“FIVE Revolutions”, That Will “Shape the Future of Your Company” | Chief Executive

Everyone knows change is coming….But underestimating the speed and impact of these changes will be the downfall of many businesses large and small in the coming years…!!

The press is full of trendy terms—Big Data, the Internet of Things, Digital Natives, Globalization, Social Media, etc.—that attempt to describe the complex technological and social changes that the world is currently experiencing. However, there is a danger in reducing complex social dynamics down to a few catchy buzzwords—trendy terms can act as intellectual shortcuts that fool people into thinking they understand these ideas when they really don’t..

In a world of constant disruption and uncertainty, however, CEOs who truly understand the key forces behind these changes will be in a better position to adapt and survive…Looking ahead, there are several horizon-level revolutions that business leaders should be aware of, because they are about to be felt with a force that is difficult to overstate..

Revolution #1: The End of the Information Age:

Many people think we are still in the Information Age, but the truth is that we are leaving the Information Age behind and entering a new stage of human development fueled by global inter-connectedness and rapidly improving technologies of all kinds. The exponential growth and convergence of so many new technologies—combined with a growing population of tech- and media-savvy consumers—will usher in a revolutionary era of social change, the likes of which humanity has never seen before. In the future, companies will need to find ways to protect themselves from the inevitable disruptions that such changes will bring, while simultaneously recognizing the advantages and opportunities..

Revolution #2: The Shift From Institutional to Individual:

One of the biggest power shifts of the 20th century was the shift from institutional power to individual power, and that isn’t going to stop. The Internet empowered individuals to communicate with anyone in the world, and now populations armed with nothing but cell phones are bringing down entire governments. Furthermore, institutions in all areas of life—education, health care, religion, media, business—are being forced to change simply because people now have more ability than ever to organize, mobilize, innovate, disrupt and demand..

Brands, too, have gone from being purely institutional inventions to personal expressions of almost any kind. For businesses, continuing empowerment of individual customers means that the dynamics of the business/customer relationship are evolving. Customers will continue to demand more transparency, integrity and responsiveness from those they choose to do business with—and businesses will have little choice but to comply. Smart businesses will initiate the inevitable rather than wait to be pushed..

Revolution #3: Artificial Intelligence Becomes Less Artificial:

Creativity and imagination are often thought of as the one realm that computers can never conquer, because the inner workings of the mind are what make humans unique. But it is already possible to control a computer with our thoughts alone, and commercials for IBM’s Watson computer are now touting its ability to generate ideas—helping chefs develop original recipes, for instance—using data to spark creative inspiration.

As artificial intelligence continues to evolve and improve—powered by the combination of Big Data, the Internet of Things, and always-connected devices tied to people’s location and activities (e.g., the Apple Watch)—it will begin to behave more and more like a giant alternative brain, one that rivals and surpasses humans in many ways. Machines already do most jobs that involve repetitive motion. When machines start replacing people who use their imagination for a living—writers, designers, architects, engineers, teachers, etc.—they won’t just be taking better jobs, they’ll be challenging what it means to be human.

This shift will create a great deal of psychological stress, generating a massive need for goods and services that will help them adjust to this strange new reality. Brands that can help people ride the wave of change to a brighter future, or help people cope and adapt, will be in high demand—as will brands that affirm human values and identity..

Revolution #4: Rise of the Digital Natives:

Much has been written about the impact of millennials (those born between 1981 and 1997) on the workforce, but the next wave of workers and consumers entering the workforce will be the digital natives (those born after 1997). Digital Natives are the first generation in human history to be born into the world of hyper-connected information overload…However, since they’ve been connected since birth, digital natives do not experience the flood of information hurling at them as anything more than just “the way things are,” and always have been—for them..

At the moment, millennials are assuming positions of power in all walks of life, and their impact on everything from viral memes, infotainment, social media, spheres of influence and cross-platform content has been profound. But when digital natives start adding their ideas and influence into the mix, the pace of change will accelerate even faster. This acceleration will feel to older generations like constant chaos and disruption, but to digital natives, it will simply be business as usual..

Revolution #5: From Selling to Sharing:

Since millennials and digital natives have been aggressively marketed to their entire lives, they are also extremely savvy about the media they consume. Direct, blatant pitches don’t work on them. They hate being sold to, and to them, commercials are just the things you fast-forward through to get back to the program. Also, since they are wary of institutions, they are much more likely to trust the opinion of a friend than anyone else, hence the rise of social media as a powerful marketing tool.

In the future, selling is going to be less about persuasion and more about participation…Brands that position themselves as a trusted “friend” have a much better chance of succeeding in this environment…

That’s not a new idea; the key is truly being worthy of the customer’s trust. For example, Whole Foods knows that its customers care about the ecological, political, and social impact of the food they consume…To help make that information more readily available to its customers, the company is investing in IT infrastructure to support its vision of total product transparency—a move it hopes will inspire the sort of trust and loyalty all companies are looking for in the 21st century…!!

“Avoiding Hidden Margin Erosion” in Mid-Market Supply-Chain Operations | by: Brad Huff | Supply Chain Digital

According to the Middle Market Indicator (MMI), 85 percent of middle market executives cite the ability to maintain margins as a somewhat to highly challenging issue..

