Co-creators at Starbucks

Starbucks is co-creating with customers through My-Starbucks-Idea. A 2.0 Web-site that let customers share their ideas (Fig. 1). The users enable the company to get an outside-in view to innovate in products, experiences and the relationship between the company with the world.

Fig-1 : My-Starbucks-idea

People can support current ideas or propose new ones. The process is very transparent, you can even see implemented ideas like a mobile payment card as an iPhone application (Fig.2).

Fig-2 : My cards

Starbucks is involving customers in their social responsibility with the environment. They are giving away 10,000 US dollars to the winner of a "more recyclable coffee cup" (Video 1).

Video 1 - Betacup

More companies are using social tools to interact directly with the customer. This is the first step to get a customer view inside the company. Companies not only need to listen the customer, but take actions on the popular ideas, like the iPhone application. As Tom Davenport complains about the lack of lemon slices in Starbucks. They should not only listen, but also implement the new ideas to avoid unsatisfied customers.

Kindle Service strategy and the iPad

Almost everybody in the blogosphere is talking about the death of Kindle. They forgot that Kindle is not a product, it's a service. Kindle is the e-book service that is already in many platforms including iPhone and iPod touch, Blackberry and PC (Figure 1).

Figure 1 : Kindle e-book service for multiple platforms

The iPad will be another platform that pushes the kindle service that carries the biggest selection of e-books on the earth. This service strategy already saved Amazon from the disruption of the market with the arrival of new devices. The kindle e-reader device its a niche device for e-books lovers who spend lot of their time reading, for them the kindle and the e-ink still provide to them a better customer experience since the measure of the value is related with the low strain in the eyes of the readers thanks to the e-ink technology.

Fan Service as the ultimate customer experience

I've been a Nine Inch Nails (NIN) fan for more than ten years, giving me the opportunity to follow Trent Rezonr's evolution. Trent is pushing the innovation in the music industry. He left Interescope Records to become fully in charge of the NIN trademark, letting him to control the whole customer (fan) experience. He owns his songs, letting him to do whatever he thinks is appropriate. Owning the content and the distribution channel is like to having control of hardware and software just like Apple does.


Trent Reznor launched viral marketing in 2007. Reznor used private torrent sites to distribute videos, raw song materials and resulting remixes from the album Year Zero. Trent, also distributed free USB drives containing unreleased songs and pictures from Year Zero, these USB drives were hidden in the bathrooms of concert venues where the fans found them and then shared the content through the Internet (see Figure 1) .

Figure 1. USB stick found in Spain.

Trent did many innovations to enhance the experience of his fans. We can summarize some Nine Inch Nails innovations as follows:

• Free Albums : Ghosts I and The Slip.
  
• Digital formats: Though Reznor had apparently been contemplating ditching his label for years, Nine Inch Nails' Ghosts I-IV came second, causing reporters to describe the no-label release as Radiohead-style. The disc was priced $5 for better-sounding 320 Kbps MP3, FLAC lossless or Apple Lossless (all DRM-free). First eight songs are free.
• Nine Inch Nails left Interscope/Universal Music Group and blew off traditional retailers, distributing the CD version of Ghosts I-IV only through the band's website.
• Advised Australian fans to steal his music after Universal priced it at AU$30. Praised Oink file sharing network.
• Remixing policy : One of the reasons Reznor hated being signed to a label was that Universal wouldn't let his fans remix his songs. Now that he's on his own, Nine Inch Nails' remix policy involves making raw materials available for use with Pro Tools or other audio programs. Bonus points if Reznor releases fan remixes on BitTorrent like last time.
• Premium Tickets at NIN.com : NIN offered premium tickets in some tours, these tickets were personalized with your own name letting you to access to the stadium earlier than regular tickets and enjoy the band testing their instruments before the concerts.
• Iphone application : NIN.com, Nine Inch Nails website, is also available on the iPhone, where the fans can interact and access to music, videos, pictures and news about the band (see Figure 2).
• Ultimate Concert Experience: In 2008, Trent offered the Lights in the Sky tour using the state of the art in LED screens and sensors to provide an ultimate user experience for his fans.
  

Figure 2. NIN's iPhone application.

The latest innovation experiment driven by Nine Inch Nails was the release of 450GB of raw High Definition footage. The fans co-created a professional release of the film using the official and fan made footage that is freely available on youtube, PS3 and DVD as well. A full HD Bluray version of the concert with 5.1 surround sound will be available to download (see Video 1).

Video 1. Co-created video.

The future of the music is not only in the production and selling music, the artists must take care about the fan experience engaging their customers (fans) to co-create content like Trent Reznor did with remixes and video.

Stakeholder focus is the new era of branding

"The social interaction is global. If you don't like a service, post it on twitter"- Broadeep.

The branding has evolved to a stakeholder view of the brand. It's not focused only on the customer, but in all stakeholders. "The brand value co-creation process is a continuous, social, and highly dynamic and interactive process between the firm, the brand, and all stakeholders" is how the branding works in the Stakeholder-Focus Brand Era (Merz, 2009).

