ROUNDMAP_RoundTable_2000_shutterstock_1120985537

© 2014-2019 Edwin Korver, CEO – CROSS SILO BV – all rights reserved – MOBILE +31-(0)6-52341111
Registered at BOIP.INT i-DEPOT 094029 (3.0), 095482 (3.1), 103610 (3.2), 105496 (3.3), 106619 (3.4), 110465 (3.5), 115384 (3.6)

CLOSING THE GROWTH GAP

ROUNDMAP™ is a framework directed at closing the gap between a firm’s growth aspirations and its commercial performance through Growth Activation™, by verifying projected revenue streams, business models and strategies, eliminating organizational barriers, and boosting the front-line operation.

ROUNDMAP™ is a creation of Edwin Korver, CEO of CROSS-SILO BV, THE NETHERLANDS

THE GROWTH GAP

Studies report that a mere 1 in 5 organizations succeeds in achieving their desired growth targets in revenue and profitability. This Growth Gap ─ the gap between aspiration and realization ─ may be related to inadequate considerations of the opportunities (= attainability), the capacity or capability of the organizational infrastructure to support successful execution (= serviceability), or even some antagonistic force inside or outside the organization.

To understand what causes the gap in a particular situation, we’ll first need to know whether the growth targets are at all feasible, given the market potential and the organizational infrastructure. Secondly, what revenue streams (could) have been identified? And thirdly, how effective is the current customer development process?

This assessment will lead to an actionable plan which may include suggestions for improvements to be made to the organizational infrastructure, corporate culture, business strategy, business model, market segmentation, partnerships, revenue streams, marketing strategy, cross-functional collaboration, or customer development processes.

GROWTH LIMITATIONS

However, when we set targets too aggressive, someone will need to pay the price. For instance, if we aim to increase our market share by 5% within 12 months, we may have to force our suppliers to lower their prices which may result in lower quality products, lower customer satisfaction, and lower retention rates, thereby increasing the costs of customer acquisition. Excessive growth aspirations come at a price: it’s bound to lead to greater inequality, social instability, and lower economic growth. Therefore, we believe EQuitable growth is part of a firm’s Corporate Social Responsibility.

Economies of scale and scope are limited as well. Economies of scale are cost advantages reaped by companies when production becomes efficient. A company can create a diseconomy of scale when it becomes too large.

GROWTH ACTIVATION™

Our approach is what we refer to as: Growth Activation™.

Growth Activation focuses on two aspects:

  1. Closing the growth gap, caused by underperformance, and
  2. Extending growth, through change-, and transformation-intiatives.

(*) We’ve derived the term Growth Activation™ from Marketing Activation ─ the execution of the marketing mix as part of the marketing process ─ and Customer Activation ─ motivating customers to move to the next stage of their lifecycle faster than they would on their own.

FRAGMENTATION AND FRUSTRATION

Today’s business enterprises are exceedingly fragmented due to specialization ─ leading to mental and functional silos, tunnel vision, internal competition, and in some cases even turf wars. These negative effects tend to obstruct the creation and delivery of value while frustrating customer experiences which will ultimately deteriorate commercial performance.

When we start with a fragmented leadership team, leading to separate groups rooted in their values, beliefs, symbols, and taxonomies, the execution of the business strategy will undoubtedly be crippled. If additionally, departments hoard relevant customer data, reluctant to share it with others, the mission could be at grave risk.

We’ve identified several ways to break down the silo-mentality, such as introducing customer roundtables, appointing cross-functional liaisons to build cross-functional teams, defining rallying goals and objectives, and so on.

THE ULTIMATE LEVEL OF TRUTH

We’re convinced that the employee-customer interaction is the Ultimate Level of Truth™. This is where new opportunities emerge and threats can be identified quickly. Studies confirm unequivocally that an integrative approach towards the customer development process leads to substantially better performance (up to 765%; Kotter and Heskett, 2011).

Obviously, for any customer development process to perform well, it needs to address the right audience with the right products while telling the right stories, using the right channels, and allocate the right resources, skills, and capabilities.

