TIMnovate

Innovation Blog

Innovating Customer Service:  The Case of  USAA

By Shlomo Maital

     A friend directed me to a Business Week article about innovative customer service at a  bank. [1]  It shows how winning businesses can emerge not just from product innovation, but innovation in key business processes. 

     A  bank, USAA, again topped Business Week’s rankings for superior customer service.  It has ranked #1 or #2 for four straight years. No other firm comes close. Surely this provides a terrific best-practice benchmark for customer service.

    USAA provides financial services for U.S.  military families.  These families have special needs related to the fact that part of the family serves in distant parts of the world. 

   The article recounts:

   In almost everything it does, the financial-services outfit puts itself in the spit-shined shoes of its often highly mobile customers, many of whom face unique financial challenges. USAA was the first bank to allow iPhone deposits, it routinely texts balances to soldiers in the field, and it heavily discounts customers’ car insurance while they are deployed overseas. “They do all this really creative stuff that applies to guys and gals who are in Afghanistan,” says Karen Pauli, a research director at consulting firm TowerGroup. “There is nobody on this earth who understands their customer better than USAA.”

  Here are a few things USAA does to provide superior customer service:

*  When Staff Sergeant Corey Mason wants to deposit a check, he doesn’t use an ATM, a teller at a branch, or even a stamped envelope and deposit slip. Rather, the 37-year-old GPS systems specialist takes a picture of the check with his iPhone, uses an app to send it to his bank, and within minutes the money shows up in his account.

*  USAA was the first bank to allow iPhone deposits, it routinely texts balances to soldiers in the field, and it heavily discounts customers’ car insurance while they are deployed overseas. “They do all this really creative stuff that applies to guys and gals who are in Afghanistan,” says Karen Pauli, a research director at consulting firm TowerGroup. “There is nobody on this earth who understands their customer better than USAA.”

   Here are some things USAA does to keep its employees happy and  in touch with their customers:

*  Customer intimacy:  ” …training for USAA employees is steeped in the military experience. New reps attend sessions where they dine on MREs, or “meals ready to eat,” which troops consume in the field.  They try on Kevlar vests and flak helmets. And each rep is handed a bona fide deployment letter—with the names changed, of course—to get them thinking about the financial decisions customers face at such an emotional time. Colleen Williams, a Phoenix-based service rep who joined the company in 2008, says the training clued her in to family issues that help her when answering calls. “I speak to women who haven’t talked to their husbands in six weeks,” she says. “It never really registered to me, the real disconnect” deployed soldiers have from their families.

  *     Training isn’t the only thing USAA lavishes on employees. After all, it takes satisfied workers to get satisfied customers. In 2009, even call center agents at USAA saw bonuses nearing 19% of their pay, up from 13.5% the year before. A new $5-an-hour concierge service lets employees outsource errands on the cheap during the workday. And when the company closed two call centers in 2009, it offered every employee a company-paid relocation package to jobs at other locations, even helping staffers burdened with underwater mortgages unload their homes. Of the 1,200 affected workers, 50% accepted move offers, far more than the fewer than 20% USAA expected.

 *   Staffers get time to do their jobs, too. Employees aren’t rushed through calls with customers or evaluated on how fast they handle the inquiries. “Member satisfaction trumps every single metric,” says Forrester’s Temkin. Other call centers “may relax things like average handle time, but they still measure it, and still you get in trouble if you’re out of bounds.”

 *   Reps are also armed with software that lets them view a history of the online screens a particular customer has viewed on USAA’s Web site, letting them know what policies or business lines the customer was perusing—and may be ready to buy.

    Every business has  a number of generic functions it does.  Customer service is one.  Even if your business is very distant from banking — study USAA.  Many of their best practices can be adopted and adapted. 

