Menchies and other self serve frozen yogurt shops are evil. No one should have unlimited access to caramel and fudge. It is just wrong.

I am completely fascinated by the business model.  Self serve yogurt franchises are proliferating, and clearly provide a mechanism for selling more products at a significantly lower labor cost. In a world where products are easily reverse engineered and replicated, attention to service model innovation is critical.

There is a Red Mango yogurt location close to my home.  In the space neighboring the store, there is a sign that indicates the store is relocating next door and will be going to “self serve”.  It is clear that in this location, Red Mango is acknowledging their traditional service model is under attack by the self serve locations such as Swirly’s and Tutti Fruiti.

Throughout Southern California, Golden Spoon is one of the predominant regional chains with loyal raving fans flocking to their locations for their tasty yogurt.  But its suddenly dated service model is creating competitive disadvantage. Its product may be exceptional but will undoubtedly lose share to the service innovation of their competitors.

The fundamental question that must be answered by the entrepreneur is “what job needs to be done” to satisfy the customer?  Technology has been an enabler to all types of transformation.

The NFL has a new service called NFL Ticket Exchange.  The job to be done is to fill stadiums with ticket holders at the optimum revenue.  But the traditional model of selling season tickets was somewhat threatened by a bad economy, and spiraling ticket prices.  With many season tickets finding their way onto to Stubhub and other online outlets, the NFL had lost control of an aftermarket of ticket distribution, so they created a new platform in the form of Ticket Exchange.  This strategy is a form of vertical integration in that it captures margin downstream, while providing a lower cost alternative for tickets that will spur demand.

The broader point is that companies cannot become complacent about service delivery methods. In a world of new realities, think proactively about the job to be done, and how you can radically alter your service model.

Big Idea 1-Your Car as a Device

In a shocking role reversal, Honda and Toyota are both caught in reverse, and GM and Ford are suddenly surging.  Ford made $2.7 billion last year, as its stock rose 700% without a government bailout.

Perhaps even more shocking is the prospect of real innovation at Ford.  Fast Company referred to the venerable auto maker as “America’s most surprising consumer-electronics company.”[i]

CEO Alan Mulally has a rabbit up his sleeve in the form of a new generation of automobiles. These cars will change our paradigm, from connecting our PDA’s and iPods to our cars, to the car becoming a device itself. Imagine a car being a killer app!

The new marriage of steel and plastic will allow people to actually pay attention to driving their car while getting more functionality than we could have imagined. Sync-My-Ride (cool brand name if I ever heard one) allows you to sync your car to a PC. In 2011, several models will have elaborate touch screens that will allow you to customize the dashboard on your car to your preferences. You can even download your Ford settings onto a thumb drive and load it on another Ford (for example,  a rental car).  Ford may be becoming relevant again.

Big Idea 2-Integrated Internet

Another news item that caught my attention recently was Facebook’s recent announcement that could upset how we use the Internet. 25 year old Mark Zuckerberg and friends are attempting to make the Internet smart; having it anticipate how you want to use it based on your Facebook preferences on things such as friends, sports, hobbies and music.

In concept Facebook tools would be outwardly facing, interacting with other websites so they become a cloud of integrated websites.  Imagine signing on to your fantasy baseball site (you know who you are) and having your favorite Kings of Leon song streaming on Pandora behind it – automatically.

As was the case when ATM’s, email and social networking exploded on the scene, there will be all kinds of security concerns and late adopters but the opportunity to create a fresh online experience is likely to take storm.  Facebook is disruptive once again.

Big Idea 3-Cashless Society

One of the scenarios we project in the book (Intended Consequences) is the trend towards a cashless society. Federal Reserve Banks rarely handle cash or checks anymore; bank commerce is almost entirely electronic.  On the internet, PayPal offers a 3^rd party clearinghouse where money is moved safely from one party to the next.

While we have the ability to transact electronically using a credit card almost everywhere, paying for things can still be slow and arduous. The mechanics of an online transaction are still a barrier;  setting up a new account can feel at times like a root canal, especially when vendors expect you to enter all kinds of extraneous information about your first born and personal income.

In contrast, on iTunes one’s ability to download media is practically instantaneous, and that is what other websites should aspire to.  As new online technologies allow for safer transactions, our ability to instantly download media and pay through a 3^rd party will be a game changer.

Yelp just scares the crap out of me.  For those of you who are unfamiliar, Yelp is a service where you can rate anything from the local bicycle shop to your CPA.  From Zagat to Trip Advisor, satisfaction ratings on the internet are in vogue. On eBay, potential buyers have three criteria, item, price, and supplier rating.

Imagine the ramifications.  How long will it be before your product or service is rated on the Internet by consumers or professional buyers?  The trend speaks to a need to get ahead of the curve and acquire real time, unfiltered feedback from customers.

