Potential: Revealed

Strategic Thinking, Innovative Ideas, Growth Marketing, and Revealing of Potential

Archive for latent

Hammer in search of a nail?

With this post I will give a bit of plug to a good, relatively new blog on all the latest in the world of Payments.

There is plenty of buzz (and spin!) regarding Apple’s foray into “contactless payments” and how it might validate and accelerate an emerging trend. When I read CNN.com’s headline  “The end of credit cards is coming” my natural skepticism went on high alert. A post on Payments.com by Karen Webster, partially in response to CNN’s article and the issue overall, really hit the nail on the head.

It is fun and compelling to learn about a heretofore unmet – or better yet, unknown! – consumer need that has been splendidly filled by an innovative and heroic entrepreneur. Even better if it is Steve Jobs and Apple – the darling, so far, of the first decade or so of the 21st century. The foreseeing of the unforeseeable is often referred to as unlocking “latent” demand. Demand we didn’t even know existed or in ways we didn’t foresee. Sometimes it happens and I’ve written about it on this blog and elsewhere.

The Payments.com post, however, pointed out that both unlocking latent consumer demand for mobile, contactless payments may not have arrived just yet. Karen pointed out many industry factors, ranging from too many competing approaches to too few points of sale (POS) for acceptance (and daunting costs to enable the millions of POS devices functioning perfectly well today across the country without “contactless” capabilities).

The most glaring thing missing in my opinion is less technological and more fundamental: the lack of a compelling value proposition to the parties involved (made up of consumers, payments processors & networks, and merchants). Is there a compelling value proposition to be had? If not, is there really any latent demand? Are we all really, unknowingly so far, just waiting for a way to ditch our current payment methods (e.g,. cash, debit and credit cards, gift cards, checks) for one that uses our mobile phones instead? While none are perfect are the available methods broken and of low enough utility to be replaced?

My comments to Karen’s post (you can find them here):

“It should be noted that Apple’s business model and track record is to be closed (a profitable strategy, no doubt), and another key player the mobile networks are notoriously closed and seeking a way to corner any market for themselves and control / disallow other alternatives.

Along with the sheer steepness of the adoption Karen points out, I think these forces will make it hard to see any widespread adoption soon. Forecasts so far are mostly hype.

Personally I also don’t see the creation of a compelling value proposition which is always required to unlock the so-called latent demand for a mobile & contactless payment alternative (other than the “cool” factor, and for certain high traffic environments where checkout speed might have high marginal value). Current consumer demand for payment methods is well satisfied without NFC (Near Field Communications)-enabled phones.”

Spouting opinions is fun. I gave mine – what’s yours?

Uplift Marketing

Recently we’ve been working on a simple framework for data-driven marketing (i.e., integrated, cross-channel, analytics-based, closed-loop):

Accumulate: • Accumulate data (multiple sources) • Integrate • Cleanse • Aggregate • Store

Synthesize: • Normalize • Match • Common Data Model • Single Customer View

Crunch: •Segment • Score • Peer Compare • Recommendations • Alerts

Publish & Execute: • Publish analytic outputs • Integrate to execution apps

Feedback, Improve & Repeat

An example of results has been impressive. ROI is a mere few months based on what we’ve seen.

More work to do and much evangelizing to propagate and get everybody doing it. But as suspected when we started, there is much potential that has been hidden and shows great promise of being revealed and realized.

Where do we want to go?

This is the third in a series on developing a “practical strategy”.  So far we’ve looked at two of the five basic questions that can be used as a framework for building and testing the strategy of an organization. The last three questions we’ll cover in this post.

The first two questions are “what business are we in?” and “where is the market going?” These questions serve to both build upon the vision which was developed (described in the first post ) and to test it in a practical way. The final three are “Where do we want to go?”, “How will we win?”, and “How will we get there?”. If the vision and the first two questions are for framing and testing then these last three are to useful for building out the details and getting ready to launch.

Picking up from the last post where the market landscape and strategic choices were developed the next step is to make those choices and identify the possible outcomes in order to be precise with the strategy. It is easy to be wishy-washy (sorry for use of such a jargon-laden term!) or settle for being too-high level. After all this is just the “strategy” and details can come later, right? Not right! Sure more details will come later in iterative execution phases and over time but forcing out specificity at this point is very valuable. Otherwise you can easily develop an elegant and logically sound strategy that still fails in the real world.

For example, while developing long term strategy at CheckFree, the leading provider of outsourced online banking and bill pay to U.S. financial institutions, the market — of both consumers who used it and the banks who provided it to them — was rapidly coming to accept such applications as mainstream (a classic sign of  market “maturity”). But there was clear difference in the states of the two key market segments that made up the value chain for CheckFree. One segment, the bank market, was more mature and the competition was likely to force price into being a key competitive issue. Consumers, the other key segment, were still in the early stages of mainstream adoption. Plus a key variable was not simply adoption (what % of households were paying bills online) but penetration (what % of all household bills were being paid online — a sort of share of “bill payment wallet”).

