A fourth mobile operator will launch in Moscow this month, jump-starting a price war by ‘aggressively undercutting its rivals.’ If you're in Moscow you may have seen the billboards?
Good news for consumers, if the expected 30% price fall materialises. Less good for the established mobile operators. Their ‘cozy’ world is about to be disrupted as dissatisfied customers - one-fifth of the entire market - exit through their doors first.
Are the big boys worried? Apparently not. Aside from their infrastructure advantage they are confident that ‘client loyalty’ will ensure they withstand any threat. But are they right?
As Mark Twain (is often wrongly attributed to have) put it “It ain’t what we don’t know that gets us into trouble, but what we think for sure that just ain’t so!”
Claims of customer loyalty are not idle boasts. Russia’s telecoms industry has some of the sharpest marketing professionals in the game (witness Beeline’s rapid ascent from obscurity to global brand). They will all have hard evidence, drawn from years of customer research, that suggests the Tele2 threat is nothing for them to lose sleep over.
But what if all their data is wrong?
CFO pressure forced marketing departments to rapidly improve over the last decade. Campaigns are now run with one eye to their return on investment. The focus on hard data has pulled marketing away from its core purpose - understanding why people behave the way they do.
A few years ago Starbucks wanted to understand which customers drank which coffees in its shops. When buying coffee customers were incentivised to fill out a short questionnaire asking their age, occupation and ‘how do you have your coffee?’
On most measures the campaign was a success - except one. The results were confusing. Most people had said they have their coffee black, but the point-of-sales systems were showing that almost no-one has black coffee in their shops. Something was wrong.
The answer is that it’s our perception about how humans behave that is wrong.
In contrast to the default thinking of conventional economists and management theorists, humans are not rational, self-interested actors in full possession of perfect information. When asked for what we do, (or what we think we do), we are utterly unreliable (e.g. we like our coffee black, but don’t order that).
When asked a question by someone face to face we consciously or sub-consciously gift the answers we think people want to hear, or game the system to project how we want to be seen. It’s one of the reasons focus groups are fatefully flawed in minutes.
‘Do I love your brand?’ Well, I don’t want to disappoint you so, ok i’ll say it. Am I satisfied with your offering? Well, sometimes I am, sometimes I’m not - how do I record that on a 5 point scale? (Most people will discover a safe score, which is why your customer satisfaction scores probably hover around a 4 on a 5 point scale or 7 on a 10 point scale).
So Starbucks changed their question to ‘how did you have your coffee today.’ Removing opinion (and therefore bias) from responses they focused customers on their experience. The result was a set of figures that bore a close resemblance to the hard numbers coming out of the cash registers.
The only true test of customer loyalty is how people act: did they sign on again, then they’re loyal, at least for now. True tests of customer loyalty are how people act, NOT how people tell you they will act.
So, if the telecom majors are confident that customer loyalty (rather than customer inertia) will deflect the competitive threat of Tele2, but those numbers are built on people’s opinions - then it may be time to re-think. The future isn’t just an extension of the past.
Establishing a weak signal detection unit will provide real-time experience (not opinion) based evidence of emerging shifts in attitudes and behaviours. This will support timely responses if the market dies start to be disrupted on price.
Make sure you’re not caught out by what you thought you knew for sure, but that just isn’t so!
Managing complexity requires a new mind-set.
In complex systems patterns of behaviour emerge through interactions between people and surroundings that can rapidly escalate if they find reinforcement. This is why a peaceful crowd can turn into a hateful mob in seconds. These shifts are also often difficult to predict beforehand.
Fortunately the reverse is also true. Crowds can also be 'wiser' than any person within it. This phenomenon was proven 100 years ago at a farmer's market in England and has been used since by Nobel peace prize winners to help the poor. Simple constraints make it work, but the phenomenon is consistent.
The 'wisdom of crowds' matters because all of us - regardless of who we are - are subject to mental biases that distort the information we take in. For example, count the number of F’s in the following text:
“Finished files are the result of years of scientific study combined with the experience of years.”Three?
