Posts Tagged ‘strategy’

Strategy and Operational Excellence: Trade-Offs Made in Design and Thinking

“Managers must clearly distinguish operational effectiveness from strategy. Both are essential, but the two agendas are different.

The operational agenda involves continual improvement everywhere there are no trade-offs. Failure to do this creates vulnerability even for companies with a good strategy.

The operational agenda is the proper place for constant change, flexibility, and relentless efforts to achieve best practice.

In contrast, the strategic agenda is the right place for defining a unique position, making clear trade-offs, and tightening fit.”

 “What is strategy?“, Michael E. Porter, Harvard Business Review, Volume 74, Number 6

With reference to my previous post, I thought to clarify my thinking a little further.

Design (not design thinking), very clearly falls in the realm of operational effectiveness, as derived from the explanation given above – let’s use that old classic, the iPod, as a commonly understood example – it is very well designed. It would not have reached it’s iconic status if it were not well designed.

But just for the sake of this thought experiment, let’s say that Apple’s strategy could be framed as “leader in the market of portable, user friendly, hard drives that allow you replay the stored information. Hypothetically, mind you, and with respect to the iPod only, for the purposes of this conversation.

Steve Jobs’ vision was clear and Apple’s unique value proposition – the user experience – well differentiated. But his strategy of maintaining leadership in this category [clearly defined, per Porter’s definition] is supported by his operational effectiveness in releasing a new product [in the same product category – strategy] with a quality and frequency that left the other players breathlessly behind.

Had he not had this clear strategy he could have done any number of things that many do to maximize the revenue generation possibilities – released an iPod clothing line, offered iPod accessories, distributed toy iPods in Happy Meals, whatever came to mind.  But any of these tactics would have moved him away from his core value proposition.

This would have been short term thinking, how to maximise the cachet of the iPod brandname or, you could say, the outcome of not having a well defined strategy from the very beginning. By continuing to make trade-offs that he did in his decision making and tightening fit, he continued to maintain his strategic agenda, envisioned in advance for Apple’s forward momentum.

96608_A

A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both.

The arithmetic of superior profitability then follows: delivering greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs. – ibid

On the other hand, at the time of the iPod’s heyday, just prior to the iPhone’s full scale disruption, there was much discussion on some of the design choices made, particularly in the arena of customer service.

Some may recall that the battery could not be changed in the original iPod and customer service for the product was nowhere near what today’s CX and UX gurus would advocate.

Here’s the snippet from the wayback machine linked above:

Its battery wears down and can’t be easily replaced because an iPod can’t be opened up by mere mortals. All of these were conscious design choices Apple made.

There’s something in that and I’ll be coming back to it, but in the context of this post one wonders whether trade-offs such as these,  in operational effectiveness, make for good strategy in the long run?

Gamer Gen: Civ III as virtual MBA?

This post was written on 29th November 2005 in San Francisco

Back in May 2005, I wrote a post on the book “Got Game: How the Gamer Generation is Reshaping Business Forever” where the authors,  John C. Beck and Richard Wade, argue that gamers glean valuable knowledge from their pastime and that they’re poised to use that knowledge to transform the workplace. While their emphasis is on how the “under 34″s differ from the boomers in their strengths, abilities, attitudes and learning styles, I contend that even within the “gamer generation” there are distinct camps*.
Beck and Wade point out these attitudes in their study of the gamer generation:

  • You are an expert who not only has gotten really good at something but also knows how to bounce back from failure.
  • Everything is possible. There is always an answer, and you can find it by trial and error.
  • Competition is the natural state. You expect nothing else.
  • Teamwork can be fun, but it needs to be structured so that each person has a clear role.
  • It’s a global world in design, consumption and characters. You can get along with people anywhere.
  • You are ambitions, competitive and want your rewards to be based on results.
  • You see leaders as irrelevant and often evil. You feel you can take charge or share the leadership role.

Last month, Sid Meier’s Civilization IV was released with much fanfare. Not having pre-ordered the “collector’s edition”, I had to wait until the games were in stock last week to purchase a copy. An avid player of Civ III, I found the newest version “dumbed down” with respect to overall management and strategy with a greater focus towards multiplayer. The key difference, imho, is beneficial for actual gameplay, that is, they’ve cut down the amount of micromanagement of your civilization that you have to do while you plot world domination strategies.  On the other hand, if gaming is argued to be the training ground for the next generation of management, then Civ III is nothing less than an “MBA” training ground for leaders.

