We’re Moving to the New Customer Innovations Website

We are very happy to announce that Customer Innovations is moving to a new and updated home on the web.

You can find us at:  www.customerinnovations.com

The ideas and insights we’ve been sharing on this blog site have already been relocated to this new location.

Onwards and upwards,

Frank Capek,  CEO, Customer Innovations, Inc.

Channel 2.0: “Collaborative Ecosystem Management”

We are in the midst of a dramatic shift in the way business is done.  In most industries, a much more open and collaborative network model is replacing the traditional closed and controlled firm-centric view of the world.   This shift has been well documented by my colleague Don Tapscott in his bestselling book Wikinomics.  Don is the head of nGenera Insights (a Customer Innovations partner).

As this shift takes place, companies must reconsider many of the foundational assumptions about their role in the complex ecosystem of customers, competitors, intermediaries, and other influencers.   While many basic relationship management capabilities are still important, there are two major problems with the traditional approach to  “Channel Management”:

  1. The first problem is the “channel” part. In a network view of the world, a channel is an outdated, linear way of viewing the market.  In many ways, it reinforces the notion that you move your products and services forward through the channel to reach end-consumers.  This doesn’t work in the presence of media-savvy and networked consumers.  These next-generation consumers can easily find better deals with more agile providers and, in the process, are more likely to either by-pass intermediaries all together or deal with newer intermediaries (e.g. Amazon, etc…) that consolidate products and services in a way that makes it easier for them to get what they want.
  2. The second problem is the “management” part. In a more agile, networked view of the world, channel participants are more difficult to manage or control.  They tend to either have or believe they have more alternatives.  In most cases, they have the all-important relationship with the ulimate consumers who are paying the money.  In addition, they have to deal with a rapidly changing set of consumer demands that change what it takes for them to be successful.  If I’m an insurance agent, retailer, distributor, etc… struggling to keep up with changing consumer demands, preferences, and alternatives, I’ll challenge anything that product providers do that gets in the way of my responding to and serving my customers.

As we move beyond the linear, Channel 1.0 view of the world, companies must begin to more effectively position themselves as part of a collaborative ecosystem.  We call this Channel 2.o model, Collaborative Ecosystem Management.

Channel 1.0:  Traditional Channel Management

Channel 2.0:  Collaborative Ecosystem Management

Linear, feed-forward value delivery system

Complex, shifting network of participants

Static and known list of channel relationships

Evolving and emerging channel participants

Product and service fulfillment model

Demand creators and accelerators

Inflexible channel structures and systems

Adaptive collaboration processes and technology

The new channel model builds on many of the Channel 1.0 capabilities (covered in:  Channel 1.0: Foundational Capabilities for Optimizing B-to-B-to-C Performance) but must express these capabilities in a world that includes a complex, shifting network of participants, an evolving and emerging set of channel partners, and, as a result, must leverage more adaptive collaboration processes and technology.

Customer Network

Example:  The SAP Developer Network (SDN) is an online community for SAP developers. It is a resource and collaboration channel for SAP developers, architects, consultants and integrators. The SDN hosts forums, expert blogs, a technical library, downloads, a code gallery, e-learning catalog, a Wiki and more.  All these support open communication between active members of the community, which includes more than 1,455,000 members.  The SDN has fundamentally transformed the scale and effectiveness of integrated and supporting SAP’s products in a way that continued to fuel the growth of the company.  This allows SAP to maintain a primary focus on evolving their product while managing an enabling network of other participants that can apply the product and fuel their growth.

In general, we’ve learned that moving to a Channel 2.0 model must integrate three dimensions.  This builds on and extends the basic Channel 1.0 Capabilities, as well as, the Consumer-Back Approach that were introduced in Channel 1.0: Foundational Capabilities for Optimizing B-to-B-to-C Performance.  The three dimensions that must be integrated are:

  1. Consumer-Back Experience Design. Creating a platform for integrating complementary providers and partners in order to provide a seamless end-to-end consumer experience around goals that are important to consumers.
  2. Provider-Forward Experience Design. Creating an “experience chain” that helps makes traditional intermediaries, as well as, the wide range of other ecosystem participants successful in serving their downstream customers, whoever those customers are.
  3. Collaborative Ecosystem Platforms. Providing an open communication environment for connecting consumers, channel customers, complementary product/service partners, and other influencers.  This collaboration platform often creates the opportunity for channel customers and complementary product/service providers to collaborate with each other in ways that are currently impossible.

