Posts Tagged ‘platform’

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.

Why demographic segmentation is bad for democracy

Sunday, November 11th, 2012

It is a bad outcome when the main lesson learned from the recent US Presidential election is that future political leaders will win through a better understanding of demographic segmentation. The conventional wisdom emerging from the recent victory of Barack Obama is that Republicans lost because they failed to understand that the United States is becoming more diverse, and consequently over-relied on older, white votes. Conversely, Democrats are deemed to have won the Presidency and gained seats in the Senate by energizing the vote of Latinos, African Americans, women and younger voters.

The problem with this argument is that it represents a static view of the situation (yes, the numbers are as advertised in the re-election of President Obama), but fails to recognize the dynamic role of political innovation in electoral success (no, there wasn’t any of that in the recent election). Like in business, political innovation does not reside in the ability to activate one’s traditional segment by honing in messages specifically crafted for them (the proverbial “red meat” for the equally proverbial “base”), but in rearranging the segments and building new creative coalitions among them. The name of the game should not be to grind out electoral victories through micro-segmentation and predictive modeling of votes county-by-county or citizen-by-citizen. The role of a political leader should be to engage a large electorate of diverse people in not only redefining their relationship to the candidate, but to each other. There is room for operational micro-segmentation processes as a second implementation step, but it is hardly a substitute for the broad democratic engagement process a candidate should orchestrate. In the election, both candidates had a lot of the former, and precious little of the latter (particularly if one compares Barack Obama’s 2012 campaign to 2008).

Successful campaigns are those where demographic frontiers get blurred and new relationships develop among supporters of widely varied ethnic, gender, sexual preference or age backgrounds, triggering new electoral coalitions. A campaign platform should be about drawing as many people as possible to become active members of the system and co-create with the candidate what he or she stands for. Voting is but the tip of the democratic co-creation iceberg, with day-to-day life in the community its underwater part.

Political campaigns should start in wide open form, not as manifestos. The pressure put by pundits on candidates to define their programs very early, down to the specific tax deductions they will eliminate and the energy programs they will support, is a negation of democracy, not an enhancement thereof. In a co-creative electoral system, there ought to be room for the much derided “listening campaign” of Hillary Clinton in her first senatorial run, or for the highly ridiculed etch-a-sketch views of Mitt Romney. Thinking that candidates should state their views once and for all, then execute them flawlessly once in office under penalty of becoming flip-floppers is as ridiculous as would have been to ask Steve Jobs to define the Apple strategy down to the scroll wheel of the next iPhone, all the while testing whether Latinos or women respond favorably to it.

The new leadership we need is not about ideas, but about process. It is not about reconfiguring party lines, or even bipartisanship from the top-down. It is about democratizing democracy at the community level, and reconstructing it piece by piece.




Top-ten list of sponsors for co-creation efforts

Thursday, March 22nd, 2012

Periodically, I ask myself: “who are the most effective change agents when it comes to implementing co-creation inside a corporation?” Here is my list, in descending order of effectiveness:

1. Chief Financial Officer (CFO)

  • Good news: The CFO’s source of power comes from controlling financial resources, often including IT money required for the development of co-creation platforms. They are often frustrated line managers who see co-creation as a means to gain influence over the operational side of the business.
  • Bad news: their analytical bias can overpower the human side of co-creation.
  • Good first step: issue cost reduction challenge to one of the businesses; suggest co-creation may be the way to reach that goal (get external people to do work for free that was previously done inside).

2. Chief Information Officer (CIO)

  • Good news: CIOs get to co-creation through the funding of engagement platforms. The role of CIO in co-creation is legitimized by the app store phenomenon (co-creation with third-party developers).
  • Bad news: CIOs often struggle with developing the human community part of co-creation (they can be too tool-focused).
  • Good first step: find a few APIs and open up some aspect of your customer-facing sites to third-party developers. Start connecting customers and developers.

3. Chief Purchasing Officer (CPO), Directors of Supply Chain

  • Good news: There is a new breath of fresh air with procurement departments; they increasingly recognize that they should be developing supplier networks rather than consolidating them. Supply chain people are often pushed to co-creation through the need to create transparency in their emerging country plants (often due to labor and sustainability issues).
  • Bad news: Supply chain people can get confused on the difference between collaborative supply chain tools that have been around for several years, and the actual development of co-creative supply chain communities that allows the constant reinvention of those supply chains.
  • Good first step: pick a particularly risky part of your supply chain (e.g., Chinese plant with labor issues), and demonstrate that you can remove some operational and reputational risk through co-creation.

4. Research and Development (R&D) Managers, Heads of Product Development

  • Good news: Many product development people know that co-creation is coming to product development and product design (also often referred to as open innovation, or crowd-sourcing).
  • Bad news: They often do not yet know how to involve their own people in co-creation and avoid the NIH syndrome. They often jump too fast to third-party platforms to generate product ideas, but fail to engage their own people in the dialogue.
  • Good first step: start inside.  Assemble your R&D people and see where they would welcome the engagement of external people. Only when you have their views will it become meaningful to engage external contributors.