The adoption metric was headed to and beyond 15% (and was at 30% at the leading bank in the U.S.) but the share of wallet was less than 5%. A clear choice on “where do we want to go?” was made: focus on the consumer. Clearly it seemed that there was both a significant unanswered challenge – how to get adopting households to pay all of their bills online through their bank — plus significant upside (increasing penetration offered a rich pool of latent, recurring revenue).

Turning to “how will we win?”: as with all of these questions they are best used in companion and with one another in an iterative manner. For instance, if we had chosen, instead, to give primacy to the bank market’s needs and compete on dimensions of traditional IT outsourcing — such as low cost, scale and quality — we felt we could win yet these were more mature areas and risk of commoditization was high (and price being a likely, and recurring, battleground). When we thought through our choice to compete with a consumer-focused strategy we were betting on this “pulling” through the banks and positioning us as clearly differentiated and preferred option in any competitive situation. The thinking was: if we could be the world-class experts in consumer adoption we were purposely choosing a more difficult yet competitively defensible path. We believed this competitive stratgegy would further raise switching costs and lock in market share with banks who chose us — and serve to help us avoid competing on price.

The last question, “How will we get there?” seems a little anticlimatic. This is by design. As I’ve mentioned previously a risk in developing strategy (amongst many!) can be that it is not practical (e.g., too high level, non-specific, hedges or is wishy-washy). If we’ve been thorough in answering and iterating through the vision and the first four questions the we’ll combat the impractical through the explicit development of a plan to accomplish the chosen strategy. The plan must include a clear set of discrete steps, time-phased and integrated across necessary functional or other organizational boundaries, assign specific accountable owners, and designate expected outcomes which become goals and metrics upon which to review and judge progress of the strategy execution and success of its outcomes. Wrappered around this methodology for developing practical strategy should be some sort of on-going strategic review, discussion and revision process (which I might blog about some other day). I like developing a 2 to 3 year strategy and then reviewing it every quarter on a rolling basis.

That’s it. I would welcome Comments from friends of my blog and from those just passing by and here for the first time.    Randy

Cloudy Thinking

Here’s an interesting way to think about Latent Value. And feel free to tell me if you agree or not!

The Latent Value of a business opportunity can be expressed as a function (think mathematics). Simply stated, Latent Value can be expressed as a function of the total Potential Value, the Cost to Unlock the Value, and the Divisibility of the Value. The latter two are related but I see them as distinct. If the potential value is high then a high cost can possibly be tolerated if the ROI comes out favorably enough. But often companies, being nothing if not pragmatic and conservative, will decide that if the potential value cannot also be unlocked in discrete, “bite-sized” chunks then a high ROI is still insufficient to proceed. Think of it as simply risk aversion to a seemingly all or nothing bet.

Recently, I was doing some research on “cloud computing” and found a particular piece on why some companies are not jumping on this bandwagon. There is a line in the piece that says on fear stems from the “downsides of depending upon SEI (Somebody Else’s Infrastructure)”. When I read these sorts of sentiments I get concerned though (note: these are not the author of the article’s sentiments). The potential of cloud computing is quite compelling as it directly impacts the Divisibility factor of my Latent Value function above.

Consider as an example, taking advantage of business intelligence (BI) solutions offered in a “software as a service” (SaaS) model (a very mainstream version of cloud computing ).

Using existing, non-SaaS BI solutions the challenge for any organization, but particular the tens of millions of small and medium sized businesses (SMBs), to get at the Latent Value available from mining and analyzing their internal data (e.g., sales history, order patterns and mixes, etc.) and improving future sales or marketing decisions is that the Cost to Unlock is steep. But more importantly, the cost to get the first increment of Potential Value is relatively high. In other words, traditional approaches to BI have a low Divisibility factor.

In comes BI offered in the “cloud” and the overall cost potentially comes down but more importantly due to the typical low entry cost and pay-as-you-grow  business model most vendors offer, there is much improved ability to achieve initially meaningful ROI.  This significantly raises the Divisibility factor.

So while SEI should be a factor, it should be weighed carefully and considered against the trade-off: without SaaS a company may not be able to get at any of the Latent Value. SaaS has potential well worth checking out and continuing to monitor as it evolves and becomes more and more applicable to more businesses of all sizes.

Creative friction

Recently I posted about an interesting research article on “The Contradictions That Drive Toyota’s Success“.

In summary the authors describe three “forces of expansion” (defined as those that lead the company to instigate change and improvement) and three “forces of integration” (defined as those that stabilize the company’s expansion and transformation). The countervailing nature of these forces allow Toyota to be widely and sometimes wildly innovative, creative, and constantly renewing itself, without undue chaos or losing its very clear and constant cultural identity. In the previous post I focused on the Expansion forces. Now a thought about Integration forces.

The Integration forces are listed as Values from the founders, Up-and-in people management, and Open communcation. Each are interesting but a part of the description of Open Communication was of most interest to me. A specific aspect of open communication was “give people freedom to voice contrary opinions”. It struck me as contraditory — ah, the authors’ title for the article was starting to make sense! — that being contrary with one another would serve to integrate the culture.