These are not three alternatives.  Effective Channel 2.0 strategies must integrate all three.

Dimension 1:  Consumer-Back Experience Design. A more ecosystem-oriented environment makes it possible to integrate capabilities across complementary service providers in ways that were previously impossible.  Often that integration was left to the customer.  For example, if your goal was to relocate your family from New York to San Francisco, the experience you would have as a customer would involve integrating the capabilities of real estate agents, mortgage companies, movers, banks, schools, doctors, utilities, home furnishing retailers, cleaning services, hotels, airlines, the post office, etc…    A significant step beyond the Consumer-Back approach described earlier would be to do what we call Consumer-Back Experience Design. This is what “The Right Move Group” did when they created an integrated platform of services address all of the elements listed above for families moving to the San Francisco area.

We are starting to see an increasing number of Consumer-Back Experience Design examples in other areas.  For example, the range of integrated platforms for launching small businesses (a.k.a. Business in a Box platforms).  This includes platforms like:  Smart Online and Microsoft’s Start Up Zone.    Other examples include travel integration services like TripIt, wedding experience integration service like Wedding Channel, and personal concierge services like Fini.

We believe that building an effective Channel 2.0 strategy starts by thinking Consumer-Back.  However, success is dependent on also considering the other two perspectives.

Dimension 2:  Provider Forward Experience Design. Forward Experience Design builds on and significantly extends the capabilities described in the Channel 1.0 Capability Model.  A more technology-enabled, ecosystem-oriented model makes it possible for providers to collaborate with their channel customers in fundamentally more effective ways.

Examples of technology that can enable Provider Forward Experience Design include:

Dimension 3:  Collaborative Ecosystem Platforms.  As we move towards more of a Channel 2.0 world, both of the previous two perspectives will increasingly be enabled by an Collaborative Ecosystem Platform.  A Collaborative Ecosystem Platform creates an environment within which participants from multiple organizations can work together to create an integrated experience that improves the performance of participants and, in the end, creates more value for customers.  This can run the range from:

  • Relatively unstructured sites for sharing information, like Microsoft’s Technical Community Platform
  • Process specific platforms for collaborative service like Get Satisfaction (enables product companies, intermediaries, and end-consumers to all collaborate on generating answers to technical and service issues.
  • Domain specific platforms like Sermo which provides an environment for physicians to discuss courses of treatment, the application and effectiveness of pharmaceutical and medical device products, etc…
  • Social networking platforms like Facebook which is providing additional ways for companies to reach end-consumer and participate in the dialogues that consumers have about the experiences that are important to them.

The migration to a Channel 2.0 strategy is very much an emerging capability for most companies.  It creates the ability to mobilize a much larger and more diverse set of participants in a way that can accelerate growth.  At this point, most of the companies we’ve seen and worked with are putting their toe in the water.   In our experience, it’s still very important to address any gaps in the foundational capabilities that are left over from Channel 1.0.  Very often addressing those gaps can have a substantial and immediate impact on business performance.  In most situations, we are recommending  a parallel set of activities aimed at:  1) addressing Channel 1.0 capability and performance gaps and 2) developing a Channel 2.0 strategy and roadmap that includes identifying the business experiments required to start to learn about and get traction in a Channel 2.0 world.

