Tag Archives: competitive advantage

The New Competitive Advantage

We are living in an era of overabundance. Consumers have more choices than ever. To survive, companies have switched from product-centric to customer-centric.

Nowadays, customer experience is the biggest competitive leverage a business could use to win the market. I am a big believer in the customer-centric approach. Companies that put customers at the center of their strategy are winners at this new era. Just think about why Google beats Yahoo in the search engine, why Apple can sell a smartphone twice the average market price or why Uber has taken over the taxi market.

A few months ago, I was invited by Anand Chopra-McGowan of General Assembly to give a talk at Telefonica. The topic was about “Frictionless Customer Experience” (FCX). It was the first time I heard about that term. However, FCX instantly captures my attention, because of the natural fit with what I am trying to do with Landbot.io.

The simplest definition I would give about FCX is:

A mindset of a business that pursues continuously the right product to customers at the right moment and in the right channel.

The three key concepts that define FCX are product, moment and channel. So lets take a close look at each one.

Right product

So what is the “right” product? The mission of every business is to provide a product that can solve a problem and satisfy customer’s need. (By “product,” I mean anything material or digital goods that you can packetize with a price and some specifications: A software platform or consulting service both can be considered as a product.)

As human beings, we are easily affected by our bias of what’s best for clients.

There is a study by Stanford where a group of students was asked to draw a capital letter “E” on their forehead. Below, you can see the result:

Different ways to write “E”

It turns out that we can draw this E in one of two ways: one self-focused “E,” like how you are seeing it as you draw it, and another “E” from someone else’s perspective. In this case, more than 90% of the people drew a self-focused “E.”

That is what happens most the time when we are designing our product. To provide the right product, we need a clear understanding of our customers: Who are they? What are their pains? What do they usually do?

See also: Why Customer Experience Is Key  

Only when we truly comprehend the context of our customers can we design, build and ultimately deliver a product that best fits with their need. A handy tool that can help us understand our customer is the Customer Empathy Map. It’s a collaborative tool we can use to gain a deeper insight into their clients. Below is an example. More information is here

To fill out all the info in the canvas, you can do lots of online research, but the most efficient way would be doing customers interviews. Only by getting out of the building and talking face to face with potential customers can you get all the data needed to understand them.

An excellent example of this is how Snapchat designed its video sharing feature. Before, the videos you saw on the mobile were always in landscape mode. However, Snapchat realized that the natural position for people to use their phone is in the vertical position, so the company designed the whole user experience around vertical videos, which turns out to be a huge success. Now, many camera-related applications have followed this new design paradigm.

Right moment

Once we have built the right product, we have to deliver it to the customer at the right moment. When is that?

Conventional wisdom would say we should provide the product whenever our customers need it most. Therefore, the job of marketers has always been building strong connections between the desire and the product. Then the business has just to be there for customers to consume the product. That’s basically how we have been running businesses in the 20 centuries. When you are hungry, you think of McDonald’s, or, when youre thirsty, Coca Cola may be the first that comes to your mind.

However, with the increasing competition in today’s market, the old approach is no longer enough. Recent research by Microsoft shows that human attention span has fallen from 12 seconds to 8 seconds, which is shorter than a goldfish!

If everyone is competing to get the attention of consumers, how can you stand out and win? One possible way is to anticipate the users’ needs even before they realize it. To offer FCX, we have to bring our customer communication to another level. We need to think deeply about our customer journey and always be one step ahead to help the client getting the product.

As technology advances, many companies start using big data and machine learning to predict user behaviors. This kind of prediction allows companies to take actions either to prevent undesirable behavior (customer churn) or to provide incentives for good behavior (purchase intention).

A good example, in this case, would be Pepephonea Spanish mobile virtual network operator (MVNO). It’s known mainly for great customer service and user friendliness.

There was one time when Pepephone suffered a major outrage of its network system late at night. The incident was solved quickly; many customers weren’t even aware of it. However, unlike other telco companies would do, Pepephone called all the clients who might be affected. The company offered a discount to these customers as compensation for the outage, regardless of whether they complained. Actions like this demonstrate how Pepephone has always put their customer in the first place, which in turn helped the company to become No. 1 profitability and customer loyalty in the industry.

