Key Ingredient for CX Innovation: Love

How can you create value for your customers and your organization? Innovate around your customer experience. Here are some examples of different ways to uncover CX innovation ideas:

Look for opportunities to add value around customer lifecycle events.

• Sovereign Assurance NZ’s research showed that many new parents don’t have the time to review their life insurance, but after having a new baby, it’s more important than ever to have some life insurance. The company developed a program called “Choose Precious” that offers new parents $10,000 free life insurance up until their baby’s first birthday. New parents just need to register at chooseprecious.co.nz before their baby is six‐months old. The company also rolled out its “Breathing Space” offering. Recognizing that buying a home is a big deal and that it’s difficult to get the attention of home buyers, the company offered them $25,000 free life cover for 90 days to provide interim protection until they have the time to consider their longer term protection needs.

Think about your customer’s journey before and after they interact with you.

• If a USAA member calls in to change his address, the reps are trained to understand why and deal with bigger issues. For example, if the call is from a soldier who is about to be deployed, then the rep might check to see if the member has thought about items such as a will, power of attorney, and life insurance. The USAA employee might even put a hold on the member’s car insurance, so the soldier doesn’t have to pay for an unused car while he’s deployed.

Identify problems related to how customers use your product, even if they’re not issues with your product.

• An insight into how people take medication helped Walgreens roll out a system called GlowCaps, which puts a glowing cap on pill bottles. It lights up when the bottle isn’t opened at the right time, then gives an auditory warning, then triggers an automatic phone call to remind the patient. It can also send reports to the patient’s doctors and remind the patient when it’s time to refill.

Use analytics to predict next steps and proactively help customers.

• Sprint uses a technique called Next Call Prevention. Here’s how it’s described in a 1to1 Blog: “Regardless of why a customer calls the telecom’s contact center, a customer service agent can offer to help with something else that the customer might call about in the near future–based on prompts queued from predictive analytics. If, for instance, someone whose contract is about to expire calls about a billing question, once the issue is resolved the agent could offer to arrange an upgrade to a new handset. This not only delivers a better customer experience, it also reduces costs and potentially increases sales and retention.”

Solicit ideas from employees, especially those who interact with customers.

• Telus created a platform for internal collaboration and idea exchange called “Habitat Social,” which combines micro-blogging (“Buzz”), blogging, video sharing (“Habitat Video”), personal profile pages, and a virtual world environment. The platform brings together a mix of employee-created content that supports learning efforts, company culture, and employee experience. Within Habitat Social, team members also engage in company-wide conversations about customer issues, share ideas and best practices, and identify ways to delight customers by delivering on the company’s Customers First promise.

Examine how customers actually behave.

• Supermarket chain Ralphs installed technology called QueVision, which uses infrared cameras to measure foot traffic in its markets. The system tracks body heat  to figure out how many customers are shopping at any given time. This information helps managers cut down on lines by redeploying workers to the cash registers when things get busy. The technology has trimmed the average time it takes to get to the front of the line to roughly 30 seconds from the national average of four minutes.

Look at experiences through the eyes of specific customers.

• CVS uses a technology called AGNES (developed by the MIT AgeLab) which stands for stands for “Age Gain Now Empathy System.” It’s a jumpsuit that allows the person wearing it to feel what it’s like to be in your mid-70s. Bungee cords anchored to the helmet and hip restrict movement and rotation of the spine, and elastic bands from hip to wrist reduce shoulder mobility. Based on what it learned form AGNES, CVS will be making store design changes such as putting carpeting on the floors in stores to reduce slick-floor slipping and adjusting the height of checkout counters to require less bending and lifting.

No matter what approach you use to spot CX innovation ideas, it’s important that you nurture them along the way. Here are the steps that I recommend you follow to raise the likelihood of success: Who/Want/Love/Fit/Test.