5. Chief Experience Officer

  • Good news: more and more companies have experience officers.  Experience officers are natural sponsors for co-creation.
  • Bad news: many of them focus on measuring “as is” experience rather than trying to change it.
  • Good first step: pick a narrow segment (a single customer in B2B), engage the mini ecosystem involved in serving this narrow segment/single customer and see what co-creation can bring.

6. Chief Marketing Officer (CMO), Head of Market Research

  • Good news: CMO and market research people understand experience.
  • Bad news: they think of themselves as experience experts, and therefore see no reason to co-create any of that experience with anyone (since they know better).
  • Good first step: open up one of the brand management processes to customers and employees, e.g., advertising, and see what you get.

7. Chief Sustainability Officer (CSO)

  • Good news: sustainability is one of the best fields of application for co-creation because of the multi-stakeholder nature of the problem.
  • Bad news: CSOs don’t typically have access to senior people and may not know how to engage them.
  • Good first step: team up with the sales force to embed sustainability in the sales message.

8. Performance Management, Quality, Reengineering, 6 Sigma, Lean, Transformation Officers.

  • Good news: Performance management people naturally gravitate toward co-creation as “the new tool kit.”
  • Bad news: The concept of process can be so engrained that moving to platforms and self-configured interactions can represent a mental challenge. Many struggle with the notion that the transformation path can/should itself be co-created, rather than established by experts.
  • Good first step: pick a customer-facing process, e.g., sales or customer service, and show how moving from process thinking to co-creation changes the outcome.

9. Strategy Officers

  • Good news: A few strategy officers understand the power of human experience in generating insights.
  • Bad news: most prefer an information-gathering and analytical approach.
  • Good first step: pick a self-contained strategy issue, and ask customer-facing people and a few customers how they would frame and solve the issue. Compare to the answer an analytical approach would have provided.

10. Human Resources Officers, Diversity Head

  • Good news: Of course, senior HR development people should be major players in co-creation.
  • Bad news: In practice, they rarely have access to the proverbial strategic table.
  • Good first step: co-create HR processes (e.g., training, hiring, career development) rather than tackling line processes.


The bounty system of the New Orleans Saints as a perfect model of co-creation

Monday, March 5th, 2012

It has been widely reported in the last few days that some players on the New Orleans Saints football team developed a home-grown bounty system whereby players would reward each other with personal money for inflicting injuries onto opposing players. While the National Football League is investigating the New Orleans Saints specifically, there are indications that such a system might be in existence across the league, along a continuum from the clearly legal (players rewarding a punt return) to the apparently illegal variety (the NFL seems to have rules that prohibit intentionally putting a quarterback on a stretcher).

The New Orleans Saints have developed a perfect system of co-creation we should write up in Harvard Business Review, not decry in the New York Times. The system developed by the players has all five ingredients of co-creation:

  • A community. The players who decided they were going to build a kitty to reward injury-causing hits on opposing players set themselves up as a community. Had the NFL not intervened in ill-advised fashion, the player community might have expanded into allowing investment from fans into the bounty scheme. A “Knock Tom Brady cold” Super PAC could not have been far behind, supported by Libyan or Syrian capital.
  • An engagement platform. The platform was an organized spreadsheet where players kept tabs on bets and rewards. The spreadsheet was further institutionalized when an assistant coach started keeping score on behalf of the players. The next expansion would have included an idea generation web site open to the public (, with an injury pricing site and rotisserie league to follow.
  • Continuously expanding interactions. The platform was originally developed as an incentive system to reward legal plays (e.g., causing a fumble), but started sprouting injury-causing moves over time. The community and platform in place could have been further expanded into player gambling on football games, sponsoring dog fights, or financing armed robbery by young deserving football players.
  • New win-win experiences for all parties. We’re told the bounties helped young players round off their modest paycheck, allowing them “to buy shoes” with the proceeds. I understand Zappos and Nike were eager to become involved in the Saints co-creative ecosystem. Elder players enjoyed the developmental experience of providing nurturing advice to their younger colleagues, supported by the team’s Human Resources function. The assistant coach was clearly on the short list for Coaching Innovation of the Year. And the New Orleans Saints fans got a winning football team after years of futility, allowing the entire city to regain its pride after Katrina (well, sort of).
  • New value for the club owner. The bounty system produced a highly motivated work force that fully dedicated itself to the task at hand, ultimately winning the Super Bowl.  Absenteeism was at an all-time low. Career progression was rapid. The bounty system had no cost to the owner since everything was financed by the players.  The system did have a tremendous revenue impact in terms of gate attendance and media revenue. What else could one wish for as an owner?

