Why are clever people failing? The problem is obvious – they are stuck in the past. Now the key question is how can companies adapt and thrive in a fast-changing and increasingly complex business world? You’ve heard it, Innovate of Die! But a leader can’t lead innovation if his or her adaptive potential is not up to snuff. Or, as Marcel Proust put it,

The real act of discovery consists not in finding new lands but in seeing with new eyes.

Adaptive Thinking

The more the business environment changes, the faster the value of what you know diminishes. Success hinges on the ability to participate in a growing array of knowledge flows. John Hagel, John Seely Brown and Lang Davison

Adaptive thinking requires the appreciation of context, the interrelated conditions or situation in which something exists and the circumstances that defines meaning or value. The context that is all-important is that of customers. Customers experience the impact of change and their context shifts. When a product or services is out-of-context with customers it is less meaningful and less valuable to them. Web browsers and Netflix didn’t make DVD rental less valuable to the customer. The customer’s context shifted and Blockbuster became much less relevant. A new context of convenience appealed to overwhelmed customers.

Seek Insight into New Meaning

Too much information, too fast, is a problem. When we filter and reduce the overload we seek confirmation of what we already believe. This is a serious liability. Insights and opportunities lie in surprises. If surprises are filtered out, we cannot see with Proust’s “new eyes.”

The Importance of Connectedness

In 1987 people felt they had 75% of the knowledge needed to do their jobs. In 1997, the had only 20% (Kelley). Today we would expect the percentage to be much less. For virtually all of us it is impossible to function independently these days. So the question is do you have a networked brain trust to help you in your sense making?

The Adaptive Potential of an Outside-in Approach

Understanding the customers’ changing context of means tapping into new flows of information. It means that businesses need to take an Outside-in approach to designing and delivering their value proposition. PUSH becomes PULL. Customers must be attracted. An outside-in approach goes beyond listen to customers. It envisions new value for customers that they do not yet see. Outside-in is more than tapping into new information flows—it requires a new way of turning information into insights and possibilities in order to create and deliver value to customers.

Executives need to make sense out of change and innovation from the customer’s perspective then help customers see it.

The Importance of Sense Making

Sense making is the new and very pressing challenge for business leaders – one that will ultimately measure their worth. Daniel Pink makes a persuasive argument that business must take sense making seriously in his book, A Whole New Mind: Moving from the Information Age to the Conceptual Age, Unfortunately, the Whole New Mind that Pink describes is a new way of thinking, a little messy or soft, is not rewarded in today’s organizations. Analytic skills are more definable and explicit knowledge is more teachable and measurable.

Sense making involves seeing what has changed and, most importantly, considering the implications. It is not about predicting the future but rather it is about seeing an emerging present. It involves concepts like intuition, prescience or gut feelings. It also takes a new form of persuasion and leadership to articulated the vision to others. At the core of this type of thinking is the ability to take different perspectives – really different perspectives.

Start today – step back, reset you lens and see your business with “new eyes.”

The 2011 Edelman Trust Barometer is out and contains some distressing news for businesses in the USA and UK. There are, however, some insights on how a company can turn this situation into an opportunity.

Trust in business in the United States and United Kingdom dropped so dramatically over the past year that both are now considered “distruster” nations. Scary, they rank just above Russia at the bottom of the scale. Interestingly, the emerging economies who are coming out of the recession ahead of the USA and the UK, all rank near the top as “Truster” nations.

The lack of trust cost businesses money.

Without trust, things cost more, take more time, and exert more strain on an organization. Stakeholders will double-check every word you say before cooperating with you. They’ll make almost any task more ponderous and exhausting. (Jennifer Scott )

Before you dismiss this as an over-generalization, stop and think about your own interactions with someone you don’t trust versus someone you do.

In his book, The Speed of Trust, Stephen Covey provides tangible evidence contrasting the burdens of low trust with the benefits of high trust relationships. Here is what Covey says about high trust.

In a company, high trust materially improves communication, collaboration, execution, innovation, strategy, engagement, partnering, and relationships with all stakeholders. In your personal life, high trust significantly improves your excitement, energy, passion, creativity, and joy in your relationships with family, friends, and community.

What company doesn’t want all those improvements? But, if you substitute “customers” for that of “your personal life” it becomes evident that trust not only impacts transaction but customer passion and desire.

The Preventive Nature of Trust

In the past few years, numerous well-known brands have had a crisis that suddenly trashed their reputation. Social media is explosive. But trust can prevent these kinds of disasters. According to this year’s Barometer, if a company is distrusted it only takes 1-2 negative stories for a person to believe them. If a company is trusted, it only takes 1-2 positive stories to achieve belief.

Of course, there are some brands and companies in the USA and UK that people trust, interestingly the terms energizing, passion, desire are use to describe them.