This is evolution of the brand, it's a natural consequence of the evolution of the business. The business focus is not in the firm anymore, is in the network.The strategy is focused in the role of the firm in the business network. The brand is now in a network environment where all stakeholders co-create it.

Today, the brand is co-created on the Web. Social interactions reached global scale powered by services like Facebook or Twitter, where it's easier to build the cult or the disappointment of the brand. These tools, specially Twitter, due to the openness of the way the interaction flow, facilitate the discussion. The social interaction is global. If you don't like a service, post it on twitter. Firms are using that information to be aware of what the community among other stakeholders are saying about their brand.

Figure 1 - The cult of mac is a book about the strong mac community of Apple.

The most illustrative case in this branding era is Apple, the company that have the cult on mac ( Fig 1) , the cult on ipod and most recently the cult of iPhone. Their stakeholders includes software developers, universities, partners, product owners and communities of bloggers and fans that not necessary own the product but want to own one (just look that dell laptop with a Apple sticker of your office mate ). All these stakeholders dynamically co-create the apple brand, driven by social interactions (Fig.2).


Figure 2 - In the diagram we can see the firm and some stakeholders* (to simplify it) interacting, Google is a developer, TechCrunch is a blog, Apple fans is a community in Facebook and Twitter is a social platform where conversations and opinions take place. All of them are co-creating the brand in this continuous, social, and highly dynamic and interactive process

The speed and reach that modern social interactions provide to the stakeholders could be used to co-create the erosion of the brand. The recent issue on the Google voice application being rejected by the apple store is clearly stakeholder brand damage. That issue caused the reaction of community leaders, like the founder of TechCrunch blog, who leaved the cult of mac, quitting the iPhone in favor to an Android based phone to use actively Google Voice, co-creating branding value for Google Android instead of the iPhone.

Apple is a stakeholder co-created brand with much more followers than detractors in the community. The Google voice incident shows us how the community react to incidents that are seen as unfair. Specially when the stakeholder, the software developer in this case, is another powerful co-created brand like Google.


References:
(Merz, 2009) Merz, Michael A., Yi He, and Stephen L. Vargo (2009), "The evolving brand logic: a service-dominant logic perspective", Journal of the Academy of Marketing Science

Gaming as a Service

The gaming industry is shifting their focus from product to services. All current consoles in the market includes some kind of services. The Playstation Network (PSN) from Sony and XboxLive from Microsoft are the best examples of this phenomenon.

Even the portable gaming devices are adding services. The Nintendo DSi and Sony PSP Go are focused on digital distribution with on-line stores with games, applications and video.

One example of Innovations in gaming is Little Big Planet (Exclusive for PS3). In this game you are a co-creator using a service that let users create, share and play new levels. The game offer a customized experience where you can buy stickers to decorate your levels and suits to personalize your character.

We can see a SONIC level created on the game Little Big Planet

John Pleasants the COO of EA in a interview on venturebeat says “If you believe all games will eventually be services — as I do — then the idea of game teams that make a game, ship it, and then do something else goes away”. In fact we can see this in the Burn Out Paradise that is a platform to deliver more ways of gaming. In fact they are constantly upgrading the service adding more vehicles and stages.

The EA executive gives a hint of new business models for gaming “They (games) will now ship and day one begins when the customer gives feedback to the live service. The way you distribute will be different. The way you charge will be different. There will be more permutations in pricing. Merchandising will be much more important. Co-marketing will be much more important".


A innovative approach on the way that games are delivered is OnLive. It is a platform that do the heavy processing on the server side bringing the Cloud Computing concept to the gaming industry . The OnLive micro console is just a terminal to connect the TV and game pads. It's not a complex piece of hardware like the PS3 and Xbox360.

The OnLive gaming service will be delivered using a micro console

As we can see the gaming industry is shifting their focus from product to services, no only in the way the software is delivered but also in how you play and purchase the game.

Insight: Smartphones are pushing Service Innovation in Bank industry

Smartphones have enriched user exeprience combining high innovative hardware and software (touchscreen and user interfaces). However, that's not been enough. Smartphones have also added services as a new component, bringing service inside (geared by application and content ecosystems).
According to Gartner, Smartphone sales have grown 27% in the last Q2 while mobile phones have declined 6%; see Figure 1. In the smartphone's OS battle market share, Symbian (51%) and Microsoft (9%) have dropped year-by-year and RIM and Apple have grown. However, Android is slowly growing with only 2%.

Figure 1: Table with Smartphone sales Q2'09 from Gartner.

This trend is pushing manufacturers to improve devices and focus on services as vital component. Also, operators will request lower prices because consumers want a cheaper service: "... the price of wireless service is far more important that the network or the phone." (NYT)

This scenario is bringing new opportunities to explore in several industries. Smartphones are pushing Service Innovation; see Figure 2. This the case where technology pushes business.

