Outside Innovation

ARE YOUR CUSTOMERS ENGAGED?

Adobe and the Economist Intelligence Unit (EIU) recently ran a global survey that identified customer engagement - "establishing a deep connection with the customer that endures over time - as an increasingly important business mandate." The survey findings were released on March 31st in conjunction with Adobe’s annual financial analyst meeting,  in a report titled "Beyond Loyalty: Meeting the Challenge of Customer Engagement."

“Executives are increasingly finding that the winning differentiator is no longer product or price, but the level of customer engagement relative to the competition,” said Rama Ramaswami, senior editor of the EIU. “Companies see there is a competitive advantage in going beyond traditional customer loyalty programs to create engaged customers.”

“The secret to success isn’t just about gathering or churning data, it’s about how you connect with customers through the medium of their choice,” said Adobe CEO Bruce Chizen. “Customers now demand information and interaction anytime, anywhere and through any medium."

Survey Factoids:

• More than 8 in 10 executives believe their companies lose sales each year because of failure to create engaged customers
• 1 in 10 estimates insufficient engagement accounts for 50 to 75 percent of lost sales.
• Nearly 90 % of respondents say that customer relationships are either very or extremely important to the success of their business.
• More customer engagement, executives believe, would translate into improved customer loyalty (80 %), increased revenue (76 %) and increased profits (75 %).
• 79% percent of executives surveyed say that engaged customers are very important because they recommend products and services to others;
• 64 % say they are frequent purchasers;
• 61% say they provide frequent feedback on products and services;
• 55 %  believe they are less price-sensitive.
• Just 13 % of respondents believe their customers are very committed to their company’s products
• 44 % believe their customers are only somewhat committed.
• 49% of respondents estimate that insufficient customer engagement accounts for up to 25% percent of lost sales each year
• 26 % believe that insufficient customer engagement costs them between 25% and 50%.
• 11% place the contribution to lost sales somewhere between 50 % and 75 %
• 47% say that the difficulty of measuring customer engagement is the biggest barrier to achieving greater levels of engagement.

GREAT EXAMPLES OF CUSTOMER INNOVATION IN ACTION!

Thanks to Michael Fitzgerald of the New York Times for his great article in the Business Section of the Sunday New York Times,  How to Improve It? Ask Those Who Use It!. He includes a nice photo of Eric von Hippel of MIT with "lead user", Dr. Nathanial Sims, an anesthiologist at Mass General, whose inventions have included an intelligent, self-monitoring drug infusion pump, which generated $700 million in sales its first year.

The thrust of the article is that your lead users and customers are the most predictable and successful source of new product innovations, which is, of course, also the main message of Outside Innovation!

In this one short article, Michael Fizgerald manages to cram in mentions of over several different customer-led innovations:

1. The Nat Rack, one of Nathaniel Sims' inventions
2. The Smart Pump, another one.
3. Counter-Strike , a game built by customers on top of Half-Life
4. Apache
5. Mozilla FireFox
6. Burton Snowboards
7. SawStop
8. LEGO MindStorms

Fitzgerald also cited Instructables--a community for citizen inventors, from Squid Labs. This is a great find! Brought to you by the folks at Squid Labs--Check out the Squid Labs' blog.

URDT and ARU: CREATING PROSPERITY IN RURAL UGANDA

KAGADI--BOOM TOWN IN THE WILDERNESS

After a five-hour drive from Kampala, the last three hours on bone-jarring, deeply-rutted dirt roads which are only passable because the rainy season has not yet begun, you reach the frontier boom town of Kagadi. Like any frontier town, this one swirls with dust as vehicles come and go, with people picking up supplies, bringing family members to the 100-bed hospital, dropping neighbors off at the bus stop. In Kagadi today, you can get your cell phone, radio, bicycle, or motorbike repaired, buy food, clothes and shoes, buy agricultural and building supplies, buy furniture for your home, buy beer and soda, eat at a restaurant, or stay in a local hotel. Since my last visit in March of 2006, power poles and wires have finally reached Kagadi town, but no electricity is being delivered yet.

This is the way Kagadi looks today. Although located 3 hours via dirt road from the nearest city, this town has grown since 1987 from one street with three stores to a bustling town, complete with electricity, a 100-bed hospital, and an Internet café.

COMMUNITY 2.0-Leveraging the Wisdom of Crowds

Crowdsourcing 2.0

Kathleen Gilroy, Otter Group
Sylvia Marino, Edmunds.com
Michael Sikorsky, Cambrian House

Kathleen:
Wikipedia definition: relies on a combination of volunteers and low-paid amateurs who use their spare time to create content and/or to solve problems.