• Who: Have a clear picture of the exact type of person you are focusing on with your innovation effort. Without this clarity, you may end up making decision that compromise the ultimate experience. Design personas can be a very useful tool in this stage.
• Want. The innovation should meet some unmet need, whether the customer knows he or she has it or not. To make sure you’ve found something real, articulate what the customer wants by completing these types of sentences: “I would really like to…”
• Love. As you develop different options and prototypes, identify specific elements of the experience that you think the target customers will absolutely love. Complete statements like this, “Our customer will love…” You will need to deliver on these elements in order to help drive adoption.
• Fit. Just because customers want something doesn’t make it a good thing to do. Only move ahead with options that fit with your business. How can you tell? Pick the efforts where you can say “yes” to all of the following questions: 1) Can you deliver it consistently? 2) Does it make financial sense? 3) Can you outperform the competition? 4) Is it consistent with your brand?
• Test. I can’t urge you enough to prototype as early and as often as possible. This allows you to crystalize your thinking and incorporate feedback along the way. But the key thing to test for is the love. Make sure that your target customers don’t just like what they see, but they love at least parts of it. Keep iterating until you find the love. Sometimes it just takes a few little things.

The bottom line: Make sure there’s love in your CX innovations

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This post is part of the Customer Experience Professionals Association’s Blog Carnival “Celebrating Customer Experience.” It is part of a broader celebration of Customer Experience Day. Check out posts from other bloggers here.

Report: Innovation Equity Quotient

We just published a new Temkin Group report, Innovation Equity Quotient. Here’s the executive summary:

Companies focus on innovating new products and services, but how willing are consumers to accept these offerings? The Innovation Equity Quotient measures the readiness of consumers to try something new from a company. Led by Hershey and Kraft Foods, six consumer packaged goods (CPG) firms came out at the top of the ratings. In some head-to-head comparisons, Google leads technology companies, Coke beats Pepsi, and Walgreen’s beats CVS. We also examined the data across age, income, gender, and ethnic groups. Income levels appear to have the least impact on the Innovation Equity Quotient, but there were considerable gaps in the other areas. Nintendo and Google have the largest age gaps, Revlon and L’Oreal have the largest gender gaps, Apple has the largest income gap, and Nike has the largest ethnicity gap.

Download report for $195

To understand this demand-side component of innovation, we created the Innovation Equity Quotient (IEQ) that gauges consumers’ openness to trying new products and services. IEQ is based on a simple question: “If <COMPANY> announced a new product or service, how likely would you be try it right away?” We asked this question to 5,000 US consumers and calculated IEQ for Forbes 50 most valuable brands. Here’s how they fared:

The report includes data charts that highlight the 25 brands with the largest IEQ gaps across age groups, ethnic groups, gender, and income levels.

Download report for $195

The bottom line: Innovation is more successful when customers want to try new offerings

McDonald’s Showcases Glocal Strategy

If you’ve dined in both the UK and the US, then you don’t need any focus groups to figure out that Brits and Americans have different culinary palettes. So it’s no surprise that a global food company might need a slightly different strategy in each country.

An article called McDonald’s: The World’s Local Restaurant pointed out how McDonald’s business has grown significantly from introducing products tailored to the specific customer tastes in other parts of the world like Little Chorizo Melt in Britain, McItaly burger in Italy, Maharaja Mac in India, McLobster in Canada and an Ebi Filit-O in Japan.

This is similar to what Macy’s found when it tailored its local merchandising as part of its My Macy’s strategy. In Macy’s case, the local changes affected different parts of the US.

These efforts are not isolated, but represent a move to a strategy called Glocalisation. While the term was originally used by Japanese businesses in the 1980s (thanks for the reference Deepak), here’s my spin on a definition:

Tailoring products and merchandising to meet local needs while supporting global brands

Here are some differences between Glocalisation and the typical approach of just translating a global strategy into local markets:

• Corporate marketing and merchandising groups will need to rethink their efforts. Rather than just setting strict global standards, they will also need to define parameters for local innovation.
• Local leaders will need to take on more responsibility for innovation, and not just operate in conformance with corporate standards.
• Innovation will need to be funded at both the global and local levels.

The bottom line: Is your strategy Glocal enough?

