Posters : Use posters to communicate the critical components of the UX message - UX principles, customer segments, etc. For example, Walmart.com had posters of its customer segments on the walls around the office to always remind its employees who they were designing for.

Process: Define the UX Engagement process. Usability.gov has a well defined design process. This may vary based on how departments are structured in your company, resources available and team dynamics but a process is a start to including all the critical elements of the user experience.

Procedure: Create standard UX templates to define the procedure to conduct a specific aspect of the UX. Usability.gov has many templates. For example, a  moderator guide or guidelines to conduct and write a heuristic report will establish a set of standards and improve the consistency and quality of work.

Protocol: Create a UX repository on the company intranet to educate everyone in your company about the UX team and their work, how to engage with them, what to expect, timelines, schedules, etc.

Publish: Get noticed in the greater UX community by publishing research and presenting at conferences. This brings visibility and credibility to the UX group.

Proof of productivity: User Experience improves the customer's experience in many ways. For example, it could reduce time, reduce help desk calls, increase enjoyment and trust, improve safety, etc. It is critical to measure this improvement in productivity to translate the value of the UX activity and to communicate it to employees and management.

Partner: This is the most important step in institutionalizing UX in a company. Unless you have a partner in upper management to rally around the UX cause this would be a very difficult struggle. It is critical to get support to ensure the message does not get lost and more importantly give UX the attention it deserves. After all, some of the top tech companies have made it their mantra. Google says "Focus on the user and all else follows" while Apple uses UX to drive its innovation engine.

Indicating interest in you/your profile by showing how many looked at your profile. Indicating interest in a job by showing how many people clicked on the Apply button.  Indicating interest in your connections by showing how many changed jobs in a year.

There are some other examples in the online retail industry. For example, Rue La La indicates interest in their products (clothing, accessories, home goods, etc.) by letting us know how many Ralph Lauren sweaters are left to buy thus indicating how quickly a product is getting sold. We also measure interest (though not shown quantitatively) by grouping stuff under most popular, most commented and most shared on various blogs and news sites.

The theme of the third largest social network, Pinterest (Facebook and Twitter are the top two) is centered around interest. Interest is indicated quantitatively through likes, repins and comments. We need to have a measure of interest by consolidating our online behavior (sharing, commenting, viewing, etc.). Let me know if you have any ideas on how to measure interest.

As drug discovery takes many years to commercialize (about 12 yrs) it is important to have clear goals (TPP) and to start with the end (FDA approval) in mind and work backwards. The TPP defines who the drug is for, what disease it cures, how large is the market, how is it administered and more details as seen in the image. Defining the unknowns upfront helps communicate the goals better to the FDA (governing body that ultimately approves if a drug can be commercialized). The TPP helps in thinking of launch strategies too. For example, some drug companies first launch in an orphan market (diseases affecting fewer than 200,000 people) and then larger markets as its faster to get approval in orphan markets and grants are available to support you in this process. Some companies also choose to launch in international markets before local markets as approval is faster for certain diseases.

Often changes in the IP landscape or manufacturing processes or technical difficulties result in changes to the TPP and CEOs are forced to make a difficult decision  to move ahead with the changes or drop the product. If the CEO agrees to go ahead she/he needs to update the TPP and keep all in the loop. The TPP can be used to increase the value of the company by finding ways to create additional IP, communicating improved benefits and decreased adverse events. CEOs can also use the TPP to forecast different scenarios of the drug. For example, a target scenario, a minimal scenario and an optimistic scenario where the CEO predicts the characteristic of the drug and thus his strategies under these three scenarios.

What does IKEA do well? IKEA’s cost leadership and unique Swedish designs provide its target customers (young buyers) excellent value.

What are the trends in the industry? Americans love to keep furniture. Ikea tried to change these attitudes with an advertisement (lamp has no feelings). The trend is to update furniture based on lifestyle changes (single, married, student, starting a new family, etc). Providing interior design expertise is a critical part of this industry. Manufacturers and distributors are joining forces. Flexible furniture (example: bed plus sofa in one) and furniture that serves dual purposes add value (example: bed has storage too). Distinctions between rooms disappearing – kitchen and living room furniture (example: chairs) is interchangeable. Personalization of furniture is on the rise (color, upholstery, wood stains, etc) and so is experimentation with new materials (jute, etc).