Channel 1.0: Foundational Capabilities for Optimizing B-to-B-to-C Performance

As I mentioned in my previous post (Optimizing B-to-B-to-C Performance: From Channel 1.0 to Channel 2.0), the foundational, Channel 1.0, capabilities required to optimize B-to-B-to-C performance include carefully selecting, cultivating, collaborating with, and deliberately managing the lifecycle and performance of channel relationships.   Unfortunately, many companies struggle with issues or symptoms of issues that result from not having these foundational capabilities in place.  These Channel 1.0 capability gaps often show up in the form of the following issues and symptoms:

Common Channel 1.0 Issues / Symptoms

  • Not proactively identifying and selecting the right channel partners. This results from either inadequate attention to profiling the ideal partner (the “Ideal Partner Profile”) or a superficial search that doesn’t acquire the best partners (the ”Warm Body Syndrome”).  The business impact is that there are a significant number of under-performing channel partners and / or channel partners where the support costs outweigh the benefits derived from working with them.
  • Focus on “selling to” rather than “selling through” the channel. Often the channel is considered the “customer” rather than the ultimate consumer.  This limits the business’ ability to anticipate changing consumer needs and priorities.  As a result, the business misses opportunities to innovate services that help partners win by selling more of their products.
  • Listening to what the channel asks for rather than what the channel needs. Changes in consumer expectations and alternatives are having a significant impact on what it takes for channel partners to be successful.  Most of what channel partners ask for is a reflection of the past rather than a proactive view on how their needs are changing.  Responding to what the channel is asking for misses opportunities to “lead the channel” to a better solution.
  • Channel partners undermining the quality of the brand. Very often channel relationships are formed without putting the principles, education, support, and controls in place to manage the quality and the consistency of the experience that channel partners create for consumers.  In many cases, this problem occurs when the traditional agreement with channel partners is no longer relevant in the current business situation.
  • Being locked into a legacy experience model that can’t change. Because the B-to-B-to-C system has a lot of moving pieces, the system often becomes difficult to change as market conditions, consumer expectations, and competitive forces shift.  The experience that consumers have ends up being driven by a loosely coupled network of independent service providers that may not be able or willing to deliver the experience that keeps the system competitive.
  • Not effectively supporting channel partners across the lifecycle of the relationship. Most businesses do a good job of initiating channel relationships, but miss opportunities to actively measure and manage the evolution and productivity of these relationships.  As a result, there may be a large number of relatively unproductive channel partner relationships.

When we encounter companies with these issues, we start by assessing and identifying specific gaps using our Channel 1.0 Capability Model.  Generally issues with channel performance can be traced to a set of specific capabilities that must be addressed.  The following Channel 1.0 Capability Model represents a comprehensive best practices perspective.  Some of these capabilities are more or less important based on the fundamental nature of the channel relationships.  For example, these things show up very differently with tightly, coupled franchise and captive agent models versus loosely coupled retail and distributor relationships.

Channel 1.0 Capability Model

Capability Elements
Lifecycle Management
  • Ideal Channel Partner Personae
  • Channel Partner Attraction  / Brand Management
  • Identification and Targeting Channel Partners
  • Recruitment
  • Registration and Approval
  • Assignment of Entitlements
  • Agreements and Contracts
  • Partner Assessments
  • Partner Database
  • Partner Retirement and Continuity Planning
Training and Readiness
  • Orientation and On-boarding
  • First 90 day Training
  • Mentor Assignments and Coaching
  • Refresher and Reinforcement Training
  • New Product and Process Training
  • Partner Alerts and Newsletters
Collaborative Marketing
  • Supplier Brand Management
  • Marketing Communications to Partners
  • Integration of Partners into Multi-channel Campaigns
  • Collateral Catalog and Fulfillment
  • Auto Presentation Generator
  • Joint Marketing Planning and Execution
  • Joint Business Development Programs
  • Event Management
Collaborative Selling
  • Shared Visibility to Sales Process
  • Team Selling with Partners
  • Partner Sales Forecasting
  • Compensation and Commissions
  • Activity Management
  • Contact Management
  • Product, Pricing, Quote administration
Collaborative Servicing
  • Experience Specification and Management
  • Partner Portals
  • Contact and Case Management
  • Multi-channel Partner Services
  • Partner Self-Service Tools
  • Partner Value-added Business Services
Performance Management
  • Partner Performance Profiles
  • Partner Performance Tracking and Reporting
  • Early Warning Systems for Changes in Partner Behavior
  • Performance Improvement Interventions
  • Performance Issue Escalation
  • Partner Termination

