Saturday, October 25, 2014

Cross Learning from Software Design to Product Design

Every now and then we come across new products that completely redefine the way we look at that product category. Some prominent examples are in the categories of room temperature control (Nest), watches (Pebble), personal transport (Segway), etc. Though the process of those respective product innovation might have been different from each other, I started to think if there is a way to formalize such product innovation - so that the process by itself contributes to completely changing the design of the product.

This got me to start exploring the As-Is, about what goes into the product design process. I read about the Design Thinking process. I read through the CAD software tools and what they enable in the design process. 

What I came across was very different that I saw in my field - software. There was a lot of focus on physical representation of a concept, idea or design. Even ideating was encouraged in physical form - this I felt pushes the designer towards incremental thinking - he or she is going to always look at a car as having 4 wheels, front and back seats, etc. I had also tweeted about it

I couldn't find any reference in design process artefacts that deal with the abstract - I did come across Mind Maps but they weren't actually a way to represent an idea - they contributed more to exploring, empathizing and defining the problem. 

But, in my own field, we had process artefacts that we use as tools to look at ideas for a solution at an abstract level before we looked at it in the physical level (i.e. UI specifications/wireframes). One of that which gained a lot of ground in recent times is Solution Architecture - a diagrammatic representation of functional components that go into solving a particular problem - a way of representing a solution. This is supported by some more diagrammatic process artefacts/tools.

Now, solution doesn't necessarily have to be a software solution. Everyday physical products are also solutions to some or other everyday problems. That brought me to the thought that why can't product design process inculcate such abstract level ideation tools. Taking the design thought to this abstract level will let us look at the product as a solution - I felt this would encourage Lateral Thinking. I tweeted about this too

Imagine if we could relook at a commuting solution (i.e. Car) in terms of a solution architecture - with functional components like locomotion, passenger comfort, driver communication, etc. Or perhaps, we could re-lay the functional components in a different manner - instead of passenger comfort and driver communication as two different components, we might just call it human interactions (driver and passenger). Imagine what kind of design ideas would it present if we re-lay components like this. It would give us a chance to re-think the way we think about the function and association of the components. Such thought about re-looking at a car or any other product could be encouraged with abstract diagrams of solution.

Monday, December 31, 2012

Surrounding the customer: Strategies for cross-leveraging assets across channels for competitive advantage

The connected-consumer forever changed the way retailers sold their goods. Each retailer no matter what channel they were selling in had to appear in other channels as well. Walmart and Target had to open their online store fronts. Amazon had to start appearing locally at Amazon Lockers at one of your neighborhood stores. Being multi-channel has become hygiene factor, even for online retailers. 

However, being multi-channel is only a hygiene factor. It is a not a competitive advantage by itself, any more, unless you  strategically leverage assets across channels for competitive advantage.

Identifying the Assets

So, what are the strategies to leverage such assets? To understand that, you need to first identify those assets. Below is a perspective on what kind of assets are there. I have derived them by identifying links between the assets that appear across channels of distribution. These are assets on the distribution side. These assets are - 

  • the locations of the retailers (these could be stores for a brick and mortar retailer or fulfillment centers for an online retailer), 
  • the customers who get serviced by these locations, 
  • the orders these customers place and 
  • the insights the retailer has based on these orders. 
This linkage of assets is diagrammatically illustrated in Figure 1 below.

Figure 1: Assets on the distribution side and their links

Building The Right Asset Bases

Every retailer has the assets that are mentioned above. These assets turn into a competitive advantage if you carefully nurture them and grow them into a differentiation  Just having a location somewhere is an asset. Having these locations strategically to suit your business's direction is an advantage - such group of locations create a competitive advantage for you. Your 'location base' becomes a competitive advantage for you. 

Other such competitive advantages are 'customer base', 'order base' and 'insight base'. 'Order Base' and 'Customer Base' are slightly different - you can have more customers than your competitor but they might not be placing as many orders i.e. you have a larger customer base but a smaller order base. These asset bases are depicted in Figure 2 below

Figure 2: Potential Asset Bases
Any business has limited resources. Choosing to invest in building on a certain asset base should be strategic decision. Decision should be based on which asset base will be the most critical to your business's future, based on what asset base can be most easily converted into a differentiation, and other factors. As you would notice in some of the case studies below, these investments doesn't necessarily have to mean investing in building more of the asset, but could mean in investing in sometimes enriching or re configuring the asset. An example below is of how Walmart enriched their stores to also fulfill cross-channel orders.

Defining Leverage Strategies

Once you have identified your asset bases, you try to leverage on those advantages to gain greater foothold across channels. The strategy to do so, is different based on what is your advantage. Below is an illustration of such strategies lined up with their respective asset bases (see Figure 3 below).

