VOLUME 2 | ISSUE 3 | MARCH 2021
DAWGEN GLOBAL INSIGHTS
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PAG E S 35
INTRODUCTION TO OUR MONTHLY NEWSLETTER DAWGEN GLOBAL INSIGHTS Welcome to Dawgen Global and our March 2021 edition of our Monthly Newsletter-Dawgen Global Insights. This Newsletter has been produced to provide you with an overview of our firm and the wide range of services offered by Dawgen Global entities; whether audit, accounting, tax or advisory services. Over the past 18 years, I can proudly say that Dawgen has significant experience and expertise that we draw upon, day after day, helping our clients to progress. Our Monthly Newsletter will demonstrate the strength of our firm and the unique and innovative approach we engender. This is communicated through client case studies on how our team have collaborated to help our clients succeed. This issue of Dawgen Global Insights explores several management tools and strategies including the economics of Unscale. The economic concept of Economies of Scale was first floated in the Adam Smith era where the idea of obtaining larger production returns through the use of division of labor was introduced. Economies of Scale are the Cost Advantages that businesses achieve owing to their scale of operation. The usual measurement is the amount of output produced, with cost per unit of output decreasing as the output increases. In this edition we also examine the Organic Growth Framework (OGF)—an innovative approach to driving reliable, sustainable organic growth. Growth can be achieved through corporate marketing (i.e. organic growth) or M&A (i.e. inorganic growth). The traditional approach to growth focuses on product differentiation and then marketing this differentiation. However, research and experience has shown, the differentiated, superior product doesn’t always win the customer. The Organic Growth Framework (OGF) is an approach to organic growth that focuses on changing customer behavior, instead of differentiating products. The central idea of the OGF is that we can drive faster, more reliable sales growth by identifying and focusing on 1 or 2 high-yield customer behaviors. Through this approach, we can change the behavior of customers at critical places in their buying journey, thereby shifting them onto paths most favorable to our offering. I hope that you will find the information we provide in this Newsletter helpful.
Dawkins Brown
Executive Chairman Dawgen Global
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DAWGEN GLOBAL INSIGHTS I MARCH 2021
TABLE OF CONTENT 04
16
Economies
Organic Growth
of Unscale
Framework (OFG) Series: Primer
ECONOMIES OF UNSCALE
4
DAWGEN GLOBAL INSIGHTS I MARCH 2021
Tech innovation is disrupting the long-standing business model of Economies of Scale Article Overview
F
uturistic, technology-propelled business models are weakening the conventional advantages of Economies of Scale.
Large corporations, founded on Scale,
nevertheless have areas that can exploit if they reposition rapidly.
The article also takes a look at 3 corporations that have, in their own way, taken advantage of Unscale to stay relevant in
this
out-rightly
dynamic
business
environment.
This article propounds 3 tactics that can help large-scale corporations take advantage.
1 2
Product to Platform Transformation Absolute Product Focus
DAWGEN GLOBAL INSIGHTS I MARCH 2021
3
Dynamic Re-bundling
Technology is turning Economies of Scale inside out. 5
Cost Advantage through Economies of Scale is a concept widely used throughout 20th century Economies of Scale – Overview
The economic concept of Economies of Scale was first floated in the Adam Smith era where the idea of obtaining larger production returns through the use of division of labor was introduced.
E
conomies of Scale are the Cost Advantages
• Economies of Scale apply to a diverse set of
that businesses achieve owing to their scale of
organizational and business circumstances
operation.
and at innumerable levels.
The usual measurement is the amount of output
• Economies of Scale may be based on
produced, with cost per unit of output decreasing as
technical, physical, engineering, statistical,
the output increases.
organizational, or related factors. • The likelihood of purchasing inputs at a lower per-unit cost, when purchased in large quantities is another source of Economies of Scale.
As quantity of production increases from Q to Q2, the average cost of each unit decreases from C to C1. LRAC is the long-run average cost. 6
Finding the point of optimum output is the main endeavor in Economies of Scale. DAWGEN GLOBAL INSIGHTS I MARCH 2021
Economies of Scale made sense in an era that saw introduction of mass production tech Economies of Scale – Competitive Advantage For the best part of over a century, Economies of Scale fashioned the corporation into a perfect engine of business.
