Sunday, December 11, 2011

Competitive advantage - defining the sweetspot to complement your strategy

In strategy creation, there are two schools that bring benefits to strategy approach: planning and position school. The planning school is more traditional, providing a clear framework, tools and process for the strategy creation. The planning view includes a deliberate long term plan, carried out by top management. According to Kimmo Suominen from Perfecto, the position school for strategy creation is focusing on the analytics – how an organization positions itself to its environment with a most profitable way and thus finds a competitive advantage.

If you compare the two schools of planning and position, the planning school, through its formalization of the strategy, has traditionally a more visible role whereas position, through the analysis part, has not yet evolved to a systematic part of the strategy creation process.

Companies through their strategy creation approaches typically have defined vision, mission and values, but as Collis and Rukstad (HBR, 2008) point out, there are typically so many elements that people get confused to what is essential and what drives the implementation really forward.
In addition to the typical definitions, what would help companies is a clear definition of the competitive advantage. According to Collis and Rukstad, “your competitive advantage is the essence of your strategy: what your business will do differently from or better than others defines the all-important means by which you will achieve your stated objective. That advantage has complementary external and internal components: a value proposition that explains why the targeted customers should buy your product and a description of how internal activities must be aligned that only your firm can deliver that value proposition.” Therefore, clarifying the strategy in described form, in addition to the value and vision statements, would clarify the direction better for the employees and help set correct shorter term objectives.

What companies could do is use eg The Strategic Sweet Spot model in Collis and Rukstad (2008) ie finding the sweet spot that aligns the firm´s capabilities with customer needs in a way that competitors cannot match given the changing external context – factors such as technology, industry demographics and regulation.

Summarizing the competitive advantage would bring a welcome addition to the strategy elements, including a) objectives, ie ends of the strategy, b) scope, the domain of it and c) advantage, the means of achieving the end.

Sunday, November 20, 2011

Services value creation – the moment of truth

Jayawardhena (Journal of Business and Industrial Marketing, 25/5, 2010) in his study states that from the customer point of view, the most immediate evidence of service quality occurs in the service encounter. Therefore, this customer interaction with the firm is called the “moment of truth”.
Customers base their evaluations on their perceptions of the service encounter. Based on above, value creation of a business-to-business service concept should be defined as customer interaction during the service process. Next to standard services, value adding services should bring additional benefits to the customers´ business. The value is created through the implementation of the service process. Therefore it could be stated that customers´ ”moment of truth” happens during planning and implementation of the service creation process and analyzing its results, leading to improved business efficiency.

The implementation of a new service concept requires analyzing the customers´ business operations, identifying improvement areas and planning a solution that is tailor made for customer needs.
The most successful service organizations understand that the purpose of any business is to create value for customers, employees, and investors, and that the interests of these three groups are inextricably linked. Therefore, sustainable value cannot be created for one group unless it is created for all of them. The first focus should be on creating value for the customer, but this cannot be achieved unless the right employees are selected, developed, and rewarded, and unless investors receive consistently attractive returns (Paul O´Malley, 1998).

What O`Malley is suggesting is extremely relevant for service organizations since customers´ value creation does not take place unless the organization is internally geared towards the correct service level implementation and the correct mindset. An integral part of the value creation is the skills, knowledge and mindset of the personnel.

Saturday, October 8, 2011

Top service brands in Finland

The Finnish marketing and advertising magazine, Markkinointi & Mainonta published a list of most appreciated brands in Finland. The magazine highlighted the Finns now liking even more Finnish brands than before. The only foreign brand in top 10 was Google.

The respondents evaluated their appreciation, usage and awareness on brands and if they would recommend the brand to their peers. The study did not tell how many people participated in the survey.

Some interesting findings. Anni Helena and Riitan Herkku in top 200. These brands were higher in the list than Helsingin Sanomat and R-Kioski. I guess a national study influences a Helsinki area driven brand. Stockmann, the Finnish shopping flagship, in place 133 after Aino ice cream, Mustapekka cheese and Kivikylän kotipalvaamo? Even if Stockmann is present only in a number of cities, where and how do you actually find and see Kivikylän kotipalvaamo?