In the course of addressing specific capability gaps, we’ve learned that most effective approach to optimizing the performance of B-to-B-to-C relationships is to work Consumer Back.  In other words, to look past what your business customers are asking for to find innovative ways help them be more successful with their customers. In fact, we’ve found that many organizations that consider themselves pure business-to-business (B-to-B) providers would benefit from adopting a B-to-B-to-C “Consumer-Back” Approach… such as the following:


The B-to-B-to-C “Consumer-Back” Approach

  1. Understand how expectations and alternatives are changing for the end-consumer. In most cases the end-consumer has a rapidly advancing set of expectations being driven by the best experiences they have with other providers. In addition, these consumers frequently have an expanding array of options for meeting the same set of needs.
  2. Understand how these changes affect the nature of the relationship that exists between your business customer and the end-consumer. Very often the changes identified in Step 1 create tension in the relationship your business customer has with the end consumer.
  3. Understand how these changes affect what it takes for your business customer to be successful. This includes changes in what it takes for your business customers to acquire consumers, serve and retain them, manage them profitably, etc… In a large portion of the situations we’ve seen, changes in end-consumer expectations lead to a fundamental shift in the dynamics of your channel customers’ operations. In some cases, these are shifts that your channel customers may have not fully recognized.
  4. Ensure that you have a solid “economic model” of your channel customers’ business. This should include understanding the basic processes and costs associated with acquiring, serving, retaining, and managing their relationships with consumers. This provides a foundation for focusing on the elements of the experience that have the highest impact on your channel customers’ business (very often not the “table stakes” requests they make of you). It also provides the foundation for knowing how to communicate with your business customers about the innovation you develop in a way that reinforces the business value to them.
  5. Brainstorm any and all opportunities to help make your channel customers be more successful meeting the changing needs of the end-consumer. Generally these opportunities have a direct impact on your channel customers’ effectiveness in acquiring, serving, retaining, and managing their relationships with consumers. We’ve found that it helps to surface the explicit or implicit “rules” that constrain your traditional relationship with the channel customer. Very often the greatest opportunities to innovate come from uncovering the opportunities and implications of breaking these rules.
  6. Analyze the impact that each of these potential innovations have on the economics of the channel customers’ business and prioritize them based on business value, complexity of implementation, and your credibility with customers on delivering that innovation.
  7. Present these innovation opportunities in terms of their economic value to the channel customer. In some cases, there may be a considerable sales cycle to helping your channel customers get their head around these innovations… particularly if they have not been directly involved in the above process with you.

B-to-B-to-C Consumer Back Examples

One of our first experiences with this approach was about 15 years ago.  At the time, we were working with a leading tire manufacturer that sells replacement tires through independent dealers.  Our client had already spent a lot of time listening and responding to what these business customers asked for… typically improvements in ordering processes and turnaround times, payment terms, and advertising support.  These requests really represented “table stakes” improvements in the basic service levels that define the traditional relationship the tire manufacturer had with these dealers.  Responding to these requests generally involved investments that were difficult to justify; they just added to the manufacturers’ cost to serve without driving additional revenue growth.  They clearly needed to do something different.

Over the course of 2-3 months, we studied the factors that influenced consumers’ experiences associated with their tires and observed how consumers shopped for and decided about replacement tires.  This was done in 5 different European markets.  It turns out that there several innovative ways the tire manufacturer could help their dealers be more successful with the consumer.  For example:

  • In the Scandinavian countries, consumers generally have two sets of tires for summer and winter. In addition, these consumers typically did not have room to store the tires in the off season. If the tire manufacturer helped the dealers set up and run a tire storage service, the dealer would be able to get the consumer back into the store on a semi-annual basis. This would generate stickiness for the dealer and also provide an opportunity to inspect the condition of the tires and make more optimal recommendations about when they needed to be replaced. This created a clear economic benefit for both the dealer and the manufacturer.
  • In the German market, time was more of an issue. In this situation, we determined that the opportunity for the tire manufacturer was to help their dealers provide mobile mounting services that would replace the tires while the car was parked at the customers’ home or workplace.