When trust comes up with executives, I frequently get the reaction, we stand behind our products, we are a trustworthy company. That might be so, but that is not the type of trust that is top-of-mind with customers these days. They are interested in the trustworthiness of the relationship – can I count this company to help me have better experience and better outcomes today and, to do so as I face a fast-changing and increasingly complex or confusing future.

The Opportunity

Where is the opportunity? Take actions that separate your company from the crowd – differentiate by taking actions they build trusting relationships.

How do you build trusting relationships? Build on two findings of the Barometer. First,

Trust is no longer a commodity that is acquired but rather a benefit that is bestowed, earned through action, reinforced by transparency and engagement.

My view of earning trust through action goes like this – customers are less interested in products or things and increasingly interested the experiences and outcomes the things help them achieve. If the relationship demonstrates a genuine interest helping a customer achieve better experiences and outcomes, trust increase. If it does so consistently the trust in the relationship has future value, it becomes an expectation. Once established, customers seek these relationships to help them turn the challenges of change into new experiences and opportunities. Not be forgotten, this sort of trust stimulates advocacy.

Apple, one of the trusted and energizing brands, is a good example of this sort of trust. When they came out with the iPhone people camped out overnight to get their hands on one. Yet, no one had ever seen one before and iPhones were nearly twice the going rate for a cellular phone. This leap-of-faith trust was repeated when Apple brought the iPad to market.

Who’s Credible and Who’s Not

The second finding has to do with who is credible and who isn’t. Over the past few years people-like-me and peers, even online, rose in trust. This year they took a tumble. It seems that a lesson we have learned is people-like-me don’t always have the expertise to offer up qualified opinions. Too often peer’s views are based on a limited range of experience.

This year greater believability came from proven experts starting with academics, technical experts, financial analysts and CEOs, in that order. In my opinion, this mirrors a growing desire for help in making sense out of the rapid change and unrelenting innovation that confronts us. We want help in figuring out what is meaningful and of value – to us, not someone else or some average. This takes not only insights, but also an effective way to communicate, “what can be” and, a credible relationship.

Unlike other countries, only one third of CEOs in the USA and UK were judged credible. Another opportunity for competitive differentiation for those who make the effort to be trustworthy.

Adrian is talking about something much more important than timesaving. Consider this, in one situation people are very stingy with their attention and in another they seemingly waste hours. If you don’t understand the “new rules” governing this behavior, you will, at best, be force to sell on price. If you own, run or lead a business, I highly recommend this book.

If you think the new rules concept is over-blown, read on, then make your decision about reading Ott’s book.

Sustainable profits, let alone growth, are not easy these days – ask almost any business leader or owner. When pushed for a reason, globalization and foreign competition frequently come up. Or, you might hear, prices drop so fast you can’t make any money and you are stuck with obsolete products.

Often, there is a little anger in the responses. It is easy to dismiss both the message (too simplistic) and the messenger (too defensive). Well, the objective evidence doesn’t paint a rosy picture either. Here are three realities that are hard to ignore.

Consumer spending is down and it is not rebounding the way it did following previous recessions. The theory of pent-up demand has been replaced by tough credit and debt. This won’t change any time soon. According to research by economist Richard Rumelt, debt-to-income ratios are too high for most people. This ratio went up exponentially over the past three decades and has reached a breaking point. There is too much debt and too little credit. This means customers will scrimp to splurge. They will scrimp on things that have less emotional value to splurge on things that do.

Brands are in trouble! Brand equity and trust has seriously eroded. Sure, consumers began choosing store brands over name brands when the recession hit and many have concluded there is little real difference except price. But, brand equity and trust have been eroding for more than a decade. If you don’t invest in the value of your brand, how will you win new customers and keep the ones you have?

Customer churn has escalated. In tough times, commonly given advice is to protect your most loyal customers. Good idea but the old strategies are not working. A study of over 32 million consumers across 685 brands found that over 50% of the most loyal customers became less loyal. Worse yet, a third of loyal customers defected completely.

These three studies should shock you into action! The marketplace doesn’t function the way it used to and many old ways of doing business are counterproductive.

Now back to Adrian Ott’s insightful book. The studies of brands in trouble and customer churn both acknowledge that there were exceptions – some companies are thriving into today’s marketplace.

What do they know? What rules are they playing by? Well, Adrian’s book will help you unravel the puzzle.

What you will learn is that customer behavior is full of paradoxes when viewed from a traditional sales/marketing perspective. Take the position that,

Time isn’t money anymore. Time is more important than money

Time starved customers are often stingy with their time and attention. However, there are circumstances where they splurge on time, attention and money. Ott tells the stories of companies who have figured this conundrum out and are thriving. More importantly, she explains the rules that govern this customer behavior and give a framework for taking action.

Want customers to splurge with you, value your brand and become advocates rather than churn – read this book.

Among the topics to be discussed is The Great Gap between Knowledge and Implementation, an issue central to the mission of the Alliance for Business Innovation.

