The radical differences between loyalty programs

Loyalty programs feel different from one company to the next, and they probably deliver very different results to those involved.

The reason for this is that most loyalty programs fall into one of three categories: discount-based, free stuff based, or gift based loyalty programs. Let’s review them one by one.

The discount-based loyalty programs

The discount based loyalty programs are based on giving loyal customers coupons with steeper discounts than regular customers can get.

The thing with discounts is that it triggers the pleasure side of the brain — that part of the brain that gets addicted to things. So in order to get the same satisfaction over time, our brain requires bigger stimuli — in this case, deeper discounts are the only thing that will keep us happy. If you bought an item at 50% off, you will never want to buy that item at full price anymore, or even with a 20% discount. Doing so would leave you with the feeling of being cheated. And after awhile the 50% off discounts become routine, and you only get excited if someone offers you 60% or 75% off. And if that someone is an alternative vendor, you might actually switch.

So all in all, and while discount-based loyalty programs may work for awhile, over the long run they suck the profitability out of an industry. They may actually not be a good basis for long term loyalty at all. And if you really think about it, they may actually reward your least profitable customers.

Free stuff based loyalty program

Many loyalty programs fall into this category, including airline programs and credit card programs. The more points you have, the more free stuff you can get and the higher up in status you go. It works really well because people will do anything in order to get something free. Dan Ariely, Behavioral Economist at Duke University has documented this phenomenon — people will do totally irrational things to get free stuff. Most of those programs also have gamification elements, such as leaderboards and levels that give you status — another powerful Human 1.0 motivator that is ingrained in all humans.

But since free is another form of discount, those programs too tend to suck the profitability out of the industry. Plus customers  that acquire free stuff are acting irrationally, and in the end there are often hidden costs for the person who acquired free stuff that they did not really need — think of all those chotchkes that you may have brought from conferences in the past. And except for the leveling part and the status, I am not sure that they result in a lot more word of mouth from your “loyal” customers.

Gift-based loyalty programs

Giving a customer a gift, and in some cases unexpected gifts, in return for their loyalty is the most powerful of all loyalty triggers. Giving a gift to someone triggers one of the most ancient Human 1.0 characteristics — reciprocity. If you give me a gift, I am indebted to you and will be driven to give something back — reciprocity is a reflex, not something we learn from mom and dad or in grade school. A good example of a gift-based loyalty program is the Kimpton Hotel Inner Circle program. When you reach the inner circle, you not only have access to the CEO, but if they have the room they upgrade you free of charge and if they know that you like berries and wine (as I do), they may have a bottle of wine with those berries when you get to your room. They keep surprising you with gifts.

A program like this does not suck the profitability out of the industry. It truly instills loyalty. And it rewards your most profitable customers, not the discount-seekers or totally irrational free-stuff seekers. And because it triggers reciprocity, the word of mouth benefits can be considerable. Look at Kimpton again. According to Steve Pinetti, the SVP of Inspiration and Creativity at Kimpton, 60% of all their first time customers are there because of word-of-mouth — that compares to 20-25% being considered successful in the industry.

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Sneak peek at the early findings of the Social Workplace Trust Study

Today we released preliminary results of the Social Workplace Trust Study, a study that was co-sponsored between Human 1.0, The Great Place to Work Institute, The International Association of Business Communicators, and The Society for New Communications Research. We will post the recording of the webinar in which we previewed a sneak peek of the results tomorrow, and you can find a copy of the deck we used on Slideshare.

So why did we release a sneak peek of the findings?

We truly believe that there is so much in the data that the more we socialize it with people who have an interest in the topic the better the findings from the study will be. If you are interested in discussing the data with us, please contact me at francois [at] human1 [dot] com.

So what are some of the high level findings?

Finding # 1 – most respondents believe that the best way to learn about a company is through social media and that the accuracy of information about a company is higher in social media than on company websites.

The people who agreed with the statement “One of the best ways for a person to learn about a company is by using social media” outnumbered those that disagreed by a factor 1.5X. When we asked the same question from heavy users of social media, that factor became a whopping 15X, and when we asked the question to people outside of the marketing and communication functions, that factor became 2X.