But what about service brands? As said, Google was the only foreign brand in top 10 - and the only service brand in top 10. The first Finnish service brand in place 14 is S-Etukortti. Most likely in most Finns´pocket. But that the service benefit is so much appreciated even after S-ryhmä stopped sending the annual bonus coupons, which I personally found the core benefit for my S-shopping behaviour?

The other kinds of service brands in top 100 were bookstores, banks (after all the discussion on banking services, one bank has managed to differentiate from others), radio and tv channels by YLE and travel brands Finnair and Aurinkomatkat.

Compared to the study made 10 years ago, biggest changes in service brands positions were first of all the drop by Finnair - then in position 8. Finnair (and Helsinki airport), having gotten all the prestigiuous service awards, has unfortunately been impacted by continuous problems in package handling and strikes by its own employees and partnering companies. Another loser is Silja Line, whose image worsened within the merger to Tallink and the lively management incidents. The bookstores still score high but Stockmann and Sokos fall behind.

The real big winners in the competition are symbols representing a new era: Finnishness, quality and ecology in general. Brands ranked in Top 30: Joutsenlippu, Joutsenmerkki, Avainlippu, Luomu.

Would this trend indicate that the Finnish consumption behaviour is moving towards specialized goods and services which clearly promote their company values and sustainability? Are service brands able to provide such an experience towards its customers? Matkahuolto, VR, Finnair, travel agencies, media companies, new emerging service brands that provide a unique Finnish, high quality, sustainable experience? Following this, I expect that the number of service brands on the list in 2021 has doubled.

Sunday, September 25, 2011

Business relationships in service settings

Bo Edvardsson, Maria Holmlund, Tore Strandvik (Initiation of business relationships in service dominant settings, Industrial Marketing Management 37, 2008) have looked into conceptualization of a relationship initiation process in service organizations.

The key question of the authors was what it is about relationships that are crucial for business growth; how can companies initiate new relationships or transform current relationships in a service organization. Or when and why does a relationship end?

The authors were looking into manufacturing companies, operating in highly competitive enviornments, transforming their business from product based offering to a service business. The core success factor in this setting is to understand how to manage and restructure customer relationships and co-creation in order to provide a successful change and transformation.

Edvardsson, Holmlund and Strandvik´s core concept for understanding relationships was explained through a new model on relationship initiation process, which suggests “statuses” with increasing likelihood of leading to a business agreement. The transition from one status to another may lead to a business relationship eg through an agreement. Relationship initiation requires and involves a number of activities and the dynamics of the process may be to move between positions either forward or backward.

What for me was one of the key thoughts was the authors´ view on customers working through projects rather than a process and how similar the way of working is between professional b-to-b companies and transforming manufacturing companies. According to the authors the earlier lifecycle models seem less adequate. If talking about a customer lifecycle and providing lifecycle value, have b-to-b companies created agile enough environments to work with customer from one status to another?

Is lifecycle management too broad term for increased value for customers? If companies split lifecycle process to relevant and detailed entities - from customer perspective - does that differentiate them better from competition? Moving towards a project based service model seems to be the key success factor, after identifying the core service levels and service experience models. The customer moves from one status to another. Service organizations cannot rely on traditional lifecycle process anymore but rather need to integrate services between customer statuses to provide project type services based on customer needs.

Tuesday, September 20, 2011

How crucial is timing for service launches?

The CEO of the Finnish national railways VR, Mikael Aro, was being interviewed on radio - and TV - for the various problems the company has been facing - and causing - lately. It was discussed how VR has become a joke among its customers using trains for daily transportation.

VR´s problems do not seem to disappear. The past two winters, with record amount of snow, caused a multitude of delays. Problems in manning the trains has been another cause for delays or even cancellations. The problems in the new ticketing logic and system is yet another episode nobody really wanted to face. According to Mikael Aro, customers cannot be blamed for unsatisfaction. Who would like to have an unpredictable service on a daily basis, especially when you depend on the train schedules for getting to work or school. And do you really want to face a problem when trying to purchase a simple thing - ticket.

VR being a service organization made me think of two things: what the right moment is for introducing new services, and if there are any differences in introducing services in a monopoly vs operating in a competitive environment.

