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It used to be that the company with the better product won. Then came the age when the company with the better message about the product won.

Very few companies still win with on the basis of having a better product. Apple is probably one of the few that can still achieve that. Their products are cool and we buy them because coolness used to get us better mates.

Most companies can no longer win that way. Coming out with products that have new features no longer gives us a sustainable competitive advantage – either users don’t care, or if they do, competition catches up in no time.

It’s also much harder to differentiate your offering based on the story you might craft about it – as customers and prospects are now increasingly owning that story.

But so – how do companies win today?

The way companies win these days is by delivering services on top of their products that make customers go WOW.  The reason why exceptional service is the new competitive differentiator is not just because it’s easier for competitors to catch up product-wise, but because the news about exceptional service travels fast in the networks that matter – peer and friend networks where the buying decisions are increasingly being made. When people recommend products to friends, colleagues, and acquaintances, they do not focus on the features, functions and benefits the way many marketers have been trained to do – they focus on the overall experience of adopting the solution, and the exceptional qualities of that “whole” offering.

So if you are like most companies and operate in a market where it is really hard to differentiate  based on the product alone, you got to focus your attention on WOW service offerings.

What do you think? I would appreciate your input and feedback.

(Cross-posted from the CMO 2.0 Conversation site)

Today’s CMO 2.0 Conversation with GE’s CMO Beth Comstock was packed with interesting insights. On a personal note it was certainly neat to get a one hour personal marketing tutorial from the CMO of one the largest companies in the world. By working in a real marketer’s laboratory, Beth must be one of the luckiest marketers around.

We touched on three main topics: the role of a corporate marketing group in a large diversified company with strong operating companies, how to foster innovation at GE, and general changes in marketing.

As a central corporate marketing group, Beth’s team is responsible for sales growth, innovation, and the GE brand platform. Even though the company has very diverse operating companies, her team has also been able to find opportunities for developing a customer platform (i.e., cross-sell accross business units), as well as product platforms (i.e., ecoimagination, the GE green platform, and a cross-operating-business battery project).

On the innovation side of things we touched on the importance of having a robust pipeline of innovations and on the need to have the right resources deployed across the right portfolio of innovations. We also discussed the need to kill ideas faster and the opportunity to create an innovation marketplace for ideas that may not be a good fit for the company. Beth described GE’s robust innovation process, and how they have both a formal process that very much resembles an in-house venture process as well as an online imagination network that relies much more on the wisdom of the crowd – in this case their employees. Other innovation related topics we covered include:

• how they use outside coaches and customer discovery sessions to bring outside insights into their innovation process
• the importance of including detractors in the innovation process
• how innovation is not just about technology innovation, but also about commercial innovations – and how they are constantly looking for new ideas around product, space, and business model
• the cultural changes required for fast-paced innovations and the creative tensions between being a process-driven organization and the inherent messiness and chaotic nature of innovation
• how in some cases you need to step away from traditional metrics to measure progress and success of ideas that are being incubated

We also talked about the changes afoot in marketing and how the new marketing challenge is in fact a knowledge management challenge – knowing enough about your customers so you can feed them data that will make them smarter.

On the need for new marketing skills Beth listed what she is looking for in marketers – people with new world skills, people who can simplify things and engage in customer communities, and people who can curate an experience for the customer. She also described how they set up a team of “rogue marketers” within the company, whose job it is to come up with rogue marketing techniques. It would be really interesting if at some point they would publish their findings in rogue marketing innovations.

You can listen to the podcast over at the CMO 2.0 Conversation site, in the near future we will also post the transcript from the interview.

As part of the prep for my presentation for this week’s o’Reilly Event on Publishing, I looked at how some old school media companies are using social media.

One of the funnier things that I ran across was how the New York Times was using twitter when compared to Guy Kawasaki with his Altop publishing company.

Funny when you look at it. The NYT has 68K+ followers and is following 80 people back, mostly NYT people. Guy has 60K+ followers and is following about that many back.

So the New York Times is bringing its legacy mindset to twitter – “we talk at our audiences with limited feedback capabilities.” I bet you they might have suggested a letter to the editor feature to the twitter folks

Guy on the other hand is talking with his audience…a much better thing to do.

In reading the book The Happiness Hypothesis by Jonathan Heidt I came across an important element that makes ultrasocial societies work – reciprocity.

