Download special report here.

This report is referenced at www.baldrige.nist.gov/Publications.htm, “Turn Customer Insight into Innovation”, Industry Week.

The article, titled, “Idea to help newspapers draws national spotlight, bloggers ire“, describes the efforts of a Cleveland lawyer to “restore protections once held by newspapers against competitors appropriating, and profiting from, stories produced at great expense.”

The story reports bloggers’ reactions to the idea, which are predictably negative. Not this author, however.

It’s one thing to send readers to a newspaper’s website to read their story (as I’m doing here.) It’s another to display news stories on one’s website for free that are produced at great expense by newspapers.

Consultants face similar intellectual property infringements as newspapers. Once someone takes that property and presents it as their own, we’re out of business. So, perhaps a “legal innovation” in favor of protecting those who actually produce the news, newspapers, is appropriate if not long overdue.

What do you think?

Jason M. Sherman is president of Whyze Group, a customer experience research and innovation firm based in Cleveland, Ohio. Whyze Group was founded in 2001 and has worked with more than thirty Fortune 500 companies in a variety of industry sectors. You can reach Jason at (440) 785-0547 or at jason@whyzegroup.com.

Our recent new product development work with two nationally prominent publishers underscores the urgency with which newspapers are scrambling to retool for the digital news world. Consumers are migrating to online news sources in greater numbers.

Readers are customizing their online news content, even creating it, and paying less for it. And there’s a wider spectrum of consumer expectations and behaviors with regard to news today than before.

Perhaps the most valuable insight we can impart to newspapers is that this migration is so broad and rapid, that many conventional approaches to understanding readers are rendered obsolete. Market share and other behavioral data will only tell you what you already know.

The real pay dirt is understanding why consumers are changing. Once you know what people are trying to accomplish with their news, you can anticipate where they’re going…and that is essential for “skating where the puck will be” in the news business.

To understand why consumers’ behavior around news is changing, we have to acknowledge that the news audience consists of people, not readers. Their lives involve touch points with people, products and events outside the news, but which are often influenced by it. Understanding how people use the news in their lives will guide news professionals to the what, where, why, when and how of innovating their products.

We’re on the forefront of customer experience research methods that unearth these insights–mental models and persona development among them. More important, we feel a kindred connection to the editors and reporters we’ve met. They, like us, are driven to create understanding where it hadn’t existed before. And that’s critical to improving our quality of life.

Jason M. Sherman is president of Whyze Group, a customer experience research and innovation firm based in Cleveland, Ohio. Whyze Group was founded in 2001 and has worked with more than thirty Fortune 500 companies in a variety of industry sectors. You can reach Jason at (440) 785-0547 or at jason@whyzegroup.com.

The report, titled Bridging the Research-Innovation Gap, describes eleven factors that determine executives’ effectiveness in leading their companies from the mountains of customer information they collect to innovation pay dirt. It provides ways for managers at all levels to diagnose innovation challenges and implement solutions.

The report comes in the midst of an economic crisis that has raised public skepticism of many company executives. U.S. taxpayers are on the hook for trillions of dollars in bailouts to companies that, among other faults, have failed to innovate products customers want. GM’s former CEO, Rick Wagoner, was ousted by an Obama administration calling for more accountability.

Whyze Group president, Jason M. Sherman, says, “This report gives U.S. managers, investors and employees the tools to recognize barriers to innovation in organizations and respond accordingly.”

Sherman adds, “It’s in our collective interest to assure that everyone who depends on the continued prosperity of the United States participate in making us more innovative and competitive. This report is a primer for those who will make that happen.”

‘Bridging the Research-Innovation Gap’ is the culmination of eight years of analysis of Fortune 500 companies. Whyze Group audited hundreds of strategy documents and conducted thousands of interviews with executives, employees and customers. The report integrates data from the U.S. Commerce Department and observations from thought leaders at top business schools.

The report includes an analysis of how management teams waste billions of dollars on market research each year. Companies use only half of the customer information they acquire. Some customer information is misapplied.

As a result, there is little association between how much companies spend on research and their relative financial performance. Company performance is influenced more by how effectively managers apply what they learn.

‘Bridging the Research-Innovation Gap’ identifies eleven factors that determine how effectively managers apply what they learn. One example is the degree to which executives carve out fiefdoms to the detriment of their organizations. In some companies, managers try to manipulate information for their own personal gain. In others, executives openly share information and work in ways that are more aligned with the interests of customers, employees and shareholders.