The bounty system was such a perfect example of co-creation and produced an ever-expanding win for all parties (except for a few injured parties along the way, but doesn’t there have to be some Schumpeterian creative destruction?). The Saints bounty system could have become the new Facebook, the new Google or the new Groupon. Will regulators ever learn?

Look at her run

Saturday, February 18th, 2012

She’s young. She’s passionate. She’s an environmentalist. Her ecological ideas feel a bit out of place in the conservative bank where she works, but she doesn’t care. That’s her passion. Every Thursday night, she goes to the local movie theater to participate in the meetings of the sustainability group she’s part of. She wants to change the world, just from where she is.

She’s also a triathlete. She can swim, run and bike faster than anyone around her. She shrugs her shoulders when the conversation moves to the local soccer team and the thousands of people they attract every week. “Have you ever attended a track and field meeting she asks us?” None of us has. She describes the excitement of having so many things going on in the stadium at any one time: watch a race, then focus on a pole-vaulter clearing the bar or watch a javelin fly across the field. I feel like signing up.

I ‘m having lunch with a group of bank advisors, between a morning and an afternoon workshop session. I’m sitting next to this young bank advisor, and I feel young again. She operates in a small town that does not quite fit the community-building scheme we have devised, so we make lame excuses about not having enough resources to support her in her small town. She just ignores our objections. We rapidly understand that any resistance is futile. She wants to get involved in this co-creation project, and we will help her.

So we agree to run a workshop with the customer she’s identified. I am long gone by the time the workshop happens, but I get an account a couple of weeks later. Between her client and herself, they have mapped out what the community should do, how the bank should get involved and how everybody would benefit. The community is building itself. One of my colleagues calls me at the end of her day in Europe to give me the news. No need for deep analytics, or motivational speech. All we have to do is watch her run. It’s hard to know who’s more excited — the customer, the young bank advisor, the consultants or the banks’ management.

Why didn’t it happen before? She was there all along. All we did was give her a platform. Her passion is now channeled through her job. She’s become a business activist. I know she’ll run far and drag thousands of people with her. I will be rooting from afar.



Frozen French tundra

Monday, February 6th, 2012



It’s a rude awakening. I have arrived in Saint-Etienne, France, where the temperature has dropped down to 10 degrees Fahrenheit, compared to 85 degrees earlier that morning in Mumbai. A cold suburban train from the Paris airport to Gare de Lyon and a TGV train down to Saint-Etienne, watching the snow-covered French landscape at high speed. I’m here for a workshop with a French bank, hoping to activate an economic community among the small business customers of the bank.

The temperature drop outside is huge, but the one in the room is even greater. Participants in the workshop are reluctant, to say the least. They simply don’t see the point of building a customer community. Yes, they care about Saint-Etienne, the 400,000 inhabitants city where they live, and a former mining town which struggles to find its next economic source of growth. But no, they do not see any role for their bank in activating the local economy beyond what the bank already does, i.e., gather savings and make loans to local businesses. “This is for the government to do”, one of the participants tells me in the uniquely dismissive style of my compatriots. This has to be the toughest workshop I’ve done in five years.

By mid-afternoon, there is a noticeable thaw. The bank advisors around the room are willing to contact one of their customers and ask them to describe their personal community network. The idea is to start with individual networks of individual small business owners, then see whether these individual networks somehow converge into communities we can engage on a larger scale. It’s a start. For the first time, participants start building on each other’s interventions, without my having to prompt every single comment with a question. This approach feels more concrete to them than any conceptualization of what communities and platforms can do: if co-creation starts with one advisor and one customer at a time, they’re willing to suspend disbelief and try it. I look out the window and notice the snow has stopped falling. By the time I sit down, I notice my shirt is soaked, in spite of the cold in the room.

The following day, we are in the small town of Montbrison, in the center of France. I have spent a good deal of time lying awake the preceding night, trying to mentally devise a more effective way of engaging the audience, but also still struggling with my Indian jet lag. By the morning, a miracle has occurred. The people at the workshop are warm. They’re ready to go. Ideas for communities fly around the room. They know exactly whom to engage to get started. It feels like an invisible hand is guiding us to co-creation heaven. Life is wonderful again. Thank you, Montbrison.

I sometimes wish I could predict how audiences will react to co-creation. The only thing I’ve learned is that I’m consistently wrong. My “sure thing” workshops often end up in agony, while my “fear of the unknown” workshops sometimes end up in blockbuster success. One of the teachings of co-creation is that you never know what lies beyond the initial engagement process. I guess I have to re-learn this lesson every day. I have to take my own “let go” medicine. It makes for anxious moments, but I wouldn’t have it any other way.