Right channel

If we did a great job with the previous two points, we should have a clear understanding of what product we should build and when to deliver it to customers. The last but not least thing we have to take into account is the way (channel) we use to interact with customers.
“Be where your customers are” has been the first rule of success for every business. History told us that each time a new “channel” emerges, a whole new market could build around it. Those companies that know how to take full advantage of the new medium become winners at a new market. Think about what Microsoft did with the personal computer, Apple the smartphone, Uber with mobile applications, etc.

So what channel should you use? To choose the best channel, we need to keep in mind two important factors:

  • Target: is your customer using this channel? Think about which kind of user segment you will get using the channel. It doesn’t make much sense for an enterprise B2B company to work on Snapchat because it won’t attract the correct kind of user.
  • Saturation: Most channels tend to reach a saturation point after which it will be tough for new players coming in. Example: It will be quite difficult to start a new mobile app company right now due to the market share of some big corporations. If you look at the ranking of top 10 apps, most of them are from companies like Facebook, Google and Snapchat.
  • Openness: you should look for the flexibility and the scalability you can have with a particular channel. Does it offer tools for third-party developers like APIs? Analyze possible risks of being cannibalized by native solutions from the channel. You don’t want to experience what happened to Meerkat when Twitter banned it from the social network.

See also: How the Customer Experience Is Shifting  

A fascinating case study is Grammarly, the best grammar checking tool on the planet. My friend Hiten Shah wrote a few days ago an in-deep review of how Grammarly grew into millions of users. One key point in the strategy was that the company had designed the product to be where customers are. Grammarly built plugins for Microsoft Office and later as Chrome extensions so people can use it where they need the tool most: when writing a post, filling job forms, editing text documents, etc.

A screenshot of a user editing his facebook post with Grammerly

I hope these brief thoughts about FCX could help you design a better product, delivering it to the customer when and where it’s needed.

Do you have any thoughts or examples about FCX? Let me know in the comment section. If you enjoy this article and would like to read more about FCX you can support me by giving some claps ? (up to 50 would take less than one minute).

4 Tips for Creating a Culture of Action

More than a decade of creating and leading insight teams has taught me that two aspects of culture are critical for customer insight teams to make a real difference to the wider business. One is collaboration between the different technical disciplines (to deliver holistic customer insights). The other is action-orientation, galvanizing the team behind a vision of driving change in the real world. This goes beyond delivery of technical analysis or Powerpoint, to focus on the decision and action needed to deliver commercial results and improved experiences as judged by your customers.

As with most cultural challenges, this one takes time, determination and consistency in leadership. Mostly through getting it wrong first, which seems to be how I’ve learned most of my leadership lessons, I have discovered a few tips that help embed this action-oriented culture. None is a panacea, and each needs to be practiced consistently and equitably, so they become assumed and just embedded in the “the way we do things around here.”

Anyway, enough soap-boxing from me: here are those four tips from the trenches for building a culture of action:

1. Filter out requests that won’t drive action.

The most sensible place to start with culture change is at the start of new work processes. It’s important to train and support your analysts in challenging new requests for work and, importantly, using incisive questioning to drill down to the real need. By focusing on what the internal stakeholder really needs, not just what he wants, it should be possible to uncover the real motivation. An analyst should make clear that the reason for this questioning is two-fold: (a) to better understand the real need so as to identify the most appropriate solution (across a number of potential technical approaches) or identify that existing work could meet that need; (b) to check what action will be taken as a result of answering the question. The latter is what is critical to this culture change. If such questioning reveals that it’s really just of academic interest to another leader and that there is no commitment to take action on the results, then you should back your analyst in declining. Customer insight work only adds value if it is acted upon, and you cannot afford for costly technical resource to be tied up satisfying someone else’s intellectual curiosity or desire to appear smart.

2. All output must include recommendations.

Once the technical work has been completed, the important work of writing up the results and telling a compelling story to engage the business begins. Any customer insight leader should make clear to the team that this output (often in PowerPoint) must include clear recommendations for action. Wherever possible, this should include decisions or actions that the business can take promptly, even if they are only interim steps before a final solution. Even if the insight work has simply identified the need for more data or further work, that must be drawn out as a clear recommendation, alongside any investment or change needed in the wider business to avoid being in this situation again. Consistently requiring clear recommendations that force the business to take decisions, including sending work back to analysts as unacceptable, will drive change.