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[1] Jena McGregor, Business Week, Feb. 18, 2010:  “Customer Service Champs: USAA’s Battle Plan”

Innovation Blog

Can Countries Innovate?    Case Study: Singapore’s Aerospace Industry

By Shlomo Maital

   A brief study by Ron Matthews and Nellie Zhang, of Nanyang Technological University, reveals how Singapore’s rather secretive aerospace industry has become one of the global leaders.[1]   What can other countries learn from Singapore’s success?  Here are the key success factors, according to the authors:

*  ST Aerospace, established in 1975,  just a decade after Singapore’s independence (in 1965).  The company began with maintenance contracts, building on Singapore’s hub airport, and grew rapidly to employing 19,000 workers.  Together with Japan and South Korea, ST Aerospace is regarded as one of Asia’s top three players. It is, among other things, the world’s biggest third-party airframe MRO provider (maintenance, repair, overhaul). 

*  Avoid Making Complete Aircraft:   ST Group avoids making complete aircraft, but instead targets high value services associated with MRO, modification, upgrade and technology insertion.  ST has identified high-margin areas in the aerospace value chain and staked its claim there.

* Focus, focus:  ST Aerospace is part of ST Engineering, and enjoys synergies with sister business units:  Electronics, Kinetics, Marine.  ST Aerospace leverages high quality engineering services available in the other divisions, focusing in particular ‘dual-use’ (civil-military) interfaces.

* Government leadership:  Governments can and do pick winners, especially in Singapore. Among other things, the government transformed an old WWII air base, Seletar, into an aerospace center. 

*  Become part of the global aerospace ecosystem:  Singapore has positioned itself to become a highly desirable site to locate production of aerospace products, building contracts as OEM.  Rolls Royce, for instance, will build its first Asian facility at Seletar, where it will build engines for the 787 Dreamliner and A350 aircraft. 

    “The most important contributory factor, in promoting and sustaining Singapore’s aerospace competitiveness,’ note the authors, “is the island-state’s interventionist government strategy…through the pro-active …Economic Development Board.”  Not every nation can follow the Singapore model.  But the old assumption that governments cannot, should not, do not, pick winners, is clearly false, at least in come cases.

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[1]   Singapore’s Aerospace Development ‘Model’.   Feb. 1, 2010.

Innovation Blog

Innovating Our Neighborhoods:  Breaking the Tyranny of Cars

By Shlomo Maital    Peter Katz, The New Urbanism

   “Imagine,” former Beatle John Lennon sang in his 1971 hit,  “imagine all the people… sharing all the world…You may say that I’m a dreamer…but I’m not the only one.”     

      You’re not alone, John.  Let us all imagine! 

      Imagine, if you will, getting up in the morning, scrambling bleary-eyed into your car and spending a frazzling hour or two in a traffic jam, arriving at work irritable and crabby, only to reverse the process at day’s end, arriving home exhausted after battling aggressive motorists for another hour or more.  And then − repeat the torture again, the next day, and every weekday.

       There is no need to imagine.  This is the reality many face  in Israel and abroad.  According to the United Nations Population Fund, since 2008 a majority of the world’s population, some 3.3 billion people,  live in cities.  Far more people work  in cities.  And cities everywhere are increasingly choked by private cars.    

         So, let’s listen to Lennon’s words again.  This time,  imagine getting up in the morning, walking to work down tree-lined boulevards, stopping for coffee at an outdoor café;  or  walking to a railroad station and zipping by train to work, to shop, to classes or to do errands or meet friends, a half-hour away.  

        This is the neighborhood-sharing vision of a group of revolutionary city planners, known as the New Urbanists.  They propose a new approach to urban development built around public transportation, known as transit-oriented development, or TOD.     I recently interviewed Peter Katz, a leader and founder of New Urbanism in America, now a Sarasota, Florida, County urban planner, during his first visit to Israel.

        TOD is defined as moderate-to-high density development, featuring a mix of residential, employment & retail uses,  all in short walking distance from adjacent public transportation. The essence of TOD is making transportation (access) a vital part of every master plan.  Indeed, easy access is the starting point of urban development. This is generally not the case.