Examples of crowdsourcing:
Zazzle I use it to generate stamps as presents for my nephews and nieces.
Goldcorp -- Took its data and made it public and encouraged people to analyze the data and suggest mining opportunities for a reward. (Written Up in Mavericks at Work.)
Threadless--T-shirt design

This notion of earning credentials from crowdsourcing is great.

Community 2.0: Reframing Community--How Consumers Perceive Different Forms of Community and What's Missing

Michael Perman, Consumer Insights at Levi Strauss
John Winsor, Radar Communications

Michael: I am charged with understanding the future. About a year ago, we picked up on two themes:

1. Content Meritocracy--Ideas Win; they elevate your status
2. Searching for Community--we have legs on the ground -- somebody's first kiss, somebody's first day at school, somebody's first drink. People remember their first time

Our company is full of stories from the gold rush and James Dean, Marlon Brando, Woodstock, falling of the Berlin wall--you can choose Lenin or you choose Levi's. It's really important for us to know how these cultural themes emerge and coalesce. We have communities of fashionistas, of hard-working people around the world. Lots of communities. We watch and observe.

John Winsor: Project.. Community explored project.. go out to people's houses.. in reality and in virtuality. Look at the context of consumers' lives as they interact with the the community.

10 thought leader interviews
25 consumer reporters
Ages 20 to 45..
Lots of ethnographies.. Mind maps of communities. .real and virtual community.

COMMUNITY 2.0-Community-Based Innovation

Topic: Take a look at how companies successfully leverage internal and external communities to improve all their innovation processes.

This is a panel discussion with the following players:

• Gwen Ishmail, Decision Analyst
• Sean Belka, SVP, Fidelity Investments (one of my "Visionaries")
• Richard Gotham, Boston Celtics
• Jake McKee, Lead Samurai

(I'm not sure why I wasn't invited to this panel--I was assigned to moderate the customer self-service panel tomorrow.. )

Gwen Ishmael, Decision Analyst--have been working with communities

Sean Belka--We try to help people achieve their big life goals. We decided to build a purpose-built community. We do consumer research, customer listening, develop prototypes, conceptual and functional. We can engage hundreds of people that way. About 1 year and a half ago, we created Fidelity Labs to invite customers to give us feedback, what we could do better and take suggestions and see what was missing. By the time it got where we put things into production, they had been thru 5 stages before they go into production. In retirement planning.. There's only a certain set of folks who really want to engage with us. We've run customer sessions in Boston and we have a lead user panel, but   this makes it easier for us to find the folks who really care passionately about retirement planning.

Jake McKee, was responsible for LEGO group--the adult fan community. It was difficult in the beginning to convince the employees in the company to do this.. They didn't think that the 5% of consumers--adult fans were worth investing in. Having adult fans--like 5 guys who put together a model railroad layout and take it to the mall--and show it to 20,000 customers. One of my favorite projects was LEGO Mindstorms, four adult fans sitting side by side with the product developers. My role was to figure out that both side of the equation don't kill each other. How do we make sure that fans stay enthused. They had no idea that they'd be profiled in Wired magazine. Those 4 people were submitting wiring diagrams, product code, developing marketing efforts. We had 100 slots and 6,000 applicants for  the Mindstorms.

Rich- Boston Celtics. Before I joined the Celtics, I was with an Internet search engine--Lycos. It built market cap for Lycos, but I got into a sports world where community has a whole new world. We have a global community of fans who give us more feedback than we could manage. Most teams don't talk about ticket sales as product development, but we did. Allows us to create products and experiences that meet their needs. I've worked in businesses where the biggest challenge is to get people to tell you what they want.  When we send out a survey, we get a 50% open rate. People want to tell us what they think about the team, finding a parking spot, a trade or a draft pick we made. We've spent the last 4 years building out an infrastructure that allows us with analytics that let us tailor promotions to their needs (go out on Friday night for dinner and a game, business entertainer, family with kids--we'll book restaurant reservations, sit you courtside, etc.).. We've created an analytical infrastructure that lets us put it to work. No one talks about it, but community is what it's all about.