This is not surprising since most corporation are still operating on a 20th century command/control business model that focuses on internal efficiency not adaptability to rapidly changing external forces and dynamics.

In the upcoming Social Business Executive Summit, I will describe a framework that will dramatically increase organizational adaptive potential. My talk

Social Business Strategies for Adapting to the New Normal in Business

is in the opening session on May 25th.

There are 9 other speakers who will also shed light on the challenges. This is a free online event sponsored by CustomerThink.

Click to register.

On May 25-27 CustomerThink will host six free webinars on Social Business. Join us!

Register Now!

You can pick and choose from the sessions that interest you the most, from strategy to online communities to using social media to boost your marketing, sales and service operations.

Session Topics:
* The CEO’s Challenge: Creating and Leading a Profitable Social Business Strategy
* Transforming Marketing to Listen, Influence and Drive Sales-Ready Leads
* Best Practices to Create Online Communities to Engage Customers and Increase Loyalty
* Transforming Sales to Align with Social Buyers and Close More Deals
* Best Practices to Create a High-Performance Organization with Employee Collaboration
* Transforming Customer Service/Support to Profit from the Wisdom of Crowds

Each session will be conducted in an interactive panel format featuring experts from the Founders Council of our new community, SocialBusinessOne.com. Bring your toughest questions!

I will be speaking in the first session on “Social Business Strategies for adapting to the New Normal in Business.

Registration is FREE, and all attendees are eligible to win an iPad.

To learn more and sign up, please visit:

Register Now!

Hope to see you online next week!
Regards,
John Todor

Our topic:

Winning Profitable Customer Relationships.

More information…

May 6, 2010

Sponsor by Loyalty 360 and VeraCentra.

Free Registration

For at least the past 5 years, the tried-and-true formulas to boost sales and market shares of brands have been become increasingly irrelevant and losing traction with customers.
(John Gerzema and Ed Lebar, The Trouble with Brands)

To understand what is relevant and does get traction with customers, it is critical to recognize that the pursuit of market share and commodity sales are not the same thing. Germane to this distinction are the two buying personalities I have discussed elsewhere. Here is the short version that makes it especially relevant to this differentiation.

When customers are not emotionally involved or indifferent they are usually seeking a means-to-an-end. For example, gasoline is gasoline to me. I go to the filling station that offers the best trade-off between price and convenience. I am loyal to this heuristic, not a brand name. Sure, there are people who seek out a name brand gas station and are willing to pay more per gallon. For them, the brand either has meaning or they are mindlessly hung up on an old habit. Both are proving to have a tenuous hold on loyalty and profitability.

In contrast, when customers are emotionally engaged in the experience enabled by the product they are much more willing to pay more and come back often. The message here it that it is the experience or outcome of the customer, not the label that has an impact on profitability and advocacy.

Recently, Geoffrey James blogged about this distinction. To bolster his case he referred to a New Yorker magazine article that cited the iPhone as a good example: “the iPhone generates as much profit for Apple as Noika’s entire cell phone business, even though Noika sells 20 times as many units.

Back to Gerzema and Lebar. Their research indicates that beginning in 2004, consumer attitudes about all sizes and segments of brands were in serious decline. Trust in brands had dropped from 52% in 1997 to 22% in 2008.

That was before the recession. A Nielsen survey (see James) now indicates more than 60% of consumers think that store brand products are equal in quality to brand name ones. The indifferent buying personality, not seeing any meaningful differentiation, is leading customers to switch to the lower prices generics.

The notion that the brand name and visibility will generate sales and profits is generally a pursuit of diminishing returns. It is not however, true for all brands. Gerzema and Lebar shed to light on this. According to their research, what sets successful brands apart is Energized Differentiation.

This energy comes from 3 sources ( I quote):

• the vision the brand presents to consumers, often originates from leadership, conviction and reputation of the company.
  was the invention consumers perceive in the brand through product or services innovation, design or content.
• The dynamism consumers feel – how the brand creates a persona, emotion, advocacy and evangelism among consumers through marketing and other forms of conversation with them.

Brands that rank high on the energy metric are: Adidas, iPhone, Nike, JetBlue and Virgin Atlantic. These brands don’t focus on logos and visibility – they do focus on communicating and delivering a differentiated experience that is meaningful to customers. Think of it as a focus on mindshare not market share.

Over a three-day period, CustomerThink will host six webinars focused on social business strategy, customer communities, employee collaboration and how social computing will transform marketing, sales and customer service.

This will not be “death by PowerPoint.” Each session will provide plenty of time to get your specific questions answered. Bob Thompson, Founder of CustomerThink and SocialBusinessOne, will chair the Summit and serve as moderator for all webinars.

In the opening session John Todor of The Whetstone Edge will be discussing:

Social Strategies for Adapting to the New Normal

Register now