19 Jun

A Recession is Coming….Threat or Opportunity?

While no one can accurately predict one, the signs of an impending recession seem to be mounting.

Earlier this month, the Federal Reserve updated its probability of a recession based on the Treasury Spread. The current inverted yield curve, which has been used as one leading indicator, has moved the probability of recession up sharply in the last year towards 30%.[1]

Another indicator: Nearly half, or 48%, of chief financial officers in the U.S. are predicting a recession by mid-2020, according to the Duke University/CFO Global Business Outlook survey, which is conducted quarterly. And more than two-thirds, 69%, are predicting a downturn by the end of next year.[2]

Other signs are looming such as lower GDP growth in China relative to what it was before 2010, the dramatic increase in alternative lenders in the U.S. economy called ‘shadow banking’, [3] and an expected interest rate cut by the Fed today. “The last time it [The Fed] entered a cutting cycle was September 2007. At that juncture, the subprime mortgage crisis had displayed clear signs of accelerating.“  [4]

Regardless of whether a downturn occurs within the next two years, a recession represents CHANGE. And when CHANGE occurs, be it technological, societal or economic in this case, there will be winners and losers. Those with the right outlook and a plan to leverage data and analytics will likely come out on top.  

How will your business respond?

The way in which different business organizations responded during the 2007 – 2009 ‘great recession’ has been studied by several researchers to identify winners and losers, and the strategic decisions that separated them.

In one study published in HBR, McKinsey clustered companies into ‘Resilients’ and ‘Nonresilients’. The Resilients returned between 6% and 8% more in returns to shareholders than industry peers did. Their performance dipped less overall during the downturn, and they were able to significantly widen their leads in their respective industries during economic recovery.  

As might be expected, these companies placed a high emphasis on controlling operating costs. In addition, resilient companies also focused on maintaining loyalty among high-value customers that were central to the company’s post-recession recovery. They were also smart at pricing. Using data and analysis about customers and their competition, the Resilients were forgoing revenues they could have earned through pricing changes. By contrast, industry peers were more likely to try and maintain revenue at any cost, applying price reductions haphazardly to products and services and sending mixed marketing messages. (See our recent post on using external data to excel at pricing)

One of our own clients illustrates the ability to grow, rather than retract, during an economic downturn.

The company is in the commercial printing industry – highly capital intensive and under constant pricing pressure from large corporate customers. In 2008 to 2009, the management team decided to explore growth through potential acquisitions of smaller players that may not be able to withstand the downturn. Rather than investing the time and money to approach companies directly, however, they asked for our assistance to identify potential targets and prioritize them based on certain attributes such as customer base, core assets, technology stack and capabilities. Armed with this insight, their legal and finance teams made formal introductions with confidence and very quickly made several acquisitions. The resulting market share gain (and some new digital capabilities gained in the process) moved our client into a leadership position in the industry.  

How they do it

Downturns bring a conundrum for business leaders. While the short-term demands caution, cutbacks and capital preservation, the long-term presents opportunities for growth. How do the winners excel?

  • Rather than cutting back, a key aspect of their success is continued investment in research, data and analysis to make smart decisions and focus their attention and investments where they have the greatest impact. Research, hypothesis testing and refinement save them from investing in marginal areas while directing investment to the most promising.

As a result, these organizations leap-frog their industry peers into new positions of growth with the eventual recovery. Will yours be one of the winners?


[1] https://www.newyorkfed.org/medialibrary/media/research/capital_markets/Prob_Rec.pdf

[2] https://www.cbsnews.com/news/nearly-half-of-u-s-financial-chiefs-expect-economic-recession-within-a-year/

[3] http://www.startribune.com/risky-borrowing-is-making-a-comeback-but-banks-are-on-the-sideline/511160862/

[4] https://www.cnbc.com/2019/06/19/the-federal-reserve-is-likely-to-say-rate-cuts-are-coming-satisfying-markets.html

30 May

Using External Data to Excel at Pricing

A study published last year in HBR, Forbes and Bain and Company’s own outlets looked at top-performing B2B companies (as defined by increased market share, self-described excellent pricing decisions and execution of regular price increases). The findings suggest that top performers are more likely to:

  • Employ tailored pricing at the individual customer and product level
  • Align incentives for frontline sales staff with the pricing strategy
  • Invest in ongoing development of capabilities through data, training and tools

These top performers develop pricing capabilities by bringing market intelligence to bear on three variables for setting target prices:

  • The attributes and benefits that each customer truly values (External Data)
  • The alternatives and competitive intensity in the industry (External Data)
  • The true profitability of the transaction after accounting for leakage in areas such as rebates, freight, terms, and inventory holding (Internal Data)

What caught my eye, of course, is the emphasis on the use of EXTERNAL DATA to develop the pricing capabilities of these top performers.  