A
technological rush, distinct in history, was observed near the beginning of the 20th century.
These new technologies
were accompanied by scale i.e., bulk production and access to huge markets. The Economies of Scale guided business success—the strong inverse relationship connecting fixed costs and output grew into a basis of Competitive Advantage. Investments in scale was the most sensible proposition. Not only did it lower fixed costs but also created a formidable barrier for competitors denying them entry in the market. Every type of business spent the 20th century in the quest for scale.
Large-scale manufacturing was the disrupting technology of the 20th century. DAWGEN GLOBAL INSIGHTS I MARCH 2021
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Disruptive technology of 21st century is changing the entire landscape of conducting business Economies of Unscale – Overview Advent of game-changing new technologies such as mobile devices, social media, and cloud computing, augmented by Artificial Intelligence (AI), is whirling Economies of Scale into Economies of Unscale.
S
pecifically, rise of Software as a Service
(SaaS)
and
emergence
of Platform technologies—coupled
with AI’s ability to customize—overthrows bulk production and mass marketing as a basis of Competitive Advantage. These progressions have battered the powerful inverse correlation between fixed costs and output that delineated Economies of Scale. Today,
minor,
unscaled
businesses,
leveraging these Platforms while renting SaaS, can hunt in niche markets, effectively contesting big companies that are pushed down by decades of investment in scale i.e., in large-scale production, distribution, and marketing.
while making a profit, and not companies
Enhanced computing machines and the internet were precursors to the disrupting tech of 21st century.
offering everyone uniform products.
Source: The End of Scale, Taneja, Maney, MIT Sloan Management Review, 2018
The triumphant companies in the current tech rush—enabled by Platforms and SaaS—are
the
ones
providing
each
customer precisely what they want, that too
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DAWGEN GLOBAL INSIGHTS I MARCH 2021
Large corporations operating on the Scale model can take advantage in these changing times by employing these 3 tactics Economies of Unscale – Tactics When Unscaled competitors start enticing away scores of customers, Economies of Scale start to work against the scaled corporations. Large corporations can remain relevant in this era of niche marketing by taking leverage of their existing infrastructure through astute modifications in their use. There are 3 tactics that can be deployed:
Sagacious companies should discover means to reinvent themselves for the age of Unscale.
Product to Platform Transformation Platforms allow small organizations use of their infrastructure for a fee.
Dynamic Rebundling Through tailored, customer-specific offerings, this allows every customer to feel like a market of one.
DAWGEN GLOBAL INSIGHTS I MARCH 2021
Absolute Product Focus Outsource non-core functions and focus on developing a notable product.
Innovative avenues need to be explored for corporations to stay relevant. 9
Emphasis has to shift from efficiency through Economies of Scale to alternative ways of generating revenue Unscaling – Product to Platform Transformation OVERVIEW Large companies, that have invested heavily in building massive production, distribution, and marketing infrastructures should do away with their exclusive use and offer them, as a charged service,
Product to Platform Transformation
to other businesses.
DESCRIPTION
EXAMPLE (S)
• Dynamic corporations have expended decades
P&G’s
Connect
+
Develop
program
building scale which is extremely specialized for
has been running for about a decade.
their industry.
Efficient factories, distribution
The company came to recognize that
channels, retail outlets, supply chains, marketing
more smart inventors outside of P&G
expertise,
were available than could possibly be
and
global
been painstakingly built.
partnerships
have
It is time for these
corporations to take a decision on whether it is more viable to rent out this capability to other companies or not. • Numerous small companies can have the capability to design, innovative new products, get them crafted, marketed, and delivered to customers—all using the large corporations’
contained inside P&G. General Electric (GE) is another example of big corporations serving as platform providers.
Predix, the company’s AI-
based platform, is being used by other companies to seize the promise of the Internet of Things (IoT).
infrastructure while allowing them to serve a niche market at a profit. • Platforms can be extremely lucrative and lasting since the minor companies operating on the Platform come to rely on them for their success. 10
A successful Platform strategy offers a path to growth in the Unscaled era. DAWGEN GLOBAL INSIGHTS I MARCH 2021
We can follow a 4-phase approach to undertake Product to Platform Transformation Unscaling – Product to Platform Transformation
(Approach)
The shift from products to platforms is under evaluation— and being implemented—by many organizations.