This should be no surprise, considering mid-market companies are squeezed between large and small cap businesses: they must streamline product manufacturing and delivery operations as much as larger companies, yet be as nimble as smaller companies. As a result, they have a unique set of challenges that make margin management even more critical..

Today’s combination of increasingly complex supply chain operations and the availability of more accessible/affordable technology means mid-market companies can and should take a deeper look into these areas as a means to maximise margins..

Mid-market supply chain operations explained

Hidden Planning and Forecasting Areas:

Mid-market companies often must focus so tightly on delivering quality products and services to their customers that investing resources into analyzing and fixing what appear to be minor supply chain issues might not seem practical or even feasible. It’s true that each of these less obvious areas does not cause significant margin erosion on its own; however, many mid-market companies can suffer from a number of combinations of these issues. When evaluated in that context, the impact on profitability can be noteworthy…

Evaluating materials based on landed cost instead of the item’s unit cost is a growing trend in planning and procurement. Materials planning based on landed cost allows companies to factor transportation and logistics costs into the contract item cost for more visibility into actual materials expense..

Forecasting is also an area that can impact margins. Without reliable forecasting processes and tools, a company can easily order the wrong quantity of materials. “Projecting heavy” unnecessarily consumes warehouse space, increases the risk of waste or loss, raises taxes, and impacts inventory turns. “Projecting light” drives up procurement and transportation costs, as well as increases the risk of materials run-out. Fortunately, there are a number of low-investment ways to increase accuracy, such as increasing collaboration with customers to gauge future demand, integrating marketing plans and projections to prepare for order spikes or lulls, or increasing forecast sharing and communication with suppliers via a collaboration portal or other automated workflow system..

Hidden Inbound and Receiving Areas:

Ordering and receiving inefficiencies, such as a lack of automation and collaboration in critical areas, play a quiet yet potentially large contribution to reduced profits. Automating workflow tasks between buyers and suppliers such as sending, receiving, acknowledging and approving purchase orders can enhance processing speeds by more than eighty percent while reducing costs by approximately 83 percent..

But the benefits go beyond the initial savings. Automation also increases purchase order throughput and allows you to focus efforts on quickly resolving issues that require human attention. Configurable workflow helps to ensure compliance so what is shipped always matches what is ordered. With simpler implementation and more user-friendly interfaces, these solutions can consolidate product and order communications to help minimize disputes as well as empower planners to better forecast demand..

Carrier and delivery windows:

According to Refrigerated Transporter, “Supply chain compliance is now a vital component of logistics transactions and supplier relationships.” Requiring fixed materials delivery windows from suppliers is a growing trend in supply chain management that impacts margin on both the buyer and supplier side..

In recent years, improvements have been made in receiving dock scheduling systems in an effort to help warehouse managers and supply chain professionals streamline operations and reduce unnecessary cost. As a result, more companies now require dock reservations for inbound orders, including financial penalties for suppliers who deliver off-schedule..

For example, in 2010, Walmart joined other retailers in imposing a penalty on suppliers that failed to deliver products within the company’s prescribed four-day window. Under the policy, suppliers whose products arrive at Walmart before or after that period face a three-percent penalty based on the cost of the goods..

Before the policy went into effect, Walmart requested delivery within the four-day period, but suppliers had no incentive to actually adhere to that schedule. Although it was not the first to adopt this policy, Walmart’s status as the world’s largest retailer prompted a domino effect that continues to affect supply chains to this day…as late/early delivery fees are now the norm for many industries..

Installing a functionally strong shipment collaboration solution can help to reduce and/or eliminate these less obvious/hidden logistics areas that eat into margin. These types of solutions allow order fulfillment thresholds such as delivery windows, order quantity, and carrier selection/mode to be configured and validated prior to shipment release..

Advanced Shipment Notices (ASNs) and package/container traceability are also typically included, along with pre-formatted, compliant labeling to further reduce receiving dock errors…As a result, all stakeholders across the buy side and the supply side have real time visibility for more accurate resource and materials planning through the rest of the supply chain..

“Understanding consumers” in a multi-channel world | by: Jason Nathan | Research

The Evolving behaviour set of #Customers in the world of #MultiChannelRetailing, is well documented and not always easy to follow…It’s easy to conflate the rapidly changing technology with analysis of those behaviours – while they are linked, they can and should also be thought of as apart…Let’s focus on the behavioural side…

How are these behavioural changes manifesting themselves? It makes sense to think back (briefly) to a shopping trip in the pre-internet age…#Shoppers, would take a predictable and linear path to purchase : making a list, looking for (or seeing) offers, going to a store, picking off the shelf, paying at checkout, going home and then consuming the products they had purchased…and then repeating..

In the multi-channel world, TWO Key Dynamics have changed : The path is non-linear…and different steps can and do occur on different channels…!!

If we consider a shopping trip today – a customer might log on to an account with a grocery retailer and add some items to a basket. Then, a couple of days later, receive an email with a set of offers which they activate on their half-built online basket. They might go in to store to have a look at some new products but decide not to buy them…and then buy them online…They may have an offer shared with them on social media….which they then use in a store (perhaps having found the nearest branch to them using their smartphone)…

Where to spend the Money ?