Don’t Listen To Customers, Understand Them

There’s an interesting article in BusinessWeek about how innovation requires executives to periodically step back from three things: “decision attitudes,” “users,” and “your assumptions.” I really like this quote from Sir Denys Lasdun, the English architect, saying that the architect’s job is to give a client:

Not what he wants but what he never dreamed that he wanted; and when he gets it, he recognizes it as something he wanted all the time.

My take: In a previous post, I discussed the power of an approach called “deliberation without attention.” The idea is similar; step back and let your mind process information in a different way. It’s particularly valuable technique for complex situations. Executives definitely need to learn when to step back and reassess a situation or a decision.

While stepping back from “decision attitudes” and “your assumptions” makes intuitive sense, the idea of stepping back from “users” may seem to conflict with customer-centric behavior. But it really doesn’t.

Breakthrough innovations often address needs that customers can’t articulate with solutions that customers can’t imagine. So customers feedback can not be used to define the requirements. Does this mean that innovation is devoid of customers? No!

Instead of looking at direct responses to questions, breakthrough innovations often require a different type of customer input: Observation. Companies need to understand the core needs and desires of target customers through ethnographic techniques and through observations about larger trends in society (like the rise in social networking) to extrapolate (and hypothesize) what type of offering may “click” with those customers.

Customer feedback plays a very important role in fine-tuning the offering. Once prototypes of the solutions exist, companies need to observe (not just survey) how target customers use them. Keep in mind that customers’ first reaction to those offerings may not be nearly as important as their feelings after using them for a while.

The bottom line: Breakthrough innovations require understanding customers, not listening to them.

Practicing Continuous Innovation, IDEO Style

Tim Brown, the CEO of design firm IDEO, has a new book called “Change By Design.” It talks about how large organizations can infuse “design thinking” into the company’s DNA. Who can practice design thinking? Everyone. According to Brown

The design thinkers I have described here are not minimalist, esoteric members of an elite priesthood, and they do not wear black turtlenecks. They are creative innovators who can bridge the chasm between thinking and doing because they are passionately committed to the goal of a better life and a better world around them.

One of the examples that Brown uses is Kaiser Permanente. Guided by IDEO’s support, a Kaiser team redesign the nursing staff shift change at hospitals. The internal group followed a design process, including videotaping, brainstorming, role playing, and prototyping. The redesigned shift change process enabled nurses to visit with patients twice as fast and raised satisfaction rates for both nurses and patients.

My take: I agree with Brown’s focus on infusing the elements of design into an organization’s DNA. One of the 6 New Management Imperatives that I’ve defined is: Turn innovation into a continuous process. Innovation shouldn’t be left to a handful of people or focus only on big-bang events.

There’s a strong overlap with these concepts and customer experience as well. A correctly implemented Voice Of The Customer program represents a form of continuous “Design Thinking.”

The bottom line: Either innovate continuously or fall behind consistently.

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 application — remote 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.

Recession And Innovation From Wool To Hulu

I just read a very interesting article in the New York Times called Why Bad Times Nurture New Inventions which combines some of my major interests: customer experience, innovation, and managing in the recession. It’s a series of short commentaries by five people:

• Amar Bhidé, professor of business at Columbia and author of book “The Venturesome Economy.”
• Scott Reynolds Nelson, history professor at the College of William and Mary and author of the forthcoming “Crash: An Uncommon History of America’s Financial Panics.”
• Rita Gunther McGrath, professor of management at Columbia University and author of “Discovery Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity.”
• Don Kelly, patent agent and former chief of staff for the United States Patent and Trademark Office
• Martin Lindstrom, marketing consultant and author of “Buyology: The Truth and Lies About Why We Buy.”

Here is my take on the key items in the article:

Bhide: “The deck gets reshuffled in a recession as habits are re-examined and patterns of behavior are broken, perhaps to greater degree than when things are humming along at a steady state. And that’s what creates business opportunities.” Bhide discusses Kindles, iPods, and computers and the 1980s.

Nelson: “America’s financial panics have often been the periods of its most interesting commercial and logistical innovations. Plummeting commodity prices combined with new observations about manufacturing or trade often suggest new solutions to old problems.” Nelson discusses wool manufacturers circa 1815, industrial food canners circa 1873, and integrated circuits in the 1970s.