CUSTOMER DYNAMICS

ROUNDMAP™ is an integrative framework on Customer Dynamics. Customer Dynamics is a theory on customer-business relationships that describes the ongoing interchange of information and transactions between customers and organizations. It goes beyond the transactional nature of the interaction to look at emotions, intent, and desires. It views interactions as a chain of events rather than single-point occurrences. Customer dynamics is a subset of organizational dynamics, which describes how people function together to accomplish a task.

We perceive Customer Dynamics as a firm’s intermediate primary activities ─ derived from Michael Porter’s value chain (to the left).

By ‘intermediate’ we mean those activities that exist in between the firm’s back-office and the marketplace, enclosing both the business-touching as well as the customer-touching functions of the customer development process.

This unique arrangement made it easy to outline the SWOT-model (Strengths, Weaknesses, Opportunities and Threats), as well as the Backstage and Onstage Competitive Advantages, relevant to defensible differentiation.

ROUNDMAP DEFINITION

ROUNDMAP

A sense and respond approach to drive customer excellence by adapting the strategy, business model, and value orchestration to deliver significant value to customers.

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ROADMAP

How to get from purpose to (a transformative) strategy, business model, operating model, and marketing model with which to drive customer excellence.

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ROUNDTRIP

The dynamics that lead to the delivery of value that is perceived as significant to customers to drive customer loyalty and as a result increase operating revenue.

While ROUNDMAP™ focuses on value delivery and frontline performance optimization, other frameworks are generally cost-oriented. To increase operating income both aspects ─ cost and performance ─ should be considered.

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Cultivate a deep understanding of yourself - not only what your strengths and weaknesses are but also how you learn, how you work with others, what your values are, and where you can make the greatest contribution. Because only when you operate from strengths can you achieve true excellence.

Peter Drucker, best-selling author and management consultant

ENHANCE YOUR PERFORMANCE

What to expect in terms of commercial outcomes from adopting the integrated approach of the ROUNDMAP™ Framework for Customer Excellence?

Although the effects of the deployment of the ROUNDMAP™ methodology will depend on the specific circumstances, the authors of HumanSigma suggest that increased engagement, which is one of the goals of the ROUNDMAP, will produce results ‘that far exceed companies’ expectations’. Kotter & Heskett’s extensive research on the effects of culture on performance even showed a 765% net income improvement over 11 years (~22% YoY-growth, between 1977-1988).

+300%
Towers Watson, 2011

"More Engaged Employees"

+340%
Gallup, 2008

"More Engaged Employees and more Engaged Customers"

+765%
Kotter & Heskett, 2011

"More Collaborative and a less Adversarial Culture"

You may have noticed that these impressive growth numbers aren’t the result of better marketing, sales, or customer service, rather from a culture in which employees are given the opportunity, skills, systems, and trust to be able to commit themselves to offer customers the value they deserve and take full responsibility for it. We call this customer excellence.

PREREQUISITES

While the ROUNDMAP™ is the go-to framework for maximizing the performance of value delivery and the customer development process, it does require certain prerequisites. To create the appropriate conditions the ROUNDMAP™ integrative framework offers an effective approach allowing the firm to transcend past performances.

No one knows the cost of a defective product - don't tell me you do. You know the cost of replacing it, but not the cost of a dissatisfied customer.

W. Edwards Deming

THE DRAWBACK OF SPECIALIZATION

To understand the difference between an integrated and a fragmented operation, we’ll need to explain the concepts of the division of labor and specialization, which began in the past century.

The division of labor is one of the hallmarks of capitalism. Before Henry Ford’s advancement of the assembly line for automobile production, cars were primarily produced by craftsmen or artisans. Every member on the team had a very good working knowledge of virtually all aspects of car manufacturing. With the assembly line, a small team of people designed the car and assembly process, while a larger team of unskilled workers built the cars.

Consequently, the Industrial Revolution brought specialization from the division of labor, by standardizing and allocating work, which brought increased productivity. This specialization, however, decreased self-sufficiency and people became increasingly interdependent on one another, leading to fragmented structures (silos), a limited sense of responsibility and a narrow scope of awareness.

SCIENTIFIC APPROACH

To illustrate the underlying scientific management approach, often attributed to Frederick Windsor Taylor, we’ve created the following figure of the compartmentalized product assembly line:

INDUSTRIAL EFFICIENCY

While Taylor sought to optimize industrial efficiency, ultimately leading to robots replacing much of human labor, few will realize that a similar scientific management approach to increase employee productivity has also been applied to today’s customer development processes.