3. Refocus your progress updates on action taken.

Regular update meetings or calls are a feature of most insight teams. Depending on your organizational culture and personal management style, you may do these weekly, fortnightly or monthly and may favor “morning prayers,” mid-day meeting or end-of-the-day “wrap ups.” However you do it, as a leader what you choose to focus on in these meetings often conveys more in terms of culture than your words. Requiring updates to be structured in terms of the action they are aimed to drive (i.e. improvement in commercial metric or improvement in customer experience scores) and protecting time to check in on progress with the required business decisions and actions needed to achieve these, will speak volumes to your managers and team. It is key to make clear that, in assessing everyone’s performance, you want the acid test to be what change they have driven in the “real world,” not just the efficiency of the process following or delivery of great-looking slides. This does raise the bar and require your team to influence stakeholders in other teams, attend key meetings and even “walk the floor” — but getting out there is great for showing to the wider business and your team that you care about the difference being made.

4. Communicate to the top table with final outcomes.

I’ve shared previously some tips for influencing once in the boardroom or executive committee. A key part of engaging these directors is communicating in terms of what matters to them. Here, leveraging the regular updates you receive in terms of action being taken and communicating in terms of the outcomes being driven (improved incremental income/profit or improved net promoter score (NPS), et al.) can make a huge difference to how customer insight is perceived. I have seen many a director over the years turn from skepticism to passionate support once she experienced that the customer insight leader doesn’t just want to bore with jargon but rather is actively engaged with how insight is improving the key commercial numbers and ensuring better customer experience. Coupled with visible cooperation with marketing and operations, to ensure that the insight “baton” is safely passed to those teams owning taking action and that you continue to run with them to ensure things work in practice, can build positive impressions that deliver support in the boardroom .

I hope those tips help. None is rocket science and I’m sure only serve as a reminder of best practices you know already, but I hope that’s a good thing, too.

As a final comment, just let me say that an orientation toward action also has benefits for your customer insight team members. Almost every analyst/researcher that I’ve employed over the years wants to make a difference. They want all those hours in the office to count for something — to result in an improvement they are proud of. So, although it can seem like more work for them to start with, I have seen delivering the above culture also be welcomed by a team who start to sit up straighter and believe in themselves more. The sense of pride they experience in being a key part of your business and not just being good at what they do but delivering insights that really matter, is a huge benefit. In these days of so many businesses struggling to recruit and retain analytical talent, the difference can also be a real source of competitive advantage.

In fact, working on your customer insight team culture could be a far better investment than the latest shiny software or more external data. It might just be your only sustainable competitive advantage in the coming talent wars.

Tigers, Pampers and Competitive Advantage

I am intrigued by the continuing trend of pursuing competitive advantage through early adoption of analytics, and the concept of “first mover advantage,” but was taken aback by a contrary view expressed at a recent round table on compliance and risk. There, it was suggested that, because of uncertainty about the requirements of insurance regulators, it might be better to wait before committing time, money and resources.

The participants talked of “last mover advantage,” and in their particular case perhaps they have a point. I wondered where else last mover advantage had been used and to what effect, and what the implication is in the insurance sector. Last mover advantage is a tried and tested strategy with our old friends, the retail sector. Own-label branding often relies on branded suppliers to invest in marketing to establish a new product, before retailers enter the market with a lower-priced version. It was suggested at the round table that “first mover advantage” is a myth. Chux was cited as an example–it entered the market ahead of Pampers but lost out.

Personally, I don’t buy into that idea. Effective innovation is no longer just about being the first to have a good idea, but being able to quickly execute on the idea in a sustainable way that meets the customer’s needs.

There's no doubt that innovation is speeding up. IHS Consulting cites a study showing that, of 46 major innovations in the 20th century, the average timespan between introduction and follow-on declined by 90%, from 33 years to 3.4 years, and that was in the pre-digital age. What does innovation look like at the speed of WiFi?

In a rapidly growing global marketplace, speed to market remains critical for insurance innovators and can mean the difference between success and failure of a new venture. Analytical accelerators can only increase that speed and provide greater certainty of a successful outcome. Incremental improvement that continuously differentiates, including customer and staff feedback obtained through social media analytics, allows insurers to keep ahead of their competition.

How insurers obtain and keep competitive advantage remains critical, and innovation is clearly a part of this. But I wonder, what is more important: the quality of the innovation, or the quality of the competition?