For those who have never encountered Civilization, it’s about playing God on a world somewhat modeled on Earth’s history, but with lots of variations in maps and how you go about building your civilization. It’s all about “interesting choices,” as Sid Meier once put it. Do you build up a big army and pursue aggressive campaigns of conquest? Do you try to live in peace, keeping your people happy and growing culturally? However, I believe that it is the very micro management that CivIII requires that teaches us how to be corporate leaders, and specifically, I’d say, it applies to managing a creative shop like a design studio.

 Why?

As your civilization grows in the game, you deal with issues on two fronts – the competing end, where you play an aggressive game based on war and conquest or the cultural approach where you build Wonders and culture to win – and the back end that needs to be managed throughout however deals with resource management. Issues such as pollution, paying for extra workers, unhappy citizens in over crowded cities, building requirements for growth, all of these “micro” issues need to be dealt with simultaneously as you create your winning strategy. Those who play at the expert level, successfully, in Civilization III, develop a unique skill set that can be translated to management terms. Here are some of them:

  • Multi tasking, multi threading – tracking all events creates the ability to have a multiplistic perspective of the world
  • Resource management – Identifying, sourcing, choosing to trade or buy resources such as money, labor, machinery, raw materials to ensure an uninterrupted supply to meet your objectives.
  • Ability to see the “BIG” picture – you can’t get any bigger a picture than the growth and evolution of a complete civilization competing against 7 others for the same resources.
  • Cooperation, collaboration and team play – how to coordinate and deploy your armies, your workers, scientists, artists and engineers for maximum support.
  • Decision making, diplomacy and leadership – jockeying your way to a United Nations winning vote requires the ability to manage and negotiate trade, sales and peace treaties.

There are probably many more such skills, but these are those that come immediately to mind. If the US Army can use simulation software to develop war games to teach strategy and diplomats can use a game to figure out how to over throw a government without war, who says CEO’s cannot be trained by a little civilization?

Why are they shaming Simon Berry for making an important and valuable strategic change? #colalife

In my 2009 article “The 5Ds of BoP Marketing: Touchpoints for a holistic, human centered strategy” I used Simon Berry’s initial work, with Cola Life, as an example of innovative distribution models,  so:

Such “piggybacking” has been attempted on an existing tried and tested global distribution network as a way to distribute medicines to the neediest. Simon Berry has launched a scheme called colalife.org, an award-winning social media campaign launched this year to demonstrable success that sought cooperation from The Coca Cola Company in order to leverage their extensive and highly visible supply chain in the remotest parts of the developing world to distribute critical life-saving medicines such as ‘oral rehydration therapy’ for common waterborne diseases.

A status report from their Flickr group discussion board:
Before the Facebook group I was getting nowhere at all. The group has changed everything and is the reason we’ve made such rapid progress… Continuing support for the idea is vital if we are to turn this idea into a reality and actually save some lives.

Research and development of the campaign continues to evolve. The next objective is to get an international NGO to engage with the campaign. Meanwhile research is underway in East African into Coca-Cola’s distribution system and the feasibility of the idea is being investigated and reported in Simon’s blog.

Simon is to be commended for his brave, courageous act in acknowledging that the highly acclaimed and design award winning concept of packaging made to fit the Coke crate -the “Kit Yamoyo”, which has been recognized with The Design Museum’s inclusion in 2013 for product design – was not successful as a means to achieve his goals. Thus, regardless of the cool concept and the design innovation manifest in the packaging, he has stayed true to his real mission – how to distribute life saving medicine rapidly and cost effectively as Coca Cola does into every remote village shop on the African continent. And in order to do so, he has adapted his methods to suit the distribution channel.

Simon’s real achievement has been gaining access to Coca Cola’s trusted vendor and distribution network. Listen to what he says,

Berry replied: “We are piggybacking on Coca-Cola in the sense that we’re using their ideas, we’re using all their wholesalers, who are very well respected and know how to look after stuff, but putting the kits in the crates has turned out not to be the key innovation.”Berry also conceded that the concept of delivering the kits in Coca-Cola crates hadn’t worked in an interview with New Scientist magazine last month.“Instead, what has worked is copying Coca-Cola’s business techniques: create a desirable product, market it like mad, and put the product in a distribution system at a price so that everyone can make a profit. If there is demand and retailers can make a profit, then they will do anything to meet that demand.”
He’s learning how to scale, massively, from the master. If you have ever been anywhere remotely remote and then wondered how did that familiar red show up here, then there’s the start of your trail of clues.

