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WHAT IS ROUNDMAP™ ─ ROUNDMAP is an integrated framework designed to drive sustainable business growth. The framework first perceives an operation from the bottom-up, at the frontline operation or the Ultimate Level of Truth™, to allow the business enterprise to discover, design, develop, and deliver products, services, and experiences that continue to match fast-changing customer expectations.
Secondly, it looks at the value chain and the core operating model, to determine what strategy needs to be applied to transform the operation toward sustainable growth. To achieve this, companies need to adapt to the rules of the digital economy which requires them to launch new business models with agility, forge strong customer bonds, collect and democratize relevant data, build cross-functional teams, and incite an overall commitment to its purpose while fostering a mindset of continuous change.
WHO IS IT FOR ─ Companies that fail to achieve their short-term growth aspirations and are looking for ways to overturn disappointing commercial outcomes but have trouble identifying or eliminating the causes of poor customer performance. As well as companies that want to launch (sustainable) products more quickly and more often and look for an integrative approach toward (sustaining) value creation and customer development.
WHAT ARE THE BUILDING BLOCKS – We first described the integrated customer lifecycle, leading up to the Customer Carousel™ from which the Business Model Matrix™ and the Business Model Compass™ emerged. The Cycle of Disruption™ complements the four pillars that support the ROUNDMAP™ structure.
MIND THE GAPS
Concerns over technological disruption, globalization, growing inequality, and the environment are ubiquitous. Despite these challenges, we believe businesses can sustain growth at an affordable cost, not just to the business but to society and the planet as well if the (growth) gaps are closed.
Our motto: Profit is good, if no harm is done.
2.1 - CLOSING THE GAPs
Studies show that 80% of organizations fail to achieve their desired growth targets in terms of revenue and profitability. Closing the growth gap ─ the gap between growth aspirations and growth activation ─ is one of the applications of the ROUNDMAP.
A growth gap may occur due to:
- Inadequate considerations of the opportunities for growth, i.e., the attainability of growth.
- The limited capacity of the organizational infrastructure to support successful execution, i.e., the serviceability of growth.
- Adversarial forces inside or outside the organization ─ think of Porter’s Five Forces.
- So-called growth traps ─ deeply embedded assumptions that can lead firms into misconceptions about growth.
- Fleeting competitive advantages ─ reducing the growth cycle, forcing firms to rotate through the cycle much more quickly.
To appreciate a level of growth that is attainable and serviceable, we’ll have to make sure that any misconceptions about growth (red line, often caused by inadequate market research) are removed from the equation. This will give us the green line. If current growth (blue line) does not match the green line, we’ll need to consider what causes the growth gap. Additionally, we may need to account for a measure of Growth Cycle Reduction due to fleeting competitive advantages as it makes no sense to work toward a discontinuous future.
By assessing the operation, ROUNDMAP Certified Professionals will be able to reveal what causes these gaps. This brings forth an actionable plan which may include changes to be made to the infrastructure, business strategy, business model, market segmentation, partnerships, revenue streams, marketing strategy, cross-functional collaboration, individual mindsets, or the customer development process.
2.2 - GROWTH ACTIVATION
We refer to our approach to business growth as (sustainable) Growth Activation™ – this approach intends to identify and eliminate growth gaps and growth traps while exploring new opportunities for growth and to create an environment in which growth can sustain.
Both McKinsey and IFF* have encouraged senior executives to pay equal attention to the Three Horizons of Growth (see figure below). Our perception of growth is slightly different.
We perceive growth as conditional ─ depending on the situation the business is in, given the internal and external forces ─ which led to the belief that Conditional Growth has four stages of activation:
- EXPLOITING GROWTH ─ Defend and exploit ‘business as usual’ (similar to horizon 1).
- EXTENDING GROWTH ─ Adapt to changing customer demand and market circumstances (similar to horizon 2).
- EXPLORING GROWTH ─ Build new lines of business through innovation (similar to horizon 2).
- EMERGING GROWTH ─ Transform from an ‘end-of-life’ towards new business ventures (similar to horizon 3).
During each of these stages, a growth gap may occur: we may overlook profitable revenue streams, try to exploit the wrong ones, or start change-initiatives while we should initiate transformation, and so on. Sustainable Growth Activation and Situational Readiness are part of the ROUNDMAP’s Business Model Compass™ ─ more can be found here.
(*) We’ve derived the term Growth Activation from the term 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). The Three Horizons of Growth framework has two sources. One is a collaborative effort by the IFF (International Futures Forum), published in the book Three Horizons by Bill Sharpe. The other source points to McKinsey, published in the book The Alchemy of Growth by Mehrdad Baghai et al.
