The Rapidly Emerging Role of the Consumer in Value Creation
Value Co-Creation
May 2012
Presenter
Presentation Notes
Jon – Welcome Partners in a boutique firm Advisors to c-suite Across many industries and sizes
It Feels Chaotic!
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JON Ever higher volumes of information and variables to manage combined with unusually high and sustained levels of market and regulatory uncertainty have created a business environment that feels chaotic. The demands for growth from the capital markets are, as always, unrelenting. The U.S. economy appears stable with some modest encouraging signs, but few are relying on broader economic expansion to drive their growth; they can’t wait. The lingering prospect of a deepening European debt crisis, or whatever is next, is creating an underlying low level headache that won’t go away.
At a deep level, business leaders are feeling very unsettled.
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JON Dull headache that won’t go away
Explosion of internet enabled devices and engagement with social media
It’s not just a headache but an anxious headache as market activities are
moving at a rapidly accelerating rate.
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JON Meanwhile, there is an explosion of internet enabled devices and engagement with social media applications. So it’s not just a headache but an anxious headache as market activities are moving at a rapidly accelerating rate.
The challenge to successfully lead an organization to desired levels of growth has never, in our lifetime,
been more difficult.
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JON Energy and relevancy
The historic internal approaches to enhancing value and driving organic growth are insufficient.
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JON There is recognition that the historic internal approaches to enhancing value and driving organic growth are insufficient.
Finding better ways to explore market opportunities is on the minds of most leaders…
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JON Executives almost everywhere are hungry for growth and they realize their organizations must become more creative and develop better market experimentation discipline to accelerate the discovery of new value … Yes, there are instances of brilliant market insight and demand creation, but few companies have a Steve Jobs to figure out the next great thing. For most enterprises, the approach to innovation is multi-level and they recognize they must be in the network/social media game…the question is often “how”?
….and asking more of your
people has its limits.
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Employees have been the beast of burden
Innovation
Collaboration
...is the mantra.
AND
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JON Yes, but is this sufficient???
We have entered into a new era of
rapidly expanding complexity and opportunity that requires new leadership mindsets and execution
capabilities to enable growth.
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JON Our view is no, collaboration and innovation as it is typically thought of today is not sufficient
Looking Back
The Rear View Mirror
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WENDY
70’s and 80’s…mass consumption
“build it and they will come”
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WENDY The 70’s and 80’s was an era characterized by “build it and they will come.” The focus was on high volume, low cost and scale Mass consumption was expected. Large corporations dictated what was made, for whom Example: Music recording industry: Entertainment companies like MGM and Atlantic Records produced music on albums and cassettes. Technology changes influenced new formats for listening to music, but the company was still driving what the product would be.
An era of relative
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Wendy Market conditions were clear and relatively certain. The consumer was easy to define or at least throw into a group
Low Moderate High and Epic
DEGREE OF UNCERTAINTY
Clear
Operations Level Innovation “TQM”
Complex Adaptive Systems
Vast and Growing
Many
Few
VARI
ABL
ES TO
CO
NSI
DER
Presenter
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WENDY Explain framework: A way to capture what is going on over time; 2 axis: Variable and Uncertainty The variables to manage were limited. Degree of uncertainty was low. Focus on operations level innovation – how can we make more, for less, with fewer mistakes and so on Total Quality Mgmt and process re-engineering were key strategies for adapting to market changes and competition. These approaches to improvement are still at the foundation of day-to-day improvements at many organizations especially in large scale, low cost areas of execution. Traditional functional organizations prevailed.
Mid to late 90’s and into the first
decade of the 21st century, businesses
became more
complicated and leaders began to think
more holistically across the value chain, looking for
growth and efficiency.
Presenter
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WENDY In the 90’s and into the first decade of the 21st century, there are more variables to manage and higher degrees of uncertainty as new technologies, including the Internet as we know it, unleashed higher levels of creativity and information; CDs were first introduced in the 90s. By early 2000, cassettes made up only 4% of all music sold. In 1999, an 18 year old freshman figured out how to share music files over the internet – the big companies fought Napster to stop the sharing (they won the battle but not the war) In the last decade, we are downloading individual songs on our mobile devices, and of course this has extended to books, magazines and newspapers. Massive new markets for products, production capabilities and talent opened up full throttle in China, India and other emerging markets.
Low Moderate High and Epic
DEGREE OF UNCERTAINTY
Vast and Growing
Many
Few
VARI
ABL
ES TO
CO
NSI
DER
Complex Adaptive Systems
Clear
Operations Level Innovation “TQM”
Organization Innovation
“Transformation”
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WENDY With higher degrees of uncertainty and more variables to consider, Businesses became more complicated and leaders began to think more holistically across their businesses and how to create value, looking for growth as well as efficiency. “Business Transformation” became the strategy to redesign and reassemble organizations to stimulate growth across global markets. The focus was still inwards looking outwards, now with some degree of customization for population segments, and the organization still dictating what was made for whom Complicated matrix organization structures became the norm.