Then why does that article sound like its trying to shame him for not using the shiny award winning design? And is that why other clunkers like LifeStraw or something solar clank along limpingly rather than attempt to deconstruct and start over from lessons learnt? What a sad waste of time and money…

 “I have to say Simon though, this is a bit of a con,” Day said on discovering the innovative strategy had been dropped. “You got this award for the design product of the year, very ingenious, very clever, because it fitted into a crate of bottles. You’ve abandoned the crate of bottles distribution now, so it comes in very conventional, ordinary packs. You’re nothing to do with cola now. In other words, the design is almost incidental.”

Way to go, Simon!

This post was written by niti bhan and rss originates from www.nitibhan.com

Reflecting on The Informal Economy, October 2012

John Keith Hart, who first saw the economic activity of the “unemployed” in Accra, Ghana back in the beginning of the 1970’s, almost exactly 40 years ago, opened the symposium with the statement that the informal economy had gone mainstream. After all, he said, here was a gathering of folks from around the world, ready to discuss a concept he’d observed and named in some dusty research paper from so long ago.

Meeting him was the highlight of the day for me. Having him come up to me after my little talk on the principle of flexibility, to say that he’d appreciated my insights, was the icing and the cherry on the cake. It makes all the hard work worth the while when you learn that you’re on the right track and not simply on a wild goose chase of speculation. Thank you, Keith Hart, for giving me that extra bit of encouragement.

From the first panel, Richard Tyson’s presentation on the dark side of the informal economy, from Somalian pirates to Sahelian terrorist networks, made a big impact. His key point, however, was that this particular flavour of the complex adaptive system that is our global worldview/economy is out of date now and very badly needs a refresh in order for more accurate responses to the challenges ahead.

From the second panel on the future of money, I was struck by Ignacio Mas’ presentation which focused on disabusing us of the assumptions made on the role of mobile money within the informal economy and how little of a real impact it has made beyond the social network of the individual in areas such as financial inclusion or small business.

And finally, the last panel, where it was Timothy Brown of the Shanzai blog who opened my eyes to the real thinking behind the business models of what we tend to assume as simply “cheap Chinese fakes”.

Finally, all the food for thought provided by the myriads of conversations with old friends and new like Cordy Swope, Ben Lyon,  Scott Smith, Steve Daniels, Aldo de Jong, and John Thackara himself.

Target market strategy for upwardly mobile BoP segments

* BoP – referring Prahalad’s Bottom of the social and economic pyramid, MoP – middle

This visualization of the emerging consumer market opportunity in India is by the insightful analysts at Nomura Research Institute, Japan. When taking this in conjunction with the information collated in my previous post on the imminent boom in upward mobility currently being seen in rural India, one can instantly perceive the logic of their target market strategy.

Why stumble around in other rural areas, when the first ones most likely to benefit from the economic changes taking place will be in teh vicinity of the smaller cities which are themselves rapidly growing? And if they themselves aren’t, its likely that their local market’s shops will source new products from the nearest city. Innovation diffuses outward from the urban areas, as do new ideas and thinking. We saw this same pattern with the way the internet cafe industry was evolving across Kenya during the Village Telco project last year. And its the same pattern of diffusion for new product introductions in the informal trade – the ones who are ultimately serving the BoP customer in their rural village. Thus, this target is a focused one with greater impact than seen in the first instance.

What Nomura’s gurus have added however is a layer of nuanced caveats on this analysis – one, not to forget the fact that even as people’s upward mobility takes them up the food chain to ‘middle of the pyramid’ (their MoPs in the diagrams), this very same economic change will have visible impact on the local business environments, so stay cognizant of that, and two, that even as people migrate upward economically, they do not automatically change their system of values in terms of purchasing patterns and buyer behaviour to resemble the existing higher income strata, instead they still think like the “BoP” they were.

Thus, the emphasis in the strategies to choose how and at which point to enter the market whilst straddling both the MoP and BoP population segments. An example of all of the above comes from the recent Daily Yomiuri article about Yamaha’s activities in Asia and Africa:

Yamaha Motor Co. has started selling water purification facilities in emerging countries in Africa, Southeast Asia and other areas, as part of its so-called bottom of the pyramid business plan, which aims to generate profits by improving the livelihood of low-income earners in such countries.
[…]
Yamaha has built small water purification facilities in five locations in Senegal and Indonesia, including local water service public corporations. Each facility is designed to provide a community of about 200 households with 8,000 liters of water daily. The firm also received an order in Mauritania.
[…]
By selling its name in untapped markets in Africa and small villages in Asia, Yamaha also aims to boost its sales of outboard motors and motorcycles in the future.