Figure 2: Smartphones are pushing service innovation

In the last post, we analyzed how banks could innovate offering services more than products in the downturn, looking forward the upturn.
Banks should take advantage of this smartphone's scenario bringing browser-based or application-based services (Apple's iPhone application store, Google's Android application store, other). Potential market is enormous given that mobile banking adoption has not exceeded 10% in Europe and 5% in USA in 2008 (Forrester).
Banks should change consumer needs since more than 40% of people don't see value in using mobile banking (Forrester). Therefore, Banks should incite consumers to use other services more than check a balance, for example, offering contactless mobile payments: "With the new generation of mobile devices, the smartphone, BlackBerry, iPhone, gPhone, technology fillers are driving mobile payments. Once contactless chips are installed in most phones, this model will grow rapidly" (Accenture) see Figure 3.

Figure 3: Contactless mobile payments

Customers behavior by accessing mobile banking is predominant at home: 31% of people access financial accounts at home, 25% while running errands, 15% while commuting, 11% at work, 9% on vacation, and 8% in business travel (InformationWeek).
Banks should consider the growing smartphone market and customers behavior to be prepared for the new age of social banking and the emerging models such as financial social networks, microfinance and personal finance management (Gartner).

Indeed, every new designed mobile service must take in account that customer trust is very important for banks (Gartner): "There is evidence that a lack of customer trust in banks may hurt larger banks more than smaller banks ... However, this is an industry issue that all institutions must address".

Banks taking this competitive advantages brought by smartphones will emerge strong in the upturn and will be positioned stronger in the next decade.

Service Innovation is a need in the economic downturn

Indeed, innovation is a need everytime. That is the discourse since more than 25 years ago. According to Rosabeth Moss Kanter (Change Masters, 1983) "innovation refers to the process of bringing any new, problem-solving idea into use."

However, in the economic downturn is needed even more. Financial sector and Automotive industry have suffered a painful crisis worldwide with many companies going to bankruptcy.

What should they learn about Service Innovation? (What to do?)

First of all, Banks are well known as rigid cathedrals where innovation is difficult to get flourished. Entrepreneurial innovators (R. Moss Kanter, 1983) are needed in any company to boost innovation inside. However, on this time where service industry is becoming more and more important worldwide, companies need T-shaped people to lead innovation inside.
Banks should pursue consumer loyalty bringing them a valuable service experience. Gartner Inc. says that "Banks should be ready for the emergence of the social-banking services model".
Secondly, in this crisis Banks should learn from the most innovative organizations of the world: Team Obama, Google, Hulu, Apple, Cisco Systems, etc. (see list here), realizing that innovation is important and technology brings lots of opportunities and competitive advantages.

On the other hand, Automotive industry has to change the dominant logic of goods to services.
Adding services to their products, they make new value propositions for consumers (see Figure 1) and co-create value between manufacturers and providers.

An example could be CaaS: Car a a Service (another discussion post in Spanish), which is an innovative idea where manufacturers sell the transportation service to consumers by subscriptions.

Figure 1. Car manufacturers should pursue consumer loyalty.

Moreover, this industry has to learn much more from other successful business models like Dell in which "its direct way of working delivers industry-leading value to customers";
or Amazon in which "growth is core for its business strategy, and that has had a significant impact on the way they use technology: growth through more categories, a larger selection, more services, more buying customers, more sellers, more merchants, more developers, increasing the different access methods, and expanding delivery mechanisms."
These two successful companies lead innovation, pursuing innovation everytime.

Therefore, Financial sector and Automotive industry have to engage Disruptive Innovation: "a phase starts where leaders ask which parts of their business model are weak (and perhaps unsustainable) and that, in turn, can lead to restructuring and reinvention".


What are the benefits to invest in innovation plans during the crisis? (Why do it?)

According to Nielsen:

"Companies that continue to invest in their new product innovations during challenging economic times emerge from recessions with much higher growth rates than companies who cut back."
..."growth rates that are two or three times higher (five to 10 times higher in some cases) than the growth rates of companies that cut back on innovation during a recession."

On the other hand, governments should do four things "for the long term so their countries can emerge from this crisis as winners: inject capital, think global, focus on public programs, and support talent" since "while many businesses simply won't be able to afford further investment in innovation, governments should recognize that innovation systems".


Which methodology could they use? (How to do it?)

Broadeep has designed the Services life-cycle which allows continuous service innovation and service improvement (see Figure 2). This has four essential phases: Strategic Design and Planning of Services, Engineering and Development of Services, Execution and Monitoring of Services, and Controlling and Diagnosis of Services. These phases have four strong relations: Service Alignment, Process Management, Service Government and Service Redesign; which define either a method or an approach for consistently using the output of one phase as an input of the other.

Figure 2: Service life-cycle as a basis of
Continuous Service Innovation and Service Improvement.