Applying external data to pricing decisions requires an underlying capability to collect data, analyze and deliver insight to pricing decisions. While the authors offer no specifics on HOW this is done, here are three techniques we’ve used over the years to help clients develop this capability:

  • Systematic scanning. Top performers systematically monitor for pricing information and indicators rather than engaging in “episodic pricing projects”. From press releases to published contracts to captured conversations by the sales force, open source data is compiled, organized and analyzed to understand what customers are paying and the pricing strategies of the competition
  • Market and competitive analysis. The B2B supply chain contains several transaction points – the points at which money is exchanged for something of value, whether a supplier, customer, distribution partner or other. And whenever money is exchanged, data and information are associated with the transaction. Using this ‘follow the money’ approach and asking the right questions, it is possible to extract valuable insight regarding the attributes customers value and the pricing practices of the competition
  • Win/Loss analysis. When we speak to B2B customers on our client’s behalf following a buying decision, we seek to understand both the key buying factors as well as the customer’s buying alternatives and their perceptions of price. Whether our client won or lost the decision, knowing how their pricing compared aids them in setting future prices

While data and insight are one component of overall pricing success, 77% of top performing companies have access to the right data and tools. An example is a top performing company in the specialty chemical industry that successfully employed these pricing tactics and increased EBIT by 35% within two years.

The authors close the white paper with these words, “companies in almost all industries have underinvested generally across pricing. The episodic “pricing project” approach leaves companies well short of full potential. With meaningful margin upside at stake, managers cannot afford to continue pricing by guesswork or rules of thumb.”

The links below will open a three pricing-related case studies.      

Maximizing Revenue Through Market-Based Pricing

https://lineofsightgroup.com/wp-content/uploads/2018/12/LoSCaseStudyCS32.18_MarketPricing-1.pdf

Price Benchmarking

https://lineofsightgroup.com/wp-content/uploads/2016/02/LoSCaseStudyCS30.18_PriceBenchmark-1.pdf

Protect Against Low Priced Competition

https://lineofsightgroup.com/wp-content/uploads/2016/02/LoSCaseStudyCS31.18_LowPriceCompetition.pdf

Here is a link to the Bain and Company brief “Is Pricing Killing Your Profits?”:

https://www.bain.com/contentassets/da6c7f536eeb47ab863ff9719ea2381e/bain_brief_is_pricing_killing_your_profits.pdf

28 Jun

Using Analytics to Stay Ahead of the Competition

Using analytics to stay ahead of the competition

“As product strategists aiming to launch a new product or gain market share with a new enhancement, it is critical to be first to the finish line. The risk of losing the race can be in the millions of dollars and devastating to careers.”  – Steve Schulz, Line of Sight Group President and Founder

Our efforts to stay current on trends and keep a pulse on the needs of product managers is addressed by attending and sponsoring key events in the local marketplace. Line of Sight Group sponsored the monthly PDMA meeting and presented “Using Analytics to Stay Ahead of the Competition” at Starkey Hearing Technologies in Eden Prairie, Minnesota.

Line of Sight Group’s Steve Schulz shared some analytical models for using knowledge of the external environment to understand where you are in the race with your competition, and how to think about bets and moves you can make to differentiate and stay ahead. Use cases demonstrated how organizations can apply data and analytics to continuously monitor competitive developments and engage in interactive dialog on how to use that information to respond to threats and opportunities.

One of the ways we help our clients monitor their external environment is through Line of Sight’s SCIP Endorsed Market-i Competitive Intelligence System.

Key insights from the event:

  • How to identify key indicators
  • Where to find the needed data
  • How to create and populate a development map and scorecard
  • Development strategies and response adjustments
  • How to present the data and strategic response

Starkey’s Aaron Schroeder, Au.D, kicked off the event with a welcome and shared their efforts to help people hear throughout the U.S. and around the world. He showed a music video featuring singer-songwriter Matt Nathanson, who joined Starkey in Peru to help raise awareness and funds for people struggling with hearing loss. I encourage you to watch it here. It is sure to warm your heart.

Thanks to Minnesota PDMA and Starkey Hearing Technologies for the opportunity!

Minnesota PDMA is the place for innovators and product people to come together. The organization holds monthly events all around the Twin Cities. All people, perspectives, and ideas are welcome.

Starkey Hearing Technologies is a hearing-aid manufacturer that prides itself on connecting people and changing lives. The company has provided more than 1 million hearing aids to people around the world.