Emerging evolution of global BoP markets by mindset and income

 Japan’s Nomura Research Institute have an interesting take on the evolution of the existing global population currently demarcated as the BoP (Base or Bottom of the Pyramid). While it is not surprising that income levels are expected to increase, given the signals already observed in frontier markets and rapidly growing economies, what was intriguing was their assertion that the newly emerging “Middle of the Pyramid” (or rather, emerging global middle class since that’s a diamond not a pyramid) will display an entirely different sense of value i.e. a different mindset, from mainstream consumer culture prevalent today.

This values gap between the customers at the BoP and those immersed in the global mainstream is something I’ve written extensively about previously, having identified and framed it in “Design for the next billion customers” back in 2008. It is one thing, however, to describe my observations of differences in mindset and buyer behaviour, and another, to see this aspect in terms of population and income, that too, taking the increasing upward mobility into account.

That is, what this diagram is saying is that not only is there a difference in value (and thus, mindset) between the BoP customer and his brethren higher up on the social and economic pyramid, but even as their income rises and they evolve into ‘middle income’ customers, their mindset is more likely to remain the same as when they were classified as BoP than to suddenly shift into the mindset and values of those in the higher income brackets.

That these emerging global middle classes will continue to have more in common with their rural cousins and their BoP roots.

Yes. This makes perfect sense. And to see it visualized like so offers valuable insight into the emerging consumer markets of the near and medium term future.

What price brand? No pretence about “fakes”


One of the most fascinating things that emerged from my immersion in the informal trade of China made consumer electronics in Kenya last month was the role played by “fakes”.

We assume that cheaper copies of well known brands attempt to fool the customers. Packaging and brand names echo the look and feel of the original as far as they are able and the entire exercise is one of “bait and switch”. In fact, this is not the case at all. Nobody is fooled and people know exactly what they are buying.

What is interesting, however, is how these “fakes” are sold.

Shopkeepers – whether the upcountry retailers catering to their local, rural customer base or the wholesalers back in the Central Business District dealing with rural stockists – offer you a choice. They display both the original brand, a genuine product of quality with warranties and whatnot, and the “fake” version, whose only guarantee is caveat emptor, and leave it up to you to assess your willingness to take a risk.

Their words often follow along the lines of “Here is the original Nokia, costing so much and doing this, this and this, while here is the China made product closely resembling the above but has these additional features and costs only so much”. Everyone is completely aware of the lifetime value of either product and the risk involved in ending up with a dud.

It is upto the customer to decide if they want to spend for durability and reliability and quality or make the tradeoff for a short term gain in features, upfront cost and the caveat of a short lifespan.

This approach seems to fit within the constraints of the informal economy’s cash flow volatility as well as the customer demographic’s mindset around brand value and product performance. No one that I spoke to, either at the wholesaler, the shopkeeper or the customer level, seemed to feel that the “fakes” were an attempt to defraud them in anyway.

Its a pragmatic approach to affordability and aspirational ownership.

Marketing principles for the informal economies of the emerging world

This will be the working title of the book I plan to sit down and start writing the latest by January 2013. And I can’t start earlier than November this year because I need to see the results in the market start to come in first before I can pontificate on the topic, but naturally as they say.

I was mentioning to someone on a call just yesterday that we cannot define the informal economy, or rather it has been our attempts to do so that have led to more barriers between the formal and the informal. Why not try to describe it, give it some characteristics and possibly propose a principle or two that underlays the design?

I think that the seeming chaos of the informal economies across the rural and peri urban parts of less developed regions seems to imply automatically to those more accustomed to neat and clean systems that work in their home locations that there are no rules to this economy nor any commonly agreed standards or measures i.e. economic anarchy

This is so not true.

This old post of mine illustrates different types of “socially agreed upon” weights and measures in the informal market, not only is the variety astounding but the quantities and measures are similar across the country. Every single cyber cafe, big or small, across the country charges a shilling a minute as standard rate unless they have high competition in the neighbourhood that might make them lower it but I’ve only seen it twice in all the cybers we covered in last year’s Village Telco project.

Flexibility is the key to understanding how this economy works, and its carefully crafted hyper local “guidelines” rather than rules, as in they are socially enforced rather than through formal channels available to consumers elsewhere more privileged.

