Pmc non linear business logic

Non-Linear Business Logic

Paul McCabepaulmccabester@gmail.com@paulmccabester

Trained as a sociologist

Managing Director of Advertising Agency - BMW/ Mini, Groupe Danone, Hyundai,

innocent, Mars/ Masterfoods, Pernod Ricard, Tesco, UNICEF & Warner Music

Business Consultant in Transformation - focus on digital technology and sustainability as

catalysts for change

Educator in Transformation & Innovation - Hyper Island & Strelka Institute of Media,

Design & Architecture (2 of Domus Top 100 Design Schools)

Paul McCabe

Your name

Your company

What industry are you in?

Your turn

Digital technology as a disruptor

The nature of value

Different approaches to value creation

Emerging value drivers

What we’re going to explore

Technological innovation is behind social change

Hunter/ Gatherer

Agriculture/ Feudal

IndustrialRevolution

Digital Revolution

We are living in a very seismic time

2 tectonic plates converging and causing friction

DISRUPTIVE AMBIGUITY

Most businesses, organisations and systems were designed for a less complex world

DISRUPTIVE AMBIGUITY

Most businesses, organisations and systems were designed for a less complex world

Non-linearity is causing a complex restructuring of society:

- Need to embrace ambiguity, understand it, listen to it- How to transform and design for transformation

DISRUPTIVE AMBIGUITY

Most businesses, organisations and systems were designed for a less complex world

Non-linearity is causing a complex restructuring of society:

- Need to embrace ambiguity, understand it, listen to it- How to transform and design for transformation

Industries and organisations are struggling as they are unable to adjust to what is to them an ambiguous world

DISRUPTIVE AMBIGUITY

Most businesses, organisations and systems were designed for a less complex world

Non-linearity is causing a complex restructuring of society:

- Need to embrace ambiguity, understand it, listen to it- How to transform and design for transformation

Industries and organisations are struggling as they are unable to adjust to what is to them an ambiguous world

Deep institutional & cultural resistance to change:- As disruption increases so to does resistance

DISRUPTIVE AMBIGUITY & THE CONSUMER

New technologies are the tools for change

DISRUPTIVE AMBIGUITY & THE CONSUMER

New technologies are the tools for change

A social revolution:- In the face of institutional failure people are getting what they want from each other- Greater freedom, empowerment, mutualism, diversity & efficiency

DISRUPTIVE AMBIGUITY & THE CONSUMER

New technologies are the tools for change

A social revolution:- In the face of institutional failure people are getting what they want from each other- Greater freedom, empowerment, mutualism, diversity & efficiency

Companies need to design around the needs of the consumer rather than the needs of the orthodoxies of an industrial world

Contours of a new human being emerging

NEW:life valu!

belie" & priori#! behaviou$

ways of workingways of being%la#onships

frien&hips and social pat'erns

hobbi! & ac#vi#!

Contours of a new human being are emerging

We’re on a threadmill

“Science and technology have progressed to the point where what we

build is only constrained by the limits of our own imaginations.“

—Justin Rattner, Intel CTO

Human evolution

Technologyrevolution

“Science and technology have progressed to the point

where what we build is only constrained by the limits of our own imaginations.“

—Justin Rattner, Intel CTO

Human evolution

Technologyrevolution

As a business how should we view innovation - what is our

vision for the future?

We’re on a threadmill

Lifespans

1937

75 yrs

2012

15 yrs

S+P 500 COMPANIES

By 2030 more than 75% of the S&P 500 will be companies that we have

not heard of yet

(Yale University)

Lifespans

1937

75 yrs

2012

15 yrs

S+P 500 COMPANIES

Since 1984, 69% of the companies in the UK FTSE 100 have been taken over, gone bust, or slipped into the second rank

Lifespans

1937

75 yrs

2012

15 yrs

S+P 500 COMPANIES

Who is likely to disrupt your industry?