T
Research into successful platform businesses reveals that such a transformation necessitates a robust approach comprising the following 4 critical phases:
he drive behind such a shift is the huge success of platform companies—e.g., Amazon, Google, and Apple.
These organizations started out as a retailer,
Attractive Product and Customer Base
search engine, and computer manufacturer respectively, but later developed themselves into platform models. However, this transition is anything but
Hybrid Business Model
straightforward.
Rapid Conversion
Identify and Seize Opportunities
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Zeroing in on core function is an absolute necessity of the time Unscaling – Product to Platform Transformation DESCRIPTION • As corporations become bigger, emphasis on control becomes more pronounced—processes, regulations, stock prices, and a variety of non-core issues take precedence over great product
TACTIC
offering. Niche market focus blurs and attempts are made to
Absolute Product Focus
make a product that may appeal to the masses in an effort to
OVERVIEW Businesses have started outsourcing non-core functions and are focusing on their core function of developing a remarkable product.
create Economies of Scale. • In this age of Unscale, the product/customer-focused competitor preys on such weakness. Large corporations can mitigate the repercussion of such weakness by organizing as a network of small businesses focusing on core function while outsourcing non-core functions. Each business, completely dedicated to creating a product perfect for its part of the market.
Succeeding generation of Unscaled businesses will outsource even more than today’s corporations— whatever is not related to creating an extraordinary product has to go. 12
• The product creators will propel business, whereas top management will give the platform for them to build upon.
EXAMPLE (S) Apple
Inc.
contracts
out
manufacturing
to
Chinese companies while keeping the R&D and innovation—its core function—in the U.S. Netflix operates its entertainment streaming service—its core business—on Amazon Web Service instead of building data centers of its own—a non-core function.
DAWGEN GLOBAL INSIGHTS I MARCH 2021
Flexibility is the name of the game in this era of Unscale Unscaling – Dynamic Rebundling OVERVIEW Successful companies in this day and age of Unscale are the ones that make every customer feel like a market of one. Corporations—a compendium of products—can match this by initially understanding its customer, then bundling its products as
TACTIC
per each customer’s needs.
Dynamic Rebundling DESCRIPTION
EXAMPLE (S)
• The era of Unscale is seeing tailored products and
The Honest Co., in 2012, began
services for each customer. Corporations, which are
selling specialized line of diapers
a collection of numerous products, need to keep this
and wipes by subscription.
initiative in their court. They can accomplish this by • First year, the company raked in $10 million
first understanding their customer needs. • Once the customers’ preferences are understood, various combinations of the corporation’s products can be offered that satisfy individual customers. • Dynamic Rebundling permits a company to imitate the benefits of scale without essentially building
a niche product, dissimilar to mass-market brands. • It used the knowledge gained, to fashion other products in the same vein. • Honest had 135 closely focused products by
scale. • The
in revenue by supplying a niche customer,
company
remains
agile
and
innovative,
concentrating on product, and uses its portfolio to broaden its sales to each individual customer.
2016. It bundled them into sets of products suited for the right set of customers, making sales exceeding $300 million.
Understanding each customer will keep companies germane in current business environment. DAWGEN GLOBAL INSIGHTS I MARCH 2021
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P&G found innovation outside of its operations at a more inexpensive cost than within Case Study – P&G
COMPANY: Procter & Gamble Co. (P&G)
SITUATION A 2016 analysis displayed P&G as a series of distinct products, each susceptible to upstart, technologyenabled, product-focused companies. The analysis showed how minor, entrepreneurial unscaled companies were attacking P&G with products more perfectly targeted towards its customer base as opposed to P&Gs mass-appeal products. With enough customers lured away, the Economies of Scale turns against the corporation as fewer number of units move through the behemoth called large-scale corporation.
KEY ACTIONS • P&G already had cognizance of the situation and had taken action almost a decade earlier by launching Connect + Develop. • P&G recognized that there were more talented inventors
KEY TAKEAWAYS Instead of competing against the niche products that were challenging P&Gs products, the company provided its Platform to those small competitors
outside P&G than what they could possibly gather within
and created a win-win situation.
the company.