In each of the markets there were things the manufacturer could do to optimize or improve the relationship between their customer and their customers’ customer.  (See Most Efforts to Improve Customer Experiences are Misdirected!).  Like most of the situations we’ve seen since that time, these innovations are the kinds of things that business customers would never ask for.

After that experience, we started to (semi-jokingly) tell our other clients that they needed to stop listening to their “channel” customers so much.  We’ve observed that these channel customers typically ask for things that drive up your costs rather than increase your revenues.  Of course they need to pay attention to what customers are asking for (or at least look in their general direction when they’re talking)… but the trick is to look past what they’re asking for to find more innovative ways to help them be more successful with the end-consumer.

Since that time, we’ve worked with very many companies to create similar opportunities, for example:

  • Several financial broker-dealers that now provide innovative services to help their independent financial adviser customers be more successful acquiring, serving, and managing relationships with individual investors.
  • A leading food processor that now provides innovative and collaborative concept development, meal design, kitchen layout, and education services to their restaurant customers… all aimed at helping their restaurant customers stay ahead of changes in consumer expectations for dining experiences.
  • An automotive financial services company that provides dealer financing, pre-paid maintenance, extended warrantee services, etc…  Beyond these basic products, this company’s entire positioning is now focused on collaborating with automotive dealers to improve the profitability and performance of their customers’ finance and insurance function. In addition, the company is now getting paid based on increases in their customers’ profitability not just the sale of their basic products.
  • A leading small group health insurance company that has significantly improved their performance by focusing on how they can help independent agents provide value-added services and advice to small businesses on the management of health benefits costs and employee wellness/productivity.

In this post, I’ve dealth with the foundational capabilities associated with the Channel 1.0 model.  In an upcoming post, I’ll share some of what we’ve been learning as we’ve helped companies build on these foundational capabilities in order to move to an inherently more agile, collaborative, and open, “next generation” Channel 2.0 model

Optimizing B-to-B-to-C Performance: From Channel 1.0 to Channel 2.0

How do we keep up with changing consumer expectations when we only have limited direct contact with the ultimate consumers of our products?

How do we align agents, brokers, retailers, or franchisees in order to deliver a consistent brand experience that drives growth?

How do we overcome complex, legacy distribution channels in order to reinvent the customer experience in a way that allows us to stay competitive?

How do we balance attention or investment in channel “customers” versus end-consumers?

How do we collaborate across an increasing array of diverse distribution network participants in a way that helps us accelerate growth?


The majority of companies we’ve worked with operate in some form of intermediated business model that fits a Business-to-Business-to-Consumer (B-to-B-to-C) structure.  This includes:

  • Product companies that sell through retailers, distributors, or sales reps
  • Financial services companies that sell through agents, brokers, or financial planners
  • Technology companies that sell to and through integrators
  • Food products companies that sell to restaurants and food service companies
  • Franchise operations that maintain and manage a network of franchisees

It also includes many companies that haven’t traditionally thought of themselves as operating in this model, but would benefit from doing so, including:

  • Pharmaceuticals or medical devices that focus on providers as well as patients
  • Placement agencies that manage employer, as well as candidate relationships

Although the B-to-B-to-C structure is an efficient way to go to market, there are a common and predictable set of challenges that not only make it difficult for the model to work effectively but to change as market and competitive conditions shift.  As downstream consumer expectations change and competitive alternatives arise, upstream product companies often find themselves locked in to a set of channel relationships that are difficult to influence.   Most of the B-to-B-to-C companies we’ve worked with experience a lot of angst and conflict about how to integrate:  1) what they do for their channel, 2) what they try to encourage the channel to do for the downstream consumer, and 3) what they do for the downstream consumer themselves (often very uncomfortably by-passing their channel.

This angst is now being amplified by a dramatic shift in the way business is done.  In most industries, the emerging model for the market is a much more open and collaborative network rather than a closed and controlled firm-centric model.   This shift has been well documented by my colleague Don Tapscott in his bestselling book Wikinomics.  Don is the head of nGenera Insights (a Customer Innovations partner).

The traditional concept of channel management is a product of the older closed, controlled, and firm-centric market model.  We call this “Channel 1.0.”    The basic capabilities associated with Channel 1.0 include carefully selecting, cultivating, collaborating with, and deliberately managing the lifecycle and performance of channel relationships.