To illustrate this, we’ve created a schematic illustration of the customer creation line (process):

FRONTLINE PRODUCTIVITY

Are you confused to see how customers are passing by stationary frontline employees, on an imaginary conveyor belt, similar to how products, like cars, passed stationary factory workers for over a century?

This is in fact how most creative processes are organized today. And it should come at no surprise that this approach leads to employee disengagement, similar to how industrial compartmentalization led to disengaged factory workers.

Margaret Heffernan: “The problem is that efficiency works very well if you know exactly what you are going to need. But when the anomalous or the unexpected comes along then efficiency is no longer your friend ─ especially when the unexpected becomes the norm”. So how are we going to deal with the unexpected if we’re being controlled by algorithms that steer us towards a future that isn’t very likely to happen?”

HENRY FORD: 370% eMPLOYEE TURNOVER

Apparantly, Henry Ford did not believe factory workers needed to bother with the final product and would be more than happy to do repetitive work routinely. However, Ford underestimated the effect this had on people: employee turnover rose to 370%. In 1913 Ford hired more than 52.000 men to keep a workforce of only 14.000. Even today, the automotive industry’s track record on hiring and retention is ‘unacceptable’.

Henry Ford

SURVEILLANCE CAPITALISM

As suggested by Harvard professor and celebrated scholar Shahshan Zuboff there is a third arrangement: the assembly line of surveillance capitalism. According to Zuboff, companies like Google and Facebook offer free access to their platforms and services in exchange for a user’s behavioral data whiich allows these companies to predict their future buying or voting behavior. This data is then sold to advertisers as ‘qualified leads’ to market their products and services against.

THE SILO SYNDROME

Best-selling author and entrepreneur Ricardo Semler identified the negative effects of industrial compartmentalization on the level of engagement of factory workers. However, by dividing the frontline operation into separate teams and departments, we’ve adopted a similar form of siloization and as a consequence led office workers to become disengaged as well.

When interdepartmental turf wars obstruct the exchange of information, because of resentment and cynicism between teams, blocking cross-functional solutions and creating inefficiencies throughout, the business will fail in its mission.

Silos tend to obstruct effective communication between separate teams and departments, stall innovation, lower employee engagement, increase resistance to change, and thereby decrease operating performance.

LACK OF EMPATHY AND COMMITMENT

Employee disengagement will result in a lack of empathy for and commitment to a customer’s cause. Departments and individual workers become self-centered, entrenching the silo effect, and inevitably hurting customer performance. This goes back to the business strategy: instead of trying to be the best, leading to machismo, tribalism, fragmentation, and friction, we should strive for uniqueness, appealing to our creativity and our sense of purpose and meaning.

JOHN P. KOTTER: OPTIMIZED FOR EFFICIENCY

John P. Kotter, Emeritus at Harvard Business School, stated: “Any company that has made it past the start-up stage is optimized for efficiency rather than for strategic agility—the ability to capitalize on opportunities and dodge threats with speed and assurance”, while adding to it, “The very structure we have created to operate efficiently and effectively today gets in the way of what we need to do to innovate for tomorrow”, therefore, “Organizations need a ‘second operating system’ that works in tandem with the traditional hierarchy, the original “operating system” that the organization depends on to get day-to-day tasks completed and out the door.”

Kotter

The paradox of the modern age, I realized, is that we live in a world that is closely integrated in some ways, but fragmented in others. Shocks are increasingly contagious. But we continue to behave and think in tiny silos.

Gillian Tett, FT journalist, author of The Silo Effect

CROSSING THE SILOS

We are not suggesting to break down the silos: they come naturally. We merely propose to cross the silos and embrace a stakeholder-focused, collaborative and meaningful mode of operation.

To advance from a siloed to an integrated customer development process, we’re suggesting to build a bridge, a fourth department: Success. This department needs to be assigned with the task to pro-actively assist customers in achieving their objectives sooner, rather than later, and in the process increase the significance of future relationships.

RETURNING CUSTOMERS

While it makes sense to want to create more one-off customers as part of a product-centric business model to increase market share, in most other cases ─ provided we want the business to be more profitable ─ we need customers to return more often and spend more money throughout the extended customer relationship.

