Celebrating failure

Today, I read a blog by Seth Godin on How to fail. In this blog, he talks about how to fail better. He also mentions that not trying new things due to fear of failure is also not a good option. He also goes on and provides some random ideas that will help you fail better, more often and with an inevitably positive upside.

With more and more organizations looking to innovate more often and much faster, it is not enough to know how to fail. It is important to encourage employees to take on the risk of failure. The perception of failure needs to be changed. One of the ways, organizations can do this is by celebrating failures. I am not suggesting that you go out on the roof and party to celebrate failures. One suggestion is to have a project or idea closure party. The agenda on the party could be:

  1. Announce the closure of the project or idea.
  2. List all the positives coming out of the project. Be realistic. Employees willing to take the risk to be on the project could also be a positive.
  3. Discuss why things did not work out as expected.
  4. Share your learning’s from the project.
  5. Celebrate the fact that the team had the initiative to start something new and the courage to admit that things were not working out.
  6. Help the team find different projects where they can start a new chapter in their career.
This if done consistently sends out the message to employees that it is important to take initiatives though there might be a risk of failure. It is also fine to fail as long as you accept that things are not working out as early as possible and move on. 

Saving the Nano….

After the fantastic launch of Tata Nano, the cheapest car in the world, we have seen that the fan fare and the interest levels have not kept up and there is a drastic decline in the sales of Nano and the Tata Motors management is working overtime to get this corrected and to generate interest. A big ad campaign has been launched. The results are yet to be seen. Tata Motors is trying hard to revive the fortunes of their Chairman’s dream project. 

  1. Safe and Secure: No one wants to buy a car which is considered to be un-safe. The first thing that they need to do is to fix the issues that caused fire while driving and drive home the message that the vehicle is safe and secure to be used. Easier said than done. The message has to go across to one and all. The best way that I can think of getting the point across is by getting Ratan Tata to use the Nano for local transportation at least for a month. This will generate the buzz and news hungry media will do the rest.
  2. Distribution strategy: Current Tata Motors dealers do not have much incentive to promote Nano as they have much more profitable products to sell. So, launch a series of exclusive showrooms for Nano, ideally in Tier 2 and 3 towns. Even better would be if they encourage people from within the Nano team to take up these dealerships and support them. No one can beat the enthusiasm that they will bring to selling Nano.
  3. Business Model Innovation: Tata Motors can also think of newer business models in automotive business. The following models are worth a thought:
    1. Time share resorts model: Customers do not buy the car outright but buy the right to use the car for a certain number of days in a year. They share the car with other similar customers.  This will solve the problem of them not needing to find space for parking and also reduce their total cost of ownership. Also, as per my understanding the model has never been tried in the automobile industry. Tata Motors can either float a completely new company to manage these operations or outsource them to new entrepreneurs – (Franchise it). This will give a huge boost for the sagging revenue for Tata Motors as the new franchisees will buy cars based on a pre-agreed basis ( for example, 1 car for every 4 such customers).
    2. Mobile phone business model: Find a way to give the car away for nothing and charge the customers for the service they provide – transportation or miles driven. This could be achieved by partnering with all the oil companies and them charging a pre-defined amount above the prevalent fuel price. This is already being tried by BetterPlace for their electric car. This model is difficult to implement but can give huge competitive advantage to Tata Motors not only in the local market but also when they plan to start selling Nano in other markets as they can learn from the experiment in India and perfect the model.
These are just some of the ideas that I could think up. Is there anything else that they can do apart from just running advertisement campaigns? 

I would love to hear from everyone out there, about what else can Tata Motors do, in order to save the Nano. 

Fueling growth from existing customers

It is a well known fact that it is much more expensive to acquire a new customer than retaining an existing customer. But as they say, common sense is not so common. We find that businesses are going out of their way to attract new customers by offering them great deals. I do not think there is anything wrong in this, but when you exclude the offer to your existing customers, you are inviting trouble. 

This is a very important reason for customer loyalty to become so rare. There does not seem any  benefit for customers to remain loyal anymore as they miss out on such attractive offers in the market that are only available to new customers. So, they keep changing loyalties.

In the short term, everyone is happy. The businesses are gaining new customers and the customers are getting attractive offers. However, in the long term all of them stand to lose. The customer has to keep negotiating with new vendors with associated risks. Constant change in the suppliers can also mean in-consistencies in the supplies/services which in the long run can hurt the customers’ business.

The businesses spend so much more to attract new customers and the cost of customer acquisition goes drastically up and hence the cost of sale and the profitability starts its downward trend as businesses will need to continually come up with more and more attractive offers to attract new customers and this becomes the only way for top-line growth as repeat business starts to shrink due to lack of loyal customers.

Once businesses realize that they are in this downward spiral, they decide that it is important to retain existing customers as well and hence start offering the attractive offers to existing customers as well in addition to new customers. Still they will find that retaining customers is a challenge.  

A clear example of this phenomena playing out currently is in the Indian telecom industry. All the players like Airtel, Vodafone, Tata DoCoMo, Idea, Reliance, Aircel and the other players are all creating very attractive offers for new customers and incentivize customers to switch from one player to another. This has led the profitability of the entire industry downward. These businesses will be able to sustain their top-line growth and profitability till the overall market keeps growing. Once this stops, then we will see a shake-out of the players in the industry.You will then start mergers and acquisition starting to be considered and there will be only a handful of player be left in the market and the same cycle will get initiated with a similar result.

Now the question is “What are the alternatives?”