Actually there are six F's here. This isn't a brain failure - there are evolutionary reasons why we don't see everything - it's cognitive bias and highlights the importance of taking many perspectives before acting.
For managing complex systems requires learning how to spot weak signals of emerging trends as early as you can. If you detect positive signals early enough you can amplify those and ride that wave ahead of your rivals. While negative signals can be quickly disrupted before they become threats that overwhelm you.
Tapping the wisdom of crowds may be the smartest decision leaders can make today
In a complex and crisis-ridden world ‘lessons of the past' are unreliable guides for future action. While ‘management by objectives’ doesn’t equip organisations with the agility or awareness to respond to emergent threats and opportunities. Yet, management thinking 1.0 and 2.0 still dominate organisations today.
1.0 Scientific Management - views the organisation as a machine and its people as component parts. Their work can be commanded and controlled through rigorous automation and focus on efficiency. The result are economies of scale that dominated management thinking for much of the 20th century.
2.0 Business Process Re-engineering - challenged the status quo, demonstrating that organisations could define future outcomes and goals, or values and behaviours for staff to adopt. While scalable information and communication technology could drive improved performance through metrics. This is the dominant management thinking of today.
Management 2.0 has a fundamental flaw - it sees the world as a predictable place
In 1994 Leading Change was published in which Prof. John Kotter highlighted a damning statistic: 70% of all change management programs fail. Yet, despite an assembly line of case studies and continuous BPR improvements in two decades since this figure hasn't improved. For organisations are collections of people and people are rarely interested in having change done to them. So faced with a need to 'adapt or die' business leaders today face a stark choice:
Find a way to do Management 2.0 better or find a more appropriate approach
Management 3.0 Sensemaking is a naturalised approach to leading in times of change. Rather than projecting an idealised future it seeks to understand and manage the evolutionary potential of the present. It puts people first - rather than processes - and taps into mass collaboration to bring the collective intelligence of the entire organisation (and beyond) into play. In short, management 3.0 replicates how the human brain - the most effective adaptive tool in the world - works rather than imitating the machines it creates.
Management 3.0 is already here and it will favour those quickest to adapt.
Just 19% of employees in Russian organisations are engaged. The opportunity cost is staggering: $50 billion invested annually in people not motivated to achieve organisational goals. Is there any other investment area leaders would accept such returns without acting?
In a country that prior to the 2008 crisis had arguably the best human resources anywhere in the world (Economist Intelligence Unit 2007) this represents the biggest missed opportunity for organisations in Russia today. But can anything be done about it?
The management thinker Gary Hamel once famously declared that “human beings are limited not by our resources but by our aspirations”. Nowhere is this more true than in Russia. Organisations overall are unhealthy, for they are not “adaptable … innovative at their core” or “engaging, exciting places to work.”
It’s perhaps unsurprising. Private enterprise was only legalised a little over a quarter of a century ago, giving the modern Russian organisation little time to develop a healthy corporate culture. The road has also been bumpy - from the gangster capitalism of the early 90’s to crashes of ’98, ’01 and ’08. While imported expat talent - meant to accelerate commercial development - was often not of the first variety.
When the going was good though, it was very good. But then again, even a turkey flies in a tornado. But what do you do when the trade winds have died down and you must make your way forward under your own steam?McKinsey have shown the path. Over a decade of research across multiple industries they have uncovered what they call the ‘great paradox of management’ - that “when it comes to achieving and sustaining excellence in [organisational] performance, what separates winners from losers is, paradoxically, the very focus on performance itself.” In other words, if you want to be a great organisation, stop focusing on performance (your measurable operational and financial activities) alone.
What McKinsey discovered was that those who focus on both organisational health and performance simultaneously are “nearly three times as successful as those that focus on performance alone”.
The answer seems obvious - if you want to get more out of your people investment then create an environment that provides what talented employees everywhere want - a dynamic workplace where they feel empowered to make meaningful change happen.
The question is, how do you do that with depleted resources and an environment where tomorrow might be too late …. ?
Shape the Future
Don't just adapt to it