2.3 - MiND THE GAPS
A growth gap is often the result of a series of small gaps. We’ve addressed some of these gaps in more detail in a separate post: Mind the Growth Gaps. It is important to realize that every gap has an adverse effect on the desired outcome, that will not go away until it’s identified and properly dealt with.
2.4 - VENTURE DESIGN
If you are familiar with the book In Search of Excellence by Peters and Waterman (1983), you won’t be surprised to learn that the way responsive businesses operate today resembles the eight management principles mentioned in this book ─ after all, we’re a long wave (Kondratieff) further down. If you’re not familiar with the book, you’ll need to understand that these organizations are extremely nimble and entrepreneurial, highly disruptive, and often very effective ─ they are true frontrunners.
Their growth cycles look pretty much like this (every cycle represents a separate venture with its own core business):
The approach of venture design (VX) is to intentionally set out to conquer a market, based on opportunities for growth that have not been explored before ─ by anyone. The approach doesn’t perceive the core business as a holy grail. On the contrary, I would say, employees are allowed to explore any opportunity, as long as it serves a real customer need and is highly scalable.
Before you jump on the VX-bandwagon, consider the fact that a multi-core operation does increase complexity dramatically. More on this subject can be found here: Where to find future growth?
BUSINESS VENTURE DESIGN
ROUNDMAP™ is a framework directed at designing a business as well as closing the gap between a firm’s growth aspirations and its actual commercial performance: by verifying and enhancing projected revenue streams, assessing sustainable business models, eliminating organizational barriers, and boosting the front-line operation.
3.1 - THE ULTIMATE LEVEL OF TRUTH
Research confirms that the employee-customer interaction that occurs during each customer lifecycle is at the core of a successful business operation. It is the ONLY level at which a company is able to identify opportunities (and threaths) and capture enough value with which to offset the cost of value creation and delivery. We, therefore, call this level The Ultimate Level of Truth™.
Furthermore, studies confirm that an integrative approach toward the customer development process leads to a substantially better commercial performance (up to 765%; Kotter and Heskett, 2011). However, research also confirms that teams within organizations have become extremely disconnected. This isn’t harmful to the execution of the business strategy, as idenfied by creators of the Balanced Scorecard, but undermines any prospect of offering seamless, personalized, and meaningful experiences to customers.
Obviously, a firm also needs to have the right products and services in place, address the right audience with the right messages, using the right channels while making sure the operation is truly up to the task to serve customers’ needs with poise.
3.2 - THE SILO SYNDROME
What is keeping most companies from reaching a level of excellence is the degree of fragmention due to specialization ─ leading to mental and functional silos, tunnel vision, internal competition, and even turf wars. These negative effects tend to obstruct the creation and delivery of significant value while frustrating customer experiences; ultimately deteriorating commercial performance.
When you start with a fragmented leadership team, leading to separate groups, each rooted in their own 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 the introduction of customer round tables, appointing cross-functional liaisons to build cross-functional teams, defining inciting rallying goals and objectives, and so on.
3.3 - ROUNDMAP DEFINITION
The name ROUNDMAP™ is a composition of two words: roadMAP and ROUNDtrip.
While ROUNDMAP™ addresses both the strategy map (roadmap) as well as the customer lifecycle (roundtrip) to drive growth, other frameworks are generally cost-oriented. To increase operating income both aspects ─ cost and performance ─ should be considered.
3.4 - SYSTEM DYNAMICS
ROUNDMAP™ is a holistic system, aimed at designing the business venture (roadmap) as well as the customer lifecycle (roundtrip).
The latter is based on Customer Dynamics. Customer Dynamics is a theory on company-customer 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.
If you look at the ROUNDMAP poster image, the lifecycle-section ─ the Customer Carousel™ ─ is the most eye catching. Additionally, located around the edges, you’ll find some references to marketing strategies, value disciplines, and business models. However, the business venture design and strategy mapping aspects are not included.
To explain how we regard the Customer Dynamics, relative to the design of the business venture, let’s discuss what we refer to as the ROUNDMAP™ VENTURE DESIGN framework ─ relative to Michael Porter’s value chain model (see PDF for more info):
3.5 - BUSINESS VENTURE DESIGN
To (re-)design a business venture, to consider multiple business ventures, or to determine the gaps between (current and new) business ventures, Edwin Korver developed an intelligent roadmap as part of the ROUNDMAP™ framework.
The ROUNDMAP™ Roadmap to VENTURE DESIGN requires you to answer three questions:
- What’s your BASE PLAN?
- What’s your GAME PLAN?
- What’s your ACTION PLAN?
- TEAM DYNAMICS ─ Mission Line: What do we intent to achieve, how and why?