     Peter Katz says  the new TOD approach is a three-legged stool, whose ‘legs’ are compelling urban design, effective public process, and better development regulations.    For a new approach to the planning process, Katz suggests a novel idea.   Mobilize neighborhood groups to say how they would like their neighborhood to look,  then integrate their ideas and create winning master plans.  This process is highly visual, with groups posting drawings and pictures on walls that reflect their thinking.  The results are then quickly integrated and combined by experts into development plans.  Katz says he and others have applied this method with success in the U.S.   (See my Blog on “Vive la Charette!”).  He notes that in an era when deficit-ridden central governments are slashing grants to local government, TOD is a way to enhance local property values and raise revenues.  

      Archaeologists and anthropologists claim that some 40,000 years ago, a wondrous thing occurred.  Homo sapiens began to create things of beauty, like drawings on the walls of caves, using their imaginations.  Only humans have imaginations.  Animals lack them.

     Why has this imaginative process seemingly halted, when it comes to planning the neighborhoods we live in?  Have we lost our city planning imagination? Can we revive it?  And can we enlist John Lennon, Peter Katz, the New Urbanism and TOD to unchain our lives from the tyranny of cars?             

* A longer version appeared in The Jerusalem Report, “Marketplace” column 

Innovation Blog

Battle of the Titans: Jobs vs. Schmidt —  A Case of Collabo-WAR

    Eric Schmidt and Steve Jobs

    Boxing fans know that in heavyweight prize fight history, the two bouts between Joe Louis, an American, and Max Schmeling, a German, were among the greatest in history. I am reminded of these two bouts while reading “A fierce clash of computing titans” — the prize fight between Google’s CEO Eric Schmidt and Apple’s CEO Steve Jobs. [1]

    Some of us anticipated a different prize fight — between the Wintel (Windows + Intel) partners.   A beautiful loving relationship between Microsoft’s Windows operating system and Intel’s microprocessors soured somewhat, as Intel began putting growing amounts of software onto its chips.  (Many Intel development engineers are in fact software engineers). But real warfare never developed.

    A similar honeymoon existed between Apple and Google.  Three years ago, Schmidt shook hands with jobs on a San Francisco state and helped Jobs unveil the iPhone.  “This product is going to be hot!” Schmidt said.   Some suggested merging the two firms, into AppleGoo. 

    No longer.  Harvard Business School’s Adam Brandenburger once wrote a book titled Coopetition, a term he coined, signifying how companies cooperate at one level (e.g. development), then compete at another (e.g. in the marketplace).  Today we have examples of what I would call Collabo-WAR:  Initial collaboration between giant firms that turns into World War III.   Apple and Google form an example.

     What is the source of conflict?  Both Jobs and Schmidt are tough and intensely competitive.   Apple and Google are now warring over controlling the future of mobile computing and cellphones.  Apple has sued HTC, the mobile phone maker that runs Google’s Androir operating system; this is seen as the start of Apple’s legal assault on Google’s plans to dominate mobile devices just as it dominates web search and web advertising.   

     Apparently, Apple (true to form) wants smartphones to have tightly controlled proprietary standards, with customers buying applications from Apple’s App Store.  Google, true to form, wants smartphones to have open nonproprietary platforms so users can freely roam the Web for applications. 

   Like the Louis-Schmeling fight, the battle is both ideological (Germany vs. US, white vs. black)  and deeply personal.  Jobs thinks Google broke the alliance between the two companies by producing cellphones that resemble iPhones.  Jobs even disparaged Google’s famous mantra, saying ironically, “Don’t be #$%#@@#$% (expletive) evil!”.   As always, strong egos are involved.