These non-linear paths and the increase in channels used by customers to shop, has commensurately increased both complexity and opportunity for both brands and retailers to divert and influence customers on those paths. The challenge for #Retailers, is that creating seamlessness in those paths costs money…The challenge for brands is that investment in media to influence those paths costs money…What both retailers and brands want to know is where to best spend that money…

More than ever before, the answer lies with an obsessive focus on the customer and the data their behaviours are generating. Retailers and brands are collecting and looking at data – lots of it – but often those data are used for specific ends. For instance, plenty of retailers will use the data for reviews to look at which products are winning, which products are in decline, but few retailers will capture and present this data to understand customers. Knowing, at the level of an individual, a pattern of review posting will be part of a set of indicators which will allow the retailer and brand to understand that customer’s propensity to purchase again and, maybe, when they would do so..

For instance, if we knew that a customer had posted two consecutive bad reviews of a product from a certain brand, could we use that to understand their likelihood to repurchase a product of that brand? And therefore, perhaps the generosity of the offer or the need to present NPD to that customer. And what could a retailer glean from a customer who had steadily posted a review every two months but was not doing so anymore ?

Retail Data :

Similarly, and specifically in the world of grocery and FMCG, retailers will capture the levels of substitutions and rejections in baskets composed of dozens of SKUs (stock keeping units) when they are delivered or collected. This will be done to optimise the supply chain and picking process. Again, how many retailers are looking at the data through the customer lens? Would a customer who had received 20% of their basket as substitutes three times in a row (and rejected half of those on each occasion) as against a customer who had received three consecutive perfect orders, be more or less likely to lapse ?

The challenge for retailers and brands is technical and commercial. Technically, linking their data assets to understand the multi-channel path to purchase is difficult – legacy systems built for specific ends and ambiguous data ownership structures are significant barriers to overcome. Moreover, in many cases the capture of the data at customer level may not even yet exist. Retailers and brands will need to ensure that their technology plans seek to plug these gaps in understanding..

A Greater Challenge :

Despite appearing to be easier, it may yet be that commercially, the challenge will ultimately be greater: customers will be more aware of the value of the data they are generating and expect to be compensated for it. For that compensation to be sensible, attribution of investment (always a challenge in marketing) will need to be tighter than ever. Was it the coupon on Facebook or the free sample at the Click and Collect point or the interrupt media on the app which activated that customer ? The data will exist but how will we cut it to understand the key to orientating the path to purchase ?

The next few years are likely to continue to present opportunity: technological innovation will lead to more data and more opportunities for customers to exhibit non-linear behaviours – some of which may yet prove even more disruptive in some sectors (such as peer-to-peer selling)..

Getting on top of the current behaviours and using existing data assets to do so will be one of the key differentiators which will define the retailers which win in this turbulent period.

In “Omni-channel Retail”, It’s Still About Detail | BCG

“As omni-channel retail increasingly moves from concept to reality, consumers are sending a clear message : Convenience is king…”

But the days when convenience could be defined solely in terms of drive times and the in-store experience are long gone. In today’s reality, “convenience” means letting customers decide when, where, and how to shop. They want to order anytime, anywhere, and from any device; to get their purchases in the store, at a separate delivery location, or through home delivery; to determine their own shopping and delivery or pick-up windows to fit their busy schedules; and to be able to return items at any of the store’s retail locations, hassle-free..

The Rise of Click-and-Collect Retail:

The emergence and growth of click-and-collect retail—which allows shoppers to order an item online and then go get it at a nearby store location or pick-up point—is evidence of the power of convenience in the omnichannel world. For many shoppers, the click-and-collect experience offers a more convenient mix of speed, quality, and flexibility than either traditional shopping or standard home delivery…

Already, 35 percent of shoppers who buy items online have used click-and-collect retail to pick up their purchases, and that proportion will increase to more than 75 percent of shoppers by 2017, according to retail researcher Planet Retail. Shoppers in France can pick up their groceries at more than 2,000 “click and drive” facilities. On the basis of our experience with leading retailers, we expect substantial growth in the use of such services.

Done right, click-and-collect retail can be a way for brick-and-mortar retailers to differentiate themselves from pure-play e-tailers by leveraging their existing store assets to offer fast delivery, low prices, and even greater convenience. That’s why many traditional retailers are eager to capitalize on this opportunity..

But click-and-collect retail can also pose real risks for retailers that fail to execute it flawlessly. A recent survey by market researcher E-consultancy.com found that as many as 60 percent of online consumers in the UK and U.S. said they would not shop at retailers that failed to deliver on their promises. This is as true for click and collect as it is for home delivery—particularly when it comes to apparel, a sector where customers expect to pick up the exact size and color they ordered and not a close substitute. In a hyper-competitive retail environment, an annoyed customer is likely a lost customer..

