Posts Tagged ‘co-create’

Customers want to know how businesses make money

Sunday, February 3rd, 2013


Strange things grow in the darkness of many businesses’ economic models. If you think that businesses serve the needs of customers and make money by earning their trust, think again. Businesses are platforms balancing the needs of multiple constituencies, and their economic model is rarely what you think. More importantly, businesses don’t want you to understand how they earn their profits, because if you found out, you’d know many are not telling you the truth.

When you go to a grocery store, you assume the products being offered are those that the consumers want. You envision a customer democracy driving shelf space. But the grocery store is responding as much to the spiffing from suppliers as to the needs of customers. Customers matter some (the grocery store cannot really do without the brands that people love), but shelf allocation is really driven by the rebate terms granted by suppliers to the store, not by what you want.

If you’re an investor who’s placed money with a large bank (or even more so a private bank), you may naively believe your advisor has your best interest at heart. But in many cases, your advisor is investing into assets managed by the asset management division of the bank, with the asset management division “retroceding” a good chunk of its profit to the banking division. How can you trust your agent when you have no idea what incentives he responds to?

Why are investment bankers so despised? Because nobody understands how they generate their money. Given the darkness in which they operate, we assume they’re making tons of money (which is largely true), using reprehensible schemes (which is sometimes true). The inability to identify the real costs and risks involved drives a general suspicion. If we were to understand costs and risks, corporate CFOs and treasurers (and the public at large) could start trusting investment bankers again.

At, you may think the search results you’re provided are the result of some objective assessment of the relevance to the question you posed. But Google makes money from its advertisers, not from you, so whom do you think they cater to when you ask your question? They have resisted any probe from regulators on how their search algorithm works (most recently in Europe), which would be the only way to figure out whether the search is indeed honest, or whether it tilts results to Google-biased suggestions? As a result, many of us may use Google as the dominant option, but few of us trust them.

At Internet sites like Lending Tree, TV advertising urges you to come to them because they will get lenders to compete to lend you money. But what they really do is “source” you as a customer and bring you tied and gagged to one of their chosen (often second-tier) suppliers based on some pre-arrangement they’ve struck with them.

All of that is as old as business. Newspapers, radio and television have always been financed by advertisers, while pretending to be accountable to their readers, listeners, or viewers. Large cultural institutions like symphonies, ballets, and museums routinely raise more money from grants and donations than from people paying for performances or visits at those institutions. As a result, the editorial or content integrity of those institutions is constantly in question, since the economic model does not match the purported consumer-oriented intent.

So what’s wrong with that? The lack of transparency is what’s wrong. Customers should have the right to know the economics of the businesses they patronize. They should understand the motivation of the store being spiffed by suppliers, or how much money the asset management division earns from their business with the retail banking division. If they did, they might decide to not buy from those businesses, go to more transparent suppliers who do the same thing but make it transparent, or choose to engage directly with the other members of the ecosystem. After all, grocery stores increasingly invite customers to talk to their suppliers on issues of sustainability for example, so why not do it on price or profit issues? They might help small suppliers struggling to break into the store shelves’ line up without paying a ransom, or punish spiffing suppliers who over-buy space.

I have repeatedly found that people, when confronted with the economic reality of business, make intelligent choices. Customers want their businesses (and their businesses’ suppliers) to be successful. They’re often eager to participate in the co-creation of the business’ economic model. The only time where they want to punish businesses is when they’re not honest with them, as has happened with car dealers playing back-room pricing games: consumers have deservedly pushed the industry close to zero profit on the sale of new cars through the power of Internet transparency.

In the future, economic models will be increasingly the result of a co-creation between customers and suppliers, with businesses earning their profit through the intermediation they create between them. Making your business model transparent is the first rule in the new economic order.

The silent voice of government employees

Sunday, October 14th, 2012

I’ve been a private sector guy all my life. I like singing for my supper. I like fighting on any consulting proposal, executive education gig, or speaking platform. I consider myself a front-line warrior in an economic war, and I like the thrill of victory and (in moderate doses) the agony of defeat. I have created employment for others (with some inevitable ups and downs), brought back currency to the countries that have been my home, and have traditionally thought of myself as an entrepreneurial type that makes an economic contribution to society without expecting much social credit for it. Most of my fellow citizens seem to believe the wealth generated by entrepreneurial success should be my sole reward, and that’s OK with me. With most of my family members in France as civil servants of one kind or other – many teachers among them – I have run at a young age as far away from government employment as I could, even moving to America to be at the frontier of creative capitalism and avoid any public temptation.

Through the vagaries of consulting life, though, I have found myself in the last few years confronted with the challenge of helping large government entities transform. As is often the case, civil servants have morphed in my mind from abstract aggregates represented by predatory unions into real people of flesh and blood, many of whom I actually like. It was always easier for me to develop a fondness for “teachers, policemen and firemen”, these archetypical public servants US Democrats like for us to visualize when they talk about government employees. But I have discovered that people working in post offices, unemployment agencies, government healthcare or ministries can touch my heart as deeply as any private sector person trying to make a living. As naïve as it may be, I have discovered that government employees are people too.

