For SME (Small, Medium Scale Enterprises) to scale up and be successful, they must understand that innovation is about creating value and differentiating from others in shibumi (elegant simplicity), the multi-dimensions of customer value, the power of branding, systematic innovative methods BVITS, and the steps to take. Read on for the details….
Invited by NUS Extension to participate in a Emerging Enterprise Round-table that resulted in the publication in Business Times Business Times 2 April 2013.
Branding and its Power
A brand is the summation of customers’ experience over time of what it means to them. It is more than what the company says. It is what people say about the company, products or services. These sayings are the impressions formed the customers in their encounters with the company products, services and ways of doing business.
A brand is then the trusted statement of company’s identity and values in the market by the public.
A good brand is like a flower that draws customers. Whereas for no brand companies, they have to seek out and push its offerings like the busy bees.
A good brand creates the awareness and short-cut the decision making process.
The whole marketing process of AIDA (Attention or Awareness, Interest, Decision and Action) is shortened. For unknown brand, most people may not find it, and even if they do, they will want to test and evaluate it, ask others about it, carefully consider all other options, before, if ever, arrive at the purchasing decision. It is also likely to be very a price sensitive decision reducing the profits for the company.
In addition, a good brand creates a differentiation that command higher value.
Consider the purchase of smart-phone, the typical preferences and recommendations by people are Apple and Samsung and the prices reflect that. A relative similar feature sets of Android phones to the Samsung are available in the 2nd tier brands like HTC, Sony and LG and they are priced lower. Technically, HuaWei, the China leading telecom network and phone company also produces Android phones that are similar to the Samsung but does not enjoy the same branding of Samsung so that its phones are priced much lower and yet lag in market share in Singapore.
Branding for the SME’s
- A Unique and Differentiated Value Proposition – Clarity Needed
Unless one is clear on its unique value proposition, it is hard to create a brand that stands out from the pack of similar offerings. To understand this value proposition better, we need to understand the following:
- Customer don’t buy products or services but the outcome of a wow experience.
- The Value of the experience has the following three dimensions of:
- Rational, Economic or Utility such as cheaper, faster, better, safer, easier, longer lasting. People are happy when they have a good deal.
- Emotional (look good, feel good, trustworthy) & Social (lifestyle of class and trendiness and status of wealth and honour) .
- Significance of meaningfulness for a good social, environmental, health and long life causes.
- Need to address all contact points with customer that creates the wow experience. From awareness, interests, decision making, purchase, installation, use, enhanced usage, repair, upgrade and retirement.
- Shibumi (MiniMax) – Simplicity in Elegance and Depth.
Most people equate more features as better not realizing that more choices actually create stress and errors besides adding production and quality costs. The success of Apple teaches us that ease of use and depth of use are more important. SME’s must know how to minimize the big set of features into a few key features that customers desire and implement those features well and in depth. The branding can then be more effectively done.
- Consider companies like Starbuck or Breadtalk, are they just selling coffee or bread only? The answer is no. Their value proposition is higher. Breadtalk said they are selling innovative and trendy lifestyles.
- Gap between Claim and Delivery – Alignment Needed
- The claim of the Unique Value Proposition must be delivered consistently across all locations, by all staff and all the time. It is in the delivery of such claims that create the customer experience. Many fail because either they lack clarity of their value proposition, or their policies and deliveries are not aligned with the value proposition. There may also be lack of training and monitoring of staff especially when there are multiple locations.
- It is important to note that everything, the locations, deco and layout of shops, brochures, policies, procedures, attitudes and behaviour of staff, the delivery trucks etc all contribute to creating a brand and the experience.
- Consider Breadtalk, its beautiful shop deco, the innovative bread products, opened kitchen, its locations at high end shopping malls, friendly staff and others are all aligned to its vision of creating the trendy and innovate lifestyles.
- Handing of Complains or Defects – Be Positive
- Most typical reactions to customers complains are to blame others and pass the bugs.
- Instead, one needs to have a positive attitudes towards customers’ complains. Customer’s complain is actually customer giving us a second chance to make good. If we can recover well then we will gain a loyal customer. He or she will also tell others about your good service too.
- We need to understand the multiplying effect of customers complains or praise. A unhappy customer will tell many others. A happy customer may tell others too. Why not make his/her praise of telling others easy too?
Steps for the Branding
- Put in a Branding Process to be led by the CEO and involving other key staff. The objective is to create their unique brand and work out the tasks, staff, budgets and timelines with monitoring of the progress. Branding is not a one off exercise. The brand is the company’s identity and value statement to the world and should be a prime concern for top to bottom.
- Work out the Unique & Differentiated value proposition and communicate it throughout the company. Sessions with the key customers should be arranged to ensure the value proposition is also welcome and experience by the customers. A common error is to think what the customers would like rather than finding out from the customers. The Value Proposition should be viewed from the customers’ eyes.
- Ensure all staff understand that branding is more than just marketing but more importantly, it is the delivery of the value proposition at all contact points with the customers. Every staff has a role to play. Find and show the right behaviour for that role. A common error is to state the objective. like serve the customer well, without telling the how, resulting in every staff having their own interpretation of what ‘serve well’ means and creating inconsistency of service.