The respondent who agreed to the statement “What I read about a company on social media is more accurate than what I read about the company on its own website” also outnumbered those that disagreed by a factor 1.5X. When we asked the heavy social media users, that factor became 5.5X, and without the communication and marketing functions, the factor became 2.4X.

Finding #2 – if you treat your employees as adults, instead of as children, you can expect a work environment with higher trust, higher loyalty, and higher employee self-esteem.

Treating an employee as an adult encompasses many cultural traits – including risk, trust, hierarchy, passion, and a set of human-centric belief systems. We used the answers to 5 questions from the survey as proxies for determining whether employees were treated as adults or children. The subsequent findings were amazing.

People that are treated as adults are 3.3X as likely to trust management, they are 2X more loyal to the company, they have 1.7X as much job satisfaction, they take pride in talking about their work with others that is 2X that of people treated as children, and 1.5X as many people who are treated as adults consider themselves having larger social networks than others. Now can you see the benefits that companies who treat their employees as adults must be gaining in terms of talent acquisition and retention, increased innovation and word of mouth?

Not only are the benefits not incremental, they are totally non-linear. If you treat an employee as an adult, not only will they participate in conversations about their company in social media by a factor 3.3X compared to those treated as children, with 1.5X as many of them having larger than average social networks, they will buzz more to more people – and therein lays just one of the exponents.

We also found a clear link between treating employees as adults and passion. The factor there is between 2X and 12X – that means that people who are treated as adults are 2-12X as likely to be passionate at work. Now if you are familiar with some of John Hagel’s work on passion, he found that people who are passionate at work are 2X as likely to tackle tough problems and have social networks that are 2X as large as those that do not have passion at work. Again, can you see the benefits in terms of knowledge flow and innovation?

We have many other findings, including how management actually does live in a “bubble”, how there might be an employee engagement gap, how many companies still discourage the use of social media, and how they fail to use social media to humanize their brands.

Another key finding is how companies expose themselves to significant risks and liabilities by not providing training or “guard rails” on the proper use of social media to their employees.

Again, those results are preliminary. We are still conducting qualitative interviews and cross-tabulating survey results, but if you would like to get involved and make it better before we release the final findings, please be in touch.

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Culture Trumps Strategy

One of the most important Human 1.0 characteristic  is culture. According to human evolutionary biologists, humans developed culture (broadly defined as tools, language, rituals, etc.) during the rapid climate swings of the Pleistocene era to deal with those climate changes without having to wait for biological evolution to help us out. So while humans from Lapland and the Sahara Desert were identical 20,000 years ago, transplanting one from one region to the other would surely have resulted in death – the cultures of survival were drastically different. When the Pleistocene era ended about 11,000 years ago, humans realized that they were the only species that could deal with change using culture – and so they started to create their own change and adapted to it through culture. That was driven by evolutionary forces that allowed humans to become the dominant species on earth. Culture is influenced by genetic evolution and vice versa, as Boyd and Richerson (Peter J. Richerson, 2006) argue in one of their great books “Not by Genes Alone: How Culture Transformed Human Evolution.”

Culture – referring to a body of knowledge, rituals, language and beliefs that gets passed around to help us make sense of our surroundings and drive parts of our behavior – can develop and change very rapidly. Take the culture of SMS and that of Twitter – they are both less than a decade old yet very different. They use different languages and different rituals.

Humans create culture in all the different aspects of their lives. There are cultural differences between families, consumer tribes, pop-culture fans, and employee groups. Companies that take the time to understand their customer and employee cultures, or better yet, those that can shape it, can gain game changing advantages over those that don’t. Those that don’t try to understand these cultures can continue to expect high strategic failure rates – like the classic 80% product failure rate that has been plaguing modern companies for decades.

You see – culture trumps strategy. You can develop the best internal or external strategies – change management initiatives, new product development plans, or go-to market strategies –, but if you do not have a good understanding of the cultures in which you will attempt to deploy these strategies, they are almost certain to fail. That does not mean that strategy is not important – it is. It just means that focusing on strategy without understanding the fundamental Human 1.0 cultural characteristics that underlie all successful strategies is like focusing on a recipe without having any understanding of the ingredients.