McGrath: “With business as usual off the table in a recession, people become more open to new and efficient ways of doing things. And they’re forced to show more entrepreneurial discipline – you have to expend imagination before spending money.” McGrath discusses recent companies Kiva Systems and Hulu.

Kelly: “Inventors and innovative entrepreneurs should be smiling. That timeworn proverb about “an ill wind that blows no good” truly applies in an economic downturn. No doubt, in garages across the country, innovators are hard at work as opportunity bangs on the doors. Answering the call, however, will require them to step back and take a hard look at the current environment.” Kelly discusses small entrepreneurs.

Lindstrom: “What do Lindt chocolate, the Rubik’s Cube, French perfumes and a pair of Wellies have in common? They’ve all had increased profits during this recession. The number of products getting these results, however, is small and getting smaller by the day. These brands, which may weather the storm, offer some hints for start-up businesses.” Lindstrom describes two concepts: 1) don’t ask consumers what they want; figure out what they need; and 2) practical features give consumers a reason to make a purchase.

The bottom line: It’s time to ask yourself if you’re keeping up with shifting customer needs

10 Innovation Steps For CEOs

As I’ve described in the 6 new management imperatives, senior executives need to turn innovation into a continuous process. This is even more important in this economic downturn where innovation is sorely needed, but can be easily ignored during cut-backs.

In a book called Innovating at the Top: How global CEOs drive innovation for growth and profit, researchers at INSEAD examined the innovation efforts at nine corporations: 3M, Research in Motion, Genentech, Unilever, SAP, Bosch, Nokia, Infosys and Toyota. The research uncovered ten innovation drivers:

1. Appoint the CEO as the innovation champion
2. Celebrate an innovation culture
3. Engage more innovation partners by sharing knowledge
4. Organise diversity to promote positive friction and cross-fertilisation
5. Use customer needs to drive simultaneous R&D and Business Model Innovation
6. Set high-quality standards and demanding challenges
7. Encourage youth and keep a challenger mentality
8. Appoint appropriate decision-makers and encourage transparent information-sharing
9. Use processes judiciously
10. Incentivise people to innovate continuously

Given my focus on customer-centricity, I really enjoyed these quotes:

Innovation, based on the needs (of customers), is faster, cheaper and a more dependable approach.
     – Fujio Cho, chairman of Toyota Motor

Unless our researchers realise what the outside world is and what is happening in the trenches, their innovations will have no value for the customer.
     – N.R. Narayana Murthy, chairman of Infosys

The bottom line: A recession is a great time NOT to forget about innovation.

Great Lessons From Aravind Eye Care

I recently learned about Aravind Eye Care, which won the 2008 Gates Award for Global Health. Based in Tamil Nadu, India, Aravind has become the largest and most productive eye clinic in the world. It handles 2.4 million outpatients and conducts eye surgery on more than 285,000 people at its five hospitals in southern India.  What makes the story so compelling is that Aravind provides care nearly free of charge for 65% of its patients.

According to the late founder of Aravind, Dr. G. Venkatswamy (affectionately referred to as Dr. V):

Being of service to God and humanity means going well beyond the sophistication of the best technology, to the humble demonstration of courtesy and compassion to each patient

Here’s some of what we can learn from Aravind:

• Aggressively streamline repeating processes. Aravind identified high volume, repeatable processes like cataract surgeries and developed highly efficient and consistent approaches. Aravind surgeons carry out an average of 2,000 procedures a year, way ahead of the average 125 procedures achieved in the US.
• Limit the need for high-cost personnel. Aravind recruits young paramedical staff from local villages and trains them to carry out a wide range of duties from eye refraction testing to counselling and preparing patients for surgery. This leaves the surgeons free to operate, predominantly removing cataracts and inserting intraocular lenses.
• Get creative about differentiated service. Paying patients receive extra comforts such as air conditioning and greater privacy, but Aravind staff are rotated between free and paying hospitals so as not to compromise treatment quality.
• Blend centralized and distributed resources. Aravind uses a network in rural vision centers. The technology allows doctors in central hospitals to consult with clinicians at the vision centers in real time via webcam, making quality eye care accessible to the rural poor who don’t have the time or money to travel to big cities for examinations.
• Don’t trade-off humanity for profits. According to David Green, a US consultant who setup a non-profit arm of Aravind for manufacturing ophthalmic products at affordable prices:  “You can have a form of humanised capitalism and you can do it in a way where you don’t cannibalise your margins.”