- BUSINESS DYNAMICS ─ Added Value Line: What’s our value proposition and who’s to benefit?
- BEHAVIORAL DYNAMICS ─ Trend Line: What are the trends in customer buying behavior?
The output of the BASE PLAN acts as the starting points for the GAME PLAN:
- ORGANIZATION DYNAMICS ─ Strategy Line: What’s our business model and business strategy?
- NETWORK DYNAMICS ─ Communication Line: What’s our distribution/collaboration strategy?
- OPERATIONAL DYNAMICS ─ The Operating Line: What’s needed to create and deliver value?
- CUSTOMER DYNAMICS ─ The Front Line: What’s needed to develop the customer lifecycle?
- MARKET DYNAMICS ─ The Activation Line: What’s needed to influence customer behavior?
We’ll soon share a canvas that will help you apply the ROUNDMAP™ Roadmap to BUSINESS VENTURE DESIGN.
P.s.: The arrangement of the dynamics in the ACTION PLAN makes it easy to consider the SWOT-model (Strengths, Weaknesses, Opportunities and Threats), as well as the Backstage and Onstage Competitive Advantages relevant to defensible differentiation.
3.6 - COMMUNICATING VESSELS
The dynamics of the ACTION PLAN behave like ‘communicating vessels’, indicating that they will (need to) balance each other off. We’ve deliberately drawn them as three ‘jars’ (as in three ‘vessels’) while ‘communicating’ can be replaced by ‘signaling’.
For instance, if Market Dynamics (blue) begin to change, for instance due to a crisis, the potential to deliver and capture value ─ with which to offset the cost of creating value ─ could evaporate and cashflow problems may start to occur.
Similarly, if the Customer Dynamics (green) covert more customers than the operation (yellow) can ‘handle’, customer satisfaction will dwindle which in turn may decrease the number of customers that may follow their lead.
3.7 - VIEWPOINTS
The three dynamics of the ROUNDMAP™ ACTION PLAN also provides us with different viewpoints.
For instance, we may aspire a large portion of the total addressable market (TAM), however, without a capable operating line to service a target market and an assertive front line to obtain (SOM) it, we’re likely to become disappointed. Or, we may assume that we’re in full control of our brand’s identity, however, the image of the brand will be determined by (the interactions with) our customers.
ASSIGN TO THE ROUNDMAP CIRCULAR
What should you expect in terms of commercial outcomes from adopting the integrative approach of the ROUNDMAP™ strategic and executive framework?
4.1 - EXCEEDING EXPECTATIONS
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).
"More Engaged Employees"
"More Engaged Employees and more Engaged Customers"
"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.
4.2 - 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.
THE SPECIALIZATION TRAP
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.
5.1 - DIVISION oF LABOR
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.
The ‘division of labor’ is often attributed to Taylor, however, it was Plato (424-347 BC) who had long before propagated the idea. Plato believed that ‘only through specialization [..] can disunity between people be erased and a just state is established’. While Plato described how specialization and division of labor contributed to running a state, Taylor c.s. took the idea to run an effective business.
5.2 - SCIENTIFIC APPROACH
5.3 - 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):
5.4 - 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 (!)
Apparently, 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’.
5.5 - SURVEILLANCE CAPITALISM
As suggested by Harvard professor and celebrated scholar Shahshan Zuboff there may be 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 which allows these companies to predict their future 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.
6.1 - END THE TURF WARS
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.
6.2 - 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 that “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.”
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.
7.1 - INCREASE SIGNIFICANCE
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, bringing them nearer to the company, and in the process increase the significance of future relationships.
7.2 - 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.
7.3 - 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.
7.4 - TRANSFORMING THE CULTURE
It would be naive to expect any organization to make an instant leap from a highly fragmented operation to a cross-functional, collaborative one. However, it can be done and it is worth the effort as silos stifle organizations, hamper innovation, and deprive stakeholders of its full potential.
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.
8.1 - SHIFTS IN CUSTOMER DEVELOPMENT
We found that the customer development process has changed significantly in recent years and in many ways. Not just because of globalization and digitalization, but also due to rising concerns over matters like income inequality, our environment, and climate.
Let’s review just some of these changes, although there are many more:
Technically, your mission is your purpose. However, customers demand more than a mission statement explaining what it is you do, how you plan to do it, and to who it may concern. They want to know why you do what you do. What drives you, what passionates you, or what keeps you awake at night. They need to know whether you're equitable to your stakeholders and care about our planet. With the rise of social media public scrutiny is intimidating, so whatever you do, don't pretend to be what you're not. They're bound to find out and destroy your reputation.