I think that there are a couple of alternatives that they can consider:

  1. Incentivize your customers to bring in additional customers for your business. Make your customers your evangelists.
  2. Incentivize your sales teams more on bringing in repeat business than net new customers.
Let me elaborate on both the alternatives.

Incentivizing your customers to refer additional customers for your business:

There are a few things that you will need to put in place in order to turn your customers to evangelists:

  1. Deliver and delight your existing customers by the high standards of quality and service!
  2. Make them your raving fans!
  3. Create an opportunity for your customers to refer your business/products/services to their peers, friends and family!
  4. Make it much easier, simpler, and faster to do repeat business with you!
  5. Recognize/reward all your customers who have referred your business to their network
  6. Never show new customers are more important than the existing one’s!
As you can see that this is a cultural change that businesses will need to undergo. This focus on customer delight will take time and effort but is worth all the time, money and effort that goes into this as this will create a competitive advantage that will be hard replicate. You can even go on to.

An example of one such company is Apple. In this age of declining customer loyalty, Apple customers are still one of the happiest lots and do a lot of evangelizing for Apple.

Incentivize your sales teams more on bringing in repeat business than net new customers.

Businesses often realize that new customer acquisition is of paramount importance and hence expend a lot of their energies in acquiring new customers. Sales people are incentivized for bringing in net new customers for the business. Marketing is busy creating the next great offer to attract new customers. All of this leads to the state that no one is bothered about the potential business opportunity with existing customers and their networks.

  1. Set a rewards/recognition program for sales teams where they get more rewards and recognition for Repeat business generated from existing customers, Net new customers referred by existing customers and slightly less compensation for Net new customers who were not referred by existing customers
  2. Introduce a step in your sales process where sales people ask for the customers/prospects to refer you to people in their network. Request for referrals even in the opportunities where you have not won the deal.  
  3. Reward sales people who get more repeat business transactions (irrespective of the volume of transaction).
  4. Initiate a customer satisfaction survey for 2-3 customers of each sales person. Choose the customers randomly.
This will clearly give out the message to the sales teams that it is very important to provide excellent service to existing customers. They will also learn to explore options to generate repeat business and to keep their customers happy all the time.

I know that there are businesses that have customer referral programs in place that intend to achieve the same outcome but I have not seen any of them achieve it. This by itself is a deep topic which I will discuss in a separate post. 

I have not come across a business which has implemented this system for increasing business from existing customers yet!

Happy selling !

Building great products

I have been thinking about a lot of great products that have now become an integral part of our life aka Google, iPods, iPads, SAP ERP, Zappos, Facebook, Twitter, Intuit, Amazon, Mitticool, etc.. 

When I think about what is common across these products and their growth to super-stardom and i found these common traits:

  1. Great products are highly focused in solving a particular need of a particular customer. No product ever succeeds if it tries to solve a lot of problems for a lot of people. 
  2. Great products are very simple to learn & use. Great user experience can make the difference between greatness and extinction. 
  3. Great products are born out of conviction and never out of consensus. Conviction can create great products or crappy products. Consensus can only create average products. 
  4. Great products continuously improve to solve the needs better. Continuous,  concentrated improvements make good products great.   
  5. Great products are built by small teams. I have never seen any great product coming out of a large team. The larger the team, the greater the chance that the product will turn out to be average or less than average. 
Guy Kawasaki also talks about DICEE (Deep, Intelligent, Complete, Elegant and Emotive as the characteristics of any great product. These are traits that also need to be kept in mind while designing any new products. 

Next wave of Growth for Banks – Retailer Credit Card

Farmers in India are offered Kisan Credit Cards to provide adequate and timely support from the banking system to the farmers for their short-term credit needs. The banking industry can take a clue from this and introduce a retailer credit card for exclusive use by small-time retailers to pay to their suppliers. 
The idea: 
  1. Banks to offer small retailers a Retailer Credit Card with a minimum credit limit of 10000 INR. 
  2. This offer will also come with the credit card swiping machine which the retailer has to use in his retail counter. The rent will be waived off if the retailer does a minimum of “x” number of swipes in a month.
  3. The credit limit of the retailer goes up by a % of the total transactions done via the credit card swipe machine. For example, if the retailer has swiped for INR 100000 in a month, his credit limit on his card goes up by (for example) 1.5% of INR 100000, i.e., 1500 INR. 
  4. The retailer can use the credit card to pay his suppliers. The suppliers will only be charged rent for the machine and the transaction costs will be waived off (may be for the 1st year to induce usage).  
What’s in it for the bank: 
  1. Currently, the number of retailers who accept credit cards are limited. The bank can increase this number by a large margin. 
  2. The profit for the banks will come from the transaction fees. By combining the credit limit for the retailer to the value of transactions, the bank can incentivize the retailer to increase the transaction via credit cards thereby leading to higher profits. 
  3. There is also the possibility for the end consumers to make part payments towards their credit card spending, thereby generating very high interest fees for the bank. 
  4. This has the potential to increase the total spend via credit cards twice or even more than the current usage.  
What’s in it for the retailer: 
  1. Currently, one of the big pain points that the retailers have to grow their business is to be able to procure more goods to sell in their shops. One of the limiting reasons is the limitation of working capital. Most of these retailers are unbanked and can not get access to working capital loans on offer due to variety of reasons. This credit card provides them an easy way to get short-term working capital. The fee that they pay is much less than the other options they have (local money lenders). 
  2. By accepting credit card payments, they have the opportunity to increase their sales as they loose some sales to organized retail due to the ease of paying with a credit card that the organized players provide. 
My personal opinion is that this can provide the banks a lot of growth in the next few years.
What do you all think? Pls let me know.