Supply Chain Imperatives:

So, for retailers that seek to make click-and-collect retail a core component of their omni-channel #RetailStrategy, many specific #Supply-chain capabilities are required. (See Exhibit 1)..All are important, but in our experience, it all begins with providing shoppers—and store associates—with accurate, real-time information on product availability…

One way to manage this critical capability in a click-and-collect retail environment is to deliver the customer order from a distribution center to the store, as UK retailer John Lewis does. Centralizing click-and-collect fulfillment in distribution centers concentrates and simplifies the inventory management challenges. But it also adds precious time to the order-to-pick-up cycle, putting off impatient customers who might simply buy the item elsewhere next time. And many retailers’ legacy distribution networks are ill equipped to fulfill customer orders from existing distribution centers, which are typically designed to pick large orders for stores.

For many retailers, then, a better solution is to pick click-and-collect orders from store stock. But getting the basics of in-store inventory management right presents a real challenge in terms of meeting customers’ expectations about availability. In our experience, a store’s balance-on-hand accuracy can be as low as 60 percent, which would be disastrous for click-and-collect customer satisfaction. Search online for “click and collect” for many big-name retailers, and you will see a slew of messages from customers describing poor experiences and products not being available when buyers turned up to collect them, even though the website had indicated that the goods were in stock. That’s why at Best Buy, for example, clerks physically doublecheck the availability of every item in every click-and-collect order in the stores themselves to overcome unreliable in-store inventory.

Why the poor performance? In support of their initial omnichannel offers, many retailers have chosen to focus first on building new infrastructure—pick-up points, distribution centers, delivery networks, IT systems, and even new stores. No doubt, these solutions can be critical components of a successful long-term omni-channel strategy, but getting the basics right, including in-store inventory, is often the most important first step to creating immediate impact and options for the future…

Back to Basics:

Best-in-class players focus on making in-store processes efficient, rigorous, and self-correcting; their processes are consistent with our six “golden rules” of inventory management. (See Exhibit 2.) No IT system can account for products mistakenly left in the back room, inaccurate distribution-center deliveries, removal of damaged goods from shelves that is not captured by the inventory system, check-out errors, and theft. These unavoidable issues, and their consequences, must be accounted for and captured, accurately, by the inventory system. This often needs to be done by a real person, properly incentivised and managed. Ideally, every touch of inventory at every point in the process should validate, correct, or improve inventory accuracy. In our experience, major retailers with such self-correcting systems and processes can achieve balance-on-hand accuracy of greater than 95 percent; at that level, the impact on items popular with customers is marginal…

Building such an approach, however, requires getting all the details right: understanding where errors occur, why they occur, and what solutions can be implemented consistently and effectively by store employees. In this endeavor, the devil really is in the details…

Eventually, emerging technologies will likely become a key part of the solution as well. Radio frequency identification, or #RFID, for example, has the potential to dramatically improve the accuracy of the information that supply chains depend on. Unfortunately, the ability to tag individual items economically and to scale up the technology to the needs of large retailers is still several years away. In-store cameras are a promising alternative for monitoring store stock, but they will require further developments in high-quality processing and image recognition if they are to make a difference. But even the most advanced technology will never entirely substitute for the disciplined in-store behavior needed to drive true inventory accuracy…

Thriving in an #OmnichannelRetail environment will require a host of different fulfillment capabilities. Retailers must design and execute the best possible customer service across all retail channels, build the infrastructure needed to ensure consistent pick-up and return processes, and continually capture and analyze the data needed to understand their customers and customers’ expectations of each channel so that stocking and flow strategies can be adjusted accordingly.

But that’s a longer-term goal. Near term, #Retailers, that seek to capture their fair share of the growth in click-and-collect shopping should focus first on getting the basics of stock accuracy right. Doing so will deliver near-term benefits to the #Bottomline and position them for success, no matter what #OmnichannelStrategy, they decide to pursue…

“Hotel Brands” : the “Devil Is in the Delivery” | BCG

Two Big Trends in the Hotel / Lodging industry are colliding…Whether Hotel-Companies get caught in the Pile-up or Steer-clear of the wreckage will have a big impact on their profitability…?

One trend is the industry’s increasing use of #Franchising, as a means of achieving more “Asset Light” #BusinessModels…For the past decade or longer, #HotelCompanies, have been divesting physical properties and becoming Pure #BrandOwners, and orchestrators because this model receives higher share-price multiples from public equity markets. One key consequence is that hotel companies increasingly must rely on individual franchisees to deliver the customer service experience that they have spent millions of dollars developing and educating consumers to expect—and that substantially defines their brands..

The other trend which is, the rise of information transparency and perpetual connectivity in the digital, and increasingly mobile, age…Online opinions affect more and more #Consumers, travel decisions…Our research shows that the two most trusted channels are personal recommendations (not surprisingly, 90 percent of people rely on these) and the opinions of other consumers they find online (70 percent trust those)…Our research also indicates that the average consumer spends 42 hours online—the equivalent of a full workweek—dreaming about, researching, planning, and making reservations for a four-day leisure trip, and then sharing the experience. Dreaming and researching take up 75 percent of the 42 hours—ample time to be influenced by what others have to say. This time is having an increasing impact on how people book and where they choose to stay, and this impact is showing up in hotel companies’ average daily rates (ADRs)…

Recent research by BCG involving more than a Dozen #HotelBrands, in several-categories shows a strong correlation between companies’ ratings on travel sites and their ADRs. Perhaps even more significant, we found a strong correlation between the consistency of those ratings and hotels’ ADRs…Companies that deliver Higher #CustomerSatisfaction, have the opportunity to charge more; conversely, consumers recognize those brands with inconsistent delivery—from both their own experiences and those of others—and discount the amount they are willing to pay...Within a network of multiple #PropertyOwners, the worst offenders can drag down the best performers and undercut brand ADRs across the board…In today’s #DigitallyDriven World…generating higher ADRs means delivering on the brand promise—and delivering consistently.