Common practice dictates that customer development is mostly about driving a customer to a moment of purchase. This is unsound: purchase is not an end, it is the start of a relationship that is based on an Understanding of Trust™ and confirmed by a contract to which both parties are commited. Only if you follow through, as promised and expected, the relationship could develop into an Alliance of Trust™ which could lead to a long-lasting relationship. However, most marketing and sales funnels describe 'purchase' as a final stage while a few models have added 'satisfaction' and 'advocacy', without describing how to reach these post-purchase stages or who is responsible for it.
Before the age of digital, marketing communications was mostly a unilateral process, often referred to as ‘sending’. Due to the rise of the Internet, mobile devices, and social networks customers can now actively engage in the buying process, driving bilateral communications. Yet, most purchase funnels still perceive the customer journey as a one-sided process. As we will explain further down, the buying process is best seen as two separate ribbons, that may become entangled for as long as it is beneficial to both parties involved.
Due to the amount of information that is now freely available to each and everyone, customers already know most of what is to know about your product and your reputation. Customer activation, therefore, needs to shift, from an emphasis on rational triggers to emotional triggers, all the things people can 'experience' about your product or brand. As a result, Emotional Intelligence (EQ) and emotional engagement have become most prevalent in customer experience management (CEM).
The frontline operation has become extremely divided with numerous specialists, each focusing on a fraction of the 360-degree puzzle. It should come at no surprise that individual employees have become entirely disconnected from the overall customer development process and often have no clue what customers experience during each of their interactions with the organization at large.
As more and more companies make the shift from as-a-product to as-a-service business models, the revenue model is also changing from one-off purchases to subscription-based services. While customer churn hasn't been of much concern to product-centric brands, in case of subscription-based services it is absolutely vital that customers extend their subscriptions. To reduce customer churn ─ and increase employee engagement to raise customer loyalty ─ brands now resort to Customer Success, a kind of proactive customer support practice. Typically, Customer Success efforts commence just prior to or shortly after the moment of purchase.
Customer Lifecycle Management involves many steps, however, one step has been overlooked by most: Significance. Significance supersedes Satisfaction and even Happiness. While Satisfaction and Happiness look backward, Significance looks toward the future. Why should a customer maintain a close relationship with you? What future value do you have to offer them? Why would they want to associate themselves with your brand? If you want to build strong customer bonds, you'll need to provide customers (implicitly) with favorable answers to these questions.
It should come to no surprise that we live in an age of technological disruption. Technology that was developed in the previous century is now phasing out, while new (digital) technology is rapidly gaining traction. If your core operation still relies on old systems, or your business model is out-of-date, chances are that your revenue streams will soon be prematurely discontinued. Since your business relies on revenue, this disruption could become fatal. While product innovation could provide a temporary edge over the competition, outdated business models may require your organization to make a complete turnaround.
As mentioned before, the customer journey isn't a one-sided process: it involves two parties, your brand, represented by its employees, and the customer. If you want to drive loyalty and advocacy, you'll need to get both your customers as well as your employees engaged in the process.
Customer expectations greatly determine Customer Satisfaction, Happiness, Significance, and Loyalty. However, each customer has a different point (or frame) of reference, meaning, their expectations may vary greatly. While one customer may be thrilled because your customer service desk was quick to solve an issue, others may not be so impressed and demand that you proactively help them to obtain as many benefits as soon as possible from what it is they purchased from you.
8.2 - INTEGRATED PROCESS
To incorporate these changes into a modern buying cycle, we’ve created the Customer Carousel™.
The Customer Carousel is the ’roundtrip’ part of the ROUNDMAP framework and contains:
- 4x Customer Development Goals ─ Acquisition, Creation, Retention, and Extension.
- 4x Frontline Departments ─ Marketing, Sales, Delivery, and Success.
- 8x Moments of Engagement ─ Brand-initiated touchpoints.
- 8x Moments of Reflection™ ─ Measurable responses by customers to these touchpoints.
Instead of focusing much of your efforts on creating the ideal customer journey, companies should focus on providing more insights into the gains of their product (see: Prospect Theory) and attach a simple 3-step extension to each touchpoint (f.i., “More info”, “Order now”, and “Keep me informed”). By using the right channels and creating responsive touchpoints, companies will be able to influence their prospective customers, wherever they may be and whatever frame of reference they may have. Remember the KISS-rule: Keep it simple, stupid.
8.3 - TIMELINE
While the circular arrangement of the ROUNDMAP is often perceived as ingenious, it may also be difficult to grasp at first sight. Therefore, we’ve also created a more familiar linear timeline. Let’s have a quick look at it (we’ll continue below the image):
On the bottom half of the figure, you’ll find the brand-initiated touchpoints or Moments of Engagement, as well as the Prompts that drive it. While on the upper-half you’ll find the customer’s journey, identified by the Moments of Reflection™. In between is a color-coded wave, representing the Ultimate Level of Truth™.