Heidt defines ultrasociality as: living in large cooperative societies in which hundreds of thousand of individuals reap the benefits of an extensive division of labor. Only four instances of ultrasociality are in existence – among hymenoptera (ants, bees and wasps), termites, naked mole rats, and humans. In all species but humans the force that makes that possible is the genetics of kin altruism. In an ants nest or a bee nest, everybody is brother and sister, and since you have as much genes in common with your siblings as you have with your children, the evolutionary drive to leave surviving copies of your genes makes those ultrasocial communities work – shared genes equals shared interest.

In societies that are not structured like bee or ant colonies, the shared set of genes that you have with others drops off rather dramatically – while you share 50% of the genes with your children and siblings, you only share 1/8 the genes with your cousins, and 1/32 with second cousins. In a strictly Darwinian calculation, you would only spend as much energy to save 4 of your cousins as you would for 1 child or brother. That is why kin altruism explains only how groups of a few dozen, or perhaps a hundred, animals can work together. The rest would be competitors in the Darwinian sense.

So what happened to human societies? How did we get fictitious families, like the Mafia, where there is no real kinship, even though they talk about the Godfather and being part of the “family”, to work as ultrasocial societies? It’s the old fashioned “you scratch my back and I’ll scratch yours” phenomenon – which is in fact a mindless and automatic reciprocity reflex. if someone receives a favor, that person will be driven to repay that favor – not because it the proper thing to do – but because it is a built-in ethological reflex. It’s tit-for-tat, hardwired in our brains, that opens the possibility of forming cooperative relationships with strangers. Now mind you that tit-for-tat can only explain the existence of social groups up to a few hundreds. What allows larger social groups is its co-existence with vengeance, gratitude and gossip as tools that reduce the payoff to cheaters by the cost of making enemies.

Those very primitive hardwired human behaviors confirm a lot about what makes online communities work as well – the importance of reputation, the importance of self-organized posses to police communities, the importance of helping one another as a currency, and the failure of communities where reciprocity is not an integral component of the community.

Many companies seem to have legal departments that put up huge barriers to adopting communities and other social media programs that include employees, customers, prospects and even detractors. In fact some put up barriers so high that nobody can do anything in the space. Now, if your competitors cannot find a way to overcome those objections either, you may be ok, but if they do and manage to extend their business processes to leverage the power of the internal and external crowds, it may be “game over.”

Typical legal objections include the issues related to brand protection, engaging hourly workers as part of internal communities, the threat of liability for what employees say in public, having employees socialize online instead of doing work, meeting regulatory compliance requirements, and more. While most legal departments will claim that their situation is very unique, at the end of the day the issues are fairly common among many companies.

I do not think that there is one best practice on how to overcome those objections. Some companies find it easier to get legal involved upfront in the process, while others are asking legal to quantify the risks and then balancing those with the benefits or the risks of doing nothing. One good bit of common sense (as recommended in this BT case study) is to make sure that you do not overhype what you are trying to do and position it as something radically different from other programs. Many companies already have policies in place that cover things like email communications and acceptable behavior in public forums – which could possibly be extended to virtual environments without too much change.

What have you found to be working?

Scott Antony, one of the Innovator’s Dilemma gurus, has a great post on how market research, if not done properly, can kill the innovation process within a company.

In essence he says that there are 4 ways to screw up innovation with market research – ask the wrong people, ask the wrong questions, have the wrong people interpret the data, and making the wrong decisions based on the data.

Does that resonate with your experiences? How many companies have you seen do market research to prove something which they have already taken a position on? And how many times have you seen companies do market research only within their existing customer base, even though they need 90% of all their future revenues to come from companies or people who never bought from them before?

Scott is right when he says that if done properly market research can be a powerful weapon – it just needs to be handled by pros who know what they are doing. Unfortunately, and in most cases, market research is done by amateurs who put out crappy surveys – or worse, pay you money to fill out those crappy surveys.

While most people haven’t really yet grasped the meaning and the potential impact of the web 2.0, some are already trying to define the Web 3.0, and along with that comes the usual litany of buzzwords – let go of control, more pervasive, more intelligent, always on, we are in control, etc. (Stephen Baker from Business Week talks about it here and here, Valeria Maltoni has a very eloquent post with a great discussion here, and then of course Phil Wainewright and John Hagel were already having this debate two years ago).

One of the things that most people forget is that we always overestimate the amount of change in the short term and underestimate the amount of change in the long term.

Let’s start by taking a look at the short term. The adoption of web 2.0 is not anywhere near a done deal – with very powerful barriers to adoption standing in the way of success. Many of those barriers were the same that the web 1.0 tools and even pre-web tools faced. In fact many of those barriers are the same as the ones described in the context of innovations as far fledged as agricultural innovations in third world countries by Everett Rogers in his seminal book on adoption of innovations – Diffusion of Innovations.