28 Dec

Competing on Customer Experience in Retail

customer experience

Customer Experience is the area many retailers have chosen to compete on over the past few years. When it comes to shopping, it is breaking increasingly into “chore” vs. “cherish” activities. On the “chore” side, firms like Amazon offer commodity pricing, streamlined delivery, and voice recognition to make online ordering an easy experience for obtaining essentials. That leaves “cherish,” the type of shopping based on the discovery of interesting products and socializing them with others. This type of shopping is characterized by a great physical presence, unique items, and creating meaningful experiences. You’ll find artisan crafted products, hand-picked selections, custom built offers, or even built-by-the customer creations. How might a retailer best compete in the Customer Experience realm?

One of the first areas to consider is to understand the external environment.  What are the trends and who are the competitors? Are there competitors offering something similar? How are they unique? What kinds of experiences do they offer? Are they competing on digital or physical experience or both or is it something else?

Next, savvy retailers track and map internal environment elements like customer journeys and voice of the customer as well as metrics like Net Promoter Score and Customer Satisfaction. Asking for feedback after every interaction or transaction is wearing customers down so building insight via analytics into the flow (that is not invasive) will be a key.

With external and internal environment insight in hand, retailers have a number of levers available to pull.  Retailers can swiftly test and prototype various experience design elements using service blueprinting, bio-mimicry and design thinking.  Some are using Virtual Reality to conduct their prototyping digitally as a first step. Capturing insight via primary and secondary research about the external and internal environment goes a long way towards creating a strategy to compete on customer experience as a differentiator in retail. Knowing the type of shopping that your current and future customers engage in can align your strategy and go-to-market initiatives on a path toward delivering meaningful and differentiated customer experiences in the digital and physical worlds.

01 Dec

Competing in Financial Services

finance indusrty

Competing in the financial services industry can be as risky as it is broad. While the services of our clients in the financial services industry range from consumer finance to sophisticated back-office technology in the insurance industry, they all share a common challenge of dealing with quick, continuous and sometimes dramatic changes in the industry. Driven by government regulations, global economics, technology and many other factors, these organizations know that changes in their industry can happen swiftly and can devastate profits for those that misread the tea leaves. They also know that timely and objective knowledge and insight can help offset those risks and challenges.

In one financial services segment, our client deals with competitive offers and pricing that changes on a monthly basis or less. With the help of Line of Sight Group, however, managers know about the changes in near-real-time, and use the information to identify situations where they have a competitive advantage. They quickly funnel the information to their sales force who uses it to contact client prospects, confident that they have a true advantage to gain a new customer. This client conservatively estimates an ROI on the research and insight at over 20 to 1.

Late last year, another client asked Line of Sight Group to conduct a deep analysis on an adjacent market in which they were contemplating entry. In early 2017, they made the decision to go forward with the move and began maneuvering resources for the planned entry late this year. Not only did the analysis provide the support needed to make a confident strategic decision, it also provided guidance in the build-out phase to align products, pricing and positioning. The insight was further extended as education for the business development team about the market and how to out-sell the competition they were getting ready to face.

Still another client in the financial services technology sector, utilized our Competitive Landscape Program as part of its overall strategy formulation following a major restructuring. By gaining insight into the key growth strategies and buying criteria of buyers in its target segment, and overlaying that data with insight about its primary competition and its own competitive position (it is not the industry leader), management developed a variation of a ‘fast-follower’ strategy. Predicated on management’s understanding that they cannot predict the future and control the uncontrollable, and that the industry leader tends to respond sluggishly, they are building a competency that enables management to adjust its strategies based on a continuous ‘external learning loop’ focused on its industry and markets. This allows them to quickly identify and take advantage of new opportunities.

The stakes can be extremely high in the financial services industry with high capital intensity, powerful regulation and dynamic market and competitive factors. Because they are in the financial services industry, however, risk management is in their DNA. They understand how to manage market and operational risk, and understand that market and industry research is a vital component of their risk strategy. These firms also understand economics. They understand the value of accurate, timely and unbiased research and insight, and that the investment will pay dividends in both the short and long-term.

06 Oct

Strategic and Competitive Intelligence Tips and Techniques

IMG_0282_4

Last week, Line of Sight Group partnered with the Strategic & Competitive Intelligence Professionals (SCIP) Association to deliver a panel discussion to explore how various organizational roles define and use intelligence to formulate strategy and execute go-to-market initiatives. The panel consisted of practitioners from several industries and across several roles. There were panelists and attendees not only from SCIP but from other associations representing the roles we sought including Product Development and Management Association (PDMA), Customer Experience Professional Association (CXPA) and the Special Libraries Association (SLA).

The fast-paced discussion first explored what types of intelligence were needed. With so much data available from so many sources, there is a heightened importance for analyzing, synthesizing and making sense of it. Several ideas emerged from making it simple, visual, or put into the context of the consumer of the intelligence. One of the firms had operationalized this into Red, Yellow, and Green dashboards. Some added that storytellers could be employed to convey the messages and clues found in the intelligence. There was attention given to the ways that technology was impacting the field – several firms are using or are built on analytics. Others are starting to look at Artificial Intelligence (AI) and Virtual Reality (VR).

