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!
Sanctions have been extended and the oil prices have dipped back to three month lows. So, what are you (and your organisation) going to do next?
Do you cut again - or did you already strip away some flesh with the fat last time and now risk going into the bone?
Short-term survival is of course key to long-term prosperity, but how can executives balance the needs of an uncertain tomorrow with the real threats of a volatile today?
While evidence-based reasoning - defining problems, breaking them down into parts, analysing information and solving them - got the executive this far, today’s increasingly uncertain and unpredictable world resists such logical approaches.
What then must leaders do?
Leaders must add another bow to their quiver - taking a radically new approach to addressing issues of volatility, uncertainty, complexity and ambiguity.
Over the summer we’ll be blogging in preparation for a major autumn event that will widen leaders’ lens on their landscape to discover the real issues they must prioritise.
We will be introducing a radical leadership model: Data - Insights - Perspective - Action to help businesses make sense of the challenges they face, so they act more effectively.
Stay tuned for updates on how to:
For more information contact me at: email@example.com
The KPMG senior management obsession with predictive technology appears to be finally satiated. Last week's announcement of an alliance with the Formula 1 team, McClaren, is intended to help the big 4 firm evolve from its current “retrospective and subjective” business model to become “forward looking and predictive.” Which is great news - if it wasn’t such nonsense!
The desire to know in advance of chaotic shocks that could rock the firm or its market place is understandable. Yet having more data, even of the turbo-charged variety, seems less a breakthrough in predictive capabilities and more an attempt by a large organisation to differentiate its commoditised offering in an increasingly fragmented market place. “Multi-dimensional” data - the influence of weather, pit stops and wheel changes - may be able to predict the performance of a complicated machine, like an F1 car, in a known environment (a limited term event operating to clearly defined rules). But KPMG - and the clients its advising - are complex entities operating in deeply uncertain ecosystems where the rules change at random and prediction is not impossible but can be dangerous if its believed.
Complex entities, like organisations or markets, are made up of thousands of people engaging in an almost infinite number of interactions that are impossible to calculate. Furthermore, these interactions are non-linear - meaning small causes have large effects (e.g. US sub-prime mortgages and the global economy). Though events often seem obvious in hindsight (e.g. sub-prime mortgages look a bad idea now) this doesn’t lead to foresight as a complex ecosystem is constantly emerging and new patterns make past pattens obsolete. This is why generals don’t win wars by re-fighting the last one.
The futility of relying on past data for future planning was perhaps best exposed when Alan Greenspan gave testimony to Congress in October 2008. He expressed “shocked disbelief” at the global crisis unfolding because for “40 years” there had been “considerable evidence things were going exceptionally well.” The 2012 collapse of Monitor Group, the elite strategy firm of Michael Porter - the ‘father of modern strategic analysis’ - also demonstrated how rigorous analysis may explain success in hindsight but still fail to predict it.
A complex world, by definition, is unpredictable and more data doesn’t alter this reality. KPMG therefore faces a real danger of unintended consequences in adopting ‘sexy’ technology: complacency (believing the models to be right), retardation (why think for ourselves now) and ultimately worse decisions (as the outputs will only be as good as the inputs chosen and are supposedly more experienced partners going to learn how to do that or push it down the chain?). The result of a turbo-charged stream of data may be to merely obscure the key signals KPMG and its clients need under even more noise.
If KPMG truly wishes to distinguish its offerings there are better ways than embarking on (another) long, seductive foray into technology they don’t understand. Within the organisation’s engine room sits (probably 87% idly) its most sophisticated capabilities: auditors who’ve completed thousands of audits and can recognise emerging patterns of system failures and potential improvement paths. “How do you report those insights to decision-makers in the organisation” one such auditor was asked in an interview. “We don’t” was the answer. “Why not?” they were asked. “Because my manager has told me to keep my damn mouth shut” was the reply.
So, before you buy the latest snake oil to solve your organisational problems consider what underused capabilities you already have that you can bring to bear on your strategic challenges. For any increase in the amount of data being collected must be coupled with the human capability and desire to seek insights and create action. Predictive technologies alone won’t turn a complex world, prone to eruptions of chaos, into an ordered one. But while it may not be possible to make an unpredictable world predictable - it is feasible to make your organisation better adapt to this reality through harnessing the natural sense-making talents of your people.
Strategies are often created with little thought about how to implement them. In dangerous times - such as those facing organisations doing business in Russia today - a smart strategy is simply not enough to survive or thrive.
Corporate strategies often look great on paper - often designed by the biggest brains for even bigger money. But these glossy visions of the future and the steps needed to exploit opportunities must do more than impress senior management. To add value, which organisations need now more than ever, strategies must be rigorously executed. But too often, too little thought is given to which obstacles the strategy will meet and how to overcome them.