Therefore, the focus should be on getting customers to return, or at least refer. There is a bonus: it is at least 5x times less expensive to retain a customer and get them to repurchase than it is to acquire a new customer.

UNIFIED CUSTOMER PROFILE

To improve value creation and delivery each frontline employee should have access to a unified customer profile to be able to act on relevant emotions, intent, and desires. Customer feedback needs to be shared continuously, preferably at a weekly Customer Roundtable, to advance from a discrete to a collective sense of achievement.

CUSTOMER CAROUSEL™

Once you have the right processes and systems in place, developed a collaborative mindset based on a shared vision, and established cross-functional teams that understand the customer dynamics, you’ll appreciate the high level of detail we’ve put into describing the entire customer lifecycle process.

Common practice dictates that the customer development process consists of a marketing and a sales funnel, aimed at getting a customer to buy. We believe this to be a great misconception: purchase is a transitional state, not an end point.

Most marketing and sales funnels describe ‘purchase’ as a final stage while a few models add ‘satisfaction’ and ‘advocacy’ but without describing how to reach those extended stages. Additionally, these funnels typically address just one aspect of the engagement process while it takes two-to-tango.

As such, we perceive the customer development process as a helix ─ a cyclical process consisting of:

  • 4 Stages ─ Acquisition, Creation, Retention, and Extension.
  • 4 Departments ─ Marketing, Sales, Delivery, and Success.
  • 8 Moments of Engagement ─ Attraction, Awareness, Consideration, Confidence, Exchange, Experience, Satisfaction, and Significance.
  • 8 Moments of Reflection™ ─ Attention, Interest, Desire, Action, Anticipation, Honor, Happiness, and Advocacy.

To support this arrangement, we’ve introduced the term Customer Carousel™ ─ despite what others may suggest, using the term customer journey, we can’t dictate how customers orientate themselves or buy products. However, by using the right channels and creating responsive touchpoints, we may be able to anticipate their moves.

We’ve created 3 visual representations to explain the arrangement of the Customer Carousel.

 #1 - LIFECYCLES

Customer Carousel™ can be perceived as a screenplay composed of 4 acts (marketing, sales, delivery, and success). These acts are performed on 8 stages ─  the Moments of Engagement. What we perform on each stage is defined by the Prompts. The Moments of Reflection™ is how the audience (customers) experience each performance and respond to it.

#2 - TIMELINE

Because a circular layout might be difficult to grasp, we’ve also created a more familiar linear layout. On the bottom half you’ll find the brand-initiated Moments of Engagement (and the Prompts that drive it) while on the upper-half you’ll find the customer’s journey, identified by the Moments of Reflection™:

man-left-to-right-black

#3 - PASSAGEWAYS

Another way of looking at the Customer Carousel™ is by perceiving it as a series of passageways. We’ve described it in more detail here. The dark person (left) points to the start of the initial sales cycle while the white person (right) points to the start of the recurring sales cycle:

Each passage is a step forward in the Customer Carousel™ while each passing-through has two aspects: on the one hand, the intent of the brand that created the touchpoint, and on the other, the intent of the customer, derived from their response to the touchpoint and analyzed from their subsequent behavior.

PETER DRUCKER: PURPOSE OF BUSINESS

Despite Peter Drucker suggestion that “The purpose of business is to create and keep a customer”, few companies actually have a customer retention strategy even though an increase of 5% retention rate raises profitability by 25-95% (Harvard).

And: “Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”

Peter Drucker

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.

George Bernard Shaw, Man and Superman (1903)

PROCESS TRANSFORMATION

It would be naive to expect an organization to make an instant leap, from a fragmented to an integrated mode of operation. It requires a radically different mindset, involving trust, commitment, and accountability, as well as cross-departmental information systems.

However, it can be done and it is worth your time and effort. For it has been proven time-and-time again that silos stifle organizations, depriving all stakeholders of the full potential.

“In order for collaboration to take place, managers must their silos and their perceptions of power.”

Jane Ripley, “Collaboration Begins with You: Be a Silo Buster”

VALUEHUB THEORY

Prior to constructing the ROUNDMAP, we had created the ValueHub Theory which in retrospect correlates to Michael Porter’s Value Chains and (later) Value Streams.