The internet as a black hole

Communications

Photography

News

Higher Education

Broadcasting / TV

MusicTravel

Advertising

Hollywood

Retailing

Banking

Health

Publishing

Transforming Business

Motors

Legal

Define themselves by the product they produce

See the internet & technology as a threat

Change is a bad thing

They can control customer behaviour & assimilation of technology

What made us successful in the past will make us successful in the future

We can take our customer for granted

More important to manage existing revenues than look for future ones

More important to manage threats than opportunities

Competition rather than collaboration

Harmful business beliefs

Subjective

Worth

Negotiable

Fluctuating

Usefulness

Desirability

– Warren Buffet

»Price is what you pay. Value is what you get.«

Internetisation exponentially impacts customers’ opportunities to get from a to b in the least annoying way

Business Logic: What we’re trained to believe in

Research& Development

Manufacturing Distribution SalesMarketing Product

Business Logic: What we’re trained to believe in

Research& Development

Manufacturing Distribution SalesMarketing Product

The value is created here. And stored here.

Business Logic: What we’re trained to believe in

Research& Development

Manufacturing Distribution SalesMarketing Product

The value is created here. And stored here.

R&D Prod Dist SalesMktg Product Desired Outcome

What the customer buys and considers “value” is not the product, but the result it generates.

Product Focused Approach to Value Creation

An output - what customers get out

What the customer buys and considers “value” is not the product, but the result it generates.

Happens in the customer space

Accumulates over time

A holistic experience

Helping people get to their desired outcome

Product Focused Approach to Value Creation

Make, Sell, Distribute stuff

Make Products & Work in Silos

Linear definition of industry (we make/sell cars)

Obsessed with market share

Lock-in customers

Squeeze costs out of the chain to drive profitability

Make, buy, rely on technology for advantage

Meet expectations

Innovation = Incremental improvements of products & processes

Just more of the same.

More products, more services. More

brands. More markets.

Product Focus

Helping people get to their desired outcome

X X X X X X X

The Dinosaurs

100% of CD sales?

X X X X X X X

Product v Customer Focus Going the extra mile to land value in the customer space

X X X X X X X

Product Category / Industry Definitions

Market Space

Shape and Dominate a Future Market Space

Market Space: Based on a vision

Market Space: What’s your vision of the future?

Market Space: Where could they take the brand?

Market Space: Where do they operate?

X X X X X X X

What industry are they in?

What industry are they in?

What industry are they in?

What business are you in?

VALUE (OUTPUT)

Great Music Experienceanytime, everywhere

VALUE (INPUT)

Records (LPs, CDs, mp3s, etc)

What business are you in?

VALUE (OUTPUT)

Accelerating Running Performance

VALUE (INPUT)

Running Shoes

VALUE (OUTPUT)

Life-long Health Management

What business are you in?

VALUE (OUTPUT)

PersonalisedCoffee Experience

VALUE (INPUT)

Coffee

What business are you in?

VALUE (OUTPUT)

Life-long Oral Health & BeautyVALUE (INPUT)

Toothpaste

What business are you in?

VALUE (OUTPUT)

Personal Mobility ManagementVALUE (INPUT)

Cars

Value = Input Value = Output

Records (CDs, MP3s etc)

Running Shoes

Tooth Paste

Coffee

Great music experience -anytime, anywhere

Lifelong health management

Lifelong oral health & beauty

Personalised coffee experience

Cars Personal mobility management

Noun (Object) Verb (Activity)

Records (CDs, MP3s etc)

Running Shoes

Tooth Paste

Coffee

Great music experience -anytime, anywhere

Lifelong health management

Lifelong oral health & beauty

Personalised coffee experience

Cars Personal mobility management

How big a role do you want to play for the customer to help them get to their desired outcome?

Market SpaceArticulates what customers want

Provides an integrated customer viewpoint linking benefits across products, companies and industries

Comes from convergence not linear trends

Defining not confining

Direct thinking, strategy and resources

Provide value for customer and enterprise

Product vs Customer FocusFundamentally different ways of approaching the value creation process

Make, Sell, Distribute stuff

Market Share

Lock in

Industrialisation

Make, buy, rely on technology for advantage

Meet expectations

Innovation =Incremental improvements of products & processes

Product Focus

Provide Integrated Experience

Shape & Create Market Spaces

Lock on

Personalisation

Integrate technology into Customer Activity Cycle for advantage

Shape expectations

Innovation =Doing things with and for customers that change the rules in the market

Customer Focus

DesiredOutcome

Market Space

CustomerActivityCycle

Product vs Customer FocusFundamentally different belief systems

Input

Ownership

Competition

Short term profits

Next in line

Segments

Product Focus

Output

Access & usership

Partnering & co-operating

Customer lifetime value

End user

Individuals

Customer Focus

DesiredOutcome

Market Space

CustomerActivityCycle

Product vs Customer FocusDifferent ways of being

Cut costs

Self serving

Short sighted

Risk averse

Hierarchial

Proof driven

Management

Add value

Breakthrough value

Shape expectations

Change markets

Vision for the ecology

Purpose beyond making money

Leadership

Customer Focus

DesiredOutcome

Market Space

CustomerActivityCycle

Product Focus

Solve your user’s problem

Not the brand’s

When it comes to digital...

