Most organisations today still make things which they sell to customers. When the customer tires of the thing or the thing breaks down, or a shiny new thing comes along (either from the company or a competitor), the customer is expected to buy a new thing. It’s up to the customer to get the value out of the things. And let’s face it, as customers ourselves, our expectations on value have changed over recent years. We want that value—however we perceive it—delivered faster, cheaper, and more conveniently.1 We want an engaging experience that, rather than paying up front in the hope of deriving value later; we now only want to pay for value as we consume it.
Indeed, the whole nature of competition has moved on. It’s no longer good enough to have great products.2 We know that customers “want a ¼ inch hole rather than a drill.” 3 Customers want the outcome of the hole, rather than the goods represented by the drill. 4 As the purchaser, we want the firms that we buy from to work with us, to understand our specific needs, and then to customise the outcome to those needs; instead of trying to give us some sort cookie-cutter, one-size-fits-all standardised offering. 5
Customer expectations and competition are not the only things to have moved on—even the measure of success has moved on—it’s gone from Productivity to Value:
- In the product-centric world, we measure productivity and efficiency. Executives could claim success by merely reducing the resources required. In this world, Productivity=Value/Resources.
- In a services-centric world, firms focus on effectiveness and measure ways of delivering more value. That means better outcomes within the constraints of the resources available. Now it’s Value=Outcome/Resources.
The New Transformation Equation
That new equation—Value=Outcome/Resources—represents the core of the transformational opportunity. It puts the firm on a very different value innovation curve. The centre of a true business transformation is always a shift in value. Without the value change, it’s merely “better sameness.”
The business transformation programme is the vehicle of change from the current business as usual to a new level of value delivery. This is especially challenging since it really revolves around engaging a business and its employees into thinking quite differently; these are the same people that have spent their entire lives thinking products and productivity, climbing the hierarchies that go with the silos they create.
Those enterprises that have moved the goal posts—the competitors that are streaking ahead or have suddenly entered your industry—they’ve cracked the code of delivering more and better value. It all begins by “standing in the shoes” of the customer. For example, consider the situation of Apple in the 1990s on the brink of bankruptcy it sought a come-back strategy. Instead of continuing to repatriate income to stockholders, Steve Jobs refocused the firm on ensuring its products delivered the best experience possible to its customers; delighting them, and along the way, turning them into surrogate salespeople.6 The rest, as they say, is history, but it didn’t happen overnight. Apple not only transformed its own operating model, it progressively transformed the industries within which it chose to operate—the PC business, the music business, and the phone business. Steve Jobs drove Apple to reinvent its business model and as a result it scaled the heights of success to become the most valuable firm in the world. 7 Apple’s focus on value, in terms of the outcomes it delivered to customers, with close attention to the resources needed, made its business model vastly profitable. Profits came as a result of focusing on and controlling the product experience delivered to its customers; which, in turn, followed on from Apple rediscovering its purpose. 8
Transformation Means Engaging The Employees At Scale
So how do you get employees to want to change, and collectively reinvent the organisation; to innovate and renew the ways in which they engage customer’s and ultimately, modernise organisational business models? This involves engaging your people to:
- Start with the customer. Engage the business to deeply understand customers—their needs, desires and current frustrations. Stand in the shoes of the customer. Move beyond segmentation to build a set of personas—characterisations of customers—and their “jobs to be done.” This helps teams focus on whose problems they are solving. 9
The transition goes something like this. If an organisation sets out to identify customers’ true needs and then improves the experience it delivers by taking out what the customer doesn’t value, then that will almost certainly reduce costs while, at the same time, improving the customer’s perception of the organisation and its long-term sustainability. Moreover, as a result of focusing on customers, the organisation learns new things about what its customers want or might value, things that it just couldn’t discover anywhere else. The underlying basis for this change is an organisational learning process. 10
- Rethink the business as a set of “service propositions” outside-in. Map out the customers’ ideal journey, from their point of view (rather than the firm’s point of view). Describe and blueprint the experience that you will provide. Work backwards into the capabilities and processes needed to deliver that experience—i.e. don’t start with your processes that you use today. That route leads to slow incremental change.
However, it’s challenging to work backwards from the expectations of customers to design an ideal experience you want to deliver, right back into the processes you need and the role of systems in support of that. We use a “big tent” workshop format to engage multiple teams to co-create their future together. With personas as the focus, teams map out the journey that customers are on as they try to solve for that “job to be done.” Sharing artefacts regularly between the teams, the business people themselves design the experience that they want to deliver as a part of that customer’s journey.11 Because they work on this together, stealing each other’s ideas, the results are theirs. Business commitment, skin-in-the-game, and ownership of the results are built in because they created the results together.
- Reinvent the business model. That usually means cannibalising the existing business in one way or another so expect significant resistance. On the other hand, if you have engaged the business effectively to design its own future—the set of service propositions that they want to take to market—protagonists worry less about fixing the past. One of the biggest challenges here it to reimagine the impact of (or potential for) platforms to fundamentally change the rules of competition.12
While very few businesses have the opportunity to reinvent themselves as multi-sided platform plays—think how the likes of Amazon, Uber, eBay and others were founded as platform businesses—it’s this overall process of engaging colleagues to understand and reframe customer needs that allows firms to innovate. Over time, by focusing on the experience that it delivers—providing better outcomes and more value—the firm distinguishes its offerings from those of its competitors.
Returning to our Apple example, the firm’s meteoric rise took quite a time to gestate as they built the capabilities that would differentiate the firm. The dramatic increase in market cap followed its reorientation around services ecosystem to underpin its product focus—the i-Tunes platform facilitated a new value delivery curve by enabling the firm to leverage a broad array of app developers.13 By focusing Apple on developing the iPhone as more than just another product, and more than a mere conduit for its own services, Apple changed the rules of competition. 14 It’s not that Nokia did not see the opportunity for an ecosystem—they had a rudimentary ecosystem in place as early as 2001; but they didn’t want to invest in developing the infrastructure to support that ecosystem. Ironically, they were more worried about Microsoft stealing their future. At the time, I was trying to guide them towards a radical expansion of this ecosystem concept. However, the reality was that the culture of Nokia just couldn’t embrace ideas that did not involve the engineering and marketing of a new product; something that they could manufacture at scale.
None of this is particularly new—the ideas have been slowly emerging for years; rather than focusing on products as the unit of exchange, “all businesses are service business.” 15 A service business exists to help customers achieve their goals. 16 Therefore, transformation means refocusing the firm to build compelling outcomes in the form of service offerings, within the constraints of the available resources—i.e. Value=Outcome/Resources.
Transformation based on moving to a new value delivery curve has dramatic implications for strategy. It’s how you get there that’s critical. The key action needed to move past merely improving the current products—another flavour of faux transformation—is engaging employees at scale; that means involving them in the journey, facilitating them as they design new experiences that focus on the customers’ jobs-to-be-done. But that almost certainly means stopping doing some things; dropping some business lines or at least re-focusing the actions of your transformation teams onto a very few things around the business capabilities that matter. Treating the organisation as a set of service propositions helps the firm focus on its primary purpose and breaks down the silos that exist in every firm.