Other factors that determine how companies apply what they learn are management teams’ abilities to
-   Correctly identify their own blind spots
-   Stimulate innovation among employees
-   Identify and champion the most promising ideas

The report describes seven additional factors that determine companies’ abilities to bridge the research-innovation gap. Descriptions of each factor are followed by strategies executives can use to make their companies more innovative.

About Whyze Group:
Whyze Group, founded in 2001, is a leading research and innovation management consulting firm that works with executives at Fortune 1000 companies. The company provides management belief audits, customer research, innovation planning, executive facilitation and training.

Contact:
Please direct inquiries to Jason M. Sherman, (440) 785-0547 or email, jason (at) whyzegroup (dot) com.
Subscribe to Whyze Group News at www.whyzegroup.com/wp-rss2.php?cat=3

Many managers speak these words with the vacant demeanor of a politician regurgitating their party’s least credible talking points. They haven’t bought in, but not because they don’t want to. 

Privately, they all express doubts. If you too are harboring doubts, you’re in abundant company.

Here are the two things that managers say most often undermine the journey to Customer CentriCity and what to do about them… 

1. The way to Customer CentriCity is through your boss.  There are a plethora of excellent writings about the influences of leadership on employee behavior and innovativeness. Your boss determines your job stability, promotability and income, not the customer. So, when the boss starts talking about moving to Customer CentriCity, subordinates quickly begin calculating the vectors between what their boss wants and what the customer wants.  

Enlightened leaders create an innovation space where subordinates can gain an unimpeded view of the customer.  Subordinates can collaborate, research, ideate, prioritize and design (click on each link to learn more) freely in this space. If you’ve got a good relationship with your boss, then you should mutually define this space.  If not, then strap on your hip waders and wait for your boss to come up with the next great customer centric idea.

2.  No firm can be exclusively customer-centric. That’s because the customer’s job is to demand the greatest value for the lowest price. Your company’s ROI has to be factored into any new products, services or customer experience that you innovate and commercialize. The optimal location for innovation is between Customer CentriCity and ROI land.  Finding that location is part of the prioritization process.

We welcome your reactions, points of view and criticisms. 

• Customer Experience Mapping. Whyze Group pioneered the process of integrating multiple sources of insight in a representation that gives managers a more holistic and empathetic understanding of customers’ experiences.
• Marketing ROI scenario modeling. In the late 90’s, we were among the first to apply ROI scenario modeling outside the context of direct marketing.
• Training for corporate innovators. One example is our workshop, Influencing Organizational Change with Market Intelligence, which we delivered at several national conferences and for consulting clients.
• Open innovation. We began participating in social innovation networks long before this became vogue. This has led to highly productive partnerships, intellectual capital and value for our clients.

1. Your company doesn’t have a customer experience. Customers do.
2. The customer experience does not begin and end with your company’s “touchpoints”. Competitors’ actions, expectations set by other industries, life changes, and changes in customers’ economic, technological, and political situations all influence the customer experience.
3. Customers filter their experiences through their associated memories, mental models, values, perceptions, cognition and emotions.
4. Whether you manage it or not, your customers are having an experience with your company.
5. 20th century management methods assure that customers will have disjointed experiences delivered by discreet silos that regard customers as “targets” (marketing), “users” (product development), “audience members” (advertising), “prospects” (sales), or “callers” (customer service).
6. 21st century customer experience research methods, many developed by Whyze Group, surface meaningful insights into customer experiences, in accordance with the time frames and contexts in which experiences form.
7. The mental models of managers who spend 20 years in an industry are almost always misaligned with the mental models of customers, who may spend as little as 20 seconds dealing with you.
8. An authentic, deep understanding of the customer experience shifts executives’ mental models into closer alignment with those of customers and accelerates their innovations of experiences that matter.
9. Successfully innovating the customer experience builds on an orchestrated delivery across your company.
10. Sustaining a compelling experience requires that you focus on monitoring the consistency with which customers achieve their desired outcomes, not the consistency of company processes.

Whyze Group has a combined 60 years experience helping executive teams innovate and deliver compelling customer experiences. Our approach has resulted in more efficient customer acquisition, higher customer retention, lower operating costs and greater profitability. Learn more.

In this article, we examine the prevailing management belief that more research leads to more innovation.

What’s the relationship between research spend, innovation and business performance?

The Fortune 500 are by far the biggest marketing research spenders in the U.S., consuming the majority of $7 billion in research services annually. Several years ago, we hypothesized that companies among the Fortune 500 would remain preeminent from decade to decade given their advantage of large research budgets. So, we tracked them.