The figure illustrates how customers respond to the brand-initiated touchpoints as they pass through the Customer Carousel™. By extending the frontline operation with a fourth department, Customer Success (marked in red), the likelihood of retaining more customers ─ getting them to return more often and spend more over the course of their customer lifetime ─ increases significantly. According to Zappos, 75% of their daily purchases come from returning customers.
8.4 - THE DOUBLE HELIX
Although we’ve chosen to explain the arrangement of the Customer Carousel to you by using a linear timeline, you’ll need to realize that the actual motion is circular (360-degrees) and over time this creates a helix (see image to the right).
However, since it is a two-sided process the brand and the customer are both engaged in the process, thereby creating a double helix ─ much like a DNA-string.
PETER DRUCKER: PURPOSE OF BUSINESS
Despite Peter Drucker‘s 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 a mere 5% of the customer retention rate could raise profitability by as much as 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.”
ULTIMATE LEVEL OF TRUTH™
Now let’s have a look at where to position the entire framework: from strategy, chaining, business model, value position, marketing strategy, and all the way down to the employee-customer interaction.
9.1 - EMPLOYEE-CUSTOMER ENGAGEMENT
If frontline employees fail to acquire, create, retain, and extend enough paying customers at a profit, then, regardless of the resources, infrastructure, capabilities, skills, talents, processes, services, systems, culture, business model, or products, the entire operation will eventually crumble. To emphasize the gravity of employee-customer engagement to drive sustainable growth, we regard the entire frontline operation, represented by the Customer Carousel™, as the Ultimate Level of Truth™.
9.2 - THE OVErALL PICTURE
We’ve created an image to explain where we position the Customer Carousel (and The Ultimate Level of Truth™) relative to the strategy execution (cross-structure), the performance (cross-silo), and customer intelligence (cross-market):
As we discussed earlier, the Customer Carousel™ is a double helix ─ as the brand touches onto suspects, prospects, and leads, the objective is to transform them into customers. But beware, after the customer was on-boarded, their expectations and frame of reference will evolve over time.
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.”, a philosophy more commonly known as Panta Rhei.
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 arranged in the system.
10.1 - LAYOUT OF 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. If we unbundle the system you’ll see it is composed of the business strategy (strategy line), strategy execution (operating line), and performance (customer line).
10.2 - INTERRELATIONSHIPS
These three layers, strategy, execution, and performance, obviously are interrelated: it makes no sense to simply drive customer performance without being acutely aware of aspects like corporate goals and objectives, business strategy, competitive offerings, or customer expectations.
10.3 - REVISIT THE ROUNDMAP
We believe you are now better prepared to have look at the ROUNDMAP™ system. 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 ─ in any order customers see fit.
VALUE HUB THEORY
Prior to constructing the ROUNDMAP™, we created the Value Hub™ theory which in retrospect correlates to Michael Porter’s Value Chains and (later) Value Streams.
11.1 - VALUE HUB THEORY
In 2012, Edwin Korver was invited to sit at a round table to help a local radiostation adapt itself to the digital age. During this meeting, he described how they should perceive the role of a (modern) radio station. Which in effect was ‘the curation of relevant content, collected from multiple sources and then published via multiple channels, to please an audience’. All they needed to do was to describe and organize their internal processes to be able to collect, curate, and package content in such a way that it pleased their digital media users.
He soon realized that the same description could also be applied to any business. All he had to do was replace ‘content’ by ‘product’. In fact, what he described was the Value Hub™ Orchestration Model which we’ve described in far more detail here (part 1) and here (part 2).
As such, another way of explaining why we divided Porter’s Value Chain ─ consisting of primary and secondary activities ─ into separate dynamics is by perceiving the entire value orchestration process (see figure below) as a value hub:
11.2 - NOTES
In general, the creation of tangible value comes at a cost (credit) which is driven by the business dynamics. Value delivery, on the other hand, creates revenue (debit) which is driven by Customer Dynamics. The result (margin) ─ what can be captured as value to offset the costs of the value orchestration process ─ 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. In process improvement, the Value Hub Orchestration Model relates to the SIPOC/COPIS model, originated in the late 1980s and continues to be used in Six Sigma and business process management.
BUSINESS MODEL MATRIX™
We’ve just looked at the overall composition of the ROUNDMAP. After having created the Customer Carousel™, we found that the traits of two known business models ─ Product Centricity and Customer Centricity ─ correlated with marketing and sales, respectively. This opened up a whole new way of perceiving business models.
