USAA’s Mobile App Showcases Innovation

For years, there’s been a lot of hype about mobile banking. It turns out, however, that most people are not ready to abandon their branch visits, phone calls, or Web browsing for a mobile window into their bank. But that doesn’t mean that mobile can’t play an important role in banking.

Source: New York Times

USAA introduced an innovative iPhone applicationremote check depositing. Customers that qualify for the service can take pictures of their checks and deposit them into their accounts as if they were handing the paper check over to a teller.

My take: This application makes a ton of sense for USAA, especially since many of its military customers are stationed around the world. Companies can find opportunities like this by following my three steps for customer experience innovation:

  1. Uncover the needs. Many USAA customers do not have an easy way to deposit checks.
  2. Design a disruptive strategy. The mobile app is a great example of a strategy called online infusion.
  3. Evaluate the opportunity. Given USAA’s focus on making it as easy as possible for their customers, this new application makes strategic sense. And the company’s rules for qualifying help keep the risks low. 

The bottom line: Everything starts with customers’ needs.

Google Chrome OS Sets Off Customer Experience War

Google recently created quite a stir when it introduced its new operating system (OS), Chrome OS. Here’s how Google describes its new OS:

Speed, simplicity and security are the key aspects of Google Chrome OS. We’re designing the OS to be fast and lightweight, to start up and get you onto the web in a few seconds.

My take: Will Chrome OS destroy Microsoft? No. Will Chrome shake up the PC market? Yes; especially when it comes to customer experience. Here are a few lessons that Microsoft and others can learn from Google’s announcement:

  • Ultrasimplicity is powerful. Most companies compete by adding features to their products. As a result, offerings (like PC operating systems) get bloated beyond the needs of large segments of customers. That’s why there are many opportunities for radically simplified offerings. This approach, which I call Ultrasimplicity, is one of five disruptive customer experience strategies.
  • PCs are just about passé. The world of large desktop and laptop PCs is past its prime. Computing will increasingly happen on smaller, networked devices like iPhones, Kindles, and netbooks. These portable computing devices will need to be designed like fashion accessories and provide near immediate access to functionality.
  • Unmet customer needs are gold. Companies should assume that they aren’t meeting customer needs. With this perspective, firms will continuously hunt for those unmet needs and actively cannibalize their existing products before their competitors do. That’s why one of the principles of Experience-Based Differentiation is Obsess about customer needs, not product features.

The bottom line: Chrome OS will refocus the “computer industry” on customer experience

PNC Bank Breaks Through Gen Y Blindspot

Last year I proclaimed that Banks Have A Gen Y Blind Spot. Well, that’s no longer true for all banks. It turns out that PNC enlisted IDEO to help engage Gen Y and created a new offering: VirtualWallet. According to a recent BusinessWeek article, PNC has signed up more than 20,000 customers (70% from Gen Y) and is on track to break even in two years.

Here’s how VirtualWallet is described on the IDEO Website:

[It is] a family of banking products that provide customers with seamless access to their finances and intuitive, tangible, and direct control of their money. Centered on electronic transactional banking, it is designed to both promote and optimize banking activities with features and visualizations that support the mental models and lifestyles of its Gen Y customers

My take: I really like VirtualWallet. It shows what you can do when you explicitly focus on Gen Y. The long-term success will require ongoing nurturing by PNC, but the initial approach makes a lot of sense because:

  • It applies a strategy called online infusion. While it’s a financial offering, online features like a money slide bar to graphically indicate available funds, a “Savings Engine” that helps customers establish rules around spending, and a playful instant transfer feature named “Punch the Pig” are core to the value proposition.
  • The online experience implements many components of the four strategies we’ve defined for engaging Gen Y: 1) Immediacy, 2) Gen Y literacy, 3) Individualism, and 4) Social Interactivity.
  • There’s a mobile component. While this wouldn’t make sense for many banking applications based on overall mobile usage, it’s almost a requirement if you want to target Gen Y; many of whom view their cell phone as their primary digital device.
  • The approach starts with customer needs. While this is not novel for projects that involve IDEO, many companies aren’t diligent enough in starting with a solid process for uncovering the true needs of specific customer segments. By understanding Gen Y behaviors, the bank can actually charge fees for anything more than 3 checks per month.

