Category Archives: Outside In

Does Intel have the right culture for the future?

intel's_customer_culture

In a question asking him to summarize the Intel culture, outgoing CEO (in May  2013), Paul Otellini said:

“Egalitarian. Merit based. That came from Noyce. Anyone can speak in a meeting, but you must speak with data. That came from Moore. Take risks. Embrace innovation, but do it with discipline. That’s Grove. World-class manufacturing came from Barrett. I’ve added a marketing component.

The other thing unique to Intel, at least in Silicon Valley, is the mix of older and newer employees. Intel has more 20-year-plus veterans than any Silicon Valley company. I’ve been here 36 years. Yet the average age of our global workforce is 25. Tradition and innovation. We like both.”

Intel’s culture seems to do everything to drive facts and reasons ahead of position and formal authority. One of Intel’s values is something like “constructive confrontation”.

Among large technology companies, only Intel has mastered CEO succession multiple times. Founded in 1968, Intel has gone from founders Bob Noyce and Gordon Moore, who both served as CEOs, to Andy Grove, Craig Barrett and now Paul Otellini without losing its status as the world’s preeminent chip manufacturer. It has had some major tests of its culture.

In the mid-1980s Intel’s memory chip cash cow was being wiped out by Asian competitors and its future star, the microprocessor, was still building. Intel faced scandal in 1994 when it mishandled news about flaws in its Pentium chip. In 2006, the newest CEO, Otellini, had to lay off 10% of workers in what now can be seen as a prelude to the Great Recession.

In 2006, when Ortellini took the helm, he tossed out the old business model. Instead of remaining focused on PCs, he pushed Intel to play a key technological role in new  fields, including consumer electronics, wireless communications, and health care. And rather than just microprocessors, he wanted Intel to create all kinds of chips, as well as software, and then meld them together into what he called “platforms.” He went about reinventing Intel as PC growth began to slow.

In addition top to bottom reorganization, he made big changes in the way products are developed. While previously engineers worked on ever-faster chips and then let marketers try to sell them, there are now teams of people with a cross-section of skills. Chip engineers, software developers, marketers, and market specialists all work together to come up with compelling products. Otellini is convinced such collaboration leads to breakthrough innovations.

Otellini has strengthened Intel’s financial performance and maintained dominance of its industry. The challenge facing the new CEO will be to keep pace with the changing mobile, tablet and social media environment. Intel’s culture took a battering with the major staff cuts in 2006 and again substantial cuts in 2011.

Will it be resilient and adaptive enough with a new CEO to strengthen the future focused, customer oriented culture that was a focus of Otellini’s reign? Has it retained its innovative capabilities? Only time will tell.

4 ways Electronic Arts navigated major Tectonic Shifts impacting their Customers

tectonic_shifts_in_technology_and_customer_impacts

Many industries today are experiencing market and technology shifts in their marketplaces that are somewhat like the clashing of tectonic plates that cause earthquakes and tsunamis. Industries including publishing and printing, education, telecommunications, media, advertising, health and retail are all facing massive change. How does an organization navigate a techtonic shift?

Electronic Arts Labels (EA), the world’s leading developer and publisher of interactive entertainment  faced a techtonic shift in 2007 with the rapid change occurring from retail packaged goods products to new digital delivery platforms. The new CEO at that time, John Riccitello, presented his vision as a burning platform – you are in the middle of the ocean on an oil platform that is on fire. You either hold on and ride it down or you jump off and face the unknowns of a swirling ocean.

In his article titled “Getting into your customers’ heads”, Krish Krishnakanthan finds out what EA had to do to navigate this techtonic shift. To transform from a retail products business to a digital supplier using new platforms such as social networks, mobile phones and tablets.

The key success factors:

1)   Measuring and tracking customer usage of games, external gaming-publication reviews (critical review success is linked with sales performance). For that part of the business with direct sales to consumers, they use technology to measure customer interactions and the lifetime value of each customer.