The move by P&G has not made it an
• P&G started reaching out to small innovators via internet,
Unscaled company but has steered
invited anyone with a product that complemented P&Gs
the company in the right direction.
port-folio of products to ask them to submit development
As per a 2015 study, 45% of the key
proposals. • The product innovators get use of P&Gs distribution, marketing, and knowledge base.
elements of the company’s product development came from Connect + Develop program. P&G of the future may appear to be
Collaborative effort makes for a mutually gainful operation. 14
an
enormous
consumer
products
Platform, rented by throngs of small, niche market-focused businesses. DAWGEN GLOBAL INSIGHTS I MARCH 2021
Serving niche markets is easier now than ever before and that pinches large corporations hard Case Study – P&G (Competitive Landscape) • A 2016 analysis showed how minor, entrepreneurial unscaled companies were attacking P&G with products more perfectly targeted towards its customer base as opposed to P&Gs mass-appeal products. • For example, Dollar Shave Club’s and Harry’s Inc.’s subscription models are threatening P&G’s Gillette razors.
A chunk of buyers is being pulled away by The Honest Co.’s environmentally friendly diapers from P&G’s huge Pampers brand of disposable diapers. Source: CB Insights
DAWGEN GLOBAL INSIGHTS I MARCH 2021
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ORGANIC GROWTH FRAMEWORK (OFG) SERIES: PRIMER
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DAWGEN GLOBAL INSIGHTS I MARCH 2021
This article discusses the Organic Growth Framework (OGF)—an innovative approach to driving reliable, sustainable organic growth Article Overview
G
rowth
can
be
through
achieved corporate
marketing
(i.e.
growth). The traditional approach to growth focuses on product differentiation and then marketing differentiation.
follows a 5-phase process.
organic
growth) or M&A (i.e. inorganic
this
The Organic Growth Framework
However,
research and experience has shown, the differentiated, superior product doesn’t always win the customer. The Organic Growth Framework (OGF) is an approach to organic
1
Map the Customer Decision
2
Use Propensity-based
behavior,
differentiating
instead
products.
of The
central idea of the OGF is that we can drive faster, more reliable sales growth by identifying and focusing on 1 or 2 high-yield customer behaviors. Through this approach, we can change the behavior of customers at critical places in their buying journey, thereby shifting
Segmentation
3
Identify Points of Leakage and Leverage
The Organic
4
Develop a Behavior Change
Growth
growth that focuses on changing customer
Journey Waterfall
5
Value Proposition (BCVP)
Framework is
Invest Disproportionately and
largely based
Sequentially
This article provides an introduction to OGF. Topics discussed include the Customer Decision Journey, the Marketing Strategy Process, Strategic
Objectives,
Propensity-
based Segmentation, among topics.
on the GrowthPath® framework, developed by Monitor Group.
them onto paths most favorable to our offering.
DAWGEN GLOBAL INSIGHTS I MARCH 2021
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OGF allows us to drive sustainable organic growth by tactically altering customer behavior along the Customer Decision Journey Organic Growth Framework (OGF) Growth can be achieved through corporate marketing (i.e. organic growth) or M&A (i.e. inorganic growth). • The traditional approach to growth focuses on
product
differentiation
marketing this differentiation.
and
then
However,
research and experience has shown, the differentiated, superior product doesn’t always win the customer. Why is this? • If we look at the Customer Decision Journey, the specific actions and behaviors a specific customer performs along a common journey can be heavily nuanced from person to person. There are numerous (seemingly trivial) variables that can impact the path the customer goes down, thereby leading to a different purchase decision. Examples of these variables include: • Shopping at store A instead of store B.
• The Organic Growth Framework (OGF) is an approach to organic growth that remedies these uncertainties that exist along the Customer Decision Journey, so customers exhibit the specific actions and behaviors that lead them to our offering. • The central idea of the OGF is that we can drive faster, more reliable sales growth by identifying and focusing on 1 or 2 high-yield customer behaviors. Through this approach, we can change the behavior of customers at critical places in their buying journey, thereby shifting them onto paths most favorable to our offering.
The Organic Growth Framework is largely based on the GrowthPath® framework, developed by Monitor Group.