We started with the Fortune 500 list for the year 1990 and then looked at the list ten years later. We expected to see some churn, but not at the level we found. In those ten years, about forty percent of the firms on the 1990 list disappeared. About 200 firms had been displaced, absorbed or tanked at the hands of competitors. In the next four years, between 2000 and 2004, twenty-five percent of the Fortune 500 had churned. These were household names; GTE, Hasbro, Ingersoll Rand, Nabisco Holdings, Paine Weber and Ralston Purina. (Whyze Group internal research, 2005).

While our findings weren’t conclusive, it raised challenges to the notion that more research leads to meaningful innovation and business results.

Later in 2005, Booz Allen completed a study of the top 1,000 R&D spenders among public companies globally. Based on Booz Allen’s analysis, they concluded, “Contrary to conventional assumptions, R&D spending levels within the Global Innovation 1000 had no apparent impact on sales growth, gross profit, operating profit, enterprise profit, market capitalization, or total shareholder return.” (Bordia, R., Dehoff, K., Jurelzekski, B., “The Booz Allen Hamilton Global Innovation 1000: Money Isn’t Everything”, Strategy + Business, Winter 2005, p. 5)

The belief that there is a relationship between research spend and business performance persists, but a growing body of empirical evidence runs contrary to this perception. Another question we asked is, “What’s missing when research fails to improve business performance?”

Why Doesn’t More Research Produce Better Business Results?

We asked managers in client organizations and colleagues in a variety of research firms to give us their perspectives. Among the questions we asked was, “What percentage of marketing research findings are actually applied?” While the answers varied, the most common response from research suppliers and clients alike was, “fifty percent”.

This is consistent with what we see at nearly every client organization that has asked us to facilitate our Customer Experience Management Audit with their management teams.

Most corporate libraries contain reams of well-executed marketing research studies. Most contain nuggets of insight that seem valuable on the surface. To understand the value of these studies, we needed get a view of the context in which these studies were commissioned.

What we found when interviewing managers at these firms is that these research reports often misaddressed key issues that managers were wrestling with at the time. In some instances, we found that the research was misapplied, leading to dangerous actions.

One example was a company that had commissioned dial testing of its new TV advertisements. Dial testing shows how viewers are responding to audio-visual advertisements on a second-by-second basis. It shows emotional high and low points as the ad is being absorbed. What it doesn’t show, and what managers needed to know at the time, was how well this ad positioned the company against its competitors. The dial testing showed high points in the ads where managers wanted them and company made significant media buys. The ad tanked and was pulled at a cost of millions of dollars to this company.

Malcolm Baldrige Stocks Return 300% More than the S&P: Suggests Application of Findings is Key

Our convictions about how customer data translate into improved customer experiences and business performance coalesced further when we looked at the performance of Malcolm Baldrige National Quality Award winners.

Malcolm Baldrige winners achieve superior business results. During a ten-year period, the portfolio of Malcolm Baldrige winners’ stocks outperformed the S&P 500 by a margin of 3-to-1. The graph below compares the 10-year returns on investments of $5,291 in the S&P and in the portfolio of Baldrige award winners.

The Malcolm Baldrige Award isn’t given to companies that conduct the most customer research. It’s awarded to companies that excel at applying what they learn.

There are hundreds of questions in the Malcolm Baldrige application that pertain to how companies apply what they learn. An example of the questions that Malcolm Baldrige applicants answer is, “How do you use voice-of-the-customer information and feedback to become more customer-focused, to better satisfy customer needs and desires, and to identify opportunities for innovation?”

We even interviewed Rick Kolster, Quality Manager at Solectron, a Malcolm Baldrige winner. Rick gave us a ton of insights into what made Solectron a leader in its field. In short, there was a process by which managers were imbued not only with customer intelligence, but a means of applying it over and over again.

Over the last decade, we at Whyze Group have evolved our thinking and our services.  This journal is an opportunity for us to continue learning and to share perspectives with our colleagues around the world.  This particular article serves as foundation for a more expansive white paper on the subject of organizational learning and innovation.

We welcome your reactions, points of view and criticisms. 

• Customer Experience Mapping. Whyze Group pioneered the process of integrating multiple sources of insight in a representation that gives managers a more holistic and empathetic understanding of customers’ experiences.
• Marketing ROI scenario modeling. In the late 90’s, we were among the first to apply ROI scenario modeling outside the context of direct marketing.
• Training for corporate innovators. One example is our workshop, Influencing Organizational Change with Market Intelligence, which we delivered at several national conferences and for consulting clients.
• Open innovation. We began participating in social innovation networks long before this became vogue. This has led to highly productive partnerships, intellectual capital and value for our clients.