2)   Changes in the competitive landscape with low entry barriers and the emergence of small game developers has required  EA to restructure its business to give decentralized profit and loss control to product line/brand managers to enable them to compete with specific identified competitors.

3)   Enhanced communication and collaboration between development teams and marketing teams to co-ordinate go-to-market strategies.

4)   Scanning the external environment through consumer blogs and social media to identify new shifts in consumer opinion, competitive plays, new technology impacts on customers and economic forces affecting the market. This has required a culture change by EA. One which centers their whole business around the customer. An adaptive, future focused customer culture has enabled EA to cross the chasm created by the techtonic shift they faced.

Staying on the “oil platform’ would have meant riding the business to the bottom – out of business. Is your industry facing a techtonic shift? If so, check where you stand on “customer culture”. Is it strong enough to be adaptive and resilient to the storm ahead?

Think outside the box and profit from your competition

Creative Competitive Strategies

An in-depth understanding of your competitors – their strategies, behavior, intent, how they make their money, how they view your company – is a competitive advantage that can help you increase your market share and profit.

A great story about deep competitor insight comes from Overseas Shipping Services (OSS) – an Australian moving company specializing in moving people’s household goods internationally.

This story comes from a time when a large part of their market still preferred to find information on moving services in newspapers.

For years OSS had run a small ad in the Saturday paper’s “travel” section, while their competition were advertising in the “moving” section. This was based on a unique insight that people who were relocating first organized their travel before considering a moving service. The ad brought in many enquiries, most of which were converted into business.

One day the team discovered to their horror a much larger competitor’s ad right next to the OSS ad.

They had to consider how to respond so they reached out to some connections. One of the team members had a friend in an advertising business  so she asked him for some ideas. He suggested simply increase in the size of the ad to match the competitor. He said “you are in with the big boys now you need to start spending more on advertising!” An advertising man suggesting OSS spends more on advertising, what a surprise!

Recognizing there probably was not a quick and easy answer, the team decided to step back and ask themselves the following questions:

What do we know about our competitors? How do they compete? What is our competitive advantage? Are we facing a tactical decision or this strategic? How do our customers’ buy? How would they view two alternatives presented side by side in the newspaper?

The advertising team set-up a cross-functional meeting attended by the CFO, sales, operations, pricing, advertising and the call center to get everyone to weigh in on these issues. Here is what they came up with:

1) How to compete: OSS can’t compete with their competitor’s budget – just to match them requires five times its current budget and this will raise its cost structure for this market segment. What’s more, it might force it to reconsider our pricing. Its knowledge of its competitor’s resources told them that they can spend much more on advertising and still hold their prices where they are.

2) Competitors’ advantage: If OSS matches its competitor’s ad size, it will double the size and will keep doing this if OSS keeps matching. This strategy is based on a traditional dominant competitive position. He competes by out-spending his competitors and relying on his brand name to get business.

3)  Customer behavior insight: OSS already knew more about customers than its competition. Another unique insight they had was that customers nearly always get at least two quotes.

4)  What to communicate: Now that OSS is in a directly competitive media situation it will need to change its message to ‘get your second quote from OSS’.

5) How much to spend: Since its competitor was now doing the advertising for this market segment OSS could reduce the size of its ad just a little and save money.

The OSS team were tuned into competitors and customers. They could all agree on the comments being made because of strong customer and competitive disciplines embedded in the OSS culture. They all had a clear understanding of the customer’s buying behavior as well as their competitors’ current strategies and how to effectively compete with much larger organizations. They were basing a decision on clear customer and competitor insights.

The decision was made quickly and the call center and field sales team developed a process to obtain ongoing customer and competitive intelligence relevant to this market segment to monitor the effect of this decision. The results were outstanding. OSS received more enquiries from this advertising than before and converted about 80% of them into new clients with a positive trend in sales growth and profit margins.

This example shows how a small tactical decision can have a big impact on the profit and growth of a business. But more, it shows how a team that is tuned into customers and competitors as the way in which they make decisions can make a good decision quickly.