• Asking friend A instead of friend B for an opinion. • Visiting website A (a large online retailer, e.g. Amazon) instead of website B (e.g. an influencer’s blog) for customer reviews.
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When we are able to impact customers at key phases of the Customer Decision Journey, sales can grow faster, more reliably, and with reduced effort. DAWGEN GLOBAL INSIGHTS I MARCH 2021
Let us compare the differences in thinking behind traditional marketing and the OGF approach to organic growth OGF and Traditional Marketing Comparison To better understand how the OGF differs from traditional Marketing, let us compare the 2 approaches. Traditional Marketing Approach
Spread marketing investment across 4Ps in product messaging
The traditional approach focuses on differentiating our product—the OGF approach focuses on changing customer behavior.
Fully activate market with a multisegmented focus
Source: The Organic Growth Playbook; Jaworski, Lurie; American Marketing Association; 2020
Focus on differentiating products in the minds of target customers Segment based on benefits, demographics, or attitudes Develop customer profiles centered around product use and attitudes Develop a value proposition focused on creating a differentiated perception of product
Organic Growth Framework Approach Focus on changing customer behavior in their buying process that provides most leverage Segment based on likelihood of engaging in the key behavior Develop customer profiles that reveal critical drivers and barriers of key behavior Develop a value proposition that is focused on changing behavior Focus investment on behavior change – not product messaging Disproportionately and sequentially fund a few segments
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To better understand the buying process, let us familiarize ourselves with McKinsey’s Customer Decision Journey Customer Decision Journey – Overview The Consumer Decision Journey is a new-age framework developed by McKinsey that captures the customer’s path to purchase.
I
n the modern era, enabled by
Digital
customer
technologies, goes
the
through
2 Active Evaluation
a
cyclical process, as she moves from Discover/Consider to Purchase and
1
eventually back again. Each phase in the process represents a potential marketing battleground where companies compete for the
Initial Consideration
customer’s purchase and loyalty. This is a fundamental shift from
Set
3 Moment of Purchase
the traditional view of sales, which is typically conceptualized linearly as a funnel (with no feedback cycle component).
4 Post-purchase Experience
This path can take from several days to several months, mostly driven by the product category and market maturity. Source: Consumer Decision Journey, McKinsey & Co., 2009
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DAWGEN GLOBAL INSIGHTS I MARCH 2021
This framework provides the high level view of the customer buying process— after the 4th phase, the customer returns to the beginning Customer Decision Journey – Details 1 Initial Consideration
3 Moment of Purchase
• When the customer first conceives the notion of
• This is the point in the time when the customer
buying a product, she will develop an initial set of
goes to the retailer and makes the purchase.
brands to consider buying.
Even at stage of the journey, companies can still
• Brands in the initial-consideration set are three times more likely to be purchased than brands that aren’t in it. This means that Brand Awareness
influence the purchase. • This is done through in-store marketing and influence of store salesmen.
is vital. • In this phase, we should focus on push marketing.
2 Active Evaluation • In the evaluation phase, the customer is seeking information and shopping around to make an informed purchase decision. She will ask friends & family for recommendations, read reviews online, go to the store to test out products, and so forth. • This phase empowers both the customer and the company. Companies have the opportunity to enter the consideration set–and even force out companies in the Initial Consideration Set. • Big brands can no longer take their position for granted.
With increased online and social
presences, companies are increasing the number of touch points with the customer–thus increasing
4 Post-purchase Experience • After
the
purchase,
the
customer
builds
expectations based on her experience that will impact her next purchase journey. This creates the circular nature of the journey. • In this phase, our goal is to foster customer loyalty, which will drive repeat purchases and word-ofmouth marketing. Likewise, if the customer is dissatisfied with the purchase, she will become a negative influence on the purchase decisions of others. • This is not limited to her immediate circle of friends and family either. For instance, she can post a negative review on a prominent website, which will be read by countless potential customers in the Active Evaluation stage.
their influence over the customer’s purchase decision in the Active Evaluation phase. DAWGEN GLOBAL INSIGHTS I MARCH 2021
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Flexibility is the name of the game in this era of Unscale Customer Decision Journey – OGF The OGF applies a nuanced perspective to the Customer Decision Journey.