Figure 3: Strategies to leverage asset bases

Each of these strategies have been utized by retailers earlier. Below is a depiction of such strategic templates (see Figure 4 below)

Figure 4: Strategies and their Case Studies

Each strategy and their respective templates is described below -

Strategy 1: Extend Reach

Case Studies: Walmart, BestBuy's and others' Order Anywhere, Pickup Anywhere programs

This is an offering to your customer to call in customers from online to your stores and vice versa. It gives more stickiness with the customers. BT Expedite had observed that -

  1. Click & collect boosts on-line orders by at least 10% with some retailers achieving >30% uplift.  This is incremental to year-on-year increases in web sales typically in excess of 20%
  2. Best in class retailers are seeing >60% upsell once a customer is in-store to collect their order
However, just having more assets should not be considered as a reason for embarking on this strategy. I have previously posted my opnion that having more density of stores in the same metro area need not be a advantage -

Have more density of stores could mean you either 
  • add cross-channel fulfillment capabilities in all of the stores, which would be redundancy and lower utilization of the investment you make into refurbishing stores for cross-channel fulfillment OR
  • add cross-channel fulfillment capabilities in a key store in each metro area, which would mean that you asset quantity is of no consequence

Strategy 2: Spread Overhead

Case Studies: Amazon Prime

Amazon Prime is an example of this strategy. This strategy requires a large customer base because only with a large base , even a low adaption rate can assure a break even. Amazon was able to successfully execute this strategy with Amazon Prime. 

In fact the sucess of Amazon Prime, proved as further flank for Amazon to enter other markets. I had tweeted about the video market where it was making headway due to its user base of Amazon Prime

Strategy 3: Enrich Service

Case Studies: Amazon Local Express, Walmart's Same-Day Delivery Beta

This has not been new to the industry. Early dotcoms had unsuccessfully attempted it, al beit in a less sophisticated market. Present day retailers are driven towards this by Amazon's Local Express offering. Amazon had itself chosen this strategy due to the change in sales tax regime's in several states of the United States that encouraged it to bring fulfillment centers closer to cities. 

However, this is not a leverage strategy you should pick up if your asset base is not suitably positioned. Analysts anticipate probable losses in this strategy. If your asset base is not suitably aligned, perhaps partner with evolving players in this field like the US Post Office or Google.

Strategy 4: Read Forward

Case Studies: Target's Mailers

Retailer collect a lot of data, inadvertantly. More recently, retailers have started to pool this data together using technologies around BigData. Target Corporation for one was able to leverage this to an extent that it could predict family events. The strategy is to leverage such insights from across channels to encourage customers to buy.

A word of caution on this strategy though, is that it is very easy to confuse having just build BigData tools with having executed this strategy. The strategy is not just about BigData, it is about using BigData to drive meaningful and varied insights. About having an organization and skill pool to identify and process those insights. I had previously quoted PayPal's then Chief Scientist on this, in this tweet -


Retailer have exhibited the above strategies based on their unique competitive advantage positions. Choice of detailed strategy is based on complex considerations. Perhaps retailers could use my perspective on assets as a framework to chose strategic investments and chose suitable strategies to leverage those investments.

Saturday, February 26, 2011

Leveraging the mobile penetration in India

India has seen one of the fastest increases in mobile subscriptions, in the world. We currently have more mobile phones in India than land lines. Almost everyone has one today – from a galley-wala tea stall to a farmer in a village. Part of the reason behind such an explosion of mobile usage could be the ubiquitously available low-cost Chinese mobile handsets and the lowering costs for maintaining a subscription.

Potential utilities on a typical Indian mobile phone

Businesses across the developed economies, and retailers in particular, have leveraged on consumer technology trends – web, social media, mobile, location-aware apps, etc. Large retailers like GAP, JC Penny, etc have leveraged these technologies for publishing promotions to consumers. Unlike the developed economies, the mobile revolution in India is not as much about touch screen phones with internet connectivity as it is about pervasive usage of mobiles by the general population. Hence, the strategies for leveraging the mobile subscription base in India should be different from the strategies in the Western world.

Potential application for mobile at each of the Retail Stakeholders

In India, I feel the strategies for leveraging mobile penetration should be different for the different stakeholders in the company. Though the business scenario of each retailer is different, I think, in general, the following applications could be considered – 

Saturday, July 3, 2010

Why Green means ‘Great Retail’?

Green Retail

Being Green is yet to get popular consideration by Indian citizens/shoppers. We notice pollution in air, land and water but conveniently dismiss it as an urban planning issue. If day-to-day public life has to change, there is only one industry uniquely positioned to spear-head this – the retail industry – the industry than can connect the public’s preferences to eco-practices/policies of various upstream industries. Retail is the industry where the precious purchase decision happens. And being ‘Green’ could mean good business to retailers! Here’s how –

Capturing Footfalls
More and more organized retailers, especially supermarkets, are noticing each other in their store catchment areas. The store differentiation is reduced to pretty little and is moving on to building price perceptions and loss leaderships – this is not good for a 3+% net margin industry. When a shopper is deciding where to shop, especially if the shopper is green conscious, having a green attribute on your store and its merchandise can be a sure eye catcher. There may not be too many of the green conscious shoppers in all neighborhoods, but more and more families have a young son or daughter or spouse working for a western oriented industry (like IT, BPO, ITES, etc) who are aware of what green means, are not too happy about dirty polluted cities and might influence the choice of shopping places. Giving an additional reason for shoppers to try out your store could only add to the store traffic.