The bottom line: Gen Y will be getting a lot more attention from banks.

Recession Strategies From IDEO And Potatoes

I ran across an interesting article on the IDEO Website called Reframing Recession: Lessons from the potato (.pdf). The article discusses how potatoes became a popular food item in the 1790′s amidst the turmoil of a devastating grain market and repeated crop failures. The potato’s rise to the family table was driven by consumers’ innovation in trying to fill an overarching goal — feeding their families.

The article does a nice job of using this story to frame the reality of poor economic times: There’s still opportunities for growth. Here’s a very interesting observation from the article:

When the economy is down, people look to different product categories to solve persistent needs, making trade-offs that reflect both conscious and unconscious decisions. In the last recession we called this “The Lipstick Effect” – as budgets tightened, women still sought out ways to address their need to flaunt a little and sales of cosmetics went up. Just as in 2002, Estée Lauder’s makeup sales have recently felt an uptick – 11% in the third quarter of 2007.

The article ends up by making the following five recommendations:

  1. Hang out with your customers. Since customers will be looking to fill their needs in  different, cheaper ways, you need to spend time understanding their core needs. This is pretty much the 1st principle of Experience-Based Differentiation: Obsess about customer needs, not product features.
  2. Watch out for a new breed of unlikely competitors. Just like the potato replaced grain in the 1790s, consumers may turn to new categories of products as substitutes for your offerings.
  3. Be inspired by extreme value. Look for models to copy, across any industry, where people are getting more value for less.
  4. Go elephant hunting with a slingshot. Go find opportunities where you can provide a cheaper, simpler solution to replace expensive, complex ones. I like this one a lot. As a matter of fact it’s very close to one of the five disruptive customer experience strategies that I’ve called Ultrasimplicity.
  5. Don’t be afraid to prototype. Get some changes out in the field and be willing to learn, even through small-scale failures. The article provides this good advice: “Tougher times are exactly when you should give those managers who are closest to your customers the freedom to act on their insight and to experiment.” In the post Keep Customer Experience Momentum In A Recession, I also discuss the importance of innovation in a downturn.

The bottom line: Don’t react to a recession by clamping down on innovation.

HTC On Innovation, Simplicity, And Branding

I ran across a very interesting Q&A with John Wang, CMO of HTC, the Taiwanese company that delivered the first cell phone using Google’s Android operating system. The article focuses on how HTC cultivates innovation through it’s Magic Labs organization, which is a group of people across multiple disciplines (called “Magicians”) that focus on long-term innovations. The CMO runs the group and his business card says “Chief Innovation Wizard.”

While the article provides interesting insights about how HTC handles innovation, I really enjoyed Wang’s discussion about two of my favorite topics: simplicity and branding.

The way most companies compete is by adding features to their products and services. So, over time, the offerings become more complicated than what’s actually needed by large segments of customers. And the interface to those products becomes increasingly complex. That’s why I’ve defined ULTRASIMPLICITY as one of the Five Disruptive Customer Experience Strategies. Here’s some of what Wang had to say on the topic:

Everybody was talking about simplicity, everybody was talking about usability. What did people do? Well, they rearranged the menu and called that improving usability. That’s not simplicity, that’s rearranging menu items…. The true mission is not to reduce learning, but to eliminate learning… The baby is probably the best expression for zero learning because the baby has not learned anything yet. If she wants to see the monkey on the other side of the block, she simply reaches out and turns the cube.

When I discuss brand, it’s often in context of the 2nd principle of Experience-Based Differentiation: Reinforce the brand with every interaction, not just communications. Brands need to be about walking the walk, not just talking the talk. All too often, though, I find that “the brand” only exists in advertising groups. When that happens, the rest of the company doesn’t really reinforce any of the brand value; leading to empty promises in marketing. So I really appreciated the following comments from Wang:

There is a very important difference between brand value and brand recognition. Brand value means something to the end user. Brand recognition, all it means is a bunch of advertising to make people recognize the brand name. At HTC we care about brand value, not brand recognition. Building brand value is like earning respect; you have to earn respect, you cannot buy respect.

The bottom line: “Innovation + Simplicity + Brand Value” is a great formula.