The bottom line: We can all learn a lot from Dr. V.

Turn Hard Times Into Goat Stew

A short post in the HBR Editor’s Blog called Business Models for Bad Times showcases this quote from the book The Forever War:

One day near Kandahar I came across a minefield, which was hardly extraordinary in itself, and next to it a man named Juma Khan Gulalai. The field was bright and green. Gulalai was a butcher and he’d set up his table there, his apron and knives at the ready. Every day, Gulalai explained, a goat would wander into the green grassy field to graze for its meal and step on a land mine and blow apart. Gulalai would walk into the field and retrieve the carcass–braving the mines himself as he did–throw the old goat up on the table and carve up its meat for sale

My take: This is a bit gruesome, I know. But it does get the point across that there are always opportunities. As a kid, I heard this lesson in much less disturbing phrases like: “Make lemonade out of lemons,” “turn bruised apples into applesauce,” and “bake banana bread with overripe bananas.”

The insight is clear: Even in the worst of times, find a way to make the best of it. And don’t give up on innovation. So execs need to focus on the new management imperative called Turn Innovation Into A Continuous Process, even (more) in a recession.

The bottom line: Remember the lesson of Juma Khan Gulalai!

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.

IDEO’S CEO Discusses Innovation

Tim Brown, CEO of IDEO, was recently interviewed in the The McKinsey Quarterly. IDEO is the gold standard in providing design solutions and creating brealthrough innovations for companies. So it was great to hear what Brown has to say about innovation. In many ways, Brown reinforces the new management imperative that I call “Turn Innovation Into A Continuous Process.”

Here are some quotes from Brown that I found to be particularly interesting:

If you don’t have a process for choosing projects, starting projects, doing projects, and ending projects, you will never get very good at innovation.

My take: Formalized processes provide innovation with the appropriate visibility, funding, and allotment of time and attention.

You really notice a difference in organizations where the senior leadership immerses itself in innovation… by, for example, playing an active role in reviewing the innovation that’s going on at various levels in the organization in order to give people permission to take risks.

My take: Most ideas don’t work out; if you want to cultivate great ideas, you need to embrace some failures.

The antibodies that organizations naturally have to fight new ideas win out. It’s often the role of senior leadership to defend new ideas until they’re actually out in the marketplace…

My take: It’s easy for people to keep doing what they’ve always been doing, so there’s often a strong constituency for the status-quo.

The biggest barrier is needing to know the answer before you get started… Wanting to know whether you’ve got the right idea—or the assumption that you’ve got to have a business case—before beginning to explore something kills a lot of innovation.

My take: Early stage ideas often need to be cultivated until they’re understood enough to develop a realistic business plan.

It’s better to have a bigger ecosystem for innovation than a smaller one. You’re going to get more ideas and increase the likelihood of better ideas. The more people, all other things being equal, the better for innovation.

My take: Innovation can’t just “live” in an R&D organization.

In the end, all businesses exist to serve some kind of human purpose. If you can’t somehow frame what you do in terms of having an impact on the world, I don’t see how you can have a very effective business… People want to work on things they believe in.

My take: A key theme in my discussions about leadership is that executives need to create a strong sense of purpose. That’s why one of my 6 New Management Imperatives is to “Provide a clear and compelling purpose.”

The bottom line: Innovation takes strong leadership

Management Imperative #3: Turn Innovation Into A Continuous Process

As described in management imperative #2, companies operate in an increasingly dynamic environment driven by shifting consumer needs, intense competition, and new enabling capabilities. The result: faster obsolescence of offerings, processes, and business models. To maintain value in these fast-pace conditions, firms needs to accelerate their pace of innovation. Why is innovation so important?