Then it reminded me of the economist Joseph Schumpeter’s thoughts about creative destruction. Schumpeter asserted that the process of innovation and growth in a capitalist economy was a strong mixture of both descruction and creation occuring simultaneously. And bringing these contradictory forces together results in a stronger, more vibrant and growth-oriented economy.

In fact in the Toyota example there are several examples cited of how allowing contrary opinions had positive impact. One I particularly enjoyed was of the new head of U.S. sales ignoring “everything those top executives told me” about what should be done to succeed in the U.S. market. It had to be clear to his bosses in Japan that the U.S. sales executive was contradicting their orders long before the results of his decisions played out, yet they allowed him to make his case and then go with his own ideas. He could have been wrong, but then if he was following some of the principles from the “Forces for Expansion” (discussed in the previous post), particularly to have an experimental attitude and approach, he would have a built-in mechanism to manage the risk of failure and to continually adjust or abandon his ideas if needed.

Most organizations and leaders will say they want to “hear” contrary opinions. Few in my experience want to “allow” those contrary opinions to be freely acted upon. And in Toyota’s case it is apparently beyond allow, but to “encourage” their people to act on their contrary opinions and ideas.

Latent value, by definition, has to be revealed. Reveal is a verb and connotes action. Toyota is a great example of an organizational approach and culture that personifies, through their actions, continually discovering and “revealing potential”.

Do you agree? Are there other ingredients that lead to unlocking latent value?


Recently I read an excellent blog by author Neil Steinberg called Pursuing Perfection which got me thinking about this concept (yes, concept) called perfection.

Neil gives examples of where “the perfect is not always so perfect”, such as Michael Jordan failing in the final seconds of a 1995 NBA playoff game, or a sphere of pure silicon created during a space flight that upon minutely close inspection has tiny (i.e., 35 nanometer) fluctuations. Small imperfection, yes. Imperceptible to the human eye. But a flaw nonetheless.

In addition he notes that handing out of a judgment that perfection has been attained – for example gymnast Nadia Comaneci earning the first 10’s in Olympic gymnastics history in 1976 – can be momentarily satisfying but fleetingly so. Since that day in 1976, scores of 10 are both more commonplace and questionably the mark of gymnastic perfection.

So, as I like to think about, write about, consult about “revealing and attaining your potential”, I wonder if perfection is the destination, or the journey? In light of the thought that arriving at perfection somehow then ruins it, I’m inclined to choose the journey.

4 P’s, lots of D, stir and taste repeatedly.

Working recently with a client in the banking industry, they remarked about “growing beyond our ability to manage customer relationships by feel”. What they meant was that they prided themselves on being a “high touch” banker and saw it historically as one of their competitive differentiators but that it had, alone, lost its ability to create this much needed differentiation. The loss was probably imagined though (I offered) … you probably never really had it.

When you are a large commercial organization, and a bank is protypical of a large commercial organization, it is difficult to truly be “high touch”. It merely sounds good (on marketing messages, in PR ,and advertising). To scale the abilty to have your customers perceive that you know them well and catering to them as individual, highly-valued customers (that is, to have them feel as though you are high-touch), a more integrative approach is usually required. Large organizations, with their scale and resources are uniquely able to pull this off and can create differentiation for themselves, but a fair amount of change is required — procedurally, organizationally and culturally. I’ll spare all the details but a simple, high level way to think about it is:

– manage the 4 Ps of marketing as an integrative set. Define your target markets and customers in ways that you can focus on those where you clearly understand customer needs, can deliver a differentiated offering, can reach them effectively through carefully chosen channels and promotion strategies, and because of the former three you can price in a way that delivers sustainably high profit margins.

– in today’s world, you cannot possibly do this without adding plenty of D, for Data. In a subsequent post I’ll talk specifically about what’s required to add the D required for knowing the market and your customers in a way that leads to differentiation and success. Data, turned into “customer insights”, can be the glue that binds the organization together to act in concert from the inside (typically in the headquarters where the data is stored and managed) to the outside (where customer-facing associates in sales, relationship management, and customer service areas touch the customer directly).

– last but not least, managing the 4Ps intergratively and conquering the capability curve to be able to add data as a competitive weapon is not easy. I believe it requires an “iterative experimental” approach. This is very different than the perfuctory approach of “piloting” a new business process or system. I’ll use a cooking analogy (which is a great metaphor-rich activity): often times the first attempt with a new recipe in an uncharted style may be good but not yet fully satisfying. Yet the experienced, creative and most successful cook will use the experience to adjust (a little less salt? a dash of cayenne?), evolve the recipe and find the successful combination … and then continue to evolve the recipe and themselves, challenging and striving for even higher culinary heights and delights. The delighted look on a dinner guest’s or dining room patron’s face is all they need for validation. A similar mindset is required for the successful company that wants to tackle the integrative maketing and data challenge because they are convinced the results will be a uniquely delighted customer.