Many, if not most, hotel companies have come to grips with this #Operating-Disconnect, they understand that they are giving up direct control of brand delivery at precisely the time when consistency of that delivery has never been more important. They have taken steps to develop New #Strategies, Systems, and Processes for ensuring that their #FranchisePartners, deliver the #BrandExperience, that customers expect. (See Exhibit 2.) Those that successfully master the clear articulation of their brands and consistently execute the #BrandPromise, are rewarded—with Higher Revenues, a Bigger Pool of Potential Owner-Franchisees, and a product that achieves a premium in the marketplace...Those that do not increasingly pay the price…!!

Standards and Sticks:

With hotel networks today often spanning multiple brands, hundreds of owners, and thousands of properties, ensuring consistency of execution is a complex task. Companies undertaking brand renovation efforts face an even more daunting challenge as they must rely on owner-operators to deliver a new, different, enhanced experience, and to do so within the tight economic constraints of a highly competitive industry. Inconsistent execution can kill a brand renewal before it has a chance to prove itself.

The default approach on brand delivery for many hotel companies has been to develop a system of “brand standards” that they require franchisees and other operators to follow. These typically involve lengthy, highly detailed brand-standards manuals, providing instruction for everything from the number and content of information cards displayed in each guest room to rules for employee computer access. We regularly see manuals that run hundreds of pages and refer users to other manuals in the company’s collection for more detailed instruction on particular issues. Most make no attempt to prioritize or differentiate among standards or the impact they have on customer satisfaction. Very often, standards that directly affect what customers see and feel—cleanliness, for example—are given the same weight as specifications for things that are completely invisible to them…

This type of approach often ends up in companies resorting to sticks over carrots, punishing transgressions rather than offering incentives for good behavior. It adds stress to the relationship between franchiser and franchisee, and it can lead to corners being cut and inconsistent experiences for the customer from one property to the next. It also encourages owner-operators to put their efforts into avoiding transgressions rather than seeking to deliver the customer experience that the brand has promised. Most important, it does little to encourage better service, especially the kind of individualized service that customers tend to remember and post online about..

It Pays to Take a Better Approach:

Our experience, and that of many hotel companies, show that taking a more comprehensive approach to working with franchise partners on brand delivery can achieve a better result for travelers—and higher ADRs as a result. There are seven levers to pull; companies looking for the best execution will combine all of them..

Optimize the owner base. Each hotel company or brand has its own mix of property owners composed of large institutional franchisees with hundreds of properties or small, often family-run, operators—or a mix of both. Each requires a different style of engagement, and companies should think through how their mix of franchisees affects their brand delivery. They may want to favor one type of owner over the other, and gear the other components of brand delivery accordingly..

Define the franchisee relationship. Contracts define the relationship between franchiser and franchisee, of course, including the obligations of each party with respect to brand delivery—often in extensive detail. Companies need to approach these negotiations looking through a brand delivery lens. Smart negotiators seek to place an appropriate level of burden on the property owner to comply with brand-related requirements while leaving the company room to act as the ultimate brand steward when it needs to. Contracts today typically define undesired behavior on the part of the franchisee but much more rarely include incentives for providing better service or meeting customer satisfaction metrics. These agreements should be reviewed from the perspective of how they shape the customer experience as well as the business relationship between the franchiser and the franchisee…

Encourage owner engagement. Brand delivery is a tango: it takes two parties to do it effectively. Problems occur when companies do not appreciate the economic (or operational) impact of what they are asking their owners to do. Smart companies find the right balance between consultation and evaluation in their relationships with operators. For example, they can establish or update quality control processes that are based on customer expectations (see below) and establish clear rewards (and penalties) for operator performance…They can also build a business case that reinforces the value proposition for owners of meeting system wide service and #Customer-ExpectationMetrics…The interests of hotel companies and property owners may conflict at times, but both can find common ground over actions that lead to more satisfied guests who are willing to pay higher rates…

Build and motivate the team…Delivering on the brand promise is a function of countless day-to-day behaviors and habits within operators’ organizations. The very best strategy can fail if it is not appropriately distilled into necessary actions and capabilities. Few endeavors can have a bigger impact than working with owner-operators to help them recruit and train staff capable of delivering on the brand promise and building a team-focused organization. Many brand teams take an evaluative, rather than consultative, approach. They perform audits of compliance with the established standards, rather than helping the operator’s team provide a better product and service by, for example, defining the measures of success and putting in place processes, such as training and incentive programs, to help achieve them.