VALUEHUB THEORY

In 2012 we were invited to sit at a table to help a local radiostation adapt to the digital age. During this meeting, we described how we perceive the role of a modern radio station which in effect was ‘the collection, curation, and distribution of relevant content from multiple sources to multiple channels.’

We soon realized that the same processes could also be applied to ‘the procurement, creation, and delivery of value’, We’ve described what we refer to as the ValueHub Theory in more detail here (part 1) and here (part 2).

Therefore, another way of explaining why we divided Porter’s primary and secundary activities into three separate dynamics is by perceiving all value orchestration processes.

The image above: Typically, value creation comes at a cost (credit), driven by the business dynamics. Value delivery, on the other hand, creates revenue (debit), driven by the customer dynamics. The result (margin) ─ what can be captured as value to offset the costs of all value orchestration processes ─ is determined by the market dynamics. As we have seen with the rise of digital platforms, markets can be restructured to allow value to be created and captured in innovative ways.

Strategy Execution

Now let’s have a look at how to position the entire ROUNDMAP: from strategy, chaining, business model, value position, marketing strategy, down to the employee-customer interaction.

As shown in the figure below, the Customer Carousel™ is a lateral process and as such the Ultimate Level of Truth™ of the cross-structure (top-down/vertical) execution of the business strategy.

We’ve created an image to explain where we position the Customer Carousel relative to cross-structure strategy execution, cross-silo performance, and cross-market intelligence:

As a matter of fact, the Customer Carousel™ is a helix: as the brand touches suspects, prospects, and leads, the objective is to convert them to customers. This may require multiple communication cycles that revolve over time until the customer is on-boarded. And even after that, the customer will continue to revolve, never to return to the same circumstances.

Or as the Greek philosopher Heraclitus used to say: “Everything changes and nothing remains still. You cannot step twice into the same stream of water.”

MAPPING COMPOSITION

ROUNDMAP™ is covering three structural levels: (1) Business Strategy, (2) Strategy Execution, and (3) Performance. In the figure below you can see how these three levels are laid out in the system.

At first glance the ROUNDMAP might look overly complex, not allowing you to see the forest for the trees, which can be discouraging. However, you’ll need to perceive it as a three-in-one mapping system.

These three layers are intertwined: it makes no sense to measure customer performance without being mindful of aspects like a mission statement, objectives, goals, business model, strategy, tactics, or market circumstances.

We believe you are now ready to take a peek at the ROUNDMAP.

One final remark: we’ve designed the layout as a hub-and-spoke, with the value hub in the middle, while the spokes represent the 8 stages that customers typically go through ─ not necessarily in a fixed order.

VIEW THE ROUNDMAP (PDF)

TARGETED AUDIENCE

ROUNDMAP™ aims to help firms, whether for-profit or non-profit, that are faced with disappointing customer performance – due to siloization or otherwise – and are looking for ways to improve operating outcomes. ROUNDMAP™ suggests to focus on cross-functional collaboration, create more meaningful and purposeful value, build longer-lasting differentiation, advance business modeling, and shift to proactive customer services; all leading up to increased customer loyalty.

“Customer centricity is a strategy that aligns a company’s development and delivery of its products and services with the current and future needs of of customers in order to maximize their long-term financial value to the firm.”

Peter Fader, author of “Customer Centricity” and Professor of Marketing at Wharton University.

BUSINESS MODEL MATRIX™

We’ve just looked at the overall composition of the ROUNDMAP. After having created the Integrated Customer Lifecycle™, we found that the traits of two known business models ─ product centricity and customer centricity ─ correlated to marketing and sales respectively. This opened up a new way of thinking about business models.

By adding an extra dimension ─ serviced used versus products sold ─ we were able to incorporate, in addition to the known AS-A-PRODUCT type of business models, two AS-A-SERVICE type of business models into a two-by-two matrix.

Business Model Matrix™ provides a single framework of Elemental Business Models™, ranging from Product Centricity to Network Centricity. Whether you want to leverage your ROI from a Share of Market or a Share of Transaction, or otherwise, is part of your strategic heading, while an additional choice of value discipline offers further means of differentiation.

Previously, a business was either focused on growing market share (product-centric) or gaining a larger share in the customer’s wallet (customer-centric). But these two models did not account for the rise of the platform economy, servitization or the sharing economy. The framework was incomplete.

