The Great Battle (2): Are organisations ready for the new generation of customers?

In part I of the Great Battle, I discussed the struggle between the Robber Barons and the Knight Innovators, or the struggle between the hedge funds and the organisations of the future. While the Robber Barons see human capital as a cost entry, in the (near) future the difference between consumers, manufacturers, owners, financiers and developers will blur. The new organisational forms are borne up by the concept of Mass Participation: innovation as a social, cumulative and collective process. Linux and Wikipedia are the first examples of these types of ‘new’ organisations. However, things have a way to go yet. But companies are already seeing a change in consumer behaviour. In part II of the Great Battle, I will explain the changing customer, the new relationship between the customer and the organisation and a new form of organising.

A new customer relationship
Different forms of community, communication, consumption and experience have clear repercussions for the customer. The modern customer wants his very DNA to be spoken to, the ‘genetic blueprint’ of his behaviour. An organisation must be capable of understanding this DNA and of translating it into a new value proposition. The survival chances of the organisation will be determined by two crucial factors: insight into the specific customers and the speed of reaction to the continuous changes within the target groups. The survey by Capgemini, Trends in Retail (2006), shows that only a few companies are successful in this.

In their book, ‘Generatie Einstein’ (The Einstein Generation; see http://www.keesie.nl/), Jeroen Boschma and Inez Groen describe a new generation of customers. Where the previous generation focused on the individual – pleasure, convenience and benefit – the new generation acts in a smarter, faster and more social way. For companies, this means a huge change in the relationship with the customer:

Communication changes from one-way traffic to two-way traffic
(Marketing) communication cannot be used as a stopgap for mistakes or shortcomings, but must be based on concrete evidence
Customers are smarter, demand equality and punish arrogance mercilessly
Companies’ conflicting interests and poor reputations must make way for entirely logical and transparent messages.

This new generation of customers wishes to be actively involved in change, renewal and innovation. They will no longer allow an organisation to push new products on the market without their participation. The new generation will confront us with a fresh role distribution among those involved in our society. Differences between consumers, manufacturers, owners, financiers and developers are blurring. In Capgemini terms, for organisations this means that they can no longer choose a role independently (manufacturer, owner) but that they will become part of so-called ‘Mashups’ (see article Visie op Innovatie [Vision on Innovation] at http://www.capgemini.nl/ ).



Difficulty with the changing customer
In general, big companies are relatively slow-changing organisations. These organisations are built up with a number of rigid characteristics:

Certainty obtained via procedures and regulations (standardised and bureaucratic)
Political stability through the establishment of clear tasks, powers and responsibilities (clearly delineated organisational borders, internal ‘silos’)
Strong historical company culture (little room for free thinkers)
Classic (legacy) back-office information systems aimed at productivity.

Innovation within a company requires the organisational capacity for working innovatively across the internal borders (from R&D to Marketing and Customer Service). In view of the large organisation’s rigid characteristics previously mentioned, this is a huge challenge. Not to mention co-operation beyond the company’s borders. Despite all these challenges, ambitions for innovation are being created that require us to work intensively with partners outside of our own organisation, so-called Open Innovation (see http://www.openinnovatie.nl/ ). We see companies busily carrying out window dressing (client-centric front-office, multi-channel contacts, etc.). However, in many cases, feasibility and the ability to keep the promise to the customer defy reality.

But there are companies who have successfully tackled these challenges. Philips is a good Dutch example of how parties outside of the traditional organisation have managed to deliver the first successes. In the beginning, these successes were mainly the result of chain integration (innovating with suppliers). At the moment, within the concept of Open Innovation, Philips has gone a step further and is actively engaged in customer participation (End User Driven Innovation Cycle). An international example is the so-called ‘co-creation’ at Lego. Children (customer perspective) are actively involved in the development of new Lego building blocks. The children work via the Internet together with R&D (technological perspective), Marketing & Sales (market perspective) and Operations (business process perspective). The top three best-selling Lego building blocks were created in this way (see http://www.lego.com/).

Mass Participation
The new generation of customers will force organisations to take part in their adaptive and self-organising communities. In his new book, Charles Leadbeater describes the concept of Mass Participation (see http://www.wethinkthebook.net/). This concept is a way of innovating through active participation by people at extremely low cost and on a global scale. As Henry Ford created a new logic for mass production, so will the new concept create a new logic for business innovation. Organisations will lose part of their control over innovation, but will gain an entire army of strongly motivated innovators in return. Besides Lego, other examples that apply Mass Participation include Wikipedia, Linux, OhMyNews and WaveMarket. Charles Leadbeater mentions a number of basic rules for implementing the new concept:

Create the core of a basic idea: enough to work on, but with enough possibilities for additions.
Motivate and entice participants: treat the participants as ‘peers’ and not as employees or suppliers. Participants see their contribution as representing personal development and status. They are looking for concrete and practical benefits. Besides this, low entry barriers and user-friendly tools are essential.
The need for meeting places: a place where people can work together interactively and where clear rules of ownership (getting, using and returning) are established.
Self-distribution of work: an open working method based on high acceleration of the peer-to-peer review process that quickly identifies the good ideas and that can be elaborated upon.
Think LEGO: innovations are split into a series of modules that fit together and can be integrated. The integration is regulated on the basis of clear, simple and centrally created design rules. These rules and protocols make it possible to allow mass innovation.
A new form of leadership: these are no traditional corporate chief executives, but leaders with characteristics such as modesty, willingness to remain in the background, self-confidence, strong norms and values, passion and attachment. Their specifically top-down style of leadership makes large-scale, decentralised, bottom-up innovation initiatives possible.

The new generation of customers, employees, suppliers, owners, etc., will be in their element in this organisational form. But it is a giant leap from the present situation towards a full Mass Participation form. Possibly too big a leap for many organisations. A company might start with organising its employees along the lines of this new concept. Dutch companies, such as KLM, DSM, Philips, Police (KLPD), Reaal and Achmea are already making great strides in this direction. The next step is to involve various parties outside of the immediate organisation. The question is whether the traditional companies will have time to adapt their organisational form. Organisations that are not able to develop quickly into this new organisational form of Mass Participation will be confronted with very severe continuity issues. For the new generation will create the products and services they want themselves, within their existing communities.