Timing. It goes without saying that you need to fix the existing problems. But when and how do you take things forward with new service launches? In order to develop and provide a better service experience, companies need to test alternatives in widening and improving the portfolio. But would you not introduce new services gradually to maintain the core experience, supporting your brand. I heard VR had tested the new ticketing system for 6 months. Maybe it was still not enough. Maybe they did not test different customer groups. Different technical alternatives. Who knows. However, the core problem for VR has been availability of the service ie trains not moving when they should. Would it not make sense to fix the availability problem, improve schedules to the promised service level, have one "good" winter and only then go for a next level of changes ie the new ticketing service? Launching a service concept when the customer base is already unsatisfied must be the most challenging timing.

Monopoly. I don´t see any differences how a service introduction would differ for a monopoly. In case of VR, it may rule the national railways but it does not rule transportation. On TV there was a comparison of a flight vs train ticket from Helsinki to Oulu. A flight ticket was comparably much better choice. If you fail, even a monopoly has to face consequences: increased costs, impact to personnel, customers looking for alternatives or even stopping use of the service.

My question is, could VR learn something from another state owned company, Alko? Alko has successfully provided new service concepts to its customers and has most likely one of the best service experiences in the country. Is there a logic that Alko is using when introducing new service concepts and how do they test them among their customers to ensure success of implementation? It is of course different selling wine than moving people 1200km to another location in a heavy snowstorm. But both companies share something in common: a few million Finnish customers who need them and have few alternatives. And don´t we want both companies to do a good job.

Saturday, July 9, 2011

Projectizing service quality

"There are no support functions longer."
In a service company - everything is important. I listened to Jesus Belle, our Professor for Service quality management in Haaga-Helia and thought this is bold - and I comply. According to Belle, there are no longer "sales or marketing kingdoms" with everything else as "support functions". In a service organization, everybody and every organization needs to contribute to final customer experience.

Responsibilities must be clear to convert company knowledge into a seamless service experience. Modern budgetting should no longer allocate budgets to functions but rather projects with development objectives across functions. Mr Belle emphasized projectization within any (service) organization. Budgets should be allocated to projects which enforce collaboration internally and strive at (good) customer service.

Such a set-up requires a different service process also internally. Service units require request to deliver.

How is this done in practice? Coverting a support unit to an internal service unit requires converting objectives to projects. For example:
* list your services
* plan them as projects
* evaluate the cost and efficiency
* improve and provide service level
* stick to schedules and budgets allocated
* link budget to projects based on assessment of them.

Saturday, June 18, 2011

Services value assessment

According to Jesus Belle (Professor, Services quality, Haaga-Helia eMBA), the total services value equals customer benefits minus sacrifices they do. In that respect, companies need to evaluate which market stages they are in, in comparison to what kind of service quality they must provide for customer satisfaction.

In regards to service quality development, an early market strategy is to understand when quality is on an acceptable level. Companies may experiment through projects to understand the "good enough" level since competition is low and customer perception may be still very positive. Once companies move to growth phase, they need to take decisions on service developments for standardizing and looking for cost efficiencies.

In mature service markets quality expectations are on a totally different level. Customers know what they want. Core quality has become standard and is no longer appreciated. Key elements of service quality development may be modifications and improvements to functionalities or service levels, or price premiums.

In every stage of the market development, companies must have a clear vision of their ultimate service portfolio: what to invest in and what to emphasize in regards to eg: design, customization, training, maintenance, marketing, financing, upgrading, performance monitoring.

In terms of value creation you also need to consider the side benefits. If you invest in new service development and make a loss of providing that, does it generate profit in other business areas and would you otherwise lose a customer altogether?

To summarize, the concept of quality lives and varies. The quality is not a pre-defined level but rather how the customer perceives the quality vs expectations. The service provider has to understand teh stage in which the company operates in (early, growth, mature) adn develop and provide quality as expected.

Saturday, May 21, 2011

Media is not social - people are

In our course on social media we discussed why and how social media could be used by companies. We concluded that people´s motivation drives their behaviour on social media sites and therefore companies need to plan what and how they serve in different social media channels. We discussed that in principle same marketing rules apply as in other media - companies look for awareness, preference, purchase and loyalty but how they capture it in social media has to be planned based on people´s online behaviours and values. B-to-b marketing opportunities may be just as attractive as consumer marketing opportunities. It´s also clear that marketing is not the only opportunity within social media. Online channels can also be used for innovation, recruitment or customer service purposes.