By instituting a more consultative approach, hotel companies can help their franchisees do the following :

  • Select employees on the basis of fit with the customer service culture.
  • Structure training programs to support excellent performance.
  • Encourage staff to put themselves in the customer’s shoes.
  • Pay according to performance.
  • Provide non-monetary incentives when pay is not directly linked to behavior.
  • Communicate effectively, providing employees with the information they need to do their jobs better.
  • Give employees autonomy and the authority to solve problems within certain standards.
  • Enforce standards and metrics.
  • Monitor feedback to drive continuous improvement.

Update quality control processes. Ensuring consistency across multiple properties with many owners requires updating existing processes and establishing new ones to replicate best practices and maintain focus on the critical factors that affect the customer experience. Most operators do lots of things well. The key for others is to identify best-in-class performers, analyze what makes their approach successful, and leverage this expertise by documenting processes to provide step-by-step guidelines for others. We have worked with multiple hotel chains to create a “process blueprint” that provides detailed information on best-in-class practices by department, standardizes opportunities across properties to provide similar customer experiences, reduces gaps and loopholes, serves as training material, and creates a framework for continuous improvement..

Prioritize standards. Standards do have an important place, of course. The focus should be on applying and enforcing standards when they have an impact on service and customer experience rather than developing an exhaustive, all-encompassing system that is doomed by its own weight and complexity. Again, incentives and rewards, as well as an appropriate means of correcting transgressions, are essential. Priorities are important. Research shows, for example, that customers care more about the quality of the bedding than the size of the TV. The goal should be a simple set of standards that are easy to comply with. They should give franchisees the ability to improve the experience but prevent them from cutting corners or taking shortcuts that could harm the brand…

Enforce the standards and metrics. Finally, hotel companies need to hold owner-managers accountable to documented standards and metrics that reflect the brand promise and customer experience. They need to establish a clear set of evaluation criteria to assess performance and understand where changes are needed, as well as a well-understood—and enforced—set of rewards and consequences for performance. Time limits should be set for implementing improvements or corrections. Carrots almost always work better than sticks, but both are necessary in most franchiser-franchisee relationships…

The global lodging industry is expected to approach $500 billion in revenues by 2015…Competition in established markets is intensifying, and #CustomerExpectations, are rising as companies seek to gain share and increase RevPAR (revenue per available room) through more amenities and better service…The devil, however, is in the delivery…Those companies that can work most effectively with their owner-manager partners to provide a high-quality—and consistent—brand experience will win the battle for more customers and higher rates…!!

“Flipkart vs Amazon” : “How they Stack up in India” | VCCircle

” Amazon chief Jeff Bezos says that at the current scale and #GrowthRates, India is on track to be its fastest country ever to reach $1 billion in Gross Sales…”

The big daddy of #OnlineCommerce, in India hit a new milestone bagging a record $1 billion in Fresh #Funding…In less than 24 hours of this announcement, the one thousand pound Gorilla of selling things online, Amazon followed it up with $2 billion in Fresh Investment commitment in India…!!

Mind you, in the #ServicesBusiness, paying salaries to employees and adding human skill set are also considered investment and with both firms employing thousands, a good chunk of this money could be simply about paying wages (though Flipkart has said it’s looking much beyond using investors’ money to burn in existing operations)…Moreover, this could also include the imputed value of discounts to be offered to consumers…

Nevertheless, the numbers are huge and have just raised the decibel levels in the Indian #E-commerce, sector…Here we attempt to glance at how Amazon & Flipkart, are stacked against each other when it comes to India in terms of some comparable Metrics and other Features….!!

Products on offer:

Amazon claims that in just over a year it had pooled in vendors to offer as many as 17 million products on its site. It has not clarified whether this represents #StockKeepingUnits or #SKUs, but that is what it most likely means…#Flipkart, which has been in operations for almost seven years now, looks to be on a weak wicket here as its latest communication says it stocks over 15 million products. #Snapdeal is far behind with over 5 million products…!!

Indeed, what really matters is how much they are able to sell, but in terms of offering to the #Consumer, Amazon seems to have done a much better job and far quicker too..

#Amazon, does not share finer details about how many users it has in India ; so that one is not comparable…Flipkart, in contrast, says it has 22 million registered users clocking over 4 million daily visits and is delivering 5 million shipments a month, which in itself is huge…

Who Sells More ?

Flipkart said early this year it has hit the milestone of $1 billion #GrossRrevenue (#GrossMerchandiseValue or #GMV) run rate (which means based on monthly sales on its site it is set to cross $1 billion in GMV over the next 12 months (though its latest official communication erroneously says it has become the first Indian e-com firm to hit $1 billion in GMV)…

Amazon, though public listed, does not share India-specific numbers but its founder and chief Jeff Bezos has just said that at the current scale and growth rates, India is on track to be its fastest country ever to reach $1 billion in gross sales. It is estimated that it took it years to cross the revenue benchmark even in China, where it has been present since 2004 and another market dominated by local giants…But it would be fair to assume that Flipkart currently outsells Amazon..