What is the competition doing? The competition is using four (or a combination of these 4) strategies: cost leadership, design differentiation, catering to certain market segments (international, demographic segments-young and old, psychographic segments-improves self image, retail, office, etc) and enhancing the shopping experience (design consultants, in house restaurants, etc). Image on right shows cost leadership and design differentiation for a few competitors.

What does the customer want? Customers want great designs in unique styles to match their lifestyle for low prices.  They would like an expert to do the interiors of their home for free. They don’t want to burden themselves with transporting furniture from store to home or having to assemble it. People are willing to spend more on furniture items such as a bed (indicated by the wide range in prices) or items that serve dual purposes (futon serves as a sofa plus a bed). It should be easy to maintain (odors, scratches, etc).

What is Ikea’s positioning strategy relative to its competitors?

Cost Leadership (30-50% lower than competitors): This global furniture retailer based in Sweden targets young furniture buyers who want style at low cost. Buyers trade off service for cost. Ikea designs its own low-cost modular ready-to-assemble furniture (big part of their cost leadership).  Customers do their own pickup and delivery or get it delivered for a fee.  Employees are trained to save electricity and managers always travel coach and take buses instead of taxis. Cost is so important that first a price point is established, and then the manufacturer, materials and design are chosen. Expensive wood is used only on top visible layers of the furniture. Suppliers are chosen from a pool of 1800 to maintain cost leadership.

Shopping Experience: Ikea owns the furniture buying experience. It displays every product it sells in room-like settings so customers don’t need a decorator to help them imagine how to put the pieces together. Ikea's in house Swedish restaurant is as popular as its furniture and provides respite to customers who walk through 25,000 sq m (average space of Ikea store). Customers move along a predetermined path through a maze of rooms. Ikea offers services aligned to its customers who are young but not wealthy, likely to have children but no nanny and because they work for a living and need to shop at odd hours they are open late and on weekends. They also offer furniture delivery services for a fee.

Swedish Designs (functional and simple): Ikea creates functional cookie-cutter Swedish designs (designs are part of their ‘matrix’). That one table only comes in 4 Scandinavian styles at 3 price points. Design is usually the last step (after choosing, the price point and manufacturer) in the process. Other than its staff of 10 designers it also depends on freelancers highlighting that design was to focus on simple yet functional styles.

Identifying Marketing Campaigns based on Market Potential: Market potential is the estimated maximum sales revenue of a product during a certain time period. MapInfo Professional visually depicts the market potential of households who spend more than $150 per week on groceries for each block group (group of adjacent zip codes) in Orange County. The software also gives details on which customer segment will most likely contribute to the sales at the grocery store. For details on customer segments based on PRIZM groups read the earlier post. We see that White-Collar Suburbia have the highest market potential (count* penetration) of 21.1% and hence will be the target of a marketing campaign. This group is well described and is very specific so a direct mail ad campaign is suitable. As this group is family centric and enjoys a healthy and busy (both parents work) lifestyle we can tailor the campaigns to emphasize healthy foods and easy to make dishes that brings the family together. We can also identify the market potential by block group so say if Block X has high market potential we will place a billboard in that area to target customers. We could also use coupons to entice the White-Collar Suburbia that live outside the trade area (area where customers that visit the store reside - usually a 5 minute radius for a grocery store) of the grocery store to visit the store.

Using Point of Sale Data (data collected at cash registers) to Identify Sales Trends: AC Nielsen collects a lot of data from grocery stores and can show sales trends based on customer locations (zip codes). As seen in the image below we see market share and sales over a year for 2 brands of cranberry drink - Ocean Spray and Coca Cola.

For Ocean Spray we see that within a retailer’s trade area the retailer’s total market share for Ocean Spray’s SS Cranberry Drink is 38.6%, a decrease of 4.3 points from last year. This means that the retailer sells 38.6% of this brand SS Cranberry drinks in this trade area. When we look at the Total Sales we see that the retailer’s sales is down 14% while the remaining market increased by  2.9%.  This means its sales decreased by 14% or people could be going to another retailer with a better marketing campaign (possibly a discount) for this drink in the trade area. The total sales were $700,000+ which is significant. Thus this drink could be a cash cow (based on BCG classification) for the retailer with the right marketing campaign. Plus, the sales for Ocean Spray or the remaining market increased by 2.9% though the overall trend for sales of ocean spray was slightly down by 3.6%.