We have developed a fully comprehensive maturity model to analyze consumer and employee cultures, and I will document that in a future blog post.

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How to measure culture within an organization

Being in the process of writing a book on culture, we quickly got frustrated with the existing models to evaluate and measure culture. We found many models such as the Power Distance Index or OCAI  to be overly simplistic. Plus, they often uncover only the visible parts of culture. We wanted a model and process that would allow us to accurately describe all the subcultures, including the hidden ones.

And so we started developing the Hyper-Social Culture Index. The Hyper-Social Culture index borrows from some of the other models, as there are good elements in all of them.

The index is a maturity model that analyses corporate cultures and subcultures on 8 different axes.

  • Individual Behaviors: Learning vs. Knowing (includes the degree to which people strive to learn from data and results, will engage in debate, will adopt others’ processes, and will study failures)
  • Trust: High trust vs. Low Trust (includes the degree to which people desire trust from the organization and from their peers, and how vigorously people will express disagreement with management)
  • Passion: Passion at Work vs. Day at Work (includes the degree to which personnel feel passion for their daily work, interest in staying with their present employer, pride of belonging to the organization, and interest in taking on new work challenges)
  • Risk Profile: Risk Intelligence vs. Risk Intolerance (includes the degree to which personnel will willingly risk failure in the pursuit of progress and will assume accountability)
  • Organizational Structure: Tribe vs. Hierarchy (includes the prevalence of hierarchical power structures, organizational silos, self-assembled teams, etc., and the manner in which decisions are made)
  • Organizational Beliefs: Human Centric vs. Company Centric (includes customs and norms that demonstrably place people (customers and workers) before organizational interests such as financial gain or products)
  • Problem Solving Culture: System vs. Component (includes practices and attitudes that foster integrative thinking about value creation as opposed to simple task performance)
  • Knowledge Culture: Sharing vs. Hoarding (includes customs and practices that encourage the sharing of information, status, and other elements that the organization deem valuable)

We use surveys, ethnographic interviewing techniques, participant observation techniques, and online business problem challenges to gather the information that can populate the maturity index. So far we have been able to use the model very successfully to help large organizations improve their innovation processes and successfully go through change management programs.

We are continuously refining the model and if you or someone you know could give us feedback we would very much appreciate that.

In a future post I will describe how we use consumer culture modeling to to drive successful new product strategies.

 

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Do we really have to deal with multiple layers of culture at work?

Many culture scholars would argue that you always have to deal with layers of cultures. There is the gender layer, the religious layer, the ethnic layer, the regional or nationality layer, the work layer, etc. And if you have ever worked with multinational companies you will hear these differences, and especially the nationality one,  pop up every now and then — oh, but that was an American idea, we Brits don’t do it that way.

But does it really have to be that way? Or are they just excuses?

After all, some companies claim that they don’t have to deal with national cultural differences. Francoise Legoues, VP of Innovation at IBM, said that they do not see much corporate culture differences within the various geographical cultural areas. Some other folks I had the pleasure to speak with in the context of our book said the same — they do not have to account for differences in regional or national cultures.

So how does this work?

Culture is an externalization of shared beliefs and values. The way we externalize it is in the form of rituals, language, habits, techniques and behaviors.  What companies claiming to not have to account for local cultures have is a set of corporate values and beliefs that trumps the local cultural belief system. When people are at work they are IBMers first, and not Danish, Spanish or Thai.

So what happens in those companies where people constantly bring up the differences?

It too is part of the corporate culture and not an externalization of the local regional culture. In most cases it’s an excuse to disagree and form factions. It’s a corporate habit – and a bad one. It’s an externalization of a set of shared beliefs held by subgroups of people within the company. It happens when there is no strong corporate set of shared beliefs.

Now of course, nothing dealing with humans will ever be so black and white. There are, for example, some differences in how Asians, who have a more collective culture, fill out their profiles in social environments than Westeners, who have a more individualistic culture. But those differences are subtle and secondary or tertiary in companies with strong corporate cultures and true shared values.