Invest in your user

Not your brand

When it comes to digital...

Punch CardsElectronic Typewriter

NASA FlightsFloppy Disk

Speech RecognitionRetail Scanner

PCLaser Surgery

1914 First disabled employee1943 First female VP

1946 First black salesman1952 Locate in Silicon Valley5 employees won Nobel Prizes

Open door policyLife assurance

40 hour work week

Enlightened & Innovative

Punch CardsElectronic Typewriter

NASA FlightsFloppy Disk

Speech RecognitionRetail Scanner

PCLaser Surgery

1914 First disabled employee1943 First female VP

1946 First black salesman1952 Locate in Silicon Valley5 employees won Nobel Prizes

Open door policyLife assurance

40 hour work week

Leading Technology Integrator

Lost $16,000,000,000 in the early 1990’s& faced bankruptcy

The new value chain

Market Space

THE

DesiredOutcome

CustomerActivityCycle

Fuelled by technology & data

Market Space

THE

DesiredOutcome

CustomerActivityCycle

The new value chain is an eco-systemOne Unified OfferingBranded Integrated Experience

i

i

i

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pp

p

i

i

i

i

i

p

ppp

p

pi ii

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CustomerActivityCycle

Market Space

THE

DesiredOutcome

Market Space

THE

DesiredOutcome

CustomerActivityCycle

PREDeciding what

to do

DURINGDoing it

POSTKeeping it going

THE

DesiredOutcome

Customer Activity Cycle

PREDeciding what

to do

DURINGDoing it

POSTKeeping it going

THE

DesiredOutcome

Customer Activity Cycle

Putting value in

Taking waste out

1

Getting in sooner

Staying in longer

2

Add value by

PREDeciding what

to do

DURINGDoing it

POSTKeeping it going

THE

DesiredOutcome

Customer Activity Cycle

Putting value in

Taking waste out

1

Getting in sooner

Staying in longer

2

Add value byMind The Value Gap

Things customers don’t want

Things not done

Things done badly

Things done expensively

Things done inefficiently

Things done disconnectedly

Waste of time & energy

Environmental waste

Human waste (health, FUDs)

Value Gaps

Short AND long term

What does this mean for marketing?

The role of marketing

PREDeciding what

to do

DURINGDoing it

POSTKeeping it going

Customer

Lock On

To add value through out the

CAC and support a better, more

integrated, customer

experience

Value creation & internet customer logicMarketing solutions make a greater contribution to the overall customer experience

PREDeciding what

to do

PREDeciding what

to do

DURINGDoing it

POSTKeeping it going

From Demand Creation To Value Creation

ProductDesired

Outcome

Customers are getting the Value of a Product long after purchasing it (and over time). The

Internet is accelerating the Value Creation by also accelerating Waste Reduction.

Marketing activities that Add Value through out the Customer Activity Cycleto end-users are more efficient.

Marketing activities that add value through out the CAC to end users are more efficient

Time

No. of People

Customer Focused Marketing

Product Focused Marketing

Bought Owned Earned

Controlled by Brand

Controlled by Customer

Customers are more likely to take part in

Value Creation (rather than Demand

Creation)

You know you succeed when

1. You are The Customers’ first choice

2. They look to you to solve their problems

3. They share confidential information with you

4. They talk to you about their plans

5. They accept your advice and ideas

6. The discuss options with you (as opposed to just price and discounts)

7. They give you feedback, good or bad (before you ask)

8. The recommend other to you (and you to others!)

9. They trust you to take decisions on their behalf

10. They want you to succeed

Customer Lock

Further Reading

What is your customer’s Desired Outcome?

(Based on output rather than input)

What is your Market Space?

(How far are you prepared to go to help them get to their desired outcome?)

In one sentence each

Exercise - What industry are you in?