Top Ten list of excuses not to engage in co-creation

Saturday, October 17th, 2009

1. We’ve always done focus groups. We’ve done user-testing, customer-centricity, collaboration, customization, and personalization. Somewhere in there, I’m sure we ‘ve also done co-creation.

I’m sorry you suffer from methodology fatigue. But have you ever invited your customers to insert themselves into your value chain and do some of the work for you? I’m not talking about YOU adding endless variations to your product line, guessing at what they will buy from you. Put THEM to work. Give THEM tools that allow them to do some of the work instead of you. Get THEM to hold the pen. This is what defines co-creation. Maybe you’ll feel less tired after that.

2. We’re in a boring industry. We ain’t exactly Nike or Apple, you see.

You will find successful co-creators in industries such as post office systems, local community banks, manufacturers of coated film, pulp and paper, chemical companies, utilities, technology services companies and hospitals. Can your industry really be more boring than these?

3. Customers want simple, affordable products and services that are ready to use. Co-creation makes things uselessly complicated.

I see. You don’t want to engage, do you? Well, a nice thing about co-creation is that you can turn it off. If you want a standard, off-the-shelf product offering no co-creative interaction, don’t use any of the interactive capabilities. Feel free to use your iPod as a boon box.

4. If customers come up with the innovative ideas, what’s our role? Don’t customers pay us for our expertise? I don’t see what we’re here for in co-creation.

You do ask deeply existential questions, my son. Søren Kierkegaard and Friedrich Nietzsche would be proud of you. But not to worry. There is corporate life after co-creation. You role just needs to move from “doing yourself” to enabling interaction with others. You’re now a double-barreled expert. Still an expert in whatever content you were good at before, plus now you’re learned to engage others in connecting with you. Congratulations. You’re now a content platform, rather than a content vessel. Are you now reassured about your purpose in life?

5.  We’re a science-driven industry. What could possibly be the role of co-creation there?

I understand, Herr Doktor Professor. Now we want you to not only be brilliant in your lab, but we want you to start teaching the customers what you know. Of course, they’ll never discover new molecules or create new composites for your fuselage.  But draw them into your kitchen, show them all the cool ingredients you’ve got, and get them to bake a casserole with you. You’ll both have a lot of fun, and the casserole will be cheaper.

6. It would cost too much money to co-create our products with customers. We’d lose our shirt.

Darn right, you are. As long as you’re geared for production of standard products, any co-creation attempt will represent an engineering “special” and be prohibitively expensive. But dear Henry Ford, please let go of mass production and think in terms of mass interaction. If your design and production system is geared toward allowing personalized interactions on a large-scale, you’ll create another type of economies of scale. Think eBay. Interactions between buyer and seller are both co-created and extraordinarily cost-effective because of the volume handled.

7. There’s no wisdom of crowds. Blogs and chat rooms generate only junk.

Crowds, like people, are both wise and stupid. Co-creation is a bit like advertising. You know one half is wasted, but never know which half. Accept a certain messiness, tolerate some mediocrity. The valuable stuff will emerge from the swamp. And then, you’ll not only have valuable content. You’ll have the people who develop and carry that content for you. Then, it won’t matter that this valuable stuff emerged from a lot of garbage.

8. If you open to co-creation, you’ll lose control of your brand.

Yes, this has happened. For example, GM offered for people to co-create some ads and contributors made fun of the Hummer – now in Chinese hands – as a huge gas-guzzler that destroys the environment. But these things occur anyway, whether you sanction them though an official platform, or whether these ads are placed on YouTube. Most large companies are skewered in a site. Whether you recognize it or not, your brand is already co-created. It’s like when your spouse cheats on you. You’re often the only one not to know it. You might as well socialize the nasty input on your site. In the end, your fans will weed out the bad on your behalf, if your brand is worth its salt.

9. Many of your co-creation examples are about technology. It’s an IT thing, isn’t it? IT has other priorities at the present time.

Technology is often required in co-creation, but there are other ways to implement co-creation. Stores can be co-creative. People can be co-creative. There’s a wall on a chart at the French post office where employees co-create their schedule. But in many cases, the sheer volume of interactions requires some electronic intermediation, and IT is needed. If your IT is busy implementing infrastructure programs, tell them this is a good thing to do to catch up. But if they don’t learn to engage customers and other parties rapidly, they’ll soon be looking for a job.

10. You can’t defend your intellectual property if you do co-creation.

O yes, the “co-creation breeds socialism” argument. If I co-create with someone, does this someone de facto own a part of the idea, and have I diluted my intellectual property from the start, such that I cannot make money off the idea? The trick is to define a priori the terms of the IP that will be created. Some co-creation sites like Innocentive or Procter and Gamble’s Connect and Develop state what they’re willing to pay for solving a given problem. Other organizations get their lawyers to co-create the arrangement as part of the process – that’s a novel idea, isn’t it? Believe or now, even lawyers can learn to co-create.