What do you think? Do you buy that?

 

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Do you need an ROI to justify becoming a (hyper-)social organization?

Really — do you? What is the ROI on your phone system, or your conference room?

A recent set of articles such as this one in Digiday or this one in Fast Company tackle the issue of social and ROi — a real interesting topic.

Let’s start by taking a closer look at what it means. In our book, The Hyper-Social Organization, we define companies that are successful at leveraging the social as those that have been able to turn their business processes into social processes. That does not mean slapping those processes on top of social media — but it means powering those processes with people, or humans, and to anchor those processes in what we termed human 1.0 characteristics like reciprocity, fairness, status and power, tribal social instincts and the like. So in a way, succeeding at leveraging the social is allowing your employees to behave like humans with customers, prospects, partners and potential employees. Some call it humanizing your company.

Those companies that are able to humanize their company derive unbelievable benefits compared to those that continue the old ways of behaving in the marketplace — more loyal customers, more positive word of mouth (which leads to twice the amount of new business than traditional marketing programs), and more loyal and passionate employees.

Which brings us back to the ROI question — how do you calculate the ROI of becoming human in the workplace once again? You don’t.

Now what people talk about when they think ROI of social media programs is the ROI associated with traditional marketing programs run on top of social media platforms. But succeeding at leveraging the social in business is fundamentally much more profound than running traditional marketing program like couponing on top of those social platforms.

What do you think?

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You don’t want to turn your business into a social business

For someone who co-authored a book on how companies that succeed in leveraging this current wave of innovation, powered by the social, do so by turning their business processes into social processes, it may seem contradictory to now hear that you should not turn your business into a social business.

There are several reasons why those two concepts are very different. And most pundits declaring that  you should be building social businesses are missing the point.

First off, a social business (see WikiPedia entry) has been defined by Nobel Peace Prize laureate Professor Muhammad Yunus inhis book Creating a World without poverty — Social Business and the future of capitalism as a “non-loss, non-dividend company designed to address a social objective within the highly regulated marketplace of today. It is distinct from a non-profit because the business should seek to generate a modest profit but this will be used to expand the company’s reach, improve the product or service or in other ways to subsidise the social mission.

If you’re GE,  IBM, or Pfizer, you may not want to turn your business into a social business.

What you want to do is to power your business processes with humans and the social characteristics that have been innate to them for tens of thousands of years . You want the individuals and their creativity to help you humanize your brand, you want people from outside your R&D department to help you innovate, you want human employees (as opposed to corporate automatons programmed to stay on message with corporate speak) to engage with humans who may want to buy your products or come to work for you.

Companies that found the key to making this work do end up with social benefits — happier employees, happier customers, tighter-nit communities, etc. — but they do not need to become a social-objective driven enterprise to do that.

You want to turn your business into a human-powered enterprise, we called it a Hyper-Social Organizations,  not a social enterprise — and therein lies a big difference.

What are your thoughts? I will try to get back to more regular blogging…(and I know you’ve heard that one before :)

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Commentary on “Principles for Building a Successful Social Business Strategy”

The students at Baruch College’s Executive MBA Cohort 31 read our book, The Hyper-Social Organization, and authored a detailed blog post with 9 principles to build a successful social business (http://baruchemba31.blogspot.com/2012/01/principles-for-building-successful.html#comment-form). They invited me to engage in the conversation with them, so here are some of the comments I have on their great piece.

On the first principle — Objectives Should Complement Strengths and Help Overcome Weaknesses –I would add that a social business strategy can humanize a brand and therefore make it more appealing to people. People relate better with other people than they do with organizations, which are a relatively new concept when compared to human evolution ( I wrote an article on this here: http://www.imediaconnection.com/article_full.aspx?id=29788 and also here in terms of how to think of social and brands – http://www.emergencemarketing.com/2011/06/25/creating-unified-customer-experiences/)

On Point II — An Executive Sponsor (VP Social Business) Should Champion Social Business Strategy and Lead Culture Change – I agree. For many (older) companies this will mean a real change management process — and that can be painful.