Most of those barriers are from people, culture and political nature – the hardest of all to overcome (I like how Valeria calls it the Human 1.0 ability). Web 2.0 tools and processes have the potential to change organizational structures and to overhaul existing hierarchies, causing people in charge to resist those tools and come up with smoke-screens to defeat them – think security and compliance. Web 2.0 tools are social and collaborative in nature and many organizations just do not have a collaborative or social culture. And because of the collaborative nature of the tools, even self-organized groups face the classic collaboration conundrums – the white screen syndrome (how do we get started and who in the group decides how we organize ourselves in this collaborative space), and the fact that the value of the tools goes down to zero for all team members even if only one of them decides not to adopt the tools.

So with that in mind, trying to extract what the web 3.0 will look like based on what is currently happening with the web 2.0 is an exercise in futility. In fact, many of the extrapolations have been part of the innovator’s toolbox or vocabulary for a long time. Are we not overestimating the amount of change in the short term?

On the flip side, the web 3.0 could come with new forms of organizational structures, new political realities, and a new workforce – one where a new class of artisans bring their own tools to “the” work at hand. Some thinkers have painted big picture futures, including many great sci-fi authors, but also some business thinkers and magazines like Kevin Kelly, or FAST Company, just to name a few.

So, aren’t most of us underestimating the amount of change in the long term?

It does not matter what you think about your customers – what really matters is what they think about themselves. Many marketers overlook this point and end up talking about their products in ways that the customer can not relate to.

Let’s take a high-tech example that continuously pops up, especially as you have many ex-enterprise-software marketers now marketing software-as-a-service solutions. You might think of the market you’re selling into as the enterprise market – large multinational companies with thousands of employees. If your buyer is not in IT and if she can buy your solution by the drink and expense the cost of it – she is not going to think of herself as an enterprise buyer. So even if you have hundreds or thousands of users like that in a single enterprise, if you start positioning your product as an enterprise solution – your potential buyers will not associate themselves as candidate customers for your solution and never buy it.

It does not matter how you segment your market – always think about what the potential buyers think about themselves…

According to a recent report from emarketer reported in Dead 2.0, only 2% of US employees subscribe to RSS feeds. 88% do not even know what it means! Other stats show that only 13% have a good idea of what podcasting is. You can actually see the bell curve of adoption at work, with 12% of people still not knowing what spam is (via Business 2.0).

The RSS numbers also jibe with the numbers mentioned by Martin Nisenholtz from the New York Times in another Business 2.0 article (not online yet). RSS feeds at the NYT only generate 12.2 million pageviews out of a US total of 295 million.

[Tags: rss syndication ]

Over at the Fast Company blogjam, Dave Pollard looks at whether great product innovation really starts with the customer – and describes the whole issue as a chicken or egg question.

Involving the customer in product innovation is not an either or proposition – it is something that should always be done – but done in the right context. And when listening to customers companies need to realize that their mileage will vary depending on the type of product or the phase within the product life cycle.

In some product categories, people could care less about the products or the companies that manufacture them – making customer feedback useless at the least, or potentially dangerous if given too much weight.

Newer products that are still primarily appealing to innovators and early adopters have a different problem with potentially similar consequences. Assuming the product is successful, customers probably care about the product in this case. But their ability to innovate ahead of what is available will likely be several steps behind the ability of the team that came up with the innovation – and giving too much weight to customer feedback may limit the future product potential and give the competition an opportunity to catch up and out-innovate the incumbent.

Then you have more mature product categories where people care – probably the area that yields the most valuable customer feedback. Except that here too you have to be careful about how much weight you are giving to that customer feedback. If your goal is to grow your product revenue by 80% in the future, then you have to realize that “all” current customers only make up a fraction of your future customer base. Attaching too much weight to their feedback may eliminate a large number of future customers that do not share their profile. And according to Harvard Prof. Clayton Christensen’s disruptive innovation theory, your trajectory of product improvement will eventually cross the mainstream trajectory of customer need – limiting your potential future customer base, and opening yourself up for a disruptive innovation.

All that being said, and according to MIT Professor Eric Von Hippel, in some fields there are a small number of “lead users” who invent new products out of necessity and who can be an important source of new product concepts. The kind of customer listening that is required in this case is very different from what most people think of when talking about customer involvement in product innovation!

Related posts:
- You cannot outsource innovation to your users!
- Where will your killer competition come from?
- Whatever marketing becomes…

[Tags: customer feedback marketing product innovation innovation customer listening marketing innovation]