For Coca Cola within a retailer’s trade area the retailer’s total market share for Coca Cola’s SS Cranberry drink is 23.6%, a decrease of 14.9 points from last year. This means that the retailer sells 23.6% of this brand drink in this trade area. When we look at the Total Sales we see that the retailer’s sales is down 62.3% while the remaining market decreased by  23.5%.  Thus this drink is a dog for the retailer and should be dropped as its market share is less than 35% and its total sales % change is less than 5%. Plus, overall sales were $1450  which is nearly insignificant (less than 1k is insignificant).

Mapping propensity and density to determine revenue potential of the store: As we see in the images below, we use SRC's Allocate to determine the revenue potential of  a grocery store in Orange County (OC). We choose the retail store option as the input variable and the dollar per store as the output using the software. Data is also available for furniture stores, sports stores, etc. After the variables are input a map is produced (below) which can be interpreted as follows. For Orange County, the average grocery expenditure per house hold per month (propensity) across a block group (a group of zip codes) where darker green shades indicate  higher expenditure for groceries per household per month is approximately $5800-$16900/month for the darkest or most expensive parts. The hashed region shows total dollars spent for groceries per square mile per month in Orange County (expenditure density). The darkest hashed regions indicate people in OC spend a total of $18,000,000 to $103,000,000 per month on groceries. This data helps you determine if the revenue potential is close to what you expect and can help compute your approximate profit given all the expenses you will incur. It also helps you compare revenue potential across different locations to help you determine the ideal/optimal location for you.

Choosing a Store Location by Mapping Competitors Location Data: Using the Yellow pages we identify the zip codes of the competitors. For this example - a grocery store - let's assume it's Trader Joe's and Whole Foods. We identified 19 Trader Joe's and 2 Whole Foods store in the OC area and mapped their trade areas (area from where customers visit the store - usually a 5 minute radius for a grocery store) using the software.  The blue areas represent the Trader Joe's and the red and fluorescent green represent Whole Foods. This is mapped on the propensity and density map from above using MapInfo Professional. With this information we choose a location (in yellow) that is far from competitors and has good propensity and density. You will also check for magnet stores, customer demographics and traffic (info in next paragraph) and ensure that the information provided by these parameters will help drive your store's growth. You can also compute the break even demand (average retail demand per square mile) as seen below to inform your decision.

Identifying magnet stores, traffic, customer demographics and trade areas for the new store location: The software helps to draw the trade area for the new store location (for this example a 5 minute radius as seen in black) and can identify the magnet stores or stores that will help pull traffic (for example, drug stores).  It computes traffic - 32,800 cars/day. It also helps define the type of people in the trade area. Types of people are defined by PRIZM clusters (for details check  PRIZM Clusters) and gives you demographics and characteristics of the population you are likely going to attract. According to the report this store will attract 54% of people belonging to the PRIZM cluster defined as White-collar Suburbia. This group can be described as "upscale, college-educated baby boomers living in suburban comfort in expensive new subdivisions". For more details on this segment visit Experian's description. Now that you have such a wealth of information on your customers you can tailor your marketing message as well as grocery needs to better suit them.

Let's apply this to a case study- PetSmart vs. Petco. You can read the detailed analysis in my paper here - Petsmart vs Petco - 4 Actions Framework or get the highlights below.

Industry analysis

PetSmart and Petco compete in the Pet Care Industry which includes pet food, clothing, healthcare and other pet services. This is an attractive industry based on Porter's 5 forces analysis (read paper for details) with spending reaching $41 billion/year (number which doubled from a year ago). Americans spend more on pet care than what they spend on movies, video games and music put together.

PetSmart’s strategy was to connect emotionally with pet owners by providing services (services strategy) such as adoption, grooming, training, day care and pet hotels. These luxurious pet services made pet owners feel that their pets were being treated as well as family and thus commanded the higher market share (30%) of the pet care industry. Petco their rival which held 20% market share concentrated on selling a larger variety of pets at a premium price (11% more than PetSmart). As PetSmart was a services strategy it partnered with alliances such as Banfield to help in hospital needs and its stores were located in “power centers” unlike Petco whose stores were “neighborhood pet stores” and much smaller in size.