• Whereas
the
Customer
Decision
Journey helps us map out the structure of the buying process, the Organic Growth Framework takes a deeper dive into the nuances at each step of the process. • The Customer Decision Journey helps us identify battlegrounds. The OGF helps us dissect what occurs at each battleground to determine where and how to focus our efforts. • During
the
journey,
customer’s
there’s
an
decision
action
that
decisively influences which product or service the customer eventually purchases. The purpose of OGF is to identify these actions—i.e. high yield behaviors. • Through the OGF approach, our strategic objective is to change 1-2 high yield behaviors of customers (at critical places in their Customer Decision Journey), thereby shifting them onto paths that lead to the purchase of our product or service over a competitor’s.
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A key insight of the OGF is that just understanding the Customer Decision Journey is insufficient. DAWGEN GLOBAL INSIGHTS I MARCH 2021
Now, let’s examine the traditional Corporate Marketing Strategy process Marketing Strategy Process – Overview The conventional Corporate Marketing Strategy is a 4-step process known as STPP.
1
Segment
2
Segment the market.
3
Position
Develop a Customer Value Proposition (CVP) for each target segment.
DAWGEN GLOBAL INSIGHTS I MARCH 2021
Target
Determine target segments.
4
Promote
Develop promotional offers and activities around the CVPs.
STPP is an amalgamation of STP and Marketing Mix frameworks.
23
Here are the specific actions performed at each step of Segment-Target-Position-Promote Marketing Strategy Process – Details 1 Segment
3 Position
• There are numerous approaches to market
• Positioning
focuses
on
how
the
customer
segmentation. It is typically recommended to
ultimately views our offering in comparison to the
segment based on customer need.
competition.
• Additional approaches through social, economic
• Thus, customer perceptions have a huge impact
and individual factors, such as brand loyalty,
on the brands positioning in the market; and we
have been considered, along with the more
must have a well formulated CVP.
widely recognized geographic, psychographics,
• A CVP is a promise of value to be delivered to and
demographic, and behavioral factors. • Segments
should
exhibit
the
acknowledged by the customer. following
• There are 3 types of positioning:
characteristics:
• Functional
• Measurability
• Sustainability
• Accessibility
• Actionability
Positioning
Positioning
• Symbolic Positioning
2 Target • This phase naturally follows segmentation.
• Experiential
It
centers around prioritizing targeting just a few of the segments. • Targeting is a changing environment. Traditional targeting practices of advertising through print and other media sources has made way for a social media presence, leading a much more “web-connected” focus. • Behavioral targeting is a product of this change, which focuses on the optimization of online
4 Promote • Promote refers to any type of marketing communication used to inform target segments of the relative merits of our product or service. • It allows us to create a distinctive place in customers’ mind. • The aim of promotion is to increase awareness, create interest, generate sales, or create brand loyalty. • It is one of the basic elements of the Market Mix
advertising and data collection to send a message
(the 4 Ps):
to potential segments. This is oftentimes achieved
• Product
• Place
through Machine Learning algorithms.
• Price
• Promotion
Whereas the first 3 steps are around Strategy Development, the 4th step is around tactics. 24
DAWGEN GLOBAL INSIGHTS I MARCH 2021
OGF also follows the general S-T-P-P process—but, activities and analyses of OGF focus on customer behaviors, instead of product Marketing Strategy Process – Organic Growth Framework The Organic Growth Framework follows the same process, but differs in activities performed under each step. 1
Segment
• The OGF focuses on customer behaviors—not
2
Target
product. • Traditional processes lead to product positioning, operating under the assumption that once a product is favorably differentiated in a customer’s mind, he or she will buy it. This is, unfortunately,
Segment the market.
3
Position
Determine target segments.
4
Promote
an erroneous assumption. In reality, studies have shown customers who said they understood and preferred one product’s position oftentimes bought a different product. • The conclusion is that product positioning is a requisite for growth, but it is insufficient in and of itself to drive growth. • To drive growth sustainably and rapidly, we need to affect pre-purchase customer behaviors.
Develop a Customer Value Proposition (CVP) for each target segment.
Develop promotional offers and activities around the CVPs.
