, for example. You can also move some of those risks out to partners and suppliers, if they are eager to work with you.

Should you innovate? The answer lies in another question: Who is setting the pace for change in your sector? You? A competitor? Or customers?

Creation nets

I saw a great new article in McKinsey Quarterly (to which you must subscribe, hint, hint). It's called "Creation nets: Getting the most from open innovation" (Brown, John Seely, and John Hagel III, 2006 Number 2).

The idea is that you have to innovate to succeed (and this seems to be increasingly true as competition accelerates), and the best ideas may come from outside your company. CEOs generally agree that internal R&D is among the least successful ways to innovate, according to another McKinsey article I heard about in a recent Peppers & Rogers webinar. (I think the article is called Extreme Innovation. When I've got ten seconds to my name, I'll track down the reference for you.)

Brown and Hagel say:

"Although creation nets thrive in many different parts of today's global economy, they may not be fully visible to casual observers. Many Western executives, for example, go to original-design manufacturers (ODMs) such as Lite-On Technology and Compal Electronics, which are based in Taiwan but have expanding operations in mainland China, to source designs for a wide range of consumer electronics and high-tech products. From the perspective of these executives, they are dealing with a single outsourcing provider. Yet behind the scenes, the ODMs are mobilizing large creation nets to push the performance envelope of the products they design."

But oh, my gosh. Look at the big hole in the program: They've left out the customer in the creation net.

And to make this blunder even worse, it is the customer that actually defines innovation as a business term. New products and services that are not taken up in the market are not innovations.

So, if you leave out the customer during the R&D process, you're playing craps with your capital investments.

This is not to say that inventions of the past haven't, by chance, hit upon a latent (i.e., unknown) need of the market. But chance it was. Shall I mention craps again?

And to top it off, the authors were so close to getting it right, I'm amazed they left the customer out. The reason that creation networks actually create value is that they are constructed on the basic building blocks of a new kind of economy: one that is transitioning from an information economy (post-industrial, founded on information and knowledge sharing via computer technology) and a digital network economy (post-information, founded on the ability for all players to act on and improve knowledge and process outputs). Connectivity, information, motivation and co-evolution of knowledge are all parts of this network.

This is why customer experience management is critical to creating value for your company. The customer experience is an interaction (both you and the customer are players) -- it is not a "message broadcast" or "information delivery" marketing play. You must enable interactions so they can improve. That is, if customer experiences are what you want to manage and improve, then they must reveal actionable information to you (and probably to the customer). If you don’t manage customer experiences this way, you’re stuck in the information age at best – and perhaps in the industrial age at worst, where marketing and public relations were all extruded from the top.

A conscious customer strategy that brings customers and prospects into your innovation processes can really pay off for you. And, you basically have no choice in the matter if you want to be part of the new economy. You have to employ creation nets, and customers have to be part of them. You can't capture marketshare in a net filled with holes.

Global CRM

Global CRM

I'd like to share an announcement relevant to my friends and colleagues in the Washington DC area.

WEDNESDAY, MAY 24 - FOREIGN POLICY WORKSHOP

THE FUTURE OF US-ASIA RELATIONS - A U.S. Dept. of State Bureau of Intelligence & Research and Office of Civil Rights Workshop

Moderator: CORAZON SANDOVAL FOLEY
Bureau of Intelligence and Research Program Manager

Featuring BARRY WELLS - Office of Civil Rights, US Department of State
HENRIETTA FORE - Under Secretary of State for Management
VISHAKHA N. DESAI - President of the Asia Society
DR. VICTOR CHA - Director of Asian Affairs, White House National Security Council
HON. WILLIAM ITOH - Former Ambassador to Thailand
DR. FRANKLIN ODO - Director of the Smithsonian's Asian Pacific American Program

Location
WEDNESDAY, MAY 24, 2006
11:00 am - 1:00 pm
Dean Acheson Auditorium, U.S. Department of State
23rd St. NW Entrance
Washington, DC

Admission
FREE, but Advance Registration Required!
Please register by Friday, May 19. To register, email event@worldaffairsdc.org or call 202.293.1051 with the following details:

1. Full Name; 2. Birthdate; 3. Driver's License or Passport Number; 4. Citizenship; 5. Affiliation

The above information is required for security clearance purposes with the U.S. Department of State. Please have photo identification at entrance!

Global CRM

Global CRM

Customer experience management is hitting the government (and the beltway) big time.

In the last two days, I've talked to two important organizations which both spontaneously had begun looking into CEM. One derives most of its revenues (near $1billion USD) from the US Government. This company has to compete for these funds, and they realize the standard procurement process -- presumably designed to level the playing field to remove non-proposal influences -- is not the only game they have to master.

The other organization is a US Government agency. They have two big constituencies: fellow agencies, whom they assist; and global stakeholders working to harmonize regulations, laws and behaviors with international standards. It may appear that the payoff in CEM (and CRM) for this agency is not primarily measured in dollars, but in value created. And that's true. But dollars count here, too. The agencies served by the organization I'm talking about can advance their causes through other organizations (NGOs and for-profit consulting and development firms). So CEM in this case is one way to assure that this particular agency gets more wallet share from the agencies it serves. That lets them build their budget, attract better talent, keep them longer, and become more effective.

In both cases, though, CEM is being introduced to provide relative competitive advantage.

Still, CRM is the bigger player in all this. CEM matters, but just looking at the new Google Trends reports (go to http://www.google.com/trends) shows that CRM is a Google keyword far more often than CEM. (You can discover some other interesting data by checking out this cool new search engine feature. Go Google.)

That's it for now ... gotta get a proposal and a strategy out, and then I am at last going to get my haircut. Then I'm rewarding my lovely bride with a dinner out. Every day is Be Nice to the Bride Day, right?

Global CRM

Global CRM
I'm finalizing a couple of sessions on customer experience management today, which will help audiences in Singapore figure out the "CEM model fit" for their organization.

I've been thinking a lot about the organizational challenges to building a decent CEM program. Renée George from Kimpton Hotels carved out her own position to do it: Director of CRM and strategic marketing. She drives the big picture and the smallest details to make sure they're lined up. (See 1to1media.com for a great article on George's work with Kimpton.)

But a lot of organizations don't have the guts or vision to put someone in charge of strategy and tactics that spans units, functions and processes. Too bad.

I think one helpful approach is to develop a CRM and CEM communications strategy within an organization that allows stakeholders to learn how improving customer experiences can improve products, processes and resource allocations. This learning process is critical to adoption of any future system.

But adoption isn't the main goal of such a culture changing initiative: The key is to make explicit those tacit communications that interfere with or support creating great customer experiences. In short, the communications plan should be two-way: Educate your enterprise, and encourage conversation so you -- and others -- can identify how products, processes and resource allocations directly affect and can improve customer experiences.

This turns the responsibility for change onto each person participating in this two-way exchange, and puts the "what's at stake" argument in their lap.