Recommendations to PetSmart to Refine their Strategy using the Four Actions Framework

Raise: Continue to focus on services and add to these based on trends. For example pet obesity is a big trend hence providing pet diet plans and support will grow the pet food (diet meals for pets) vertical as well as services vertical (customer support), which is recurring revenue and ties into their current strategy. A limitation of this suggestion is that existing diet plans companies can easily enter this market with some modifications to their food to cater to animals.

Create: Provide pet super stores: hotel, grooming and hospital all in one. Owners will be willing to come to pet super stores. Based on maximum revenue based on location super stores that are a one stop shop for all pet owners can attract and even take away from mom and pop stores. Visiting vets from Banfield (PetSmart's already existing pet hospital) can be a part of this super store. This will also increase revenue for other verticals. For example, after the dog is treated at the vet the owner may pamper him or her at the spa and then buy the month’s food supply at the pet supply store. A limitation of this suggestion is that a lot of capital is required to create this and Francis is already working on expanding his pet hotels so this suggestion can probably wait once that is implemented and a detailed cost-benefit analysis of this suggestion is carried out.

Raise: Owners like to be a part of the pet grooming ritual as it fills an emotional need for the owners. Provide see -through rooms where owners can watch pets being groomed or trained while they wait (instead of waiting in waiting rooms). Remember, this is a business that caters to human needs through the pet. Feelings of belonging, care and connections are expressed through pets and sharing in these activities only strengthens the connection. A limitation of this suggestion is that this may be a small market (or not). In today’s busy world few may want to watch their pets being groomed. Again market research and testing will clarify this point.

Eliminate: As only 2% of their revenue comes from selling other pets such as birds and fish, etc evaluate if you still want to keep that business or use the revenue from there to better focus on the lucrative services, supplies and food verticals at PetSmart. A limitation of this suggestion is that this will change or limit the scope to only dogs and cats.

A firm can choose one of these strategies or a combination. It can also shift strategies at different points in its evolution. IBM started with the adaptation strategy by setting up mini IBMs in target countries and adapting to local needs. In the 1980s it transformed to a regional dependent organization thus shifting to the aggregation strategy. Most recently it shifted to the arbitrage strategy by exploiting wage differentials in India and increasing its headcount in India.

Which globalization option does a firm choose?

In making this decision managers can use the AAA triangle to make a decision. Firms that do a lot of advertising will need to adapt to the local market and lean more towards the adaptation strategy. Those that do a lot of R&D will use the aggregation strategy and firms that are labor intensive will use the arbitrage strategy. Though firms can use a matrix approach and have two strategies in place employing all three has its constraints in terms of limited managerial capacity and a confused culture. It is important to ensure the strategy is a good organizational fit. A firm could also get external support to integrate across borders. IBM has many vendors and joint ventures to help with its R&D and manufacturing. It is also critical to know when not to integrate as this minimizes points of contact and friction. Choosing to use or not use these strategies can help or hinder a  firm's global growth plans.

Tamara spoke about managing disruptive (vs. incremental) innovation, its risks, two case studies and lessons learned.  Incremental innovation happens in existing markets (left column in image on right) while disruptive innovation happens in new markets (right column) and is more challenging to manage. She mentioned three risks in disruptive innovation - technology, market and execution- emphasizing that markets and execution are the most challenging factors to overcome. A further breakdown of the risks are found in the image below. Lack of credibility/experience (includes C level stakeholders), lack of channel (sales/distribution network) and lack (actually the inability to filter through too much) of information are critical risk factors.

The best way to enter a market of disruptive innovation (with existing or new technology) is to start with a minimal viable product (MVP) introduced at the right time and a strong value chain. MVP is a product with a limited set of features that fits the user needs of a niche market. Once the product has gained an audience ideas to gain mass market with added features can be explored. Tamara gave an example of one of PARC's chip packaging technology which was introduced seven years ago but shelved due to bad timing. It was reworked seven years later by partnering with Sun Microsystems and Oracle due to their advances in chip technology. The value chain are a group of activities (see image below- extreme right) that help to bring the product to market. In existing markets best practices help define a path to market entry but in disruptive markets one has to be flexible and shift gears depending on learnings. It is also critical to partner with experts and consultants studying these new markets as well as visit trade shoes and conferences to learn as much as possible. Partnerships are forged to strengthen the chain and build credibility.