In your tiny social network/community/income source pool, you cannot afford to gain a bad reputation in transactions, work will be hard to come by. This is the basis of the naturally evolved checks and balances prevalent in the ‘systeme D’.

And so on and so forth, as you can see, it apparently seems I do have a lot to say but I’m waiting for all the anecdata that qualitative research relies upon to come in.

Fresh look at India’s consumer market

This report (PDF) by Yoshihiko Iwadare of Nomura Research Institute is only 15 pages long but manages to overturn conventional business strategy on its head in its framing and approach to new market entry for India’s emerging consumer markets.

For more on the Indian consumer market today.

Why so much “BoP” marketing fails in the developing world

Consumer electronics stall in informal market, Nairobi Kenya 23 January 2012

Increasingly I have been getting the sense that there are some fundamental issues with the way BoP focused organizations are developing, creating and implementing their market entry strategies.  Here are four of the most obvious errors that I’m seeing:

Assuming there’s no competition

Most of these firms, particularly those coming in from the outside and seeking to serve the ‘poor’ in the developing world seem to be operating in a vacuum. Observing their market entry actions point to an underlying assumption that they are entering a virgin market where  no competing solutions for their product or service exist.  If this fundamental premise is mistaken then every element of their marketing, communication, distribution and pricing strategy will naturally suffer.

A caveat here is that it might indeed be a virgin market for branded international solutions in the formal market but this is where overlooking the informal markets and existing practices in user behaviour can be far more dangerous since this is where the competition will come from in the form of substitutes or alternate solutions.

Because of the above assumption, little effort is made to uncover information about the customer, the market or competition or the operating environment. Whether this is due to a vacuum of information on BoP markets or the developing world, or this subject simply not being taken into consideration, the fact remains that this oversight then gives rise to a series of errors (like the domino effect) – those in marketing strategy viz., marketing communications, value propositions and positioning not to mention pricing.

Conflating company mission with marketing strategy

While this is most commonly found among well meaning social enterprises entering these markets for the first time with their life saving products for the poor, large multinationals with previous experience in the developing world are not immune the minute they choose to focus particularly on the BoP (or poor) market.

Tata Nano is the most obvious example of this although here one wonders how much of this had to do with their actual marketing communications and advertising for the Nano and how much to do with all the media hype around the car being specially for the ‘common man’? All the positioning and branding in the world through formal advertising and communication channels could not overcome the public perception of the ‘poor man’s car’ created by every other article – from engineering news to international styling – on the Nano.

Similarly, if all the marketing communications, press reports and online information is geared towards the ‘poverty alleviating” mission of the company then this lack of clear focus or understanding of who the target audience is will come through in the positioning and branding of the product in the marketplace.  And no one will aspire to buy the ‘poor man’s product’ if it means a clear signal of having failed to succeed or admitting defeat among their friends and neighbours.

Confusing value proposition with need

This lack of clarity and understanding about the target audience for a product or service and thus, its marketing communications and messaging then snowballs into incorrect positioning of the product or incorrectly identifying the value proposition for the end user.

The end result might be the same – the customer choosing to buy your product – but the pain points may differ tremendously across geographies and regions, not to mention socioeconomic strata. An example is water saving flush toilet mechanisms being sold in Nairobi as a sustainable, greener alternative – that is, the same positioning and value proposition as that used in the eco-conscious parts of the Northern European continent. Sales are sluggish. But when you take into consideration that there is a water shortage or that many communities need to purchase water in tankers to fill their household storage tanks, a simple shift in positioning to “Spend less money flushing down the toilet” or some such clever quip could in fact make a more sensible approach in this situation for the very same product.

This gets more obvious the lower down the income stream you go – Mama Mboga with her vegetable stand may not have the same priorities nor relate to the same value propositions that social impact investors do.

Overestimating the ability of a faceless brand to communicate value

There is probably a snappier sentence to capture this aspect but at this stage of understanding the BoP markets and their challenges its perhaps better to be clear than pithy.  Some have called this issue one of Trust and in the past, I’ve referred to it as Commitment but the fact remains that this aspect is the most challenging and difficult to overcome as a barrier to acceptance.

Even megabrands accustomed to instant global recognition such as Google may find that not only is their brand unknown and unheard of in these new and emerging markets but others may have gotten there before them.  Which, in a way, brings us back to the first point in the assumptions made at the very beginning of considering market entry strategies in the rising global middle class.