Track 3Emerging Value Drivers

Paul McCabe@PaulmccabesterPaulmccabester@gmail.com

Track 1: Product Focused

The sale is the end transaction, where value is delivered

Self-serving model focused on achieving high volume sales at the lowest cost

Focus on supply chain cost efficiency

Innovation is based on incremental improvements in products and services

Track 2: Customer Focused

In addition to T1 cost chain efficiencies, provides value added services that differentiate

Value is an output not an input

Focus not just on product or service but how it lands in the customer space

Based on partnerships, collaboration and horizontal thinking

Innovation is focused on doing things with and for the customer that change the rules of the market

The internet creates new ways of landing value in a more holistic and integrated way

Market SpaceTHE

DesiredOutcome

CustomerActivityCycle

Track 1

Input Focused

Linear

Product Focussed

Red Ocean

Track 2

Output Focused

Non-Linear

Customer Focussed

Blue Ocean

Fundamentally different set of core beliefs and behaviours

Product Focused Cultures - Linear Logic Customer Focused Cultures - Non Linear Logic

How do we get costs down What costs can we eliminate because they add no value to our customers

Our aim is to get ‘high volume’ unit sales Our aim is to deliver on-going ‘high value’ to our customers at low delivered costs

How do we cut costs/ hold margins to maintain profitability How do we better serve our customers to get a better share of their spending

How do we increase our market share What will it take to commit the customer we want for a lifetime

We serve customers who are next in line in the distribution chain

We need to focus on end-user, if we are to jointly serve our customers

What is the cost of the activity we do What is the opportunity cost of the activity we do

The object is to sell high volumes to get economies, thereby making profit targets

The object is to optimise the operations of the whole distribution channel so that everyone will be successful

We are responsible for our own activities We are jointly responsible for activities that create and deliver value to our customer

Our part matters most (function, division, department, unit, country, role in ‘cost chain’, etc)

The good of the whole matters most

Met

Unmet

Present Emerging Future

Value drivers

Met

Unmet

Present Emerging Future

Value drivers - why choose a brand?

What is your story and how do you tell it?

Obesity

Carbon emissions

GM Foods

Minority rights

PollutionHealthy water

Corporate tax Hygiene

Environment

Fair trade

Freedom of Expression

Worker’s rights

Animal welfareCivil liberties

Track 3: Society Focused

Creating a Win = Win = Win

Work in an ecosystem where everyone is winning in a sustainable way of doing things

Goes beyond creating customer value by taking responsibility in society. Not just concerned with whether value lands, but that it is done ethically & responsibly

Still an emerging issue, but rapidly. It is the future (lead and iron)

Behave ethically. Behave responsibly. Behave sustainably

Track 3: Society Focused (cont’d)

We can’t pretend we do good

The internet fuels transparency - we will be found out

Networks drive interactivitism - gives access and amplification to people that had none before

Hypocrisy is the new evil

Identifying wastage - eliminating things that are questionably ethically or socially

Adding value to society through product innovation.

Ethics v Morals

Morals are easy and uninteresting

The bible. Condoms. HIV

Ethics are more engaging

Internet helps us police them

Ethics as entertainment

Track 3: Society Focus & Ethics

What’s right or wrong is discursive, cultural and contextual

Take a stand. Explain benefits

If you are pro-animal testing come out and say itWork with animal rights groups to set standards & best practice Face up to grey areas or they will bring a brand down (child labour, sweat shops, animal testing)

Fight for what you think is right, even if destructive or short term

What we say and do needs to be aligned (integrity v hypocrisy)

Track 3: Checklist

Do good

Be fair

Be decent

Make things that last

Sustainability Complexity & Resources Multi-generational

Emerging Markets Life Values Power

OS1 OS2 OS3

Customer Next in Chain End users User, Community, Planet

O!ering Product or Service (the means)

Integrated User Experience (the outcome)

Quality of Life & Purpose (why)

Aim Increase Market Share of Silos

Dominate Market Space with Partners

Prosperity of Eco Space

Objective Increase Customer Lock-in

Increase Customer Lock-on

Reduce Customer Lock-out

Horizon Immediate Profit (short-term)

Over time, even Lifetime Profitability

Multi-generational

Need Ownership – replace often

E!ective User-ship over time

Empower through Access (wherever, whenever, whatever)

Reach Segment IndividualA"nity Groups:

Aggregate, Share, Pool

Track 1Product Focussed

Track 2Customer Focussed

Track 3Society Focussed

Thank You

Paul McCabe@PaulmccabesterPaulmccabester@gmail.com