T-Mobile’s “Family Allowances” Showcases Online Infusion

T-Mobile recently introduced a new feature called “Family Allowances” that provides online controls to help parents monitor and manage their kids’ phone usage. The features, which customers can control from the T-Mobile Website, include:

  • Setting limits for messages, minutes, and downloads for each phone
  • Defining the times of day when a phone can be used, or not used
  • Establishing “Always Allowed” numbers (like calling home) that work even when the limits are exceeded, and blocking other numbers

My take: This is another great example of a disruptive customer experience strategy that I call online infusion (designing offerings that natively incorporate online capabilities as part of the core product definition). These features go beyond the basic definition of of a wireless service, which usually just focuses on the features of the handset and the network, to address a broader set of needs for a specific customer segment: parents of young kids. The feature incorporates online controls as a core piece of the offering, instead of just using the Web as a channel for researching, buying, and getting customer service.

The “Family Allowances” plan incorporates features similar to a previous service called Disney Mobile that Disney built using the Sprint/Nextel network. I really liked the features of that offering, but the business did not work out in the US (it’s still operating in Japan). It makes more sense for existing carriers like T-Mobile to incorporate those features into their offerings, then to create an entirely new carrier.

Other online infusion examples that I’ve discussed in this blog include the Kindle, NetFlix, and Webkinz. To develop your own disruptive strategies, take a look at this post: Customer Experience Innovation: As Simple As 1-2-3.

The bottom line: As more consumers get more comfortable doing more things online, there will be an abundance of opportunities for online infusion.

Zara Bypasses The Gap; It’s All About Customers

The Spanish retail chain Zara has overtaken The Gap as the world’s largest clothing retailer. That’s amazing since many people outside of Europe probably don’t know much, if anything, about Zara. So what can we learn from Zara’s ascension to the top spot?

First of all, Zara is a division of Inditex, which is a vertically integrated apparel juggernaut. Unlike other large apparel corporations, the company owns all of its retailing, designing and manufacturing operations. This structural difference allows Zara to break some norms in the apparel industry.

Zara offers “instant fashions:” cheap, trendy clothing. In Zara shops, there are two new collections every week, and the company manages to design, produce, distribute and sell each of its collections in just four weeks. Here’s what Professor Isabel Díez Vial from the Complutense University of Madrid, who has studied Inditex, has said about the company:

The customer doesn’t go to the store at the beginning of summer or winter, and see what they want, and think about it and decide later what to buy. Instead, the customer has to go to the shop every 15 days because the collection is refreshed so frequently… This approach leads to a complete change in the production process. Instead of offering products that take a year to plan and sell, you now have a product that the customer demands.

In addition, Zara relies heavily on its front-line employees. Rather than squeezing costs out of its personnel costs, it sees them as a key to its advantage. By analyzing sales data, the retailer increases staff during the periods when there is heavy traffic in the store. Employees are also expected to provide feedback on any fashion trends they see or hear about — including what’s hot, what’s cold, or what’s missing from the current collection.

My take: Zara represents a great case study in how to change the paradigm by focusing on customers. Here are few lessons that others can learn from Zara’s approach:

  • Break supplier-driven paradigms. In many industries you’ll find approaches that are based on some limitation of the companies. These supplier-driven paradigms, like very discrete seasons in apparel, aren’t optimizing customer experience. So there are opportunities to expand your business by challenging the status-quo.
  • Disrupt with service amplification. Many firms view front-line employees as costs; which they try to minimize. That’s why there’s an opportunity for companies to differentiate themselves by investing in their people, like Zara. This approach, called service amplification, is one of the five disruptive customer experience strategies that I’ve mentioned before.
  • Shorten cycle times. If it takes six months to define, design, and manufacture something, then you need to make decisions six months too early. Zara’s ability to cut the cycle times for getting products to market provides it with the ability to respond more effectively to changes in the market. So firms should find ways to cut down the time it takes to make changes in their offerings. 
  • Look to customers for innovation. As I discussed in the post Customer Experience Innovation: As Simple As 1-2-3, companies need to focus their innovation efforts around the needs of customers. Zara’s growth shows that there’s a lot of opportunity to find new and better ways to meet their needs.

The bottom line: The path to the top is always fueled by customers.

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