Clear and Complicated characterized by
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WENDY (Refer to Slide) In this clear and complicated world… Known factors coupled with a strong linear-thinking and orientation to problem solving. Organizations are Highly structured, slow-to-change. Where the customer is the recipient of products and services brought to market by the manufacturers and distributors Global markets were to be exploited Annual planning cycles made sense
The Windshield View
Looking Forward
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JON So now put yourself in the drivers seat and look down the road
Mobile Global
Our society has changed….we are:
Highly interconnected
Willing to share information
Independent
Technically capable
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JON Our society is changing. We are becoming more: Willing to share information Highly interconnected Technically capable Mobile Independent Global, with historical boundaries of time and distance evaporating.
Mass customization comes to the consumer experience.
The tectonic forces have shifted the ground underneath our feet.
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JON Think from Dell to Facebook The 90’s saw mass customization capabilities in product manufacturing, e.g., Dell Computer’s ability to customize your PC order over the phone, build it and ship it within 24 hours. We are now in the early stages of mass customization of the consumer experience.
A new era of rapid, market-led value creation
…think nature, evolution, mutation
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JON The study of Complex Adaptive Systems (CAS) suggests rapid adaptation occurs when central control gives way to decentralized innovation…think nature. The point-of-view is businesses, as entities in highly complex environments, will more successfully adapt if they enable a different kind of relationship with their agents for innovation (consumers and partners) – where value creation becomes not the domain of just the company but shared with the consumer. Early evidence suggests digital technology advances have set the stage for the new shared innovation-based relationship and resultant new types of organizations.
The intersection of digitally educated people and advanced technology has
created the opportunity for a unique experience with each consumer
…access to products and services
when, where and how they want it.
Presenter
Presentation Notes
JON Think Zuboff – Psychological Soveriegnty It is the intersection of digitally educated people and advanced technology that creates the opportunity for a unique experience with each consumer…access to products and services when, where and how they want it. More than attentive service, it allows the customer to have one hand on the steering wheel – a scary thought for organizations built for replication, linear acquisition processes and control so efficiencies could be gained through scale. This dynamic and unchartered relationship between the consumer and the company can be labeled Value Co-Creation. Value Co-Creation means innovation and growth will come not from just asking or anticipating consumer wants and needs, but by enabling consumers to more fully participate in the product or service creation process.
The Shifting Balance towards Value Co-Creation
Balance of Power
Market Enabled Innovation
“Value Co-Creation”
Low Moderate High and Epic
DEGREE OF UNCERTAINTY
Vast and Growing
Many
Few
VARI
ABL
ES TO
CO
NSI
DER
Clear
Operations Level
Innovation “TQM”
Organization Innovation
“Transformation”
Presenter
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JON The consumer is no longer the recipient of value but a participant in the Value Creation process. Enabled by the ubiquitous network and social media behaviors, the balance of power between businesses and their consumers is shifting. As One…a consumer approached for commerce through the digital channel is positioned for immediate access to greater information and choices shifting the balance of power. As Many…when consumers begin to create “communities” to procure, they may bypass current sales/distribution systems and negotiate in mass dramatically shifting the balance of power.
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WENDY Value Co-Creation represents a dramatic shift from….to….(see slide)
Common Interest Who
Needs An Insurance
Agent?
Medicine The Way It Should Be
Examples
Consumer Buying Power
New Product Development
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WENDY – Examples 1: Consumer Buying Power, 3: New Product Development JON – Examples 2, 4, 5
The Consequence of shift in these tectonic forces
…is a dramatic rethinking of
organizations and how they function
to create value and get work done.
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WENDY The examples we shared introduce a new fundamental truth: a dramatic…..
Rapidly forming networked “communities”
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WENDY What we are seeing is an emerging organizational trend away from: hierarchy, control and centralization towards flexibility and rapidly forming “communities” to create value outside the walls of the enterprise. (Wikipedia, Arab Spring, FarmBelt ) This does not mean anarchy – these communities follow norms and are guided by a shared purpose. Innovation is now at the edge, open and distributed. In other words, the stage is set for consumer markets to mutate more like nature than the highly structured industrial complex that emerged in the early 20th century.
Business leaders must learn to share control – “the steering wheel” – with consumers.
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WENDY The question is will companies fight for control (20th century model) or share control and enable consumer participation in the innovation/value creation process…will the boundaries of the enterprise become permeable or completely re-defined?
Where to Begin?
Do you have “Gen-Net™” leadership who think this way and can guide your
organization through this dramatic change?
Presenter
Presentation Notes
JON
Some Guiding Principles • Don’t fight it: embrace complexity, the network and the rapidly
developing consumer behaviors.
• Think of your organization structure as inclusive of the messy external network of person-to-person consumers and communities.
• Anticipate and reward a culture of exploration. You’ll be more effective at attracting and retaining Gen-Net leaders.
• Begin to shift your mindset about leadership from “top down” to “bottom up” to support the innovation on the edge of your organization.
• Quickly prepare for and start to take greater market risks than you are comfortable with because your business is likely at greater risk than you realize.