Interest in Virtual World:

This one is somewhat superfluous but we look at it to get some additional insights. Rather than looking at Alexa (which is dismissed by many as not too accurate) or comScore (which we don’t have access to), we considered Google Trends to see how the two sites stack up against each other…

As the graph shows, Flipkart has been under the radar for over five years but really took off only three years ago and with momentary blips has been on an ascend. Amazon has been growing at about the same pace as Flipkart after its launch in June 2013… However, it seemed to have gained pace in April this year and surpassed Flipkart and though the gap has narrowed since then, it seems to have stayed at the top this month too.

Amazon Prime vs Flipkart first:

Not much of a comparison really, as Amazon Prime, the paid membership programme of Amazon, is not yet present in India. However, Flipkart has got a head start with launch of its own version of the premium membership last month. Though its benefits are limited to one vendor (more on that later), it manages to stand up against Amazon’s Fulfilled by Amazon service under which consumers are already getting free deliveries for majority of products sold on the platform.

Flipkart First (at present in a free trial period for randomly chosen members) is currently limited to free or subsidised delivery benefits for a section of its product assortment besides an early access to hot products.

Where the battle may be won, however, is other bling factor in terms of digital content strapped for free. Amazon already offers such content for its Prime members and early this year paid a bomb for a package of shows from HBO which now comes free to its premium members. It also offers movies, music on the go and free e-books for its Kindle users as part of the membership.

Flipkart has got the platform to redo this. But having tried and exited digital music store it would be a challenge for it to sew such content deals going forward…It remains to be seen by when Amazon would roll out Prime membership in India.

X-Factor:

One crucial thing in the e-com war could be the key vendor on the sites. In the case of Flipkart it is WS Retail, which used to be the in-house and sole seller through the platform before it turned a marketplace early last year. This firm is owned by an angel investor and employees of Flipkart, to comply with FDI norms. However, this is a key player for Flipkart….Although, the breakup of sales from WS Retail and other vendors is not in the public domain, it is estimated that the bulk of its sales are through this vendor (it also happens to be the partner for Flipkart’s run away hits like Motorola Moto series of handsets)…WS Retail also happens to be a key spoke in its Flipkart First offering, at least for now…

Amazon is still dependent on its third-party vendor base to sell in India. However, it has reportedly sealed an unconventional deal with Catamaran Ventures, the private investment arm of Infosys co-founder N R Narayana Murthy. Catamaran is holding a majority stake in a venture which is supposed to work at the back-end of operations for Amazon in India. However, this is seen as the first step for preparing groundwork for Amazon to start selling in India on its own as and when (as anticipated soon) multi-brand online retail is brought on par with offline retail in terms of FDI norms.

This could really pump up the activity for Amazon and take the competition right to the door steps of Flipkart….!!

Apparel:

Flipkart has strengthened its apparel vertical, one of the juiciest part in terms of margins by acquiring Myntra early this year. Although Amazon also has launched apparel section, Myntra provides a strong positioning and vendor base to Flipkart which can be important going forward.

Myntra remains a separate site but its chief is now involved in strategy making for Flipkart’s own apparel vertical and that can help the firm boost sales from this segment going forward.

To be fair, Amazon may well acquire a Myntra rival (say, a Jabong, for instance) to plug this gap that would be dependent on nifty deal structuring.

Reviews, #VendorServices, Fulfilment Centres:

One differentiator for Amazon globally is its enviable consumer reviews, which helps a prospective buyer to decide in their purchase decisions. Flipkart too has built a strong review database and in many cases has a far comprehensive review section compared with Amazon’s Indian marketplace.

If customer acquisition was key metrics to focus for Flipkart or for that matter any internet commerce firm to begin with including Amazon, now add vendor acquisition to it.

The future pace of growth for both be partly if not fully dependent on how fast they add sellers to their platforms. A factor determining this would be how smooth Amazon or Flipkart offer to get their products to the consumer. This would in turn be dependent on the fulfilment infrastructure and logistics services offered by the two firms. Both Amazon and Flipkart have their own logistics units unlike many other horizontal e-tailers in India and vendor addition could be based on who takes the minimum fee or cut from the sale of products on the site. This is where the money aspect comes in where the fresh funding announcement of Flipkart and additional investment by Amazon make them even-steven.

Meanwhile, Amazon has just announced FIVE New #FulfilmentCentres, in India which would take total such facilities to seven in the country…Flipkart has FOUR such Centres at present and is also looking to expand the number…!!

We will get more insight on how the two firms are performing a couple of months down the line. So watch out this space for their actual revenues and growth in numbers…!!

“In Pricing”, Success Breeds Success : “Pricing Full Potential Analyzer” does the Heavy-Lifting when it comes to pricing | A.T. Kearney

“ The more market power you have, the more you can still gain from your #PricingStrategy…”

A.T. Kearney surveyed more than 1,600 businesses in FIVE Countries to get an “outside view” and answers to TWO Fundamental Questions: How much money can a business realistically gain from better pricing? Is there a simple, reliable way to predict these gains? The short answers are “much more” and “yes…”

This study, which includes major companies in various for-profit industries, has yielded THREE Compelling and practical insights on how companies can make significantly higher profits from better pricing..