After matching Marketing to Product Centricity and Sales to Customer Centricity, we were able to identify Delivery with what we call Resource Centricity and Success with what we refer to as Network Centricity. This then became the Business Model Matrix™.

© 2014-2019 Edwin Korver, CEO Tenfore BV – all rights reserved – MOBILE +31-(0)6-52341111
Registered at BOIP.INT i-DEPOT 094029 (3.0), 095482 (3.1), 103610 (3.2), 105496 (3.3), 106619 (3.4), 110465 (3.5), 115384 (3.6)

ELEMENTAL BUSINESS MODELS

The Elemental Business Models™, identified by Edwin Korver, each has a distinct dynamic. Complementary to Don Peppers’ graphical representation of product and customer centricity (the AS-A-PRODUCT business models to the left), we added two new graphs to complete the series.

Leverage greatly determines the business model. Prior to the Business Model Matrix™ business literature recognized two levers: Share of Market (blue) and Share of Wallet (green). We pride ourselves to have complemented the set.

The leverage of a resource-centric business model, Share of Utilization, comes from an ROI on deployable resources. For instance, if you deploy a car in a car-sharing concept, the objective is to utilize the car to its maximum capacity (Car2Go).

On the other hand, if you offer a ride-sharing platform ─ a network-centric business model ─ your objective isn’t to plan for capacity but to get as many riders and ride-hailers together to facilitate rides and obtain a Share of Transaction (Uber).

A product-centric business model focuses on gaining market share to profit from economies of scale, while a customer-centric business model focuses on a select group of customers that are likely to increase spending.

A resource-centric business model is all about planning for capacity by utilizing a syndicated resource, while a network-centric model aims to grow participation of an aggregated network to capture a share of transactions.

ROUNDMAP STRATEGIC PLAYBOOK

To understand the level of sophistication of the ROUNDMAP™, we have created a strategic playbook, explaining some of the most noticeable traits of each of the four Elemental Business Models™.

Whether you aim to profit from economies of scale or from planning for capacity, or something else, is up to you. But each business model has concurring dynamics that are hard to ignore. F.i., a product-centric business model demands campaign-based marketing, while a network-centric business models benefit from word-of-mouth. A resource-centric business should emphasize on the service chain, while a product-centric one needs to address the supply chain.

There is so much more to this. If you want to learn more, subscribe to our newsletter (below) or apply for the Inner Circle Membership to access exclusive content and to attend the ROUNDMAP™ Introduction Course.

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PLANNING FOR SUCCESS

Choosing the right business model and value discipline is be vital to success. Airbnb’s market valuation ($38 billion in 2018) is higher than Hilton and Hyatt combined, yet it has no hotels. The new AS-A-SERVICE business models have proven to be alarmingly disruptive and there will be more to come.

“I know firsthand the complexities of leading an enterprise through business and technology transformation. It takes intense focus, a strong drive, and a clearly communicated to inspire and take an organization from where they are, to where they need to be - or where they want to go.”

Safra A. Catz, co-CEO, Oracle Corporation

TRANSFORMATION

We’ve discussed the Integrated Customer Lifecycle (Customer Carousel), Business Strategy, and the Elemental Business Models. Now let’s have a look at how we can change our heading to adapt to the world around us, or discover a new path for others to follow. 

We believe business models can develop in two directions: 

  • Business Model Regeneration (= evolutionary)
  • Business Model Shifting (= revolutionary)

Business Model Regeneration is an evolution of an existing Elemental Business Model™ ─ driven by advancing technology, new rules and regulations, etc. For instance, the traditional supermarket is a product-centric business model, focused on growing and defending market share, while the online supermarket is a contemporary (digital) regeneration.

Business Model Shifting is a revolution to the next Elemental Business Model™ in the Business Model Matrix. Shifting is, therefore, the most transformative of the two. The best way to explain ‘ shifting’ (or revolving) is by looking at IBM.

IBM

In 1974, IBM – known as Big Blue – started to move away from battling for market share by focusing on a select group of high-spending customers, allowing the company to maintain its high standards and price levels. However, in 1993 it found itself in dire straits, reporting a $5 billion loss, the highest in American corporate history.