DAWGEN GLOBAL INSIGHTS I MARCH 2021
According to studies from Monitor Group, following the OGF approach can boost growth rates by 1.5-2x. 25
We can better structure the OFG approach as a 5-phase process Organic Growth Framework (OGF) – Overview The Organic Growth Framework follows a 5-phase process.
1
2
5 Map the Customer Decision Journey Waterfall
3
Use Propensitybased Segmentation
4
Identify Points of Leakage and Leverage
Invest Disproportionately and Sequentially
Develop a Behavior Change Value Proposition (BCVP)
Each phase involves detailed analysis supported by strategic tools and component frameworks. Source: The Organic Growth Playbook; Jaworski, Lurie; American Marketing Association; 2020
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DAWGEN GLOBAL INSIGHTS I MARCH 2021
At each phase, there is an unique strategic objective to solve for OGF – Strategic Objectives Following the OGF approach will lead to new and different choices for our Growth Strategy. In fact, each phase involves a critical decision to be made around strategic objectives.
1 Map the Customer Decision Journey Waterfall
5 Invest Disproportionately and Sequentially
Strategic Objective 1
Strategic Objective 5
Identify high-yield behavioral objective(s)
Disproportionately fund just a few target segments at a time
2 Use Propensity-based Segmentation
Strategic Objective 2 Select attractive, high propensity segments
3 Identify Points of Leakage and Leverage
Strategic Objective 3 Determine the critical drivers and barrier of high-yield behavior(s) in each segment
4 Develop a Behavior Change Value Proposition (BCVP) Strategic Objective 4 Define compelling value proposition for changing high-yield behavior in target segments
DAWGEN GLOBAL INSIGHTS I MARCH 2021
The OGF process leads us towards making systemic, integrated strategic decisions about where and how to grow. Source: The Organic Growth Playbook; Jaworski, Lurie; American Marketing Association; 2020
27
After implementing OGF, organizations across different verticals have experienced considerable organic growth just 2 years later OGF – Results Here are select examples of Monitor and Deloitte clients that have implemented GrowthPath®.
We see following the OGF approach can lead to breakout growth—as much as 10X+,as with the case of EnServ. Source: The Organic Growth Playbook; Jaworski, Lurie; American Marketing Association; 2020
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DAWGEN GLOBAL INSIGHTS I MARCH 2021
In the initial phase, we begin by mapping the Customer Decision Journey Waterfall OGF – Phase 1 OVERVIEW
PHASE : Map the Customer Decision Journey Waterfall
We need to first map the Customer Decision Journey Waterfall—i.e. the customer buying process—so that we can isolate and focus our efforts on 1 or 2 critical high-yield customer behaviors.
DETAILS • The Customer Decision Journey includes a myriad of activities.
• The Customer Decision Journey Waterfall a visual tool that maps out all customer behaviors against
• To affect all activities is too costly—in terms
the Customer Decision Journey. We can see the
of money, time, and effort—and difficult of an
behaviors at each stage and how they connect
endeavor; and therefore not a feasible approach
with each other.
to take.
• Furthermore, the Customer Decision Journey
• The good news is that within the Customer Decision
Waterfall is a powerful tool to identify and quantify
Journey, there is usually just 1 or 2 activities that
the various “drop off” or switch points where
decisively shaped what the customer ultimately
customers either exit the buying process of follow
purchased.
a different, distinct sequence of activities.
• Therefore, we must identify and change these
• Mapping the waterfall will reveal that there are 1
critical activities that have a disproportionate
or 2 steps in the process where we witness a high
impact on what the customer’s purchase decision.
number of customers drop out (or switch paths).
To do this, we can leverage the Customer Decision Journey Waterfall.
Even minor changes in customer behavior at the critical, high-yield steps will lead to a disproportionate effect on customers’ purchasing paths. DAWGEN GLOBAL INSIGHTS I MARCH 2021
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In the second phase, we will conduct segmentation based on the customer’s propensity for the identified high-yield behavior OGF – Phase 2 OVERVIEW PHASE: Use Propensity-based Segmentation
We should segment based on the customer’s propensity to engage in the high-yield behaviors (as identified in the initial phase).