12.1 - NEW BUSINESS MODELS
Prior to the ROUNDMAP™, there were two known business models: Product Centricity and Customer Centricity. Product Centricity matured during the industrial age, during which the scientific management movement thrust worker productivity while cutting down on costs through economies of scale, accelerating practices that sought to increase market share.
In 1996, Don Peppers and Martha Rogers published the book ‘The One to One Future‘, a radical rethinking of marketing. The authors suggested to ─ instead of marketing standardized products to the largest group of people possible ─ focus on the needs of a select group of customers and try and fulfill more of their needs. This later became known as Customer Centricity.
By pairing Product Centricity to an emphasis on Marketing (influence at scale) and Customer Centricity to a focus on Sales (influence at scope), we wondered if the remaining departments/stages of the Customer Carousel™ ─ Delivery and Success ─ could also be matched to (yet unknown) business models?
By adding an extra dimension ─ ‘serviced used’ versus ‘products sold’ next to the ‘scale’ versus ‘scope’ dimensions ─ we were indeed able to describe and pair two new business models, Resource Centricity and Network Centricity, thereby giving birth to the Business Model Matrix™.
12.2 - BUSINESS MODEL MATRIX™
Business Model Matrix™ provides a single framework of four Elementary 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 (Facebook/Uber), or otherwise, is part of your strategic heading, while an additional choice of value disciplines offers further means of differentiation.
12.3 - PRIOR TO THE MATRIX
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™.
More information on the Business Model Matrix™ can be found here.
ELEMENTARY BUSINESS MODELS
The Elementary 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.
13.1 - CREATING LEVERAGE
Leverage greatly determines the growth potential of a 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 completed the set with two additional types of leverage: Share of Utilization (yellow) and Share of Transaction (red).
It is important to emphasize that these levers aren’t particularly ‘new’, however, they gained traction due to the rise of digital technology which took away most of the physical barriers that previously limited the growth potential of the underlying business models.
13.2 - DRIVING GROWTH
A product-centric business model is based on generating customer demand driven by product development in order to profit from so-called economies of scale ─ in general, these types of companies looking to increase and defend their Share of Market.
A customer-centric business model, on the other hand, is driven by customer development. Your objective is to fulfill more of the needs of a select group of customers that are more likely to spend more and thereby allow you to increase your Share in their Wallet.
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, your objective is to increase the utilization of the car, limited by its maximum capacity (Car2Go).
If you offer a ride-sharing platform ─ which is a network-centric business model ─ your objective is to bring together as many riders and ride-hailers together into one ‘space’ to increase the likelihood of a ride to occur from which you can obtain a Share of Transaction (Uber).
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 Elementary Business Models.
14.1 - BUSINESS MODEL DEPLOYMENT
Whether you aim to profit from economies of scale (product-centric) or from planning for capacity (resource-centric), or something else, is entirely up to you. However, each business model has concurring dynamics that are hard to ignore.
For instance, a product-centric business model demands campaign-based marketing, while a network-centric business models benefit mostly from word-of-mouth. A resource-centric business should emphasize the service chain, while a product-centric one could do with nothing less than an excellent supply chain.
This led to the creation of the ROUNDMAP™ Strategic Playbook. See the image below. If you want to learn more, subscribe to our newsletter or apply for an Inner Circle Membership to access exclusive content and to attend the ROUNDMAP™ Introduction Course.
14.2 - PLANNING FOR SUCCESS
Choosing the right business model and deployment model is critical 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 extremely scalable. We should expect many others to follow the lead of disruptors like Airbnb, Facebook, Uber, Netflix, Amazon, and Alibaba.
BUSINESS MODEL DEVELOPMENT
We’ve discussed the Integrated Customer Lifecycle (Customer Carousel), Business Strategy, and the Elementary 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.
15.1 - BUSINESS MODEL DEVELOPMENT
We believe business models can be developed into two directions:
- BUSINESS MODEL REGENERATION (= Evolutionary)
- BUSINESS MODEL SHIFTING (= Revolutionary)
15.2 - BUSINESS MODEL REGENERATION
Business Model Regeneration is an evolution of an existing Elementary Business Model ─ often driven by advancing technology. For instance, the traditional supermarket is a product-centric business model, focused on growing or defending market share, while Amazon’s Go cashier-less grocery stores are simply a contemporary regeneration (digital evolution) of a traditional business model.
We’ve created a slide to illustrate business models regenerate: ROUNDMAP™ Business Model Regeneration in Action
15.3 - BUSINESS MODEL SHIFTING
Business Model Shifting is a revolvement (clockwise) to the next Elementary Business Model in the Business Model Matrix™. Shifting is, by far, the most transformative of the two. The best way to explain ‘ shifting’ (or revolving) is by looking at IBM.
