Ecosystem strategy a boon when customer experience is out of your hands
It is nice to maintain the fiction that we are responsible for our business and our clients’ customer experience. In reality, creating customer experience is rapidly developing so that less and less of it is in a company’s own hands, and even to the point where they lose direct contact with customer experience. Nowadays, companies mostly operate as part of a larger ecosystem in which customer experience depends on how different players in the ecosystem succeed in cooperation and in their own customer encounters.
In addition to customers, a customer experience ecosystem includes employees, suppliers, distributors, subcontractors, partners, competitors, working environments and all their related interactions.
However, the customer doesn’t see it this way. The customer sees only one customer experience, good or bad.
A successful ecosystem customer experience has three common denominators. To control these steps, a company needs an effective ecosystem strategy.
The central objective of an ecosystem strategy is to get ecosystem players a) to acknowledge their roles in the ecosystem, b) to understand shared goals and commit to them and c) to know how to act to achieve common goals.
1. Succeed in encounters where you can make a difference
A good starting point for success is to understand the customer path from the early familiarization phase to the purchase event and even further to the end of the product or service life cycle. But it is impossible to control different encounters along every customer path, so it is essential to be able to recognize all the most important touchpoints.
By identifying the most crucial touchpoints along the customer path, a company can effectively deploy its available resources. And what really are the most important touchpoints? They are the ones that actively help customers reach their goal (suggested reading: Know Your Customers’ “Jobs to Be Done” article in Harvard Business Review). And perhaps also the touchpoints that are closely related to achieving the goal. The points that realize the value that the product or service creates for your customer.
You must be better at those points that anyone else, that’s the reason a customer will buy. And will buy a second time as well.
2. Create the best possible conditions for others to succeed
Every ecosystem player has a role that is interconnected. Customers may do business directly or indirectly, consciously or inadvertently with different members of an ecosystem. For an ecosystem to produce a good customer experience, it must work in concert toward a shared goal, play the same way, pull in the same direction and so on.
Cause-and-effect relationships lie behind different touchpoints: what one party does affects how another part of the ecosystem performs and in turn how a third party succeeds. Because of this, ecosystem members must have a shared understanding of each other’s role in achieving common goals. It is important to take care of your own business as well as possible (point 1), because it also assists others and the operations of the entire ecosystem. On top of this, transparency plays a key role: knowledge, investment, management and benefit. Transparency gives rise to trust, which in turn significantly contributes to ecosystem functionality and the execution of ecosystem strategy.
3. Assume responsibility for the entire ecosystem
At no stage can any part of the ecosystem shirk responsibility or assign blame to another actor, even when tempted to do so. The “I only work here” attitude will immediately undermine customer experience. And the benefit of the entire ecosystem to the customer and to the ecosystem itself.
When customer experience is produced in an ecosystem, responsibility should also be jointly carried. The ecosystem is a single touchpoint for the customer, and it is therefore a single responsibility interface for the customer. Shared responsibility becomes easier when thinking evolves from the value produced by a single company to the value produced by the entire ecosystem. A functional ecosystem only has winners.
Every organization needs to thoroughly understand that customer experience will no longer be in their exclusive control. It is therefore important to understand the unique customer experience ecosystem in which the company operates. The faster it understands this, the bigger its competitive advantage.
An ecosystem strategy makes it possible for actors to understand their roles in the big picture and to do their best to ensure the achievement of shared goals. An ecosystem strategy maximizes the benefit generated for the customer as well as ecosystem members. Once a strategy is carefully and realistically planned, it is time to turn words into action.
The time to act is now. Although it may not be simple, getting to work will eventually yield results.
Sara Toivakainen is a customer-focused business developer who always looks beyond the present. Sara’s genuine passion is management and measurement of customer-centric business activity and customer experience. Sara has helped several customers in different sectors to systematically develop and manage customer experience to the point where both customers and company become winners. Sara in Twitter: @SaraToivakainen
Ecosystems – why they matter and how to succeed in them
Most of us are familiar with the idea of ecosystems surrounding hugely successful firms like Google, Amazon, Facebook, Apple and Microsoft. But what do we really mean when we talk about ecosystems? And beyond that, how do ecosystems generate business value? In today’s economy of speed, business ecosystems play a central role in building competitive advantage, so it is important to understand how ecosystems succeed and how they reward players.
