Final - as smart as it is simple. (via @mikearauz) Why aren’t banks able to come up with these simple ideas and solutions themselves? (or are they?)

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The Next Chapter of Capitalism is Customer and Internet Driven

In his article on the future chapter of capitalism Steve Denning articulates several important implications as we move from shareholder to customer driven companies.

He starts of reminding us that the idea driving business today - which is short term shareholder value - is merely 40 years old. And is destroying the company’s long term value, customer, community and employer worth.

Denning goes on to note how the Internet has affected the established traditional economic thinking and demonstrates how the new trends, topics and question we all battle with are a part of a new way of thinking - challenging the traditional mindset.

The article is ripe with evidence and examples pushing Denning’s point across and in my case helping me tie up some loose ends when it comes to the questions I’m asking at the moment which is how important will the trend in customer centricity become?

Read Capitalism’s Future is Already Here on HBR.org.

Some Quotes:
"Milton Friedmans article shocked the sensibilities of many who worried about rising corporate power in the world, but for many executives struggling to chart courses through the chaos of newly globalized and deregulated markets, it offered an irresistible clarity: one need only focus on owners’ interests. In 1976, Professors Meckling and Jensen put a finer point on things with their economic rationale for maximizing shareholder value. Ronald Reagan and Margaret Thatcher gave the idea political cover. Very quickly, shareholder value became the gospel of capitalism."

"Incentives to maximize shareholder value pushed managers toward decisions that paid off in the short term but were devastating to the long term viability of firms:

  1. Pervasive short-termism hampered the United States’ capacity to compete in international markets.
  2. Encouraged a massive trend of offshoring that destroyed major segments of the US economy.
  3. Generated “bad profits” that undermined customer loyalty.
  4. “Financialized” the economy, making it vulnerable to increasingly severe financial crashes.
  5. Undermined economic recoveries.
  6. And drastically reduced rates of return on assets and on invested capital of US firms.”

"The other economy—the Creative Economy—is an economy of continuous innovation and transformation. This is the economy of firms and entrepreneurs that are delivering to customers what they are coming to expect, namely, “better, faster, cheaper, smaller, lighter, more convenient, and more personalized.” The Creative Economy is still relatively small but it is growing rapidly and, when implemented well, is highly profitable. It is the economy of the future. It doesn’t have to be invented: it’s already under way. Its practices represent a paradigm shift in the strict sense laid down by Thomas Kuhn: it’s a different way of thinking, speaking, and acting in the world.”

Management capitalism’s grand illusion of success. 
Incentives to maximize shareholder value pushed managers toward decisions that paid off in the short term but were devastating to the long term viability of firms:
Pervasive short-termism hampered the United States’ capacity to compete in international markets. 
Encouraged a massive trend of offshoring that destroyed major segments of the US economy. 
Generated “bad profits” that undermined customer loyalty. 
“Financialized” the economy, making it vulnerable to increasingly severe financial crashes. 
Undermined economic recoveries. 
And drastically reduced rates of return on assets and on invested capital of US firms.
Read: HBR.org Capitalism’s Future is Already Here http://bit.ly/1tSXPeE

Management capitalism’s grand illusion of success. 

Incentives to maximize shareholder value pushed managers toward decisions that paid off in the short term but were devastating to the long term viability of firms:

  1. Pervasive short-termism hampered the United States’ capacity to compete in international markets. 
  2. Encouraged a massive trend of offshoring that destroyed major segments of the US economy. 
  3. Generated “bad profits” that undermined customer loyalty. 
  4. “Financialized” the economy, making it vulnerable to increasingly severe financial crashes. 
  5. Undermined economic recoveries. 
  6. And drastically reduced rates of return on assets and on invested capital of US firms.

Read: HBR.org Capitalism’s Future is Already Here http://bit.ly/1tSXPeE

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McKinsey publishes some thoughts/intuition on management and strategy for the next 50 years. It’s a thorough article first exploring the forces at work - where I find the way they have identified and explained technology as an accelerator is very well put. They also go on to highlight possible inflictions in the collision between the forces at work and the implications when it comes to management. 

I have taken the liberty to present some quotes from the article below:

A highly recommended read in the McKinsey Quarterly by Richard Dobbs, Sree Ramaswamy, Elizabeth Stephenson, and S. Patrick Viguerie

McKinsey | Management intuition for the next 50 years: http://bit.ly/1pdDIUK

"The collision of technological disruption, rapid emerging-markets growth, and widespread aging is upending long-held assumptions that underpin strategy setting, decision making, and management."

Forces at work:
1.Dynamism in emerging markets - The shift in the weight of the global economy toward emerging markets, and the emergence of nearly two billion consumers who for the first time will have incomes sufficient to support significant discretionary spending, should create a new breed of powerful companies whose global expansion will take place on the back of strong positions in their home markets.

2. Technology and connectivity – We are in ”the second half of the chessboard” – Ray Kurzweil. Our new intuition must recognize that businesses can start and gain scale with stunning speed while using little capital, that value is shifting between sectors, that entrepreneurs and start-ups often have new advantages over large established businesses, that the life cycle of companies is shortening, and that decision making has never had to be so rapid fire.