Management guru Peter Drucker famously quipped that “culture eats strategy for breakfast”. Yet this simple insight hasn’t permeated the Russian business climate yet - even amongst those with international perspectives. Culture is treated as a soft factor - less important and therefore relegated to the non-strategic HR function. The right culture is a nice to have, but not a must have. Strategy on the other hand is a hard factor - critical to get right and therefore hammered out on the executive anvil by those who really matter. Get it right, the mantra goes, and the future is ours!
Yet even the best strategies (those that forsake aspirational aims for brutal truths) give little thought to how to implement the strategy so it will deliver value. This operational area is of little interest to the big brains and VIPs of the strategy team and usually extends to no more than a commitment to some face time at ‘strategic roll out sessions’.
'Roll outs’ can take a few days or a few months, depending on the size and dispersion of the organisation. Strategic C-level players will use the opportunity for an annual ‘touch base’ with the rest of the workforce to evangelise on ‘how it is’ and ‘how it’s going to be.’ But do roll outs really do anything more than tick a box? (Tip: if someone can’t repeat the strategy back to you afterwards it hasn’t been rolled out).
Six months down the line you'll usually find nothing much has changed. Most people are still operating largely as they did before. Their behaviour may appear similar (non compliance) but if you scratch below the surface you may find the reasons to be very different:
Archetype A hasn’t changed his/her behaviour because s/he didn’t listen to what was expected during roll out
Archetype B listened, but simply didn’t get it
Archetype C got it, but doesn’t know how to do what’s being asked
Archetype D gets it, can do it, but disagrees with the strategy and sets about subverting it (maliciously or otherwise)
And archetype E looks round at everyone else not implementing it and concludes they shouldn’t either.
This is culture. And this is how it eats strategy for breakfast.
Failure to address this soft factor is ensuring your strategy - no matter how smart it is - is doomed. If your organisation can afford for strategies to be ignored in these difficult times, then either stop wasting resources on creating strategies, or stop relegating the critical element of culture to non-strategic actors and learn to get to grips with the organisation's culture yourself.
The second part of this blog next week will look at how you can effectively do this. If you can't wait until then, get in touch now with firstname.lastname@example.org for a no obligation discussion on how we're able to support you in this challenge.
Current business conditions in Russia are highly uncertain. Will things get better, or significantly worse first? Answers are hard to find, but they do exist - if you know where to look. For, in the same way blood flows through veins and oil through pipelines, critical knowledge flows through organisations. Tapping into these flows can make known what is currently unknown.
Given enough eyeballs, all bugs are shallow.
If you knew what every person connected to your organisation knew (management, staff, customers, suppliers) in one moment, you would have a rich and accurate picture of the current reality. And like a chess grandmaster you could see the truth of your current position; enabling you to strengthen where you are weakest and capitalise where you are strongest. Such knowledge is created and transmitted daily through tightly coupled human networks. The mechanism is the act of conversation, or the sharing of thousands of open-ended narratives (micro-stories without a beginning, middle or an end). For we humans evolved socially, learning from each other networks - clans, tribes, communities and now organisations - making us hard-wired to create and share 'critical to survival knowledge' on a daily basis.
Narratives are vehicles for sharing what we know and having our assumptions or insights confirmed, challenged or augmented. This is the process by which new knowledge is created and then transmitted. We do this not to populate the knowledge management systems our organisations have invested in (!) but as part of an on-going, natural process to make sense of the uncertain world around us so we can act better in it. Narratives take many forms: from the fairy tales we share with our children to educate them about the world, to the fragmented micro-stories we share with each other around the water-cooler, coffee machine or in break-out rooms at conferences that reveal and confirm what we must do round here to survive and thrive. If you want to learn about an organisation, listen to the stories being told.
The value of narratives is they reveal the context of what is happening. Multiple narratives, properly presented, can describe the world as it currently is; with all its various opportunities and threats. So, can organisational leaders who tap into these knowledge flows find powerful, (sunken-cost) assets to navigate the uncertain environments their organisations operate in?
Making sense of the uncertain
Today's business environment is uncertain because the world is changing rapidly in unpredictable ways. We know that building on shifting sands creates a fragile structure, but it should also be self-evident that ‘engineering’ idealised outcomes in an uncertain world increases organisational fragility when the future doesn't play out the way you hoped.
Nature evolves through 'listening' intently to the signals of change, however weak, and adapting. And it is far better for leaders to manage emerging beneficial patterns in their organisations rather than attempting to engineer idealistic outcomes. This requires decision makers ‘see the world’ through the eyes of their customers, staff, or citizens to build a picture of certainty - what's happening right now - rather than what might happen - and acting on those insights. Listening intently to the narratives may be the only way leaders - especially in Russia today - can navigate uncertainty, protect against emerging threats and discover the opportunities inherent in our uncertain world.
For more information about how to tap the knowledge flows in your organisation contact email@example.com
Shape the Future
Don't just adapt to it