But what I started thinking is what is the difference between service organizations and product organizations in regards to social media. If we emphasize the role of internal marketing and communications in service organizations, could social media provide enhanced possibilities for service organizations? In service organizations people are the ones to deliver the service. Their mindset and values need to showcase what value the company delivers. If social media is an optimal forum for collaborating, sharing and networking, could service organizations better embrace their employees for interacting with customers in a variety of ways?

The challenge I see is the barrier media in general creates. It is much more challenging for people publishing content in public than in internal channels. Therefore in service organizations we could utilize the expertise of people and capture it via various media but could create different roles to make most out of it. Some act as facilitators, some act as experts providing content. Could the service process be copied in social media: planning how we interact with customers throughout the whole service process, just doing it virtually?

Monday, May 9, 2011

Knowing and doing added value

It´s been interesting following differences between a service company and a product based company.

In a service company I purchased three items. I was not too happy spending more than 10 minutes at the counter paying three different invoices "because the services had been performed by three people". The service itself was ok but the whole service process was not thoroughly thought of.

In a service organization it is vital all employees know how to add value to customers, in different stages of the service. From that perspective, working in a service organization requires a service minded attitude and interest in strategy and development. And even if the objectives are known and the direction is clear, the challenge is overcoming obstacles and clarifying processes where the hickups are.

Elements of successful implementation are thorough service processes, infrastructure that supports it and relevant communications. The employee performing the service does not alone create the service experience. The experience is the total of all details.

Sunday, April 17, 2011

Processes and infrastructure to support service branding

It´s said that in a service organization involving employees and putting effort on internal communications in regards to service branding is essential. In comparison, in product branding, it is possible to promote products if the production process works seamlessly and provides the goods which receive a brand identity in the sales and marketing funnel. In a service organization, creating the brand identity, promise and providing information and education on the brand internally is not enough. Involving people should be much more extensive. In order to deliver the expected brand promise and experience, the essential elements in internal involvement is putting people to work. Creating relevant service processes and infrastructure to support the brand promise is needed in order to tie the actual promise to what is being delivered. Service processes are not implemented by sales and marketing but throughout the organization developing and providing the actual service experience. Physical infrastructure, ie environments and locations supporting the service processes are needed to build a coherent entity. Therefore the target of internal information sharing and communications should be partly to create understanding of the value propositions and promises but also to make sure that every employee implements the brand promise in their individual daily work. Managing the work of all employees towards the same goals and same direction is challenging. Building excitement is not easy but necessary to build internal understanding and just getting what the company brand really is all about, to finally showcase the unified experience towards customers.

Sunday, March 13, 2011

Cultural change management made difficult

I watched Jamie Oliver´s tv show one night. Not because I`m particularly interested in his cooking. But because his program was a great example of a extremely difficult change management program. Oliver´s mission was to change cooking and eating habits of American schools. Not an easy task. What children eat daily - hot dogs, hamburgers, pizza, pizza, pizza. Even if there is occasionally something green available, the children do not touch it. Another problem is the culture of eating - nobody knows how to use a knife and fork properly. Showing vegetables in a classroom - children did not recognize tomatoes nor potatoes, what french fries are made of.

Jamie´s good intentions were not welcomed. The kitchen staff resisted him. School management resisted him, authorities resisted him and even local press wrote negatively. Jamie cooked fresh food: chicken, brown rice, salad. Children were asked what they wanted, pizza or chicken. Pizza won. At the end of the show Jamie bursted out crying. How to get further? What would you have done? Changing a whole culture in a week is not easy. How can you teach a whole economy that they need to eat healthier? How can you make even one school change?

One of my notions was that children did not even see the food. They were asked what they wanted and automatically chose pizza. Not even seeing what the food looked like. If they were to pick it themselves, would there be a difference?

The story continued in the next episode. Jamie used a tactic so often highlighted in change management: emphasizing a crisis and creating a burning platform. First, he concentrated on one family only. Took them to a healthcheck. The doctor predicted the son of the family, much overweight, might die at the age of 30. Then, he showed children at school how processed food is cooked. Not very successful. Even after seeing the gross stuff of which chicken nuggets are made children still were ready to eat it. Finally, he invited parents to see how much fat the school food includes and had a truckload of fat brought in the school yard. This was much better understood.