Desperate to turn the ship around, IBM could have lowered its prices or introduce a B-brand. Instead, the company decided to shift its focus to high-end integration services and acquired the consultancy branch of PwC to fill a huge capabilities gap. One decade later the company had not just overcome its perilous situation but tripled in size.

Over time, IBM had shifted from a product-centric to a customer-centric business model. While under Louis Gerstner Jr. it had shifted to a resource-centric business model – monetizing on its highly skilled workforce of integrators and consultants.

However, in 2017 the company again reported a $2.6 billion loss. They will need to fill another capabilities gap to become a network-centric business, which is the next logical path in the Business Model Matrix.

BUSINESS MODEL SHIFTING VERSUS REGENERATION

MODEL HYPING

One might perceive that for instance the Sharing Economy is something completely new but it isn’t. If you ever took a plane, train or taxi, you were essentially sharing a resource. However, technology has improved the convenience of hiring a resource by taking away the central dispatch function, which allowed the market to grow exponentially.

And what about the Platform Economy? Over two thousand years ago, traders and buyers met along the Silk Road, a series of trade routes between China and Europe. Facilitating a digital platform (marketspace) is similar to setting up a traditional marketplace. However, as virtual markets are no longer limited by physical constraints, value can now be distributed far more widely than ever before (Facebook, Uber, eBay, Taskrabbit, Producthunt, etc.).

MORE

SITUATIONal ANALYSIS

Before optimizing the customer lifecycle processes, we’ll need to consider the current circumstances. It makes no sense to increase marketing or sales efforts if customer expectations, i.e., preferences have changed dramatically due to far superior value propositions by competitors.

Whenever the business enterprise is faced with disruption ─ premature discontinuation of revenue streams ─ the business can either initiate Change (improvement the current operation) or Transformation (envision a new future). However, if the business is yet undisrupted, it has a choice between Optimization (increase productivity) and Innovation (increase agility).

Prior to adopting the ROUNDMAP we’ll, therefore, first need to assess the current status quo with regards to market circumstances, historic performance indicators, current initiatives, disruptive exposure, etc.

CYCLE OF DISRUPTION

To understand the impact of (often technological) disruption, we’ve created the Cycle of Disruption™ ─ based on Business Cycles (Expansion, Crisis, Recession, Recovery) by Kitchin, Juglar, Kuznets, Schumpeter, Perez, and Kondratieff:

The slide (PDF) can be found here.

DESIGN FOR Experience

Depending on the Business Strategy, value (equity) is derived from a focus on one of four Elemental Business Models™. For instance, brand value is firmly related to a product-centric business, while an excellent customer service experience will be most critical to a resource-centric model.

Experience Design (ED) has been at the forefront for some years now. However, few realize ED has to be tailored to the business model. For instance, in the case of a product-centric business model, the focus should be on building brand experiences (Coca-Cola), while in the case of a Resource Centricity it is mostly about user experiences (convenience).

ROUNDMAP_Experiences

CUSTOMER EXPERIENCE

Customer Experience, in our view, isn’t the all-encompassing experience. It is the main driver in case of a customer-centric business model, in which a group of comparable customers – for which the business can fulfill similar needs – means more to the business than others. They are their preferred customers and customers need to experience this.

DIGITAL BUSINESS TRANSFORMATION

A business strategy of ‘trying to be the best’ leads to machismo and tribalism, sabotaging cross-functional solutions and diminishing the chances of achieving any key objective.

We’ve looked at business models and how they can be developed, to either respond effectively to disruption or to be the disruptor (break-through innovator).

Considering all this, what are the odds that digitalization by itself will transform a business?

70% of Digital Transformation (DT) initiatives fail, according to a recent McKinsey study. Indicating a humongous amount (900 billion out of 1.3 trillion USD over 2017) of money and time wasted, let alone the opportunity costs.

A business does not transform because it adopts fancy digital technology, like artificial intelligence, big data analytics, micro-services, or some other bag of tricks. These are mostly Change-initiatives to increase productivity and profitability.

Digital Transformation should be understood as Digital Business Transformation, provided the intention is to actually transform the way the business operates based on a vision of the future ─ instead of updating the past.

The biggest challenge is not to raise the level of digitalization, but to transform the mindset of the people inside the company. To get them involved, engaged, and committed to delivering significant value to increase customer loyalty.