Qentinel recently gathered a group of experts to discuss how business leaders can build advantage in their ecosystems. All agreed on one essential point: that ecosystems must deliver value to customers as well as other players in the system. Eight other primary insights emerged from the discussions.
- Understand what you mean when you speak of ecosystems. What are the similarities and differences between naturally-occurring ecosystems and business ecosystems? From an economist’s perspective, an ecosystem is a concept borrowed from biology, and is only partially applicable to business or society. The word is used to describe very different things, but a good rule of thumb is to remember that an ecosystem is always dynamic – changeable and often organic. Subcontractor networks and other contractual partnerships are more static. Building an ecosystem means developing cooperation.
- Be the ecosystem you want! Grow your ecosystem and help all its members to flourish! We already mentioned search giant Google, one of the best-known ecosystem hubs today. It says it is driven by end users and their interests. Google’s ambition is to democratize the internet. Its ecosystem offers small players technologies that were previously at the disposal of only a few. In the future, competitiveness will depend on us all – for speed and adaptability, Google believes.
- Cooperate! Competitors can build a shared ecosystem and succeed. Meet the One Sea Ecosystem, which is being used by the Finnish maritime industry to develop unmanned vessels. The project is a concrete example of competitors collaborating to innovate in establishing an ecosystem, developing practical operations and future goals. The project offers an important opportunity to bring to the marker technologies and practices that would otherwise be too slow and risky to develop independently.
- Seize the opportunities offered by change! Disruption in your sector will generate new ecosystems. Join in and help the ecosystems succeed. For example, the traditional banking sector is also moving toward ecosystems. Existing payment directives and data protection legislation are changing in Europe. Banks still have a monopoly on data, but in the customer customers will be able to allow licensed bodies to use their data. Banks are now working with partners to develop traditional banking interfaces to provide better services for customers.
- Protect the viability of your ecosystem partners! Improve the conditions for business success for all players in the entire ecosystem, not just yourself. Seemingly crazy ideas have succeeded and concepts that seemed impossible 50 years ago are now part of everyday life. Moreover, statistics show that many companies built on ecosystems have strengthened over time.
- Succeed in changing ecosystem mindset and culture by changing everyday habits! Start changing your “egosystems” by making small changes in your everyday life with the help of nanohabits™ thinking. Changing everyday habits is an efficient approach to living in change.
- Increase trust! Make your ecosystems as transparent as possible for all members. Participants considered the case of Orion Pharma to understand how to create transparency in an ecosystem and build trust.
- Increase customer value! Measure, analyze and improve customer experience in digital channels. Essentially, it is worth digitalizing everything that can be digitized while maintaining a focus on customer value.
Digital Customer Experience sweet spot
We are witnessing the rise of the “Right Now” economy, a marketplace where spontaneity has replaced planning, ownership has given way to on-demand access and goods are produced or delivered just-in-time rather than stored in inventories. This development is disrupting traditional supply chains providing new growth opportunities for upstarts as well as established players. But it’s also reshaping customer expectations and creating challenges for firms as they try to craft winning digital customer experience in this shifting landscape.
Companies operating in the highly-competitive digital age can only win satisfied customers by offering consistent user and customer experiences. That puts pressure on brands to harmonize their customers’ online and offline experiences. As many of us know only too well, if your online and offline experiences aren’t in sync, you can expect to read all about it on social media – and that’s a not a scenario any brand wants to grapple with.
Increasingly, customers want – and expect — personalized, real-time and effortless experiences. The Right Now Economy is challenging product and service providers to find and deliver that sweet spot across all of their channels and touchpoints.
The best and the brightest came together in Chicago recently to trade ideas on how to combine the latest trends in digital and customer experience to help brands differentiate and find new growth potential in the highly-disruptive Right Now Economy.