Case Study: Printed Electronics Services

PARC developed low cost disposable printed flexible electronic expertise and devices can be applied in health electronics, packaging and biomedicine. When DARPA (Defense Agency) contacted them to develop an early detection solution to prevent brain injury for soldiers they partnered with consultants and experts to expand their printed electronics services for defense applications. They soon realized they couldn't manufacture the films at the scale desired and thus decided to play a connector role (flexibilty to change is key) between materials and manufacturing.  They partnered with Polyera and 2 other manufacturers thus giving up positions in the value chain and concentrating on their strength (network orchestrator). The lessons are outlined in the image on the right where N=1 means that they relied on more than one consultant or expert to help traverse this new territory and in many cases related to disruptive innovation a group of experts help bring together a holistic viewpoint and a superior product. The other lessons were to be flexible to change course, focus on strengths in the value chain and partner in areas of weaknesses.

Case Study: Content-Centric Networking Protocol

PARC developed a communication protocol complementing existing IP infrastructure to reduce the cost of distributing video and other content in IP/TV networks. Content-Centric Networking uses a unique architecture that caches content closest to the users who request it most thus reducing network capital cost and operating expense.  To create this solution PARC collaborated with Van Jacobson, Chief Scientist at Cisco and an IP/TV expert and took it to open source for feedback. They tested this network with the government and early adopters and used feedback to improve the solution to get critical mass. The lessons here were to get the right commitment, gain critical mass and engage user feedback early.

Overall lessons are to use ethnography to understand how people are using your products and thus have a well defined MVP. Disruptive innovation is more about unique business models and integrating technology. As a company expands it is critical to have a portfolio of products ranging from core to next gen products and using a process to manage this innovation can be the difference between success and failure.

1. Social Contagion states that communication and observation affects online demand evolution. Traditional brick and mortar retailers are limited by their small trading areas. It is more likely for you to visit your nearest grocery store whereas the internet is unlimited but this also means that you don't know where your customer is located.  One of the main findings of social contagion (as seen in image on left) is that your new customers will be located near your existing customers. Communication and observation are key in social contagion. This is where word of mouth and visual differentiation are key. For example, Warby Parker, a Wharton startup, makes prescription glasses for $95  compared to the average competitor price of $500. They have visually differentiated themselves from the competition by making their frames a distinct color (blue, orange, turquoise and more) and a classic vintage-inspired shape (thicker frames). As for word of mouth they donate a pair of glasses to someone in need every time you buy a pair.

2. Spatial Structure follows a pattern of proximity and similarity. This finding states that social and demographic proximity and similarity can drive online sales. For example, an interpersonal property or similarity such as ethnicity could drive sales of an online product that started in Chicago and then moved to LA and then Springfield through word of mouth. Internet retailers first grow through physical proximity and later through similarity among distant locations. Thus internet retailers should target sparse locations with geographically diverse demand. For example, target zip codes that are not close to each other and not socially or demographically similar but have a good number of target customers.

3. Preference Isolation brings shoppers online and explains geographic breakdown of online brand demand. The image on the right explains this concept. Consider 2 markets for diapers- Market 1 with 200 people of which 100 have babies (50% penetration) and Market 2 with 2000 people of which 100 have babies (5% penetration). Market 2 is the preference (in this case diapers) minority and the market that an online retailer should target. The primary reason for internet retailers to target Market 2 is that the brick and mortar stores in Market 1 will stock 50% of their shelf space with various diaper brands (pampers, huggies and even niche brands such as 7th generation) so it is easy for people in this market to access these diapers but Market 2 is going to allocate only 5% of their shelf space thus carrying the top selling brand only (say Pampers) so customers are more     likely to look online for  the other brands especially niche brands thus driving online sales.

4. Acquisition Modes vary in efficacy according to location characteristics. Different acquisition methods (magazines, online WOM, offline WOM, online search) get you different customers and are complementary as seen from the image on the right. Word-of-mouth (WOM) acquisitions  benefit from physical proximity among targets (offline WOM—contagion; online WOM—connectivity). Use magazines for sparsely populated markets and WOM for densely populated markets.

Many other factors such as taxes, shipping cost and type of product matter in customer acquisition in internet retailing but have not been studied in this research.