Cost Efficiencies
Green conscious shoppers are already avoiding plastic bags on purchases that they could manage by hand or in a cloth bag. Reminding shoppers at the checkout point through a signage could result in cost savings on plastic bags, in lesser checkout time for bagging and in potential extra sales of cloth bags.

Private Label Differentiation
There could potentially be private label brands on store shelves with efficient packaging, a green tag and a lower price point (lower price point due to the cost saving from the efficient packaging and other evident private label efficiencies). This could be a significant price differentiation for private labels in some categories that require redundant packaging. In the US, concentrated and efficiently packed detergents resulted in significant price point changes.

Employee Perception and Public Relations
Retail industry experiences one of the highest attrition levels among the domestically oriented industries in India. Building a perception of being ‘Green’ would give a positive feel to employees resulting in better employee engagement. This would also have a good impact on Public Relations, when people realize the being ‘Green’ implies lesser contribution to the dirty roads and nallas in their neighborhood.

First Mover Advantage
India is one of the more densely populated countries in the world. The inconveniences of pollution are only going to become more and more evident as our population density increases. Sooner or later, the typical Indian consumer is going to become green conscious. Getting a head start on this front, before other retailer’s catch on, could result in stronger recognition with green conscious customers. 

Wednesday, December 9, 2009

Part 3 of 3: Effectively Overcoming Empty Shelves in the Indian Marketplace

The asset value of stores is set to surpass inventory as the biggest investment on the balance sheets for most Indian retailers, given the improving supply chain efficiencies. Optimal utilization of this investment implies minimizing empty shelves. Strategies for doing this in India are more fundamental than in a developed market.

Empty Shelves

Supply chain text books have traditionally pointed out that inventory is the biggest asset of a retailer. Well, that has changed, at least in the developed markets. The assets at stores (real-estate plus furnishings) have become the biggest investment, as a result of more efficient supply chains in developed markets. With organized retail still developing in India, many retailers have not optimized supply chain efficiencies. Once the efficiencies are achieved, CFOs will realize that stores and store space is the biggest investment on their balance sheets.

Some retailers, such as a certain leading department store chain in India, already have store assets as the biggest investment on their balance sheet. An extract from their 2007-2008 annual report is presented below:

(All amounts in Rs. Millions)
Assets at Stores
Leasehold improvements
Air conditioning and other equipment
Furniture, fixtures and other fittings
Computers (apportioned to stores)

For mature and near-mature retailers, the strategic focus should be on improving the ROI on this biggest asset – assets at store. Empty shelves imply an under-utilization of this asset and therefore affect its ROI adversely. Empty shelves also negatively affect a shopper’s store experience.

At the corporate level too, empty shelves lead to higher items costs (COGS) and therefore reduced net margin (the bottom-line). This impact will likely become more prominent as real-estate and associated costs continue to increase. This relationship is shown in the diagram below.

Empty shelves could also represent a process issue - that merchants under-estimated consumer preference for specific items, that store personnel had sufficient inventory in the back-room but have not replenished the shelf, that supply chain managers couldn’t effect proper service levels at store or that the visual merchandisers have under-allotted shelf space in the planogram. Empty-shelf situations also skew the historical data used for forecasting, which results in reduced forecast accuracy for later seasons.

The solution:

To solve this problem, retailers can obviously over-stock items. However, that would increase the working capital costs to an unprofitable level. The solution lies in first understanding consumer preferences and then planning to effectively supply the right amount of inventory to each store. We have devised a roadmap for the typical issues at an Indian retailer. This roadmap needs to be altered to meet the specific requirements of any situation. The solution for empty shelves is provided in steps two through four of that roadmap (see diagram below). These steps fall within the demand flow.

Retail Value Chain

The demand flow starts from customer touch-points and ends in customer orders with the resulting orders being placed on the higher echelons of the supply chain. However, the steps that are pointed out (two through four) are improvements that might suit most retailers in the Indian marketplace. Our recommendations are to first identify the customer decision tree, a tool to visualize how customer needs link to specific items. This tool is drawn out as a tree with the trunk starting from the customer’s high-level needs like hunger, entertainment, exercise, etc. It then extends through the branches of categories and sub-categories and ends in the leaf nodes of items. Since every retailer’s typical customer profile is different, this tree would differ for every retailer. It is important to understand the customers shopping at your various geo-demographic store clusters before drawing this. The result of this exercise is a deeper understanding of customer-visit scenarios, customer needs and consumer preferences. This understanding should then be used to redefine merchandise hierarchies. Redefining the merchandise hierarchy is a big change, but based on deep analysis of the customer decision tree, retailers would certainly benefit from the intuitive floor layouts, clearer category roles and effective promotions.

To make sure these objectives are met, it is important to execute these strategies properly at the store level. With store personnel in India having one of the highest attrition rates in any industry, this presents challenges in training costs and compliance for retailers. Simple technologies to capture random questionnaires could be used to encourage compliance and quickly identify training issues and opportunities.