Innovation distinguishes between a leader and a follower. 
     – Steve Jobs

Never before in history has innovation offered promise of so much to so many in so short a time.
     – Bill Gates

But isolated innovation projects aren’t good enough. Large initiatives take too long, can’t respond to market shifts, and don’t provide enough options for an unknown future. Instead of thinking about innovation as a function of an R&D department, companies need to cultivate innovation as an underlying activity across their entire organization.

Here are some ways that execs can turn innovation into a continuous process:

• Make obsolescence a goal. Don’t wait for other companies to displace your products and services; do it yourself. So establish clear goals for replacing existing revenue or profit; something like “30% of revenue needs to come from products introduced in the previous 2 years.” Don’t just have overall corporate goals, translate it into specific goals for each organization.
• Reward some failures. One of the 6 laws of customer experience is that employees do what is measured, incented, and celebrated.  So companies need to measure, incent, and celebrate behaviors that lead to innovation. Since innovations require trial-and-error, people need to be rewarded taking chances, and in many cases, failing.
• Allot time for innovation. You can’t just “expect” innovation to happen. Create specific processes for innovation, so that it doesn’t get buried in the day-to-day activities. Apple, for instance, holds 2 meetings each week throughout their development processes: one for unconstrained brainstorming and the other for production details.
• Uncover customer needs. The best source for innovations often come from customers’ needs. But don’t expect customers to be able to clearly articulate their requirements, many great opportunities come from meeting customers’ latent needs. After ethnographers helped uncover unmet needs of men who view garages as their personal domain, Whirlpool developed its successful Gladiator Garageworks product line.
• Integrate customer communities. Rather than just looking to customers for initial requirements, companies should create an ongoing dialogue with customers; getting feedback all along the way from concept to rollout. How? By using online communities. Mattel’s online community of moms with small kids, for instance, provides the toymaker with ongoing feedback from this key segment.
• Seek out innovation partners. Many of the best innovations cut across the multiple organizations. So companies need to encourage cross-functional collaboration. But don’t stop there; engage your suppliers and partners into the innovation activities as well.
• Manage an innovation pipeline. Innovation looks a bit different than other ongoing activities. The time to market can be longer and the success rates can be lower. That’s why companies need to track innovations across multiple stages of maturity. For example, P&G uses a 4 stage innovation process: 1) Search & Discover; 2) Select & Resource; 3) Design & Qualify; and 4) Launch & Leverage.

The bottom line: Innovation is too important to leave to chance.

P.S. Here’s a link to all 6 New Management Imperatives

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.

Even Dressing Room Experiences Get Better

I just read an article in Forbes about new experiences that stores are designing into their dressing rooms. Here are some of the items discussed in the article:

• Mitsukoshi, a Japanese department store chain, is experimenting with an “intelligent fitting room” that gives customers the opportunity to check available sizes and styles of the items they are trying from inside the fitting room.
• Bloomingdales’ New York flagship store’s dressing room registers the items shoppers take in to try on and produces video and images of the merchandise. A touch screen gives shoppers the option to invite friends. By clicking on a url and logging on to a Web site, the friends can see the items being tried on and make comments. The shopper can then click on one of the recommendations, and make it appear in the mirror superimposed over his image, as though he were trying on the garment
• Prada’s SoHo and Beverly Hills stores have tried responsive mirrors that allow shoppers to simultaneously see pictures of themselves in all the items they try on to help them decide which they want to purchase

My take: It’s nice to see really innovative approaches to an under-served experience like dressing rooms. There are a few key things that other firms can learn from these efforts:

• There are many underserved experiences. Every company can find a number of “key moments” for customers that currently don’t meet those customers’ needs. 
• Technology can really help. Over the last decade, consumers have been trained to use digital technologies — from cell phones to Internet browsers. So there’s more of an opportunity than ever to enhance experiences with technology.
• Let customers drive your innovation. It is easy to throw technology at experiences and end up with nothing more than additional costs. That’s why companies need to focus innovations on the needs of customers.

The bottom line: Find places where technology can wow your customers.