Does your team operate that way? Can they make decisions that are right for the customer and the business, in the context of your competitive position, quickly and effectively? Do you have that kind of creative, collaborative culture?

How you can create killer customer insights

Customer Insights

Customer insight comes from a deep understanding of customers’ needs and drivers of customer behavior at a level well beyond what customers themselves can explain. These needs are understood from what customers tell us, but more deeply from what we observe customers doing and the frustrations they have in using particular products, services and companies.

Richard Branson, when trying to identify industries to enter a new Virgin service, asks the brainstorming question – “What are 10 things that nobody would say about this industry?” He and his team then prioritize those ideas that would create value for customers and profits for virgin. The next step is decide if a Virgin service can be designed to deliver some of these unspoken values in that industry. It is a great example of outside in thinking, starting with the customer’s pain points or needs and working backwards.

At Mercedes-Benz, rather than asking customers “What do you think of Mercedes-Benz?” a standard question that gets the standard answers about high quality, luxury and so on, they reverse the question –

“What do you think Mercedes-Benz thinks of you?”

This unique twist on a common question results in much deeper insights. Many customers responded initially by saying thing like “ you think we are made of money … that we have all the time in the world”. These responses  led the company to find ways of making its car servicing much more convenient for customers and to build in servicing costs to the initial purchase or lease arrangement.

In both cases these are questions designed to get customer insight that goes beyond what customers will normally tell us.

Are you asking the right questions?

The only 2 sources of competitive advantage

Creating a Competitive Advantage

Jack Welch, the former CEO of GE, suggested there were only two sources of competitive advantage for businesses. Given his track record at GE – taking its value from $14bn to 410bn when he left in 2004 – he knows a thing or two about competitive advantage.

Competitive Advantage #1

“Learn more about your customers faster than the competition.”

What do you know about customers that your competitors don’t?

Competitive Advantage #2

“Turn what you learn about customers into action faster than the competition.”

How do you collect customer knowledge and provide it to the people that can take action?

Companies that master these two sources of competitive advantage stay ahead of the competition, they are the market leaders, they have customer cultures.

Our research shows they outperform their competitors on the metrics that matter – customer satisfaction, innovation, new product success and sales revenue growth.

How does your company perform?

What is the purpose of business?

What's the purpose of business?

Ask anyone this question and you will get a variety of answers, the most common being to make a profit. While certainly to make a profit is a requirement I don’t believe it is a business’s reason for being.

Most businesses start out with a problem that needs solving. This problem is one usually experienced by many others. The business develops services and products to solve this problem better than any alternative and WHAMO it has something that people will pay for!

Unfortunately what happens over time is the focus of the business becomes the profit it generates rather than the problems it solves for customers. This often results in short term profit maximization at the expense of customers rather than for their benefit.

The outcome of this short term profit focus often results in toxic cultures where internal groups work against one another rather than for the benefit of the entire organization. The original purpose of the business is lost and employees become disconnected.

By realigning the business with its customers and rallying around a single focus, maximizing outcomes for customers, businesses can find their way again and produce even larger profits.

Remember profit is the RESULT of creating the best possible outcomes for your customers not the other way around.

If you want to create this type of culture in your company, take the Market Responsiveness Index and find out where you stand today.

Strategy from the Outside In

Here at MarketCulture we are big fans of the work of Professor George Day. He has written a number of books over the years around the idea of “Market-Driven” organizations and their ability to drive better performance outcomes.

Below is an overview of a webcast I will be hosting with him on November 30th:

What do Toyota, Barbie and Dell have in common? Each succumbed to inside-out thinking and lost their market leadership. They lost sight of the core purpose of a business: to create and keep customers at a profit.
This webcast offers an antidote to this self-defeating mind-set with a proven outside-in approach to strategy. Winning strategies are viewed through a customer value lens, and illuminated by deep market insights.

WHEN: Tuesday November 30, 2010 – 1 PM PST
Learn More and Register