3. Aging populations - These trends have profound consequences. Without a boost in productivity, a smaller workforce will mean lower consumption and constrain the rate of economic growth.

Management implications
Harnessing market momentum in the years ahead will require covering more geographies, more industries, and more types of competitors, prospective partners, and value-chain participants—as well as more governmental and nongovernmental stakeholders. All this will place a premium on agility: both to “zoom out” in the development of a coherent global approach and to “zoom in” on extremely granular product or market segments.

Continue reading McKinsey | Management intuition for the next 50 years: http://bit.ly/1pdDIUK

Poor omni-channel efforts partly to blame for dramatic decrease in customer loyalty
Almost one third of UK consumers have become less loyal to retail brands in the past five years, with poor service the most commonly cited reason and younger consumers disproportionately affected according to a new survey. 
"poor management of customer data, channels and context, but more fundamentally a lack of ownership of the consumer’s problem and lack of appreciation for their effort levels,"
"The younger generation has higher expectations of digital channels, collaborative and social communications and asks ‘how hard can it be.’ They won’t take seriously an organisation that is unable to do the basics right, and these expectations are rising all the time," Thurlow said.
"Without a true sense that different channels of communication are linked, people feel that they are wasting their time and, ultimately, this leads to an erosion of loyalty in the retail brand,” Thurlow concluded.
Source: WARC.com http://bit.ly/1lYAqtB

Poor omni-channel efforts partly to blame for dramatic decrease in customer loyalty

Almost one third of UK consumers have become less loyal to retail brands in the past five years, with poor service the most commonly cited reason and younger consumers disproportionately affected according to a new survey. 

"poor management of customer data, channels and context, but more fundamentally a lack of ownership of the consumer’s problem and lack of appreciation for their effort levels,"

"The younger generation has higher expectations of digital channels, collaborative and social communications and asks ‘how hard can it be.’ They won’t take seriously an organisation that is unable to do the basics right, and these expectations are rising all the time," Thurlow said.

"Without a true sense that different channels of communication are linked, people feel that they are wasting their time and, ultimately, this leads to an erosion of loyalty in the retail brand,” Thurlow concluded.

Source: WARC.com http://bit.ly/1lYAqtB

Roadmap - implementing strategy. Customer insight, sales, marketing, product development, loyalty, ETC. - can all be enabled by direct and individual contact with customers, their involvement and participation. The Roadmap offers an opportunity to plan and visualize how all these can be working together over time and jointly create new business value - and then execute… 
From the slideshow: Chat, Content or Social Selling - How do we Measure the Value of Social Media?

Roadmap - implementing strategy. Customer insight, sales, marketing, product development, loyalty, ETC. - can all be enabled by direct and individual contact with customers, their involvement and participation. The Roadmap offers an opportunity to plan and visualize how all these can be working together over time and jointly create new business value - and then execute… 

From the slideshow: Chat, Content or Social Selling - How do we Measure the Value of Social Media?

"one of the most important drivers is network performance: how effectively employees use their network of relationships to improve both their own and their peers’ productivity. The exemplary sales managers we studied are experts at maximizing network performance within their teams; they encourage team members to build, leverage, and contribute to their networks." - Dismantling the Sales Machine, HBR.org
From the slideshow: Chat, Content or Social Selling - How do we Measure the Value of Social Media?

"one of the most important drivers is network performance: how effectively employees use their network of relationships to improve both their own and their peers’ productivity. The exemplary sales managers we studied are experts at maximizing network performance within their teams; they encourage team members to build, leverage, and contribute to their networks." - Dismantling the Sales Machine, HBR.org

From the slideshow: Chat, Content or Social Selling - How do we Measure the Value of Social Media?

Dismantling the sales machine. But today customers are better informed than ever before. By the time they approach suppliers, they generally have a clear idea of the problem they need to solve, the solutions that are available, and the price they’re willing to pay. In this world, process-driven sales machine approaches fall short, because they give sales reps no room to exercise judgment and creativity in dealing with highly knowledgeable customers. They leave reps with little to do but compete on price.
Source: HBR.com. Dismantling the sales machine - “CEB spent the past year survey- ing 2,500 sales professionals from more than 30 B2B companies representing every major industry, geography, and go-to-market model…”
From the slideshow: Chat, content or Social Selling - How do we measure the value of social media?

Dismantling the sales machine. But today customers are better informed than ever before. By the time they approach suppliers, they generally have a clear idea of the problem they need to solve, the solutions that are available, and the price they’re willing to pay. In this world, process-driven sales machine approaches fall short, because they give sales reps no room to exercise judgment and creativity in dealing with highly knowledgeable customers. They leave reps with little to do but compete on price.

Source: HBR.com. Dismantling the sales machine - “CEB spent the past year survey- ing 2,500 sales professionals from more than 30 B2B companies representing every major industry, geography, and go-to-market model…”

From the slideshow: Chat, content or Social Selling - How do we measure the value of social media?

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