The social net may be protecting them better than most, and there are undeniably stories of excess involving them, but I have lately found myself wondering what it feels like to only be described as a sector to be shrunk, a cost to be minimized, or a citizens service to be improved. Strangely missing is a discussion of their own professional experience, as if their life had become irrelevant to the debate, or could somehow be reduced to a collective bargaining discussion conducted on their behalf by their unions. The miserable nature of the public servant’s experience has become a bit more visible in a country like France where a wave of suicides has spread through the country when government employees have been pushed to adopt new private sector practices, as has been the case at France Telecom. At this level of distress, it becomes hard to ignore the emotional reality involved.

It strikes me that the process of transformation used by managers of public entities deserves a lot of the blame. To improve productivity and service, public managers typically set goals and cascade them down through a chain of command that pushes front-line employees to higher performance level. This top-down, process-based approach has the net effect of squeezing everybody into a tighter and tighter box, producing extraordinary pain for all involved, from top managers to supervisors to front-line employees.

The key to reversing this process is to initiate a chain of empathy that starts with the interaction between employee and customer. Front-line employees and customers know a lot more than their managers about what to do. Together, they will engage with their customers and reinvent the system at the level of each post office, each blood donation team, each unemployment office, or each ministry’s office. Out of self-interest, public employees and customers will co-create better interactions between them. They’ll even figure out how to migrate these new innovative practices from office to office through peer-to-peer mechanisms, because, believe it or not, they talk to each other on the phone or on Facebook. The French post office has done that with great success (public disclosure: I have worked with them on their transformation). If the French post office can do it, shouldn’t any other public or para-public entity be able to do it?

For this to happen, though, senior government people will need to let go. This is not how senior government managers have been taught at the Harvard School of Government in the US, or the Ecole Nationale d’Administration (ENA) in France. And yet, this is what they should do: their role should be to lay out a few top-level goals, make some central resources available, then get out of the way. From there on, local post office employees will figure out with customers how to lay out or manage the local post office. Local unemployment office agents will team up with people looking for jobs and local employers to figure out how they should work together. Local blood donation staff will figure out with blood donors when and how to schedule each session. There is nothing like the self-interest of local parties to come up with innovative solutions and migrate their solutions from place to place to solve the huge societal problems that plague us.

The time has come to reinvent government. Disappointingly, none of that is part of the current presidential campaign discussion in the US.

On Wednesday, September 21, 2011, I shall walk into my local Bank of America branch and save their CEO

Monday, September 19th, 2011

The cover of Bloomberg Business Week this week is a red-filtered, haunted photo of Bank of America’s embattled CEO Brian Moynihan, accompanied by the headline: “Can this man save Bank of America?” (

While preserving the appearance of modern journalism’s objectivity, the article describes him as a largely incompetent leader who got the CEO job because he was one of the few who actually wanted it, somehow surviving because B of A is protected from its own ineptitude by being too big to fail.

I actually like Bank of America and its CEO, and I’ve decided to help them. I do not know my man Bryan or anybody senior at B of A, nor do I have any special relationship with the bank. I’m a regular customer of the local branch (I  have a small business and a personal account with them), and I like the idea that they still have a physical building right across the street from my office in Concord, Massachusetts, even though I hardly ever set foot in it. I’m also tired of seeing America bash itself, starting with its President and everybody down the line. The President of the United States has appeared uninterested in grass roots community support outside election periods, so I might as well start with a large bank CEO whom I imagine to be a friendly Irish type from New England . I’ll let you know otherwise if I ever meet him.

I sought refuge in America thirty-six years ago because the French annoyed me with their nasty habit of describing from the side of the pool why everybody in it is drowning from swimming incompetence. I came here because I liked America’s sense of collective purpose, compassion, even naiveté, and God darn it, I’ll do what I can to bring this back. It’ll be (sort of) like America sending healthy vines from California after phylloxera had depleted French vineyards, after originally importing the vines from France in the first place. I now have a mission: I will save Bank of America and its CEO.

So here is what I’ll do. On Wednesday, September 21, 2011, I will leave my office in Concord, Massachusetts, march into the Bank of America branch across the street and ask to see the branch manager (or whomever they let me see). I will offer to become the first customer activist of their branch and propose to mobilize a local community of like-minded customers to help them make their bank better. I’ll do it partly out of self-interest (they’re annoying on so many dimensions, where do I begin?), and partly out of altruism (because I want my branch to be around for many years to come and my man Bryan to be able to feed his wife and three children).