Digital Customer Experience success stories in New York and Helsinki
At the fourth annual Digital Customer Experience Strategies Summit in Chicago, IL, on last September, industry leaders like Ejieme Eromosele, The New York Times’ Managing Director of Customer Experience, pondered the implications for customer experience. Eromosele demonstrated how the landmark publication reimagined the digital experience and improved its subscribers’ customer experience by providing a single, unified space for managing their relationships with NYT. According to Eromosele, the result was average incremental revenue of USD 2.92 per customer. Perhaps harder to measure but no less valuable was an improved perception of NYT along the customer journey and a deeper emotional connection with the brand.
Reuters Institute for the Study of Journalism highlighted the case of Sanoma Media’s Helsingin Sanomat newspaper, which experimented with “diamond stories” as a new way to drive uptake of its premium content, resulting in new leads and helping the paper reach 200,000 digital subscribers. Qentinel has been working with Sanoma and Helsingin Sanomat to measure customer experience, and to react based on the metrics data.
The customer experience lessons learned from the media sector hold true for companies operating in other sectors as well. Although continents apart, both NYT and Helsingin Sanomat realized that their customers’ quality experience was influenced by the quality of content and the quality of the technical platform. Streamlining and optimizing these elements had a direct impact on the publications’ ability to maintain existing customers or subscribers and to attract new ones.
In the Right Now Economy, NYT, Helsingin Sanomat, and other brands will have to walk the tightrope dividing the data-gathering needed to personalize the customer experience and data harvesting techniques that customers might find intrusive. They will have to balance designing a rational service path with putting the user in the driver’s seat, between influencing user behavior and keeping the user in control. They will have to find the space where digital advertising does not violate the customer’s comfort zone. They will have to find that sweet spot that guarantees outstanding customer experience across all channels – digital and otherwise.
Pia Tapio sees herself as a customer experience guide. She is a business development professional with a curious mind and a passion for business and service design thinking. Pia supports companies in systematically leading and developing customer experience based on customer and business value.
Lean-Agile Portfolio Management with Systems Thinking Maximizes the Flow of Value
It’s not too hard to get a senior executive to buy in Lean, at least on a superficial level. Reducing waste, building quality in, nurturing a culture for respecting people, encouraging innovation, focusing on the lead times and relentless improvement – yes, sounds good! The essence of flow, the changing role of leadership … hmm … those tend to require a bit more digesting.
Who wouldn’t like to be Agile? Better software faster? Yes, please! And when you go wrong, you can pivot fast and again you are back on track towards success. Moreover, all seem to practice Scrum or Kanban and some elements of DevOps, so for any 21st century SW executive it’s obvious that teams need to be agile.
When your organization grows to several SW teams, you want agility at scale, too. Scaled Agile Framework® a.k.a. SAFe® gives guidance for how to do it. Essentially, SAFe suggests that you identify Value Streams, onboard the teams into Agile Release Trains, set up periodic evaluation checkpoints with Program Increments, and arrange backlogs and governance around this structure. Scaling up agile to the Program level is a highly impactful change after which projects cease to exist and teams perform continuous development in cadence. It’s no small feat to succeed with that change but it’s still not enough – Portfolio Management needs to become Lean and Agile, too.
Agile Portfolio Management requires fundamental changes in leadership
I have seen the Lean-Agile transformation somehow paralyzing at Portfolio level in some large organizations. Portfolio level requires most change in senior leaders’ own work, so the leaders who have been driving the Lean-Agile transformation now become targets of their own change. It is the time for them to change their own beliefs, ways of working and leadership, and these changes are quite fundamental. As a SW executive you need to be ready to:
- Eliminate the ghosts of waterfall. You need to forget projects; your portfolio consists now of Epics to be implemented by Release Trains and teams performing continuous development (and delivery). Give up the false feeling of control that you used to believe you had with stage gate milestones – those no longer exist. From now on you track the flow of Epics in Portfolio Kanban.
- Manage customers’ expectations for agility. Often customers still expect waterfall-like contractual commitments several months ahead with fixed schedule and essential content. There are typically valid reasons behind this: customers may have their own product or service launches or process changes that are schedule-driven. Agility, in turn, may be interpret by customers as the permission to iterate anything until the very end of the project. If you need to give too detailed commitments too early and still accept almost any change request that a customer makes up, you will probably end up paying contract penalties due to delays.