All clients tell me they listen to their customers but their approach varies dramatically. Many are reliant on salespeople to do the listening for them. During the downturn and a period of massive discounting, many salespeople have become more tactical and often lack the consultative selling skills required to diagnose and synthesize customer problems.  Having the salesperson as the sole lifeline to the customer is like having the fox in the hen house; it is not as if many salespeople will self report eroding customer relationships when they may be the cause or at least a contributor.

While much has been written about customer satisfaction, many of the most common approaches are impractical for the small and mid-market business.  Electronic surveys are impersonal and yield poor results.  Snail mail surveys (sometimes with a spif or prize) get poor response rates and feel so 90’s.

We often complete client satisfaction and perception audits for clients as a pre-curser for strategic planning.  By far, live phone surveys are the most effective method, as they provide instant, unfiltered feedback and the ability to ask follow-up questions that garner more specific commentary.

While live surveys are more expensive than the other types of survey tools, client satisfaction seems like an endeavor worthy of investment.  Ultimately, the real value of such surveys is the problems you discover and the responses to open ended questions which can be the source of innovation. We never advocate an “annual” survey because you could wait up to a year to uncover customer issues.

Of course client satisfaction is not the end game. It is customer loyalty that is nirvana and is much more difficult to measure. The book “The Ultimate Question” points out that there is one question that is the best predictor of loyalty and ultimately profitability. The question is “how likely are you to refer a friend or colleague” as referring a product or service meets a higher standard than just being satisfied with it.

Like many things, survey tools may be imperfect but querying customers on their attitudes about your company is always better than no feedback at all. “Hey, hey, hey, that’s what I say!”

Ten years ago organic foods represented 1.2% of foods sold in grocery stores. Organics were hot and going mainstream as soccer moms stuffed lunch boxes with the purist carrots and over-priced apple juice.  A decade later only 3.4% of grocery sales are organic, merely a blip on the radar. 

It is often difficult to predict if the latest and greatest is a fad or legitimate trend. Is the iPad merely an extension of the iPhone or is it a game changer? Certainly tech savvy early adopters are already scooping up the new device, but will the masses adapt to a new way of viewing media?

Our mantra in our firm, in my book and in this blog is that marketers must consider converging factors, and no more is that more true than in evaluating fads.  Within a complex socio-economic environment, changing quickly with the advent of technology, there can be immediate swings in demand of a given product or service.

The key to converging factors and understanding trends is the acquisition of current and relevant information.  The ability to understand trends, and convert the opportunities presented into competitive advantage is both art and part science.  Science is required in the accumulation of hard data, whether it be from public sources such as government statistics or through private sources such as market research or trade associations.

The art is focus on customer wants and needs in order to preempt the market with products, services or features that may not be offered or are framed differently. Often innovation is not presented in the formation of a new product but through the delivery system by which it is presented. The iPad, like the iPod before it is not delivering new media but is providing an improved gadget for accessing music, books and the Internet.

Often, the best way to define a new delivery system is to reverse engineer problems that customers have, and try to find new ways to solve them. This requires a significant intimacy where the vendor can gain a deep understanding of how the customer functions.

In the fashion industry, designers and buyers must accurately predict styles as far as a year in advance, and move quickly to capitalize on emerging styles. Whether your source of information tends to be closer to science or art, the successful marketer has their ear to the ground and is paying attention to all the inputs that determine fad or fashion.

We have all fallen victim to bad service in auto repair shops, retail stores, and restaurants. And then there are doctor’s offices, the land of inaccurate billing, mis-information, apathy and indifference. We consumers may end up with the last laugh, even before the particulars of healthcare reform unfold.

On the website, healthgrade.com, consumers have the opportunity to rate their physicians and the service provided by their offices.  As Zagat is for restaurants, and TripAdvisor to Travel, Yelp is becoming a go to destination for ratings on everything from bicycle shops to CPA’s.

It is not that I am fascinated by Yelp as much as the concept of Yelp. Businesses from construction contractors to service businesses should be both excited and petrified of the repercussions of being rated online. Customer satisfaction ratings on the Internet can be the impetus to competitive advantage or become an onerous wave of customer discontent that is difficult to reverse.

Feedback directly collected by the provider can be a source for innovation, and marketing fodder.  It is critical that every company be proactive about formally gathering customer feedback. If you fail to control the message about your company on the Internet, someone else will control it for you. Organizations should gather customer feedback regularly in order to:

- Gauge the quality of their service level, in the eyes of the customer

- Understand how customers perceive them relative to competitors

- Monitor changes in the marketplace that may lead to continuous improvement/innovation

- Understand customers’ changing wants and needs

 Companies are well advised to assign a marketing professional (internal or outsourced) to monitor postings on the Internet, from both institutional sources and customers. To preserve the optimum positioning, they should actively combat irresponsible or inaccurate postings.  