Community 2.0-Lessons Learned from Non-Business Environments

PANEL DISCUSSION

Craig Newmark, Craigslist

In 1994, Craig was working at Charles Schwab evangelizing the Internet. It's an information-intensive business. He began to comment on arts and cultural events. His buddy Jim Buckmaster is the Webmaster. "We pretty much do one thing well. We prefer not to screw it up. I pretty much do full time customer service. I still do. "

Scott Meyer--About.com

Bought a year ago by the New York Times. Our audience is so different than

We're now about the 10th largest on the Internet in terms of business services. We're a distributed publishing network. We're also a technology company... we've developed search optimization and other technologies that are propagated around the company. I didn't start this business. About.com started as a human search company.. rebranded it as About.com to be a full-service portal. We retrenched as search took off.. We made all the people who were organizing content into journalists. and organize communities around those pieces of communities. We've got 600 sites today, each one captures. 60,000 topics. We have the biggest pregnancy site. We also have one on Tatoos, cats, etc. Help you find information and people who share the same interests...

Alexandra Samuel, Social Signal
My previous life was in politics and social science. We worked on on the internet--helping political organizations do grass roots outreach. There were limited ways to mobilize the passion. A couple of years ago, Web 2.0 tools made it easy to mobilize -- A community at the March of Dimes for parents with children who are in neonatal intensive care.

Lessons Learned:
Alex: You have to connect with people who are  passionate about your brands. The approach we use is "Reflective Glory Marketing".. create a community of something that people do feel passionate about. Example: You can Change Everything if you change your bank..Vancity credit ... let's you list all the things you'd like to change in your community... you can't sign up for a credit card there. You can declare what you care about in the community.

Craig: We are a community service to a degree. If you focus on being a community service, you tap into that human social need to connect and to help. Newspapers used to perceive itself as community services, which is important in a country that is trying to be democracies. But in recent years, they've focused on profit margins; they've fired investigative journalists. That's a mistake. There are now folks who are helping journalists get paid for doing investigative journalism. For example, what lobbyists are paying what congressmen for what legislation. It all comes down to community service and trust. It's an interesting observation that the most trusted name in journalism in Stephen Colbert and John Stewart.

Alex: Right, Colbert really gets 2.0.He lets his  fans build and maintain the Colbert Nation web site and he just plays with them on it. 

Scott: I Told the Boston Globe--guys here's the fundamental problem with traditional publishers, I just rented my vacation cottage on Craig's List. You need to decide what you're trying to achieve. If you're a news organization, you have to decide what you're trying to achieve. The NYTimes doesn't want citizen journalism. Lots of people talk about OhMyNews in South Korea. They have 12 or 15 editors, all the content is sent in from folks out in the field.

Craig: Companies should engage their communities to provide better customer service and to improve products. If you have customer company reps on discussion boards where they're helping customers solve problems and have company people visibly listening, to actually change the products and services. Provide discussion boards, engage your community thru them, take some chances. If someone says the wrong thing, it may haunt you, but it's worth the risk. We should also have internal discussion boards. The people on the front lines know a lot more about what's going on... Everyone tells their boss what they want to hear. Internal discussion boards offer the possibility of breaking the internal communication failure.

Scott: About is actually a pretty small organization... 600 people. A lot of our content is generated by contractors. They have their own internal discussion site to share what's going on. It's incredibly valuable. Talk about Control: We did things with NBC for the Olympics.. it's all about the Control of the Olympic Committee. We had a blog that allowed people to sound off about what wasn't working in the NBC coverage of the Olylmpics, which they wanted so they could get out from under that control.

COMMUNITY 2.0 CONFERENCE: BEN McCONNELL-CITIZEN MARKETERS

Ben McConnell provided the second keynote.. His blog is Church of the Customer. 

I came back late from the break, so I missed some of his opening remarks, in which he was talking about MTV's "catch-up" attempt to get their customers to remix video and music.

Then he went on to talk about the number of people who are involved in "Citizen Marketing." Traditional media companies are being disrupted. But so are companies in every industry.

Why is it happening?
It's so easy to become a content creator.

Profiles: Fernando Sosa and his friend Thomas.. in their 20's. Both were involved in Second City Improv. They came up with a spoof/rap on Chicken McNuggets. Their friends saw their song, posted on YouTube, and couldn't get it out of their head. The total cost of production was $1.. the cost of the McNuggets. If an agency had done it, it would have been $1.5 million. Now it has attracted 100,000+ users on YouTube and on StupidVideos.com

What we have here are the roots of amateur culture taking shape. They're free to create whatever they want. They've grown up having their lives documented for them by their parents. So it's natural for them to document their own lives and share them with their friends. This is why YouTube has become the fourth media channel.

Tila Tequila--most connected person on MySpace... 1.7 million friends. A young woman with a foul mouth. Released a song. Started a music career. Released it directly to iTunes, bypassing traditional record companies. She has the ability to create this stuff. And the ability to connect to a huge set of folks.

