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16 December 2005

Becoming a Knowledge-driven Organization in response to more knowledgeable customers in the luxury market

Customers increasingly demand more personalized products and services. When the chosen product is relatively standard (mass-produced) they demand a personalized service around it. When the service is relatively standard (non-differentiating) they demand the resulting experience(s) to be unique.

In the World of luxury, this will not sound particularly new and challenging. For instance, the Richemont Group “Maisons” (French term used to represent the Brands owned by the Group) have been aiming to provide personalized product and services since their creation. However, even for them the context and the rules of competition are changing. Richemont customers, as much as for any other organization, do have increasingly access to more specific on-demand and interactive information. Customers are more knowledgeable about luxury products and services and about our competitor’s products and services. As a direct result, they have also more choice, or more precisely, they are more aware of having a choice.

Of course, one key medium at the origin of this phenomenon is the World Wide Web. It is now common for Cartier customers to download from a non-official web site a detailed product spec-sheet; and bring a printed copy to a Cartier boutique in order to be shown the product. Another illustration is the frustration of Panerai Management faced with a totally legal web site selling bracelets for Panerai watches. Even more worrying is the fast growing so-called “grey market” for watches, already a significant problem in North-America (these are genuine Richemont watches bought by wholesale accounts to be diverted onto a parallel network to be sold – usually on the Web - at discounted retail prices).

Traditional luxury companies will also face new types of competition. One of the most successful among wealthy people is fractional ownership. This is based on the old concept of time-sharing: Luxury products such as yachts, private jets, upmarket properties or luxury cars are shared by individuals who probably could afford to buy them outright, but find it much more cost-effective not to do so. What should be a concern for the traditional luxury brands is that this concept is starting to be available for fashion products as well such as ladies bags (http://www.bagborroworsteal.com/). Furthermore, existing or potential customers can easily share experiences and opinions on a specific luxury product and its related services, therefore at best, entering a point of sale with more pertinent knowledge; or at worse, deciding to opt for the competition before a sales-executive even had a chance to promote his products. For instance, there are very successful independent websites dedicated to luxury watches and watch-making where existing and potential owners of these wonderful time pieces can share related information. Jaeger-Le-Coultre benefits from such a website exclusively focusing on its products. It includes a Forum where customers, dealers and even JLC employees exchange experiences, ideas and opinions on various models (http://www.thepurists.com/). The key fact to note is that the website is independent: JLC management did not create it, has no input and even less control on its content.

This new competitive environment indicates that luxury Brands should focus on bridging the gap between them and their customers through co-creation of value with the customers (Prahalad & Ramaswamy, The Future of Competition, 2005). The idea is to organize companies in such a way so that all their valuable human resources based knowledge is leveraged through the creation of value for our customers and for the organization. This is done best in co-operation with the customers themselves. When a customer submits a problem at a point of sale of a particular international Brand name, the customer is in fact asking the whole company, not just the front line employee. Now can the organization ensure that the right person with the right knowledge is solicited at the right time to satisfy the customer? This is what becoming a knowledge-driven organization is ultimately all about: satisfying our customers faster and better and increasing revenue and profit as a result. A Knowledge-driven organization is focused on providing all the knowledge tools and assistance each of its front-line collaborators could benefit from, in order to deliver a better service. A knowledge-driven organization is inherently a customer-focused organization.

Typical Product and/or Market-focused Organization schematic representation:



The Organization/Customer Gap is reduced through product design assumed to satisfy the customers and through market analysis to adapt to each markets. The rationale is that the organization “knows” best what its customers need/want.

A Knowledge-driven and customer focused Organization simplified schematic representation:

A Knowledge-driven Organization sees its customers at the top of the pyramid with the whole Organization at their service. The goal is to co-create with the knowledgeable customers valuable and personalized experiences. In other words, such an Organization does not sell only products and services anymore but sells experiences.

Peter-Anthony Glick
Leveraging Organizational Knowledge

Read Verna Allee's comment to this post.

2 Comments:

At 6:16 PM, Blogger Peter-Anthony Glick said...

The KM Expert Verna Allee (Verna Allee Associates, http://www.vernaallee.com) sent me the following comment:
"...I am intrigued
with you questions around brand and the knowledge link. Brand is usually
slipped into Structural Capital slot, but I think it is too confined there.
More and more today brand is not just about what we deliver, it is also
about reputation and character. This is the missing link with Human Capital.
We already know there is a correlation between employee satisfaction and
customer satisfaction. There is also a penumbra around brand that is the
perceived essence or character of the company that is expressed in its
values, its ways of operating, the way it treats people and labor practices,
how it sources it products, and whether it is a good social citizen. I
actually talk more about reputation and place it at the center of the IC Ven
Diagram as the embodiment of principles and values - as expressed in the way
the company operates and the role it plays in the world.

If as you suggest a company focuses on brand to the detriment of human or
structural capital then my belief is that they will eventually pay the price
in loss of market share. I have absolutely no proof of this whatsoever as we
have not done the research to back this up. We are however, beginning to
collect value network case studies for benchmarking purposes and I believe
that we will find successful organizations have a pattern of relationships
that is quite different from those less successful. In the value network
analysis we look at both the contractual and non-contractual interactions
(tangible and intangible) between different roles. It is our belief that a
healthy pattern of intangible interactions is required to maintain not only
operating efficiencies but also brand. Hopefully we will have something to
report on this sometime later this year.

You may be interested in the white paper in the library on my website called
A Value Network Approach (http://www.vernaallee.com). I provides a quick
overview of the thinking behind the method. I need to do an updated version
of this soon, but it still cover the basics, as does my 2003 book The Future
of Knowledge. There are also some interviews in the library where you might
find some useful commentary. "

Thank you Verna.

 
At 7:14 AM, Anonymous Michelle said...

Such a great article which Brand is usually
slipped into Structural Capital slot, but I think it is too confined there.
More and more today brand is not just about what we deliver, it is also
about reputation and character. This is the missing link with Human Capital.
We already know there is a correlation between employee satisfaction and
customer satisfaction.Thanks for sharing this article.

 

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