    Who will win?   Well, in the past Apple tried hard to close their systems and capture all the value, and ultimately lost to the more open PC standard.  But, anticipate more than one prize fight between the two.  In the first Louis-Schmeling fight, on June 19, 1936, at Yankee Stadium,  Schmeling used a jab and right cross to baffle Louis, then knocked him out in the 12^th round — Louis’s only knockout defeat in his prime.  In the second fight, on June 22, 1938, Schmeling tried the same tactics.  But Joe Louis, the Brown Bomber, was ready.  He knocked Schmeling out after only two minutes of the first round.  

     Apple may win early rounds in the law courts, to ‘close’ its system.  But ultimately such efforts to monopolize an industry fail, as ‘barbarians’ climb the walls or batter them down and open the system.   

     In this Collabo-WAR, Apple is likely to lose, just as they did in the 1980’s. 

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[1] By Brad Stone and Miguel Helft, Global New York Times, March 15, 2010, p. 13.

Innovation Blog

Somali Pirates Revisited: Innovators to the Rescue

By Shlomo Maital

 In January,  I wrote a blog about dealing with Somali pirates who seize ships for ransom (Somali Pirates: China to the Rescue), and about how China appeared far more resolute in dealing with the problem than other nations.

   Now a BBC World Service News report suggests that where the vast U.S. and E.U. navies have failed,  innovation may have succeeded.

   A brain exercise:  What innovation might help a cargo ship thwart an attempt by pirates to seize it?

    Answer from a Texas university:  Sticky slippery goo.   That’s right — the Batman invention, seen in Batman comics and movies. 

     The “goo” is non-toxic and when sprayed on the hulls and decks of cargo ships, it makes it hard to hijackers to walk or climb.  

     Shipping firms are reluctant to pay the high costs of armed guards:  up to $50,000 daily, especially at a time when shipping rates are at all time lows, owing to the global recession.  Moreover, they are subject to law suits, if they use lethal force, even though the pirates themselves seem little concerned with lawyers.  At the moment, the cost-benefit analysis shows it pays to pay the ransom rather than spend money to prevent hijacking. 

     Can the inventors of “slippery sticky goo” save the day, where national governments have been humiliated? 

    Time will tell.  

    I wonder if the inventors of the ‘goo’ are Batman fans. 

Innovation Blog

Key Lessons From the Inventor of “Cranium”

By Shlomo Maital

    CRANIUM  

     If “Build a Business, Not  a Product” is our mantra (see previous blog):  Richard Tate is our Exhibit A. [1] 

      Richard Tate is a Scot.  The Scots are tough, proud, independent thinkers.  They invented penicillin, the steam engine, Sherlock Holmes, artificial diamonds, whiskey, radar, Encyclopedia Britannica.  Tate was born just outside Dundee.  As a child he dreamed of creating businesses.  His dissertation for Heriot Watts University (computer science) was a business case.  After graduating Tate went to study management at Dartmouth University, then sought employment. Apple turned him down (no ‘green card’).  Microsoft hired him.  He worked there from 1988, when MS had only 2,300 workers, until 1997.  In 1994 he was chosen Employee of the Year by MS, out of some 34,000 workers.  At MS Tate started 13 businesses, including * client-server computing (an operating system for this), * value added reseller channels (MS went after the huge market of IBM AS400 users),  * CD ROM publishing (Encarta, for instance, and 30 other titles), and * Internet ’94 (consumer online applications, like Expedia).  In 1997 he launched his own startup after leaving MS:  A board game called Cranium, fastest-selling game in history.  His firm became the 3^rd largest game company in the world, before being acquired by Hasbro.  

      Here are a few lessons Tate conveys to other entrepreneurs:

1.   Speed! Urgency!  Get to market!  Tate used project management techniques learned and employed at Microsoft.  Cranium came to market in just 6 months.   He consulted with eight product development people from MS. Their advice saved him six months in time.

2.  Prototype and Observe!   Tate and his partner made prototype board games, and “hid behind sofas” watching people play, then asked for feedback. What they learned was invaluable.  It is hard to overemphasize the value of prototypes and pre-beta testing.

