Potential: Revealed

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

Archive for latent

Recent Commentary: Person-to-Person Payments (P2P)

For a client recently I published some commentary on recent news in the financial services technology (Fintech) market.  Just sharing the publicly available portions here for your interest – and of course comments!

Here’s the second one (the first is here):

clearXchange P2P Next in Long Line of Mostly Unsuccessful Mega Bank Consortiums

On May 25, 2011  Bank of America, JPMorgan Chase and Wells Fargo announced the launch of a joint venture — clearXchange — which will enable their customers to move money using just a mobile number or e-mail address. A direct competitive move versus eBay’s Paypal unit. And threatening Person to Person (P2P) offerings from Fiserv (NASDAQ:FISV) (ZashPay), PopMoney (CashEdge), as well as money transfer players such as MoneyGram (NYSE:MGI), Western Union (NYSE:WU), Obopay and Fundamo.

The announcement garnered significant attention of course due to the banks involved.

Previous bank consortiums as mentioned in the article (e.g., Spectrum, Pariter, ISIS) have a lousy track record for a reason. Innovation and market success requires many characteristics such as capital – which the big banks have, of course – plus nimbleness and persistence in the face of inevitable challenges and failures along the way — which the big banks generally lack on an individual basis. I never see how the latter gets overcome if a group of mega banks simply band together as a “committee”.

P2P payments as the author notes have found success only where some friction in the marketplace could be reduced for a price the market would pay – providing for a sustainable, relatively defensible revenue model such as Paypal did with small/micro-sized merchant payments (e.g., eBay sellers and their auctioned merchandise).

I am unclear that this requirement is met with P2P where the P’s are really that, “persons” — indeed as the author points out this is a sort of last mile problem/opportunity in the payments market place. But is there enough friction with current methods (e.g, checks, cash) and processes (e.g., the infrequent incidence of paying another person such as a baby sitter or repaying a friend for picking up the drink tab last night) to offer sufficient latent demand that is ready to be met?

If successful in some way though, clearXchange would provide a positive force if they are a “network amongst networks” which interconnect to facilitate the critical mass reach that will eventually be required for P2P to become more mainstream.

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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.

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?

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.

And in the end…

Perhaps fitting (or just cheeky?) this blog will start by stealing from one of the best. In this case, The Beatles. On their last recorded album, “Abbey Road”, they were famous for naming the supposed ending tune “The End”. Yet they rewarded those that were patient and persistent with a gem (14 seconds) after “The End” called “Her Majesty”. I loved it when I first heard it (thanks Big Sis’ who gave me the original issue 33rpm), and still love it today.

For some reason I have always been a fan of surprises. As a child, I actually liked waiting until Christmas morning to find out what presents were there for me under the tree. Later in life, I have found pleasure in the word “latent” which is defined as “present potential not yet realized or revealed”. Sort of like a surprise of a different but related sort. Looking back at personal and business experiences that I’ve enjoyed and been fortunate to be a part of, many have some aspect of latency. Whether they were reinvigorating a tired product line with a great and loyal customer base, or finding hidden value in data that is the artifact of a core business process, or on a more personal note volunteering as a elementary school tutor and helping kids see possibilities in themselves that were always there, but just not able to shine through as brightly as they could.

So, this is not actually the end but the beginning of hopefully an interesting experience sharing ideas, insights, and thoughts on the subject of “revealing potential”.