Amateur culture collides with traditional marketing. When people create content about your company without your approval, they are Citizen Marketers. Marshall McLuhan said, "we shape our tools, then our tools shape us"...

We're now social media. Include the community into the media and inviting them to engage. More than 55% of kids 12 to 17 are involved in social networks. This is being fueled by access to broadband.  By the end of Sept. 2006, there were 139 million households with broadband access.. X 4 per household. Soon, we'll have 600 Milion people online around the world who have broadband access and will be creating STUFF.

Freedom of speech and freedom of assembly -- traditional values.
We need to give people a voice, a vote and a vocation.

This is influencing politics in a very big way.. in the very first week.. 70,000 members on Mybarackobama.com. 2400 separate groups, hundreds of fundraising pages--all of this in one week.

All of this adds up to influence.. that's what YOU hope to do--let the community become the voice of your brand and your product. The traditional media and broadcasting media are losing their sway. The number one driver of influence is Word of Mouth. People look online and it influences conversations. The traditional structure of "getting the message out" to the people," -- the people organized into your community becomes the message. Becomes the clarification and edification of who you are and what you are...

JOHN HAGEL's KEYNOTE at Community 2.0 Conference

This is the inaugural Community 2.0 conference being put on by Shared Insights. It's being held in Las Vegas March 12-14th.

Conference was kicked off by Barry Libert, CEO of Shared Insights, and then by Francois Goissieaux, the conference chair, who both stressed the mood of informality and strategic conversations.

JOHN HAGEL'S KEYNOTE

John Hagel led off with the keynote. See his blog. Edge Perspectives. 

Here are his remarks:

I'm very encouraged about the commercial prospects of online communities.

My book NetGain was published in 1997, was one of the first to focus on online communities in business. Every business plan in 1998 claimed to be about virtual communities.. the result was a lot of wasted investment and backlash. Most of the virtual community initiatives have operated under the radar screen.

In the past 12 months, I've gotten a series of phone calls from blue chip execs asking for help with virtual communities. So my personal barometer says that there's a time for climate change.

Community 2.0 is heralding a rebirth of online communities.

One lesson learned from my book: people focused on the opportunities, not the challenges..
The first challenge has to do with language. What are virtual communities? (anything that involves conversations among people?

Hagel's definition of Virtual Communities:
Establishing connections among people with common needs on shared networks.

1. Shared Discussions among people over time.
2. Shared relationships.
3. Shared identity with one another and with the community.
4. Shared meaning that grows over time.

The resurgence in virtual communities? They respond to deep needs we all have.

Virtual communities take a couple of different forms. Some started in physical space and became electronic. Others started electronically and added the physical community aspect.

THE CORE CHALLENGES

Diverse Skills and cultural challenges:

1. Combining published content with interactions
2. Social Interaction -- How do you catalyze and sustain relationships
3. Economic business models --

Every community starts with a  spike in one of  these three areas.. but don't do a good job of combing all three.

Three key shifts in mindsets:

1. Move from a benefit to sponsor focus to a participant focus
2. Move from short-term, get rich quick focus into long term value creation focus
3. Move from a top-down, imposed organization view to a bottom up emergent organization view.

You can't control them. You want to enhance the initiatives of the participants. Most large companies bring mindsets  that are

Organizational Challenges and Organizational Frameworks required

1. Organization-Who's accountable? Do they have the status and influence within the organization to mobilize the resources and talent required to foster community? Are they too narrowly focused in their interests? Marketing/Customer Support/Product Development or any other functional area? If the person has a narrow view, the community's focus will be narrowed.
2. Systems-What is being measured and what is being rewarded? How will they define success? What are the relevant operational metrics? Are there systematic reviews? Do we reflect on how we're doing?
3. Skills-Who has the relevant experience? Are they being mobilized into the virtual communities?

GLOBAL APPLICATIONS OF CUSTOMER CO-DESIGN: EMPOWERING VILLAGERS IN RURAL AFRICA

I just returned from a two-week visit to the campus of the Uganda Rural Development and Training (URDT) programme and of the brand new and quite revolutionary African Womens’ University (ARU) for which I am one of the few non-African Council members.

It seems fitting on International Womens’ Day to celebrate the hope and creativity that these young women bring to their communities in rural Africa. This is the first all-women’s university in East Africa. But what is even more important are the nature of its hand-picked students, the nature of its curriculum, and the impact these students are already making in their first year of study.

Photo: Six of the first-year ARU Students: from left to right: Madrene Nabukenya, Flavia Nambooze,  Resty Namubiru, Apophia Kyomukama, Eunice Kyalikunda, Doreen Kasangaki, Betty Kauma Namukaba (RIP).