I am reminded of an old joke, which goes something like this:

Two hikers in the jungle came around the bend to find an enormous tiger up the trail. The tiger spies them and begins running toward them at a full speed, licking its lips. One hiker drops his backpack, sits down, throws off his boots and starts lacing up a pair of running shoes.

The other hiker says: “What are you doing? You’ll never outrun that tiger!”

The first hiker replies: “I don’t have to outrun the tiger. I only have to outrun you.”

Analytics at the Next Level: Transformation Is in Sight

Although insurance companies are embracing analytics in many forms to a much higher degree than other businesses, adoption by the insurance industry is still only in its adolescent stage. Deployment is broad but inconsistent. The use of analytics may be about to mature considerably, though, based on a recent series of mergers and acquisitions.

Currently, while a majority of large carriers use predictive modeling in one of more lines of business, and mostly in personal lines auto, a smaller percentage use it in their commercial auto and property units. Insurers recognize predictive analytics as a critical tool for improving top-line growth and profitability while managing risk and improving operational efficiency. Insurers believe predictive analytics can create competitive advantage and increase market share.

Fueling even greater excitement – and soon to be driving transformational innovation – is the recent surge of M&A activity by both new and nontraditional players, which have combined risk management and sophisticated analytics expertise with robust and diverse industry database services. The list of recent deals includes:

  • CoreLogic’s 2014 purchase of catastrophe modeling firm Eqecat, following its 2013 acquisition of property data provider Marshall & Swift/Boeckh; a significant minority interest in Symbility, provider of cloud-based and smartphone/tablet-enabled property claims technology for the property and casualty insurance industry; and the credit and flood services units of DataQuick.
  • Statutory and public data provider SNL Insurance’s 2014 purchase of business intelligence and analytics firm iPartners, which serves P&C and life companies.
  • Verisk Analytics’ 2014 acquisition of EagleView Technology, a digital aerial property imaging and measurement solution.
  • LexisNexis Risk Solutions’ 2013 acquisition of Mapflow, a geographic risk assessment technology company with solutions that complement the data, advanced analytics, supercomputing platform and linking capabilities offered by LexisNexis.

Other 2013/2014 transactions that have broad implications for the insurance analytics and information technology ecosystem include:

  • Guidewire Software, a provider of core management system software and related products for property and casualty insurers, acquired Millbrook, a provider of data management and business intelligence and analytic solutions for P&C insurers.
  • IHS, a global leader in critical information and analytics, acquired automotive information database provider R.L. Polk, which owns the vehicle history report provider Carfax. 
  • FICO, a leading provider of analytics and decision management technology, acquired Infoglide Software, a provider of entity resolution and social network analysis solutions used primarily to improve fraud detection, security and compliance.
  • CCC Information Services, a database, software, analytics and solutions provider to the auto insurance claims and collision repair markets, acquired Auto Injury Solutions, a provider of auto injury medical review solutions. This transaction follows CCC’s acquisition of Injury Sciences, which provides insurance carriers with scientifically based analytic tools to help identify fraudulent and exaggerated injury claims associated with automobile accidents.
  • Mitchell International, a provider of technology, connectivity and information solutions to the P&C claims and collision repair industries, plans to acquire Fairpay Solutions, which provides workers’ compensation, liability and auto-cost-containment and payment-integrity services. Fairpay will expand Mitchell’s solution suite of bill review and out-of-network negotiation services and complements its acquisition of National Health Quest in 2012.

Based on these acquisitions and the other trends driving the use of analytics, it will be increasingly possible to:

  • Integrate cloud services, M2M, data mining and analytics to create the ultimate insurance enterprise platform.
  • Identify profitable customers, measure satisfaction and loyalty and drive cross/up-sell programs.
  • Capitalize on emerging technologies to improve pool optimization, create dynamic pricing models and reduce loss and claims payout.
  • Encourage “management by analytics” to overcome departmental or product-specific views of customers, update legacy systems and reduce operating spending over the enterprise.
  • Explore external data sources to better understand customer risk, pricing, attrition and opportunities for exploring emerging markets.                       

As the industry is beginning to understand, the breadth of proven analytics applications and the seemingly unlimited potential to identify even more, coupled with related M&A market activity that will drive transformational innovation, indicates that the growing interest in analytics will be well-rewarded. Those that are paying the most attention will become market leaders.

Stephen will be Chairing Analytics for Insurance USA, Chicago, March 19-20, 2014.