 As blogs and various Internet sources replace traditional media, perceptions about a product and services can be formed in a matter of hours. It is incumbent upon the marketer to seek positive relationships with customers and shape their online messaging to their strategic advantage.

Yogi Berra once said, “the future ain’t what it used to be”.

In a year of strategic uncertainty, our workplace culture has become an espresso crazed, frantic free-for-all, void of real planning. It is a remarkable irony that short-term thinking on the part of companies such as Bear Stearns, Goldman Sachs and General Motors brought about this economic malaise, which has only beset even more short-term thinking.

Conservatism has become pervasive, as many entrepreneurs have retreated to tactical approaches to managing their businesses. It is as if we are victim to a form of collective myopia, reacting to the news and adjusting budgets to make it to another day.

Survival may not be a very practical objective. If a company survives but alienates customers, vendors and employees along the way, there won’t be much of a business left with which to emerge from the trough. One can only cut costs for so long. It is time for businesses to start planning for the recovery:

Use planning as the catalyst for innovation.

Examples of innovation that occurred during recessionary times are well documented, from the birth of Microsoft to the development of the iPod. Strategic planning is not an optional exercise to be conducted only when business is robust. If you are committed to growth, retaining your best customers and acquiring new ones, the ability to establish long range targets, expand into new businesses, and improve internal processes should be explored on a continuous basis. The executives at Amazon, one of the world’s most dynamic companies, meet every week for three hours to discuss strategic issues.

Continuously improve your value proposition.

Such organizations are leaders in strategic thinking; making decisions based within a framework that supports something larger than the decision itself. In Amazon’s case, the decision to invest heavily in Kindle had enormous ramifications across the enterprise, as an attempt to take over a new industry in such a disruptive fashion requires significant resources.

For many companies, the opportunity to align behind a set of game changing events that can promote a new market position is opportune regardless of financial conditions. A value proposition is not a fixed state of being, but a fluid set of variables that change with the market and evolving customer needs.

Only manage a handful of initiatives.

At a time when resources are limited, organizations can only manage a few initiatives at a time. Select no more than 5 and focus the executive team’s attention on flawless execution.

 Build your team.

Organizations often utilize strategic planning as an opportunity to engage new contributors. Participation in a strategic meeting is often viewed as a reward for up and coming leaders and a coaching opportunity for those who don’t make the grade. Dwight Eisenhower said “plans are worthless, but planning is everything” meaning that it is not the documentation that is important, it is the learning that occurs in such meetings that can reposition organizations, reframe roles, and elevate performance. It is important to break down any team dysfunction at the onset if you want to have a productive planning meeting.

Tip the sacred cows.

Many an entrepreneur has lost their business because they were too stubborn to see the writing on the wall. It is human nature to hold on to our core beliefs. Psychologists refer to a phenomenon known as “confirmation bias” which is our instinct to seek out information that will confirm our existing beliefs instead of those that will contradict it.  Yet the greatest thinkers in history, such as Einstein, Newton and Galileo, spent most of their lives consumed with finding evidence that would disprove their own theories. Successful entrepreneurs surround themselves with people who are willing to challenge the assumptions about every product, service or process.

Be Proactive.

Many organizations intertwine strategic planning and business planning for the following calendar year.  It takes 90 days or more to unwind a business plan so the more proactive you are in your planning, the sooner you can begin to execute.

In an age where marketers compete for our limited attention span, few offers truly stand out. The disrupters are the outliers. Why is innovation so hard to come by?

The answer may be found in what philosophers refer to as “confirmation bias” or our tendency to seek out information that validates our opinions versus those that provide a counterargument. We defend our biases ruthlessly from any contradictory view. In politics, our views have become so polarized that many liberals will not even consider conservative points of view, and vice versa.

An illustration can be found in a metaphor provided by Nassim Nicholas Taleb in The Black Swan, his witty deluge into “The Impact of the Highly Improbable”:

“Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race, looking out for its best interests. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.”

Taleb points out that our body produces Dopamine which is proven to regulate the chemistry of the brain in such a way as to create patterns in our thinking which minimize randomness. We are predisposed to think of things in terms of recurring events, and it is alien for us to think of things that do not fit into a logical pattern. In other words, it is not just that we are resistant to change. It actually requires more energy for us to process new ideas. Thus innovation requires more effort than the status quo.

It also requires the willingness to fail. As Proctor and Gamble’s A.G. Lafley said, “You learn more from failure…but the key is to fail early, fail cheaply, and don’t make the same mistake twice.” The question that organizations should ask is not have we failed, but have we failed enough?