- Decentralize control and decision making. Challenge the management meetings and internal steering groups where you made the schedule and detailed content commitments several months ahead. You will still need to make customer commitments to get deals but you need to avoid fixing the scope too early. Accept the fact that teams make now detailed commitments, not you on behalf of them, as part of Sprint and Program Increment Planning. You need to empower Product Owners and Epic Owners to facilitate decentralized decision making. Your job is to ensure that Strategic Themes and portfolio priorities are crystal clear for all to facilitate alignment to priorities.
- Re-organize to align organization with Value Streams. Bring inter-team dependencies inside the teams where possible. Discontinue the old roles that overlap with the new Lean governance.
- Move from annual planning and budgeting to quarterly (or shorter) cycles. Committing resources to detailed annual plan goals 12 months ahead would kill agility. Goal setting and funding need to support the rhythm of Program Increments (ref. Lean Budgets). A practical start is to carry out quarterly financial planning (which is typical in many enterprises anyway) and have 12 weeks’ Program Increments which roughly match with quarters. However, 12 weeks tends to be a bit too long planning period from the Program Predictability point of view. Often a better solution is to choose any preferred Program Increment duration (my favourite is 8 weeks) and have only ‘directional’ target setting as part of the quarterly business planning. That is, business and SW planning don’t need to happen exactly in sync but business plans must not force the SW teams to make waterfall-like commitments. OKR (Objectives and Key Results) goal setting framework used by many Silicon Valley companies provides one good approach for agile (business) goal setting.
- Prioritize the portfolio continuously in the cadence of Program Increments. You should have a Roadmap spanning several Program Increments ahead but that’s not a committed plan. You need to re-evaluate the portfolio priorities at Program Increment boundaries and define the business objectives for one Program Increment at a time.
- Change your own work. Align your own and your leadership team’s schedules with the rhythm of release trains and teams.
The operational changes above make Portfolio Management more Agile but how to make it Lean?
Lean Portfolio Management maximizes the value of the portfolio
The goal of Lean is to deliver the maximum value to customers in the shortest sustainable lead time. Lean-Agile Portfolio Management plays a special role in maximizing the value of the portfolio and the flow of that value that an enterprise can generate.
Interestingly, while maximizing value-add over waste is in the very heart of Lean, it seems to be difficult to articulate the value of a business case so that it stands up to scrutiny. What is ‘value’ after all, what makes an Epic ‘valuable’? An Epic creates value when it results in software or service that provides benefits that are appreciated. It depends on the role and context of individuals how valuable they perceive the benefits to be.
In my experience, most organization struggle with effective prioritization. The larger the organization, the more there are good initiatives to prioritize and more political games ongoing. Dependencies – technical and organizational – make decision making a nightmare, sometimes resulting in endless discussions without clear conclusions. Each individual business case alone might look attractive but if you choose to do ‘Epic A’ what is the opportunity cost for ‘Epic B’?
Systems Thinking helps in portfolio prioritization
Systems Thinking needs to be applied in Portfolio Management, too, to prioritize Epics effectively. First, Lean Portfolio Management team needs to build a shared understanding on the Strategic Themes, the key goals of the organization. Then the logic how the proposed Epics create value and contribute to these strategic goals is described. The emerging model will make the expected benefits and dependencies explicit and allow studying the value of Epic proposals from the systemic angle.
Value Creation Model (VCM) provides a practical approach to study the impacts and relationships of Epics. It is a causal loop model that can be applied to illustrate the system dynamics for how an investment creates value. It describes the value we want to create and the factors that affect value creation as well as their interactions. The picture below shows a simple, early draft example exploring the benefits and the overall value creation logic of a Customer Relationship Management (CRM) system. This text book example reflects the real-world experience well: often the benefits – value – is created ‘outside’ the actual IT system as a positive impact to business processes. A portfolio level Value Creation Model may have some hundreds of nodes. Each node in the model is a potential metric and a leading indicator for the key goals of the organization. Thus, Value Creation Model also gives us the metrics we need to measure and lead the realization of the expected benefits.
Picture 1: Draft of value creation model for an IT investment.
Reproduced with permission from © 2016-2017 Qentinel / Esko Hannula. All rights reserved. Original picture graphic found at “Three Skills of Advantage”, page 46.
