October 13, 2010

63) Netflix

危 wēi  danger

Great businesses continually improve, prototyping new offers and services before rolling them out to the relevant customer base.  But, success criteria for innovations are often vague and ‘success’ is therefore highly subjective, particularly when innovation teams only prototype to small groups of customers.  The alternative, rolling out to large numbers of customers immediately is too risky though?  And anyway, given how quickly markets change how could the team say with confidence that any change in performance was attributable to the change in strategy?

机 jī opportunity

In my previous post about Netflix I sang the praises of the company placing a top-level strategy summary in the public domain – you can see it here.  Slide 20 particularly caught my eye, a brief slide on customer satisfaction:

I love the idea of breaking customer bases into equal sized groups, allocating each to different employees or teams and then giving them free reign to attempt to improve their group’s experience.  I imagine that this enables more offers to be prototyped and creates a competition internally to deliver quantifiable results.  I also admire the size of these groups in this case – many companies would be tempted to limit the trial to a handful of customers at most, going with groups of 10,000 enables Netflix to really quantify the benefit and assess relative performance.

The approach establishes what would be called a ‘control set’ in a science experiment and encourages agreement in terms of what success metrics might be in advance.  In fact, my colleague Elizabeth said in a talk recently that she likes to approach piloting using the scientific method:

set a hypothesis -> agree variables -> agree metrics -> agree duration -> feedback and conclusions

That makes sense, and contrary to many people’s perceptions it doesn’t need to stifle creativity. After all, the development of new approaches to pilot and the spotting of interesting new patterns in any results depend on creativity.

How About…

  • Taking a scientific approach to piloting new offers?
  • Thinking how you might divide your business into comparable units for benchmarking?
  • Tasking teams with innovating the offer to different units, then rolling out the most effective new approaches?

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May 6, 2010

50) McKinsey

危 wēi  danger

In its 2009 report, the UK CIPD’s Employment Survey claims that the average cost of filling a job vacancy is between £4333 and £7750.  This is the average across all sectors and doesn’t even include legal or training costs.  For Management Consultancies this number must be far larger – the firms visit universities in the recruitment drive and often give signing on bonuses.  With this in mind surely McKinsey’s average employee stay of about 3 years is a fundamental floor to the business model?

机 jī opportunity

Far from it, McKinsey cleverly keeps its leavers close to the Firm, recognizing their potential value.  It delivers this through its alumni services – both formal events and informal networking. This dynamic network is widely understood to be a lasting benefit of a career with McKinsey, thereby improving its appeal as a recruiter. The backbone of the McKinsey network is the firm’s alumni directory which lists the details of 3,500 ex-McKinseyites and is more up-to-date than the alumni rosters at Princeton or Harvard.  The strategy of setting up its alumni to be potential future clients must be working – McKinsey has produced more CEOs than any other company and is referred to by Fortune magazine as “the best CEO launch pad”. And you can’t blame the Firm for not publicizing the fact that Enron’s Jeff Skilling was among those high-flying CEO alumni.

How About…

  • Keeping departing employees close: supporting them where possible and viewing them as potential ambassadors for your company?

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February 2, 2010

34) Mars

Mars Logo

危 wēi  danger

In 2000, Dan Michael, then R&D director for Mars‘ M&Ms brand, and his team had the idea to make customizable M&Ms printed with a word of the customer’s choosing.  The team had experimented and found a way of printing the text but when they took the idea to senior management it was met with some concern, mainly because no marketing plan or consumer feedback existed.  They may have also feared that allowing Michael and his team to pursue the opportunity would distract them from business as usual and the proposed direct sales approach might alienate Mars’ largest retailers.

机 jī opportunity

Unperturbed, Michael’s team of 12 entered the innovation into a recently launched Mars initiative called Pioneer Week.  The concept won and the team received a modest budget with specific targets attached – building a production line within 90 days and marketing the innovation to all of Mars’ 60,000 employees (bypassing many of Mars’ conventional procedures which would have slowed the process at best).  The potential became self-evident – the team received orders for 800 pounds of custom-printed white M&Ms on the first day (the only option offered initially).  The team also solicited feedback as to why purchases had been made and used the trial to experiment with pricing.  The initiative was subsequently rolled out through a small link on the M&Ms public website (with no additional marketing) with continued success (and learning by the team).  In 2006 the trial was formally launched as Mars Direct and it is estimated that shortly thereafter ‘sales surpassed $10m and continued to accelerate’.

How about…

  • Allowing teams to initially develop ideas in Skunkworks (a small group of people given a high degree of autonomy and unhampered by bureaucracy)?
  • Inviting teams to initially market a simple version of new products and services to your own employees or your partners’ employees to assess interest and learn?
  • Adopting a ‘discovery-driven’ approach to investigating new business ideas, minimizing investment and maximizing learning?

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Source: BusinessWeek article here

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