RESEARCH KPMG - the truth about customer loyalty (2019)

What keeps consumers loyal to their favorite product brands (source: KPMG):

  • Product Quality – 74%
  • Value for Money – 66%
  • Product Consistency – 65%
  • Customer Service – 56%
  • Easy Shopping Experience – 55%
  • Product Assortment – 55%
  • Pricing – 54%
As you will have noticed, most of these characteristics are not related to digitalization, rather than how the business creates, delivers, and captures value. In a sense, it is very much business-as-usual: you’ll still need to offer great quality, at the right price, during each sales cycle, supported by great customer service.

Culture eats strategy for breakfast, execution for lunch, and performance for dinner.

Edwin Korver, author and management consultant

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NEWS

ROUNDMAP-Cover-digital-business
BUSINESS MODEL MATRIX
Edwin Korver

Digital Business Transformation

Digital Transformation has become a prevalent topic on the boardroom agenda, however, according to BT most CEOs aren’t that confident that their company will be

ROUNDMAP-ValueMeter
GENERAL
Edwin Korver

Change or Transformation?

Digital Transformation appears to be on everyone’s agenda, however, as will demonstrate: most transformations are actually change-initiatives. What’s the difference between Change and Transformation? Change

ROUNDMAP-Yesterday
GENERAL
Edwin Korver

Yesterday When I Was Young

A few days ago I watched an interview on television with a well-known Dutch poet, performer, and author, Jules Deelder ─ in celebration of his

Making a Case
Edwin Korver

Master of Business Resilience

Following our previous post in which we introduced the Cycle of Transformation and the Cycle of Disruption, we like to propose the antifragile counterpart of

ROUNDMAP-Almere
Adapt or Die
Edwin Korver

Businesses don’t transform by themselves

We know digital transformation is most critical to business survival. However, research by Prophet and VINT suggests that executives are becoming increasingly aware of two

ROUNDMAP-Lotus
ROUNDMAP™
Edwin Korver

The Wheel of Dharma

Despite not knowing about the Wheel of Dharma and the Eightfold Path, the resemblance with the structure of ROUNDMAP™ is remarkable to say the least.

ROUNDMAP-Uncertainty
Adapt or Die
Edwin Korver

How to deal with uncertainty?

Margaret Heffernan is a former CEO of five businesses, author of five books in which she explores business and effective leadership, and a part-time lecturer

ROUNDMAP-Conflict
Adapt or Die
Edwin Korver

Heffernan: Dare to Disagree

Margaret Heffernan is a former CEO of five businesses, author of five books in which she explores business and effective leadership, and a part-time lecturer

ROUNDMAP-Cover-Carousel
Customer Carousel
Edwin Korver

Advancing The Customer Carousel

I truly love the series Mad Men, however, there is one scene in particular, which was the grand finale of season one, that has kept

ROUNDMAP-Keystone
Customer Carousel
Edwin Korver

Who’s the boss?

In order to explain something complex, it may help to use an analogy. Therefore, let me tell you about ancient pillars, keystones, and bosses with

ROUNDMAP-Return-Refer
Customer Carousel
Edwin Korver

What makes customers return or refer?

ROUNDMAP™ Integrated Customer Lifecycle differs from the traditional sales cycle – which focuses on achieving customer satisfaction – because we believe customers won’t refer or

ROUNDMAP-News-IBM
Adapt or Die
Edwin Korver

Adapt or Die: IBM’s Rebirth

It is hard to watch what many companies are going through today. Automakers, the news media, entertainment industry businesses, banks, and other financial institutions–they and

ROUNDMAP-News-Picking-order
Adapt or Die
Edwin Korver

Bypassing the Pecking Order

Margaret Heffernan is a former CEO of five businesses, author of five books in which she explores business and effective leadership, and a part-time lecturer

ROUNDMAP-News-AQ
Adapt or Die
Edwin Korver

Adapt or Die: Adaptability Quotient (AQ)

Whether a startup has the potential to become a success very much depends on its founder(s). To assess the leadership of a startup most investors

ROUNDMAP-News-Compassion
Making a Case
Edwin Korver

The Case for Customer Compassion

In a previous post, we made the case for empathy. Today, we would like to make the case for customer compassion. When we made the

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