In the more open, collaborative network model for business, these capabilities are still critical but they must be exercised in a fundamentally different way.   In this new world, there are two problems with the traditional Channel 1.0 concept of “channel management:”

  1. The first problem is the “channel” part. In a network view of the world, a channel is an outdated, linear way of viewing the market.  It locks you into thinking that you move your products and services forward through the channel to reach end-consumers.  This doesn’t work in the presence of media-savvy and networked consumers.  These next-generation consumers can easily find better deals with more agile providers and, in the process, are more likely to either by-pass intermediaries all together or deal with newer intermediaries (e.g. Amazon, etc…) that consolidate products and services in a way that makes it easier for them to get what they want.
  2. The second problem is the “management” part. In a more agile, networked view of the world, channel participants are more difficult to manage or control.  They tend to either have or believe they have more alternatives.  They also have to deal with a rapidly changing set of consumer demands that change what it takes for them to be successful.  If I’m an insurance agent, retailer, distributor, etc… struggling to keep up with changing consumer demands, preferences, and alternatives, I’ll challenge anything that product providers do that gets in the way of my responding to and serving my customers.

This leads me to Channel 2.0, which for the lack of a better description can be called Collaborative Ecosystem Management. In a more networked business environment the fundamental shifts include moving…

From: To:

Linear, feed-forward value delivery system

Complex, shifting network of participants

Static and known list of channel relationships

Evolving and emerging channel participants

Product and service fulfillment model

Demand creators and accelerators

Inflexible channel structures and systems

Adaptive collaboration processes and technology

In my next two posts, I’ll share some of what we’ve learned in helping companies improve performance by establishing the foundational performance capabilities associated with Channel 1.0 and building on those foundational capabilities in order to move to a more agile, next generation Channel 2.0 model.

Addendum… here are the next two posts:

Optimizing the Business-to-Business-to-Customer (B-to-B-to-C) Experience

About 75% of the companies we’ve worked with over the past 25 years operate in some variation of a Business-to-Business-to-Customer structure.  A wide range of diverse businesses operate in this mode, including:

  • Product companies that sell through retail or distributor channels
  • Financial services companies that sell through independent agents, brokers, or financial advisers
  • Food product companies that sell to restaurant chains or food service businesses

Over the course of this work, we’ve learned that most effective approach to optimizing the performance of B-to-B-to-C relationships is to:  look past what your business customers are asking for to find innovative ways help them be more successful meeting the changing needs of the ultimate customer. In fact, we’ve found that many organizations that consider themselves business-to-business (B-to-B) providers would benefit from adopting a B-to-B-to-C perspective.

One of our first experiences with this was about 15 years ago.  At the time, we were working with a leading tire manufacturer that sells replacement tires through independent dealers.  Our client already spent a lot of time listening and responding to what these business customers asked for… typically improvements in ordering processes and turnaround times, payment terms, and advertising support.  These requests really represented “table stakes” improvements in the basic service levels that define the traditional relationship the tire manufacturer had with these dealers.  Responding to these requests generally involved investments that were difficult to justify; they just added to the manufacturers’ cost to serve without driving additional revenue growth.  They clearly needed to do something different.

Over the course of 2-3 months, we studied the factors that influenced consumers’ experiences associated with their tires and observed how consumers shopped for and decided about replacement tires.  This was done in 5 different European markets.  It turns out that there several innovative ways the tire manufacturer could help their dealers be more successful with the consumer.  For example:

  • In the Scandinavian countries, consumers generally have two sets of tires for summer and winter. In addition, these consumers typically did not have room to store the tires in the off season. If the tire manufacturer helped the dealers set up and run a tire storage service, the dealer would be able to get the consumer back into the store on a semi-annual basis. This would generate stickiness for the dealer and also provide an opportunity to inspect the condition of the tires and make more optimal recommendations about when they needed to be replaced. This created a clear economic benefit for both the dealer and the manufacturer.
  • In the German market, time was more of an issue. In this situation, we determined that the opportunity for the tire manufacturer was to help their dealers provide mobile mounting services that would replace the tires while the car was parked at the customers’ home or workplace.