As in any change management program, things take time. You need to find right target audiences and make sure they understand the urgency and need for change. Problem is the magnitude and history of the project - of even culture of eating at schools. Jamie Oliver felt already more relieved. He made a difference for one family. Maybe this is a beginning of change for more children and families.

Friday, February 11, 2011

Service branding vs product branding and the role of marketing

In various articles related to services branding, there is debate on whether services branding process differs from the more traditional product branding process.

According to Teemu Moilanen, service branding does not differ much from customer perspective but rather on the company side.

Why service branding is different from product branding is because of the multiple features of services. According to Moilanen, services are intangible, they are produced and consumed simultaneously. Services cannot be stored. Services are difficult to standardize. Customers participate in the production process. In general, a service product is an experience related to service consumption.

This is why brand management models do not fit well to the development of service brands. Service experience models require in-depth dedication in order to set a clear expectation and in best case be standardized to provide efficiencies.

Considering the role of marketing in service branding vs marketing physical products, there are differences. In regards to products, marketing is normally able to communicate product benefits and the organization handles production and logistics. In service business, things are different. All of the levels of the organization are involved in creating the customer experience. Unless the organization and all of its employees are aware of the company values and messages, the service experience will not fly. Therefore, in order to deliver a consistent service experience and be able to do successful marketing efforts, internal communications need to be taken care of, being a vital element in service branding success.

Saturday, January 15, 2011

Understanding customer service experience

Myer and Schwager in their Harvard Business Review article on Understanding customer experience (2007) talk about customer interactions. When core offering is a service, interactions matter more. According to Myer and Schwager touchpoints that advance customer to a subsequent and more valuable interaction (example Amazon´s 1-click ordering) matter more. In each touchpoint the gap between customer expectations and experience spells the difference between customer satisfaction and what is less.

And what makes service experience matter more? In a service experience, as a customer, you are greatly involved in the transaction. Due to the nature of your purchase (non physical good) your expectations may vary a great deal. Imagine a travel experience as an example.

I´ve earlier described my experiences in online shopping. Ordering goods was a positive and pleasant experience but returning and exchanging the same goods resulted in a huge disappointment. Same company was managing various customer processes. Some worked while others not. Result was my dissatisfaction and their loss.

In service environments, fundamental is service design - how you plan customer experience from first contact point to the last.

Planning service experience can be done understanding the customer opinion of the company throughout various touchpoints, rather just having customer data on the purchase history (mostly available through CRM approaches). Therefore planning a full scale customer experience is an extended step to managing customer relationship. In practice this could mean focus on customer needs and not fearing to analyze customer opinions; what it reveals and what are the actions to be developed.

In order to implement customer experience management process, companies could extend their evaluation of past patterns (eg surveys) to observation and face to face interviews in order to understand also present or potential future patterns.

Saturday, January 1, 2011

Service availability

In some industries, service availability is one of the key success factors of companies. Providing service to customes when and where they need it is crucial.

In Helsinki, there is an ongoing project called "snow fight". Snow fight is a crisis initiative by the city of Helsinki to clean the streets of snow. There are few places where to place snow, there are problems ploughing the snow due to parked cars. Overall there are 2.600 km of streets to plough and there is a question of availability of snow ploughing equipment and personnel. It is difficult to keep their number optimal since we haven´t had this much snow this time of the year in several decades.

I was trying to find snow ploughers myself. It seems the availability of snow services is scarce or I´m simply asking at the wrong time. It´s the high season of snow. In my neighbourhood my household is the only one who would like to pay for snow ploughing service. The experience from previous services is bad. Therefore people rather do it themselves. Nobody was just able to predict the scope of this work few years back. Last winter was horrible. I was out snowploughing even four times a day. This winter I`ve already had enough. I sprained my back. I was out last night. I was out this morning. I will go again since snow just keeps coming.

The companies I called were not interested in just one flat out of many. Too long trip or too small job. Some contact people were just not interested in ploughing snow. They had other jobs more attractive and were busy with those. Service availability is scarce and we´ve not even discussed about price yet. If somebody invented a company where you could call ad hoc? No news, those companies exist already and still no progress. Which online application would integrate people who could do the job vs those who need the service now.