  1. Know what’s at Stake for your Business.Improved pricing increases gross profits by 15 percent on average over a three-year period, often multiplying net profits and raising market capitalization by hundreds of millions of Euros..
  2. Don’t stop. There is always More to Gain.The more market power a company has, the more profits it can still gain from further pricing improvements..
  3. Go Deep, Not Broad.The best pricing performers succeed by focusing on a small number of pricing improvement efforts rather than broad-based pricing programs..

These findings not only illustrate what factors separate the pricing out-performers from others, but also paved the way for development of a new tool, the Pricing Full Potential (PFP) Analyzer. The PFP Analyzer provides simple, reliable estimates of how much profit is at stake..

Know What’s at Stake for Your Business:

The PFP Analyzer estimates the size of the prize for any given company by looking at the actual achievements of companies or business units with similar market positions (measured by a combination of market share and gross margins). For example, a global automotive powerhouse based in Europe with 8 percent market share and 20 percent gross margin can add almost three points on gross margin through better pricing within three years. This translates into more than $275 million in additional profits. An innovative high-tech leader with 60 percent market share and 45 percent gross margin in a niche market can add on average 10 points to its margin..

Of course, market power can vary significantly within a company, especially in large conglomerates. Metro, for example, is very strong in the cash-and-carry wholesale segment in its home market of Germany, but weaker in France where Carrefour is the long-established leader. It is essential to look at business units and markets at the right level in order to identify the pricing potential..

Two other questions helped us validate our belief that better pricing drives higher profits…We asked half of our study participants how much their suppliers could still capture from them in price negotiations. In other words, how much money were suppliers leaving on the table? We asked the other half how much they themselves were leaving on the table in price negotiations with their customers. The assessments were almost identical, at 5.2 and 5.1 percent of the deal size. Needless to say, these amounts would make a substantial difference to profits. The average EBIT margin for Europe’s top 300 companies was 9.9 percent in 2012. Adding another 5 percentage points to the top line would have increased EBIT by about 50 percent. Even if companies captured only a fraction of that potential, it would still be a substantial increase in profits…

Don’t Stop. There is Always More to Gain:

Our findings reveal that a company’s market power—measured by gross margins and market share—is a reliable predictor of its potential gains from better pricing. The more market power a company has, the higher the profit improvement potential. What’s more, the relationship is linear. Profits gained from pricing continue to rise as market share and gross margins rise. In other words, there is more, and then there is still more to gain..

This finding refutes the typical arguments heard when an organization thinks it has done enough or is already good enough when it comes to pricing. The main arguments are: “Why? We are already doing well,” “Better pricing does not work in my industry,” and “It does not work in this country.” The fact is, industry and country of origin turned out to have little influence on the profit improvement potential from pricing (see figure 1)..

The THREE Typical arguments above are dangerous, because they lead to behaviours that hinder pricing efforts and harm profits…A company that manages to lower its costs tends to pass along the cost savings to customers, which means there is a preference to preserve gross margins rather than improve them. In fact, our findings demonstrate that when cost of goods sold (COGS) rise, gross margins are almost three times less likely to change than when COGS fall..

Such companies are also prone to sacrifice profit to preserve market share, rather than the reverse. An obsession with market share is still very much alive. Looking at the laggards in our sample—companies that improved either share or profitability—the share of companies that gave ground on gross margins is almost twice as high as those that lost share…So when in doubt, laggards sacrifice profit to preserve market share, rather than sacrificing market share to preserve profits..!!

Go Deep, Not Broad:

Having #MarketPower, is clearly important…It is No surprise that companies with High #MarketShare, also enjoy High Margins…Consider Apple in smart-phones, BMW in cars, and Coca-Cola in soft drinks. What a company does with its market power is perhaps even more important..

The #TopPerformers, in our analysis, an elite group that we call the #ZenMastersOfPricing, have THREE Things in common…They enjoy very high market share and #GrossMargins, they have spent the past three years expanding their market power, and they attribute the majority of their profit improvement (more than 70 percent of it) to their #PricingStrategies…In other words, their market power, which is already high, continues to rise as their pricing improves..

The Zen Masters differ from the other Businesses in TWO Ways : First, they are much more likely to undertake at least one initiative to improve pricing…Second, almost two thirds of the Zen masters focus on One OR Two Key-pricing actions rather than a major program addressing more than FIVE Price actions (see figure 3)..

Interestingly, firms that possess better overall pricing skills (or think they do) have higher market share and gross margins…Yet these firms still invest to deepen their skills even more…Unlike price promotions, which are not applicable to many business-to-business firms, pricing training is an opportunity to change not only how people think about pricing but also how prices are managed. And it is essential to every industry..

Beyond training, other possible pricing initiatives include improved price-setting process, more-targeted discounts and promotions (if applicable), better sales force price execution, and tighter price monitoring…

Success, and More Success :

What we know intellectually is that success breeds success. A company that understands the mechanisms of smart strategy, and uses them to its advantage, is bound to succeed..No where is that more True & Pertinent than in #Pricing,..Smart Pricing leads to increased #Profits & Market-share…Our study proves it…!!