In each of the markets there were things the manufacturer could do to optimize or improve the relationship between their customer and their customers’ customer.  (See Most Efforts to Improve Customer Experiences are Misdirected!).  Like most of the situations we’ve seen since that time, these innovations are the kinds of things that business customers would never ask for.

After that experience, we started to (semi-jokingly) tell our other clients to stop listening to your customers so much.  We’ve observed that customers typically ask for things that drive up your costs rather than increase your revenues.  Of course you need to pay attention to what customers are asking for (or at least look in their general direction when they’re talking to you)… but the trick is to look past what they’re asking for to find more innovate ways to help them be more successful with their customers.

Since that time, we’ve worked with many companies create similar opportunities, for example:

  • Several financial broker-dealers that now provide innovative services to help their independent financial adviser customers be more successful acquiring, serving, and managing relationships with individual investors.
  • A leading food processor that now provides innovative and collaborative concept development, meal design, kitchen layout, and education services to their restaurant customers… all aimed at helping their restaurant customers stay ahead of changes in consumer expectations for dining experiences.
  • An automotive financial services company that provides dealer financing, pre-paid maintenance, extended warrantee services, etc…  Beyond these basic products, this company’s entire positioning is now focused on collaborating with automotive dealers to improve the profitability and performance of their customers’ finance and insurance function. In addition, the company is now getting paid based on increases in their customers’ profitability not just the sale of their basic products.
  • A leading small group health insurance company that has significantly improved their performance by focusing on how they can help independent agents provide value-added services and advice to small businesses on the management of heath benefits costs and employee wellness/productivity.

In each of these situations, we’ve found that the following seven steps are most critical.  In most cases, the best approach to following these steps involves collaborating with your more innovative and open customers.

  1. Understand how expectations and alternatives are changing for the ultimate customer. In most cases the ultimate customer has a rapidly advancing set of expectations being driven by the best experiences they have with other providers. In addition, these customers frequently have an expanding array of options for meeting the same set of needs.
  2. Understand how these changes affect the nature of the relationship that exists between your business customer and the ultimate customer. Very often the changes identified in Step 1 create tension in the relationship your business customer has with the ultimate customer.
  3. Understand how these changes affect what it takes for your business customer to be successful. This includes changes in what it takes for your business customers to acquire customers, serve and retain them, manage them profitably, etc… In a large portion of the situations we’ve seen, changes in ultimate customer expectations lead to a fundamental shift in the dynamics of your business customers’ operations. In some cases, these are shifts that your business customers may have not fully recognized.
  4. Ensure that you have a solid “economic model” of your customers’ business. This should include understanding the basic processes and costs associated with acquiring, serving, retaining, and managing their relationships with their customers. This provides a foundation for focusing on the elements of the experience that have the highest impact on your customers’ business (very often not the “table stakes” requests they make of you). It also provides the foundation for knowing how to communicate with your business customers about the innovation you develop in a way that reinforces the business value to them.
  5. Brainstorm any and all opportunities to help make your business customers be more successful meeting the changing needs of their ultimate customers. Generally these opportunities have a direct impact on your business customers’ effectiveness in acquiring, serving, retaining, and managing their relationships with these customers. We’ve found that it helps to surface the explicit or implicit “rules” that constrain your traditional relationship with the business customer. Very often the greatest opportunities to innovate come from uncovering the opportunities and implications of breaking these rules.
  6. Analyze the impact that each of these potential innovations have on the economics of the customers’ business and prioritize them based on business value, complexity of implementation, and your credibility with customers on delivering that innovation.
  7. Present these innovation opportunities in terms of their economic value to the business customer. In some cases, there may be a considerable sales cycle to helping your business customers get their head around these innovations… particularly if they have not been directly involved in the above process with you.

While these seven steps describe the overall roadmap, there are clearly other factors that need to be considered and will be discussed in future posts.  One of these other factors is the development of a B-to-B-to-C Brand Strategy that answers the following questions:  How to we build a strong supplier brand?  How do we improve the “transmission rate” of your brand message through business customers to the ultimate customer? etc…