Building a Value Creation Model for a Value Stream as a team work is beneficial in many ways. It makes the goals and the paths to achieve the goals explicit. A part of the modelling process is to identify the Value Paths – the causality chains that have the largest value creation potential or the highest risk of loss. Thus, the Epics that contribute most to the Value Paths should have the highest priority. Value Creation Model can nicely complement the proven SAFe practices by bringing Systems Thinking to Portfolio Management.
In conclusion, Lean-Agile Portfolio Management aims at maximizing the flow of value. Portfolio Management needs to live and breathe the rhythm of Agile Release Trains and teams. In order to maximize the value of portfolio flow, we need to apply Systems Thinking and understand the benefits and the overall value creation logic of the portfolio. Value Creation Model is a tried and true tool that suits well also for Portfolio Management purposes.
Juha-Markus Aalto leads product development of digital services at Qentinel. He is SAFe® Contributor and acts as SAFe Advisor in the large-scale Lean-Agile transformation programs supported by Qentinel.
Ecosystem lessons: ERP project culture due for change
The next big thing on this planet will be ecosystem thinking among businesses as well as society. Ecosystem thinking will allow us to ensure future competitiveness and our capacity to change.
When we talk about ecosystems, we don’t need a more complex metaphor than what we’ve all learned in biology classes and what we can observe in our environment. By ecosystem, we mean a functional entity comprising organic and inorganic elements operating in a shared environment.
Ideas and cooperation models that draw on the ecosystem analogy will also create amazing future opportunities in the world of Enterprise Resource Planning (ERP) projects. ERP companies have long had their own ecosystems, but now it is time to internalize the approach and environment whose focal point is…voilà – the customer!
Ecosystems are a central aspect of the platform economy. It is difficult to come up with anything that would better describe the platform economy on a micro scale than a corporate ERP system – the backbone of all operations and a pillar of productive economic activity. It is for this reason that ecosystem thinking and modeling in ERP project seems highly logical – why haven’t we always done it this way?
ERP projects are textbook examples of demanding change, system and multi-vendor projects. Traditionally they include all this and more, not forgetting money.
Almost without exception, acquiring a completely new ERP system requires significant investments with very little room for failure. In their entirety, such projects are often exhausting at the least. In the initial stages of the project, many companies purchasing a new ERP system don’t yet know what the project itself will or should entail, apart from it being a shiny, spanking-new ERP.
I maintain that a joint modeling of the ecosystem from the customer’s perspective will provide an excellent basis for cooperation among all the parties involved for years to come. Among other things, the model should describe from the customer’s perspective the desired scope of the ERP system, the customer’s organization, clients, operations model, all the players involved, systems to be omitted, touchpoints and related implementations as well as existing solutions that will remain unchanged.
Modeling an ecosystem using a value creation model helps suppliers understand the customer’s world and opens it up to all parties, something that is critical for the success of the project from the perspective of the functionality of individual segments and collaboration among the different actors. Modeling also makes it easy to observe interdependencies in the current system (value paths) and any new opportunities they may offer.
ERP will no longer be the same
The culture around traditional practices and ERP projects will change. Ecosystem logic requires trust and openness from all parties, but it also facilitates transparency and dialog among actors who would hardly even encounter each other in more conventional operational settings.
At their best, ecosystems related to ERP projects will form an agro-ecological symbiosis – a self-sufficient cooperation network – that can also give rise to new business activity and new cooperation opportunities.
Ecosystem thinking does not require major technological investments, but a little immersion into a new way of thinking and interaction.
It is possible to survive without it, but I contend that using ecosystem approaches and modelling, we can complete projects more quickly than today and using fewer resources.
Read more on how Qentinel has brought competitive edge for our customers in their ERP projects: https://qentinel.com/cases/successful-erp-project-lassila-tikanoja/.
Aino-Maija Vaskelainen currently works in the world of quality assurance. In 2004, she accidently got lost working with ERP systems and has worn the ERP brand ever since. She has worked on two major ERP projects with two stock-listed Finnish companies, as well as other development projects that came in their wake. She is still inspired and excited by the subject. Aino-Maija is always ready to share her past experiences as well as her subsequent insights about how things could have been done differently.