I recently bought my first Mac. So, my customer experience management audit of Apple’s customer experience is based on the experience of one–me–and my pre-purchase research about how consumers rate various PC brands and Macs. 

This isn’t our complete customer experience management audit.  However, it illustrates the kind of evidence we present to management teams deciding where to invest to improve customer experiences.  Just like with stocks, a cogent presentation of the evidence can make your choices so much more obvious…

• Computer users rate reliability, ease of use, compatability, speed and computing power among the most important infuences on their computer and software purchase decisions.
• On these measures, Apple rates superior to most or all competitors.
• Customer loyalty, satisfaction and likelihood to refer are higher for Apple users than for other providers. Apple users are raving fans.
• PC users are defecting to Apple due to their frustrations with software bugs, vulnerability to viruses, incompatible software, system crashes and lost productivity. Consumers’ complaints about Microsoft’s Vista operating system have contributed to consumer resistance to upgrades under the Microsoft brand. 
• Apple store staff I interviewed confirm that roughly a third of new Apple computer buyers had never owned a Mac. 
• Apple stores provide local market presences, user-friendly product displays and highly trained staff.  Live, in-store training sessions are provide for a nominal fee. These bolster customers’ confidence that their transitions from PCs to Macs will be short and successful.
• Apple store staff are well prepared to answer customers questions about transferring files and software compatibility. Staff positively differentiate Apple by describing how Apple designs their software and hardware to work together and why Apple’s software is less prone to bugs and hacks. Store staff introduced me to two ex-PC users in the store who testified to Apple’s superiority.
• Apple’s product lines, including Macs, iPods and iPhones, are literally made for each other and are 100% compatible.
• Post-purchase, the same Apple store staff who sold the Mac called to assure that I was satisfied with my purchase and to answer any questions.
• Computing consumption, in the form of desktops, laptops, software, entertainment and other products will continue to grow globally. New market entrants in the U.S. are mainly younger users who favor Apple in disproportionately higher percentages than Apple’s current overall market share. This presages likely increases in sales and market share for Apple.

According to stock market expert, Jim Cramer, if you were determined to invest in technology stocks, Apple would have to be near the top of your list. Choosing where to invest in improving your company’s customer experience is similar to choosing stocks. It’s not a mysterious process. With a robust review of the evidence in a customer experience management audit, the choices become clear.

We’ve even advised our clients to exercise skepticism when presented with anything labeled as “best practices”. What works well at one company is often counterproductive at another. 

Today, I received an email from a prominent market research company promoting its intellectual capital through an email with this document attached, “Developing the High Peformance Market Research Function: Study Excerpt”. 

The document provides no criteria against which the best practices were evaluated. The report is a derivative of research performed by the sponsor on behalf of its clients.

This begs the following question. Why would client firms knowingly hand over proprietary secrets (their best practices) for publication to the world? 

Casting my skepticism aside, I opened the attachment and began to smile as I read the best practices cited in this report. Here’s one. “Benchmark partners were aligned in their aspirations to turn market data into intelligence that can grow the business.”  

As I read other best practices, I began imagining myself in a Dilbert cartoon. Here’s another, paraphrased…when companies invest tens of thousands of dollars in focus groups someone from the company should attend them. 

There are no market research practices in this report that deviate from those uttered decades ago or common sense. If there were genuinely valuable secrets, the sources of those secrets risked being sued for disclosing trade secrets.  

Hence, are best practices–meaning, “the practices that the best 1% are using to outperform you”–really available?  Even if they were, would they apply to your organization? Of course, if your company’s capabilities and opportunities were identical to the company you’d be emulating, then they might.

As catalysts of strategic adaptation and innovation, we have a sacrosanct obligation to our colleagues, employees, our shareholders and our customers to get it right. This is our reason for being.

Getting it right starts with an honest heart, an open mind and critical thinking. If we’re really honest with ourselves, aren’t these the only starting points for figuring out what’s truly best?

Unprecedented daily swings in the DJIA are symptomatic of investors losing their gimbals. How much more unwinding do hedge funds have to do?  Who knows. When will credit markets ease?  Get out your ouija board.

Negative swings in customer loyalty and profits are similarly indicative of management teams who have lost their bearing.

So here is a parting thought:  Are your company’s innovation efforts determine by what customers will reward…or by what company leaders will reward?  If you’re outperforming similar firms on customer loyalty then it’s both. If it’s only the latter, then you’re company performance looks like the chart for the DOW.

You’ll be interested to know that most companies’ approaches to innovation are dysfunctional.  As a result, 40% of Fortune 500 firms won’t be in the Fortune 500 in ten years.  We’ve consolidated the results of several studies about this.

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