3.  A failure, a closed door, is always an opportunity!    Tate says that his opportunities always opened up after a door closed.   After leaving MS he pursued his dream to be a DJ.  A radio station in Seattle threw him out.  That closed door led him to try what eventually became a huge success. “Often, when I’m on the ropes, I’m strongest,” says Tate — spoken like a true Scot.

     Tate had 27,000 copies of Cranium produced, then learned he had missed the annual Toy Fair, where the year’s purchases are made.  What to do with such a huge stock of product?  Tate invented a new business design for board games — sell through Amazon, Barnes & Noble, and Starbucks.  This was crucial for his company’s success. 

4.  NETWORK, NETWORK!  While climbing Kilimanjaro, Tate met Dan Levitan, the investment banker who handled Starbuck’s IPO.  Tate leveraged his link to Levitan to meet with Starbucks founder Howard Schultz.  He suggested that Schultz sell Cranium in his coffee shop outlets.  Schultz, who brought music to become a major Starbucks cash cow, loved the idea.  Tate tried to sell the idea to Amazon. They never returned his calls. He persisted, used his network and ultimately became the first company to sell board games through Amazon.

5.  BOOTSTRAP!  Tate started Cranium with $100,000.   It is possible, often desirable, to launch your own business with only your own funds.  You retain control,  and no Board of Directors can fire you or tell you what to do. 

     Tate’s company went on to introduce 40 game products sold in 30 countries.  Five years out of six, Cranium games were named “Game of the Year”. 

6.  BELIEVE IN YOURSELF.   Tate has enormous self-doubt. And endless people told him: Tate, keep your day job, this will never work.  Despite everything, he persevered, in Scots fashion.  His business innovations (selling through Amazon and Starbucks) were as crucial as his innovative games.

     James Watt, inventor of the steam engine, suffered from depression and had a deeply tragic life.  He once said, “nothing is more foolish than being an inventor”.    Richard Tate provides a career path worth considering.   Work for a large company.  Be an intrapreneur, learn the best techniques for inventing businesses within the organization.  Then, retire at your peak.  And do the same thing you did before, only this time for yourself.  When you do, be sure you use as much creativity in your business design as you apply to your inventive product.

         For information about Cranium: See:

                     http://www.hasbro.com/cranium/en_US/

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[1]  Based on Peter Day, “Global Business”, BBC World Service, March 8/2010.

Innovation Blog

Mantra for your Life?

By Shlomo Maital

 Great organizations have great mantras.  Mantras are 2-3 word slogans that capture the vision, mission and goals of the organization.  For example:  Walt Disney (“Make People Happy”), or Apple (“Think Different”).

  It occurs to me that people, too, need mantras.  Mantras help us zero in on what really matters to us, what our vision is, and why we are placed here on earth.  Whether or not we share the mantra with others, a strong mantra helps us focus our own energies and vision, at a time when it is exceedingly easy to scatter them.

   What is your mantra?

   Here is mine, one that came to me very late in the game.

   Build a creative business, not just a creative product.

  Too long.  How about:  BUILD BUSINESSES, NOT INVENTIONS.

   The basic idea:  Many of the managers, entrepreneurs and students I’ve worked with, during the past 43 years, especially, those trained in engineering and science,  think that innovation is primarily about inventing a better widget. 

    And I’ve seen many such ‘widgets’, embodying magical new technology, that fail, because they lack solid marketing, sales, operations, production, finance and HR management.

    Build a business.  Learn how.  Pour equal creativity into the business design as you pour into the product.  Innovate everywhere in your business, not just in the product. And create an innovation process, so that new ideas pour out constantly, and not only in the realm of your product.  Make Version 2.0 apply to your business designs, not just your software product. 

     This is my mantra.   This is what I now do in life, as an educator.[1]

     What is YOUR mantra?  

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[1]  S. Maital, D.V.R. Seshadri, Innovation Management:  Strategies, Tools and Concepts for Growth and Profit (SAGE, 2007).   Forthcoming in Hebrew, April 2010.