- List out all the potential contact points with customers and work out how should the delivery be done such that customers can have a wow experience. The delivery could be the key product features, service levels, the ways business are done, the environment of the engagement, the right behaviour and attitudes of staff.
- Beside training the staff, managers should lead by examples, showing staff what are the right behaviour. Managers should also praise staff when staff exhibit the right behaviours so that other staff may know too. Correction should not be just saying what were wrong but also what are the right way. Managers should also show staff how to behave towards nasty customers. Managers should also celebrate successes.
- Engage the very satisfied customers and involve them in coming out with reference-able case studies and suggestions for new innovations. Engaging the very dissatisfied and former customers also give us valuable information on how to improve our offering.
- Have a Social Network Presence with dedicated team to engage with the wider audience base. Carefully monitor its content, activities and response positively to criticisms and complains. Make the work of customers giving feedback and recommendations easy for them.
- Collect and review customers feedbacks at all contact points regularly. It serves two purposes. Firstly is ensuring alignment to the company value proposition. Secondly is to detect if customers preferences and trends have changed.
Innovation for Higher Value and Profits
Innovation is the way to break free from the fierce commoditized competition of low margin and price cutting. However, one must understand ‘Innovation’ well in order to create the innovation that bring in the value and productivity.
Innovation is about converting intangible ideas into tangible products (including information content) and/or services that are valued by certain group of users called customers that they pay money for. Innovation is essentially business value creation.
Business value is more than just rational utility or economic values of cheaper, faster, better, safer, easier and longer lasting. There is also value in the emotional trigger of look good feel good and social values of lifestyle and status. There is the significance or meaningful value of contributing to the social community, protecting the environment, making life healthier and longer. By looking at the various dimensions of this value, there are much an SME can do in improving the emotional, social and meaningful value of their offerings.
Furthermore, innovation is not just restricted to products or even services. Innovation can occur through out the entire supplier chain, to production and operation, management and the distribution chain to the final customers or users. There can be innovations, such as a better or cost saving production methods, or finding a better source of supply, or better organization of tasks and team. Re-thinking about our offering and finding new meaning is also innovation. Consider lights as not just giving brightness but also creating the right ambient to create the right moods bring the lights into new markets.
By seeing innovation as creating a wow experience for customers, the company can workout and improve the engagement with customers at the various contact points to increase the delights of the customers resulting greater customer satisfaction and loyalty.
Innovation brings value and is easy. Have a right understanding of innovation and then workout the details will enable the SME’s to create differentiated offering of higher value and reduced costs.
Productivity, Higher Salary and Less Staff Turnover
With the right understanding on innovation (as in Q4), SMEs have to construct and look at their business model in terms of value consumption(values used by customers), value delivery(the distribution to customers), value creation(the manufacturing or production model) and value capture (the financial model) and reallocate the manpower, skills, tools and automation costs.
Some very basic question have to be asked:
- What features are really important to customer and can we offer less to cut production costs or offer more to increase the price.
- What are easy for us and hard for others to do? We should do more of those.
- Who does it best? Is it better to automate or for the staff to do? Can we ask the customers to do it (e.g. self-serve or self assembly)? Can our suppliers do it for us (suppliers configure, pack, and ship directly to customers)? etc.
BVITS Creative Thinking for Breakthrough Ideas
Here is a list of ten BVITS (Bvotech’s Innovation Thinking System) operators to challenge us to think out of the box. Apply the following operators to the 6M factors of Man, Machine, Materials, Methods, Measurements and Environment to re-engineer the Business Model to gain productivity:
- Take out
- remove some features and offer lower end offerings
- remove offerings that are not needed or valued by customers
- do lean methodology or go JIT
- break down into sub-components and reassign features or jobs to get better productivity
- specialize for greater productivity and skills
- contract out work to someone who are better than us.
- From standardized one size fit all to custom-made or personalization.
- As an example, a very successful start-up called Littlemissmatch of USA sells shocks in package of three in different colours and patterns instead of a pair of same colour and pattern.
- Flexible working hours and locations for staff.
- reverse the roles e.g. customers self-serve, self-assembly.
- staff pick their team leaders to lead them.
- Make two or more copies of some key components like dual or quad core CPUs, triple or Quattro blades razor etc.
- Staff acquired more skills to be more flexible and can work at different jobs at different times according to needs.
- offer an offering that is better than the market.
- hire staff from companies that are closing down.
- one product for multiple uses e.g. Smartphone
- put diverge skills people into a team for general problem solving.
- serve the people at the edges e.g. baby, old age, odd sizes.
- make product usable at extreme conditions e.g. ruggedized.
- Learn from others
- practices in other industries and even from natural science e.g. Biomimicry.
Finally, increase the value of job so that the staff can enjoy higher pay and job satisfaction. Staff turnover is a big cost not just of hiring but also lost of expertise, retraining, re-deployment and adaptation into productive teams.
Lim Liat (c) 4 April 2013