DETAILS • Customers’ willingness or resistance to changing a
high-yield
behavior
will
expectedly
desires in a product—and then position our
vary
product to meet the target segment’s needs (e.g.
considerably across the market. Some are very
create a product based on sustainable practices).
willing to change and others are not.
• In the OGF approach, we instead need to
• Therefore, it follows that we should focus our
determine what behaviors we desire in the
resources and efforts on that segment of the
target segment—and then develop a CVF and
market most prone to engage in the high-yield
campaign to compel the target segment to make
behaviors
this perform this behavior (e.g. visit Amazon and
• This is a paradigm shift in how segmentation is typically performed and the resultant actions that come through segmentation. • More specifically, a conventional approach would
read customer reviews). • To ensure targetability, we define segments in terms of characteristics that are easily observable by our customer-facing functions.
lead us to determine what our target segment
Propensity-based segmentation is also referred to as ActionSegmentation® within Monitor Group’s GrowthPath® methodology. 30
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In the third phase, we better understand high-yield behavior by identifying “points of leakage” and “points of leverage” OGF – Phase 3 OVERVIEW PHASE: Identify Points of Leakage and Leverage
We need to know and understand why customers do or don’t undertake high-yield buying behavior.
DETAILS • It is essential for us to develop an accurate
• Points of leakage and leverage are what
understanding of why customers do or don’t
Marketing is all about, because these are where
undertake high-yield buying behavior.
we change or influence the identified high-yield
This
understanding is what will guide our marketing efforts in influencing and changing the customer behavior.
customer behavior to our favor. • To be effective, need to understand both our strengths and weaknesses when it comes to
• In developing a thorough understanding of
driving change.
this behavior, we need to identify both points of leakage (i.e. where customers drop off) and leverage (i.e. where we could intervene to drive behavioral change).
Points of leverage and leakage allow us to focus our marketing efforts on areas of highest impact in the later phases. DAWGEN GLOBAL INSIGHTS I MARCH 2021
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In this fourth phase, we will be creating the Behavior Change Value Proposition (BCVP)—a complementary tool to the CVP OGF – Phase 4 OVERVIEW PHASE: Develop a Behavior Change Value Proposition (BCVP)
In addition to having a CVP, we must also develop a compelling Behavior Change Value Proposition (BCVP).
DETAILS • The BCVP articulates the benefits of engaging in the target, high-yield behavior. • The BCVP is supplemental to a pre-existing CVP, as a unique and compelling CVP alone doesn’t ensure growth.
• The BCVP seeks to fulfill 2 communication objectives: • Communicate the value of a behavior to the customer.
• Developing the BCVP should leverage insights gained from the 3rd phase in understanding the points of leverage and leakage of high-yield behaviors.
minimize any obstacles to behavioral change.
In other words, the BCVP should
highlight positive incentives to change and
• Define what’s required to boost the value of the behavior to that segment. • There are multiple tools to help articulate the BCVP, including the CVP-BCVP Matrix and the BCVP Template.
After its development, it’s important for the BCVP to be clear and accessible.
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In the final phase, we develop our growth plan, based on the principle of investing disproportionately over a sequence of waves OGF – Phase 5 OVERVIEW PHASE: Invest Disproportionately and Sequentially
This final phase involves creating the tactical growth plan, which hinges on the principles of sequencing segment-specific efforts and spending disproportionately.
DETAILS • For OGF to be effective, we need a significant shift in our organization’s spending habits.
• Within segments • At the tactical campaign level
• This final phase involves a disciplined and
• Through this approach, our desired outcome is
systematic approach to conducting sequence,
to create sequential bursts of growth in targeted
segment-specific behavioral change campaigns.
parts of the market that drive steady sustainable
• Particularly in highly competitive and crowded
organic growth, which is higher than that of our
markets, it requires serious concentration of effort and resources to break through the noise and reach our target customers. • This philosophy of disciplined, disproportionate investment operates at 3 levels:
competitors. • Once that initial burst starts to diminish/plateau, the succeeding disproportionately funded effort focused on additional segments will enable us to continue to grow faster than we would otherwise.
• Within the buying process
An organization executing this approach of disproportionately funded effort in 1-2 segments for a couple of years will grow faster than it would otherwise. DAWGEN GLOBAL INSIGHTS I MARCH 2021
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