But I do not agree with Point III — A Single Department Should Own Social Media. I think that when successful, social needs to become part of the fabric of the company. If you give “ownership” to a department then you will end up with one more silo. Customer support needs to embrace it, IT needs to embrace it for their knowledge management and innovation, HR needs to get on board, product development. It is not just marketing and communications. You want to be like IBM, where there is no corporate twitter feed, no corporate blog, but where the employees — all employees — are encouraged to be the face of the company. See my interview with Erin Nelson, the former CMO at Dell where she talks about that http://www.cmotwo.com/2010/03/04/cmo-20-conversation-with-erin-nelson-cmo-at-dell-and-manish-mehta-vp-of-social-media-and-communities/).

I agree with point IV — A Social Media Policy and Process Toolkit is Necessary–, but you cannot be too rigid. Policies need to viewed as guiderails more so than as rigid “do this and DON’T DO THAT or else” type tools. Again, at IBM they developed guidelines, in partnership with the employees, which are encouraging rather than discouraging. The same happened at other companies like Xerox. Because the risks of screwing up are egalitarian (e.g., the CEO is as likely to mess up as the junior communications employee, and the personal risks are as high as the company risks), there is a great opportunity to mitigate risk through education.

On Point V — Technology Platforms and Investment Decisions Must be Identified Early –, I agree, but would caution not to start with technology. My partner, Scott Wilder, who used to run all communities at Intuit, used to say – if your community would not survive in a Yahoo! Group, it will probably not survive anywhere. Companies tend to start with the tools and technology, where they really should start with the tribes and their shared passion, pain and interest. They then need to pay attention at what the day in the life of a user would look like if this were to be successful. It is really product management 101 to determine the features and then select technology that will meet that need.

I agree on VI — A Communications Hub Should be Created by the Social Business Dept –, although many companies give in to the loudest megaphones on social platform and they fix the problems of the individual loudmouths instead of focusing on fixing the problems that affect everyone. A company that truly gets that is JetBlue.

I agree with VII — Trust, Train, and Certify –, although I would say that what you want to do is to allow employees to act as humans again in the work environment — and humans know how to behave as humans. Look at your families and circles of friends — it can get messy, and some people will screw up, but we know how to deal with that. So TRUST is maybe the most important aspect to focus on. Don’t build the system for the 1% of people who will screw up — build it for the 99% who will benefit from it.

On Point VIII — Be Human, Be Transparent – transparency is important, but the more important characteristic is fairness. Sometimes a company cannot be transparent, but as long as that is explained in a fair way, employees and customers will understand.

On Point  IX — Social Analytics Must Drive Key Strategic Decisions — I am not sure that I completely agree. Yes, social analytics are important. But more important is to measure the impact of a social program on a process the same way as you measure the impact of other programs on the process. So for example — if you leverage social programs as part of customer support, measure the impact the same way as you would measure the impact of the call center on customer support; if you use social programs for lead gen purposes, measure the impact the same way as you measure the impact of email marketing, etc.

But the point that you are making about mining the big data that comes with social and digital marketing is a great one. Companies need to stop storing, securing and serving up that data in fancy reports and instead mine it for actionable insights like pricing strategy, marketing strategy, distribution strategy and product development strategies.

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CIO 2.0 Conversation with Dan Greller, consultant, speaker and ex-CIO at Legg-Mason

dan_grellerDan Greller, the former CIO at Legg Mason, and currently technology innovation consultant, speaker and writer (with a great blog), was kind enough to join me for my second CIO 2.0 Conversation.

Dan has 30 years of experience managing global technology organizations, mostly within the financial services industry. Having first entered the job market when the debate between mainframe and desktop computing was raging, Dan has seen his share of technology innovation battles – which made it particularly interesting to discuss this latest battle between innovation and control taking place within most companies around adopting new technologies.

According to Dan, that balance between innovation and control has remained the hardest balance for CIO’s to manage. Between the increasing demands that organizations put on their IT departments and their CIO’s, the accelerating pace of change, and the ease with which employees can now bypass their IT department – that balance will become harder to manage, not easier.