In 1974, IBM – known as Big Blue – started to move away from battling over 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.
15.4 - SHIFTING VERSUS REGENERATION
If we put the two together, business model shifting (revolution) and business model regeneration (evolution), this is a way to perceive it:
As stated before, shifting (the color-coded cycle) is by far the most transformative of the two. It has a huge impact on all of the dynamics (organizational, business, customer, and market). A decision to shift the business model shouldn’t be made lightly. A regeneration (dashed cycles), on the other hand, is often limited to change and innovation and, therefore, much less drastic.
15.5 - OLD BOUNDARIES REMOVED
You may perceive that the Sharing Economy is exemplary of the Digital Age, however, it isn’t. If you ever took a plane, train, or taxi, you were essentially sharing a resource. However, digital technology removed the need for a physical dispatch location which greatly improved the ease with which to hire a resource. This has allowed resource-centric businesses to grow rapidly which attracted others to the scene.
What about the Platform Economy? Well, remember the Silk Road from your history lessons? Hundreds of marketplaces had emerged along the trade routes between China and Europe. Facilitating a digital platform, often called a marketspace, is very much similar to setting up a traditional marketplace. However, without the physical constraints, marketspaces (or platforms if you will), now have a sheer unlimited reach, offering network-centric businesses an opportunity for exponential growth (Facebook, Uber, eBay, Taskrabbit, Producthunt, etc.).
BUSINESS MODEL COMPASS™
Before optimizing the customer lifecycle, we’ll need to consider where we’re at and what we are facing. It makes no sense to increase marketing or sales efforts if customer expectations, i.e., their frame of reference, has changed dramatically due to far superior value propositions from competitors.
16.1 - SITUATIONAL ANALYSIS
If the business enterprise isn’t facing disruption (premature discontinuation of current revenue streams) it generally focuses on:
In the simplest of words: the business enterprise can either decide to increase its performance, or redude the cost to make more profit (optimize) or offer additional value (innovate).
However, if the business enterprise does face disruption, it needs to shift its focus to:
Again, simply put, it can either offset the competition (change) or reinvent itself and its entire operation (transform).
16.2 - SITUATIONAL READINESS
Before applying the ROUNDMAP, you will, therefore, need to assess the situation with regards to current market circumstances, any (historic) performance indicators, in-house initiatives, disruptive exposure, operating agility, individual/corporate mindset, etc. Depending on the organizational readiness and the situation you’re confronted this will determine your organization’s Situational Readiness™.
Underneath you’ll find the Business Model Compass™, containing these four stages of Situational Readiness™:
16.3 - CYCLE OF DISRUPTION™
To understand the impact of (often technological) disruption, we’ve created the Cycle of Disruption™ consisting of four stages: Activation, Acceleration, Alteration, and Adaptation ─ inspired by the theories of recurring Business Cycles (Expansion, Crisis, Recession, Recovery) by Kitchin, Juglar, Kuznets, Schumpeter, Perez, and Kondratieff.
16.4 - COMPLEMENTARY MODELS
As you have may have noticed, the Business Model Compass™ and the Cycle of Disruption™ are complementary: if a business decides to ‘doing better things’ (antifragile) it will enter the arena of the Cycle of Disruption ™ as a technological innovator. It will still need to activate and accelerate adoption to be able to displace old technology, however, its heading will be regarded as offensive and disruptive.
Based on an elaborate assessment, ROUNDMAP™ Professionals will be able to reveal the Situational Readiness™ of your company relative to market conditions while providing insights into what could be a more lucrative heading.
The slide (PDF) can be found here.
Depending on the Business Strategy, value (equity) is derived from a focus on one of four Elementary 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.
17.1 - DESIGN THINKING
Experience Design has been at the forefront of business for a couple of years. However, few realize that customer experiences have 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).
We’ve identified four Elementary Experiences:
- BRAND EXPERIENCE ─ Related to Marketing and core to Product Centricity
- CUSTOMER EXPERIENCE ┬ Related to Sales and core to Customer Centricity
- USER EXPERIENCE ─ Related to Delivery and core to Resource Centricity
- SHARED EXPERIENCE ─ Related to Success and core to Network Centricity
17.2 - CUSTOMER EXPERIENCE
Customer Experience (CX), in our view, isn’t the all-encompassing experience some say it is. We believe it is a 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 and, therefore, customers need to experience this.
We’ve looked at business models and how firms can either respond effectively to disruption or be the disruptor (break-through innovator). And how ‘trying to be the best’ leads to machismo and
tribalism, sabotaging cross-functional solutions and diminishing customer experiences.