Mostly, I’m curious to know the people inside. I go into the bank two or three times a year, usually when my controller is on vacation and I throw myself at the mercy of the teller employee because I can’t even remember the business account number or locate the business debit card I’m supposed to use. There was even that time when some Brazilian client dumped loads of cash in our mail box for a speaking engagement I had done several weeks earlier, and I had to explain this was not drug money, but a bona fide fee for service. I remember the teller employee having something like a Russian name and accent, and I wanted to know more about her (how did you end up in Concord?; do you have any advice on where to stay?, I’m on my way to a Moscow conference), but we were both too busy figuring out how to deposit the cash on my account without raising unnecessary flags with Homeland Security, or depositing the cash on someone else’s account.

I have lots of ideas on how to get customers back inside the branch and co-create a new relationship with the bank. Why can’t they have a coin changer like TD Bank? I have about thirty pounds of coins I would like to change into real money some time before the universe stops expanding. I hereby pledge I will bring my grandchildren to the branch as soon as I get them and they’re able to count. I could use an extra conference room every now and then for my client meetings, and I’d love to be able to borrow or rent one of their rooms. I’m looking for a CPA in town, and I imagine they might have some CPA customers they could introduce me to (and generate new business for). My kid is a freshman in a business college nearby, and he’ll probably need an internship or a job someday. My wife is heavily involved with a bunch of local associations who also need a place to meet in the evening and have banking needs. The most effective network in town is made of former professional women volunteering their talent for various causes, never engaging with local banks in any way, because nobody at the bank ever reaches out to them.

“This is all fine and dandy”, the branch manager will say (assuming there is one; for all I know, the Russian lady runs the place), “but how are we going to make money from all this community and social stuff?” I will then flash one of my legendary smiles and tell him how to really make money with guys like me.  “I know you’ve been trying to CRM me for years. I know your strategy is to identify individuals with some assets to manage, ideally with small (or larger) businesses. Your strategy is to ‘cross-sell’ me. But you don’t even seem to be able to read my account balance and call me when I accumulate some cash to invest. ” We will agree that having me tell them where I keep my money is a more efficient way to find out than have their CRM program try to connect my business account with me as a person.  “I’ll help you make money for your branch because I want you to be promoted and Brian to remain your CEO”, I’ll say. “And by the way, I can bring you lots of people like me if you let us shape the branch with you.”

I’ll let you know how I do on Wednesday. Stay tuned. Brian’s survival is at stake.

LeBron James co-creates

Thursday, July 15th, 2010

I always love it when someone like LeBron James creatively bends the rules of a traditional marketing-run organization like the National Basketball Association.  The place is full of league-centric rules aimed at packaging the experience of the fan around its self-defined view of “the brand,” using a ’60s view of marketing management where logos and TV ads are viewed as more important than the creation of an authentic fan experience. Those of you who want your kids to emulate the behavior of NBA stars at home, please raise your hand.

The same “I’m in charge of your experience” philosophy applies to the relationship the NBA has with its players. The player’s experience is regimented by rules such as the salary cap – a team’s payroll shall not exceed $58 million for the 2010-2011 season – and the interaction between players, agents, and teams – players shall not negotiate with soon-to-be free agents before July 1. These rules proceed from a league-first paradigm where the league defines acceptable behavior and players are passive recipients of an employment product defined by the NBA.

Fortunately, LeBron James just exploded all of that. LeBron may not have been authorized by the NBA to negotiate with any team as a free agent until July 1, but he had the right to talk with two of his fellow players, Chris Bosh and Dwyane Wade, also free agents. Together, they decided they would co-create the terms of their future employment. They built a group package, defining the length of the contract (6 years for all three of them), how much each of them would be paid ($14 million to $14.5 million per year per player the first year, with a gradual increase every year after that). They intentionally lowered their collective salary by about $50 million over the length of the contract, to allow their new team to put a couple more players on the court (I’m a soccer guy, but I understand a basketball team has five players) and still stay within the salary cap. In the end, the Miami Heat turned out to be the winner, as many people discovered in an extravaganza show on ESPN a week ago.

The new James-Bosh-Wade collective has the two crucial ingredients of co-creation. It produces a better experience for the individuals involved, since they now stand a great chance of winning the NBA championship in the next six years. It also saves the Miami Heat a bunch since the three players have left money on the table for the chance of playing together, not to mention the fact that the American Airlines Arena in Miami should be full from here on. (In case you’re worried about LeBron going homeless on such a meager pittance, the money he makes from endorsements with Nike, Sprite, Glacéau, Bubblicious, Upper Deck, McDonald’s, and State Farm Insurance dwarfs his salary as a working stiff.)

The evolution of recruiting from a one-way, company-centric process to a two-way co-creative interaction where recruits engage with future employers on their own terms, often as part of a group, is a global phenomenon. One of the most innovative companies when it comes to recruiting is the Indian call center company 24/7 Customer, which allows young people in Bangalore to come and interview as a group. The firm even allows the groups to staff and manage themselves as a unit within the firm if they get hired. 24/7 Customer has devised this group recruiting process to find talent in the highly competitive IT industry in India.

Employers beware. From LeBron James to the call centers of Bangalore, madmen recruits are increasingly in charge of the recruiting asylum.