There were some interesting examples, as well. One firm conducted Scenario Planning and accurately predicted the acquisition of Whole Foods by Amazon. Another example was that Red Roof Inns capitalized on the fact that 2% of all airline flights are cancelled and figured out a way to cater to temporarily stranded travelers yielding a very favorable business outcome.

Another aspect that emerged was the importance of building trust and collaborating amongst the various roles in research, product management, marketing, sales, customer experience and strategy formulation. With the advent of technology like cloud, mobile, big data and the aforementioned analytics, AI and VR, the notion of sustainable competitive advantage is challenged. This points towards an ongoing monitoring of the external environment to either avoid disruption or to get ahead of the curve and do some disruption.

The panel ended by sharing a list of helpful books:

  • The Amazon Way: 14 Leadership Principles Behind the World’s Most Disruptive Company by John Rossman
  • Do I Make Myself Clear? by Harold Evans
  • Principles: Life and Work by Ray Dalio
  • Originals: How Non-conformists Change the World by Adam Grant
  • Starting a Competitive Intelligence Function by SCIP
  • The Strategist by Cynthia A. Montgomery
  • Good Leaders Ask Great Questions by John C. Maxwell
  • Assorted Competitive Intelligence Books by Michael Porter and Liam Fahey
13 Sep

SCIP Minnesota Presents: A Panel Discussion with Line of Sight Group, PDMA & CXPA Practitioners

2017-09-13_17-47-31

Line of Sight Group is proud to be part of SCIP Minnesota’s panel discussion later this month. President and Founder Steve Schulz will join other top experts in the competitive intelligence, product management, and customer experience arenas.

The discussion will touch on and provide insight on common challenges, including the type of intelligence leadership is looking for, and illustrate how top practitioners gather intelligence for internal use and on their competitors. Panelists will also illustrate some useful tips and tools that are used by top practitioners.

Other panelists include:

  • Lori Laflin, Global Customer Engagement Research Program Manager, Cargill/ Member CXPA , CCXP
  • Paul Santilli, WW OEM Business Intelligence & Customer Insights at Hewlett Packard Enterprise/ Secretary & Treasurer, Board of Directors, SCIP
  • Mark Jensen, Director of Product Management-Distribution, Epicor Software/ Board of Directors, PDMA
  • Tom Mcgoldrick, Strategic Insights Director of UnitedHealth Group

The Panel will be moderated by Brett Norgaard, Principal, Line of Sight Group.

The SCIP MN Panel Discussion will take place September 27 from 5 pm-7 pm Central Time at the Grant Park Conference Room, 500 East Grant Street, Minneapolis, Minnesota.

For more information or to attend the event, please go to the SCIP MN website or reach out to MN Chapter Chair, Julie Johnson.

Line of Sight’s Market-i Competitive Intelligence Program is a SCIP “Endorsed” product. Strategic and Competitive Intelligence Professionals (SCIP) is the nonprofit Association representing the Integrated Intelligence industry internationally for over 32 years.

SCIP

 

 

31 Aug

When Listening to the Market, One Plus One Can Equal Three

OnePlusOnePic

I was talking with someone recently who wanted to accomplish three specific tasks – gather market intelligence, create competitive profiles and send out newsletters. As we talked further, we discovered that the three tasks were closely related. The conversation then shifted to what intelligence was needed and how would it be used?

In this situation, it probably makes sense to take one step back and conduct a Competitive Landscape Analysis using helpful frameworks like PESTEL and Five Forces.  These types of analyses can narrow the focus and yield a specific set of competitors and trends to study and monitor.

Next, a knowledge portal, like Line of Sight Group’s Market-i Competitive Intelligence System, enables a way to organize, relate and contextualize all types of structured and unstructured intelligence. Using this system and the information garnered from the Competitive Landscape Analysis, a team could start gathering competitive intelligence, saving it, and then creating weekly newsletters, demonstrating swift value.

After several weeks or months, competitive profiles could also be created. As soon as these profiles were activated, all of the previously posted articles and artifacts could automatically link and append to the profiles.  Similarly, any new intelligence added to Market-i would have immediate relevance and would add to the collective knowledge.  The newsletter function could also include tips and techniques for using the intelligence as well as information regarding what to look for and how to capture it.

Knowing what you are looking for, why you need it, and how you will use it will allow you to architect a solution that will provide short and long term benefits. It also becomes more valuable with each new piece of intelligence, report or artifact added. Finally, an approach that includes both a push and a pull aspect helps ensure that there will be high levels of engagement. The total value can indeed be greater than that of the parts.