Considering all this, what are the odds that digitalization by itself transforms a business?
18.1 - DIGITAL IS NO HOLY GRAIL
A business does not transform simply because it adopts fancy digital technology, like artificial intelligence, big data analytics, micro-services, or some other bag of tricks. These are change-initiatives, intended to increase productivity and profitability.
Regardless, Digital Transformation should be understood as Digital Business Transformation, provided the intention is to transform the way the business operates based on a vision of the future (Netflix video streaming vs. Blockbuster video stores).
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.
18.2 - Why 70% OF Digital Transformations Fail
70% of Digital Transformation (DT) initiatives fail, according to a recent McKinsey study. Indicating a humongous amount of money and time wasted (900 billion out of 1.3 trillion USD over 2017), let alone the opportunity costs.
18.3 - THE TRUTH ABOUT CUSTOMER LOYALTY
What keeps consumers loyal to their favorite brands appears to be all but digital, according to recent reserach by KPMG:
- Product Quality – 74%
- Value for Money – 66%
- Product Consistency – 65%
- Customer Service – 56%
- Easy Shopping Experience – 55%
- Product Assortment – 55%
- Pricing – 54%
You may have noticed that few of these aspects are tied to digitalization. In a sense, it is business-as-usual: you’ll still need to offer great quality, at the right price, during each sales cycle, supported by great customer service, to retain more customers.
However, as more information became available to the average consumer, we did notice a significant shift in buying behavior from rational to emotional triggers. Also, companies that pioneered by offering more convenient digital shopping experiences did give rise to higher customer expectations and as such, forced other companies to follow their lead.
18.3 - HOW EXPERIENCES DRIVE GROWTH
Successful businesses realize that an overall customer experience is more important to their ROI than focusing only on specific channels. Adobe commissioned Forrester Consulting to conduct an online survey with 1,269 marketing, advertising, customer experience (CX), digital, and analytics business leaders.
According to the research, experience-driven businesses:
- report 1.7x higher customer retention, repeat purchase rates, and average order values.
- are 1.6x more effective in turning loyal customers into advocates.
- have 1.5x happier employees with greater satisfaction at the individual, team, and department level.
- report 1.4x revenue growth, an average growth rate of 15% compared to 11% among other companies.
However, these numbers look very similar to research by Kotter & Heskett, conducted between 1977 and 1988 (published in 2011), in which they examined the effect of ‘cross-functional collaboration’ and ‘a less adversarial culture’ on company performance. We’ve addressed these numbers in the Performance Boost section, next to corresponding research by Towers Watson (2011) and Gallup (2008).
Another thing to consider is that research also suggests that 97% of customer experience initiatives fail to produce results, while others confirm that CX programs seldom produce tangible results ─ contradicting Forrester’s research (Adobe benefits directly from an emphasis on CX).
19.1 - SUMMARY
We know from research that avid employee and customer engagement has a definite positive effect on the bottom line. Effects that were attained long before (1977-1988) we were accustomed to concepts like customer experience or design thinking.
We’ve seen digital gurus contribute similar positive effects exclusively to digital initiatives. However, as digital is fast becoming the new normal, experts are now convinced that it is high-touch, rather than high-tech, that will (continue) to make the difference.
Indeed, customers have developed new buying rituals, driven by social, mobile, and digital technology, which has provided them with access to previously unattainable information, both biased and non-biased. However, KPMG research confirms that customers still want the same thing as they did 100 years ago: quality, value for money, consistency, and service. And because of the saturation of rational triggers, the shift towards emotional triggers emphasizes the need to raise customer compassion.
Furthermore, product development has to remain aligned with actual customer demand and customer expectations while offering experiences that are appreciated, differentiating, and defendable, using methods like Design Thinking, Agile/LEAN, Six Sigma, and Experience Design. Customer feedback is most critical, hence the need to build strong Alliances of Trust™.
What has shifted, and quite dramatically (taken from a business viewpoint), is the emphasis on retaining more customers ─ as opposed to acquiring new customers ─ driven by a shift from as-a-product to as-a-service business models. As such, we’ve found the adoption of Customer Success Agents, pro-actively onboarding customers, most striking.
Meanwhile, globalization and digitalization forced some industries to restructure; at first, by taking away the middleman, later by transforming supply chains into digital platforms. Companies will need to adapt to these changes while some may even be able to create new business models, offering new opportunities for capturing and signaling value.
We live in exciting times. While the future may seem daunting, it still has to be written ─ leaving each and everyone with the opportunity to create the future they desire. What is your vision of the future?
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