The consumerization of IT, which refers to the phenomenon that consumer technology innovations are increasingly driving enterprise tools development, and also to the fact that many employees now expect their personal tools – their phone, tablet and home laptops – to work within their work environment, is clearly here to stay. The user experience that enterprise tools provide sorely lacks the experience that consumer services provide. Think of doing a Google search vs searching for content in your corporate knowledge management system, compare your corporate procurement process with the Amazon buying process, or look at how your corporate software provisioning differs from the experience you have in the iPhone or Android app stores. There is no comparison, and it is that difference in experience that leads to the consumerization of IT. CIO’s react to these forces in different ways – some say NO, and some put their head in the sand. Clearly neither one of those strategies is a workable strategy. Both will leave your users dissatisfied and relegate your IT department to irrelevance. CIO’s need to partner with key constituents and business unit owners and decide on strategic technical directions that match the culture of the company and deal with the risks associated with those strategies – human resource (HR) risks, compliance risks, legal risks, reputation risks, security risks, IP leakage risks, etc.

Risks are a thorny issue for many companies, and one that can stop innovations in their tracks. Many people, who by nature are averse to change, will hide behind potential risks, often unreal ones, to avoid having to deal with that change. In assessing risks, Dan suggests that people look at the Netflix manifesto about their culture, where they talk about a concept called the waterline. The way they look at decision-making and risk is that they think of their company as a boat, and they think of decisions being above or below the waterline. If a decision is below the waterline, then the risks of having something go wrong is much higher than if the decision is above the waterline.

We then talked about the changing role of IT and CIO’s as it relates to shifting their position from order takers to strategic business partners. CIO’s need to be the leaders who understand technologies and how they apply to the business. They need to be the ones that recommend and provide guidance on how to leverage social computing, mobility, universal access, cloud computing and “big data” as part of business processes.

Social computing should be on every CIO’s agenda, not because it’s a fad, but because eventually it will have to become part of every enterprise process and the systems that support them.

On the topic of measurements, Dan believes that there are two types of measurements – hard measurements and the anecdotal comparisons with peers. And while Dan is not a big proponent of hard benchmarks, which would require the ability to compare apples with apples, something that is virtually impossible in diverse organizations,  he does believe that comparisons with other people and companies in your industry are important. This makes sense in a competitive environment where the winner is the one that can stay ahead of the others. One of the most important measurement criteria for IT departments should be customer satisfaction, but that needs to be balanced with metrics that reflect the increasing strategic partnership that needs to exist between IT departments and the business units.

Culture trumps all and CIO’s should be thinking about culture as part of everything they do. It is what motivates people to do what they do, and it is what ultimately determines the effectiveness of all organizations. Dan believes that companies should listen to Daniel Pink when he says that people have three motivations, autonomy, mastery and purpose. They want to have a say in their destiny, they want to be recognized as a master in certain fields, and they want to be connected to a higher purpose. It’s important to have a culture that understands and promotes those values, both for your employees and also for your customers.

To create or change a corporate culture, you need to articulate where you want the culture to be, communicate it clearly with your employees, walk the talk, and reward and recognize behavior that supports that culture. The latter is especially important for IT departments, where metrics around on-time delivery and zero tolerance for failure have often stood in the way of creating a collaborative and innovative culture.

Dan ended the conversation with a few pieces of advice for IT professionals – don’t just focus on the bits and bytes, but focus on humans, their cultures and their biases; reach out to other disciplines like psychology and economics; think beyond your technical expertise when you think about the competencies that are needed to get your job done.

Well said.

Other things that we discussed include:

  • How smart companies now deal with risks through a combination of education and guiderails rather than through policies alone
  • The importance of e-discovery and archival systems in regulated markets
  • The positive aspects of operating in regulated environments where everything gets recorded on business communications
  • The importance for CIO’s to stay abreast of what happens to their industry by networking with peers
  • How companies and individuals deal with innate human/cognitive biases like the confirmation bias

As usual, you can listen to the actual podcast at the CMO 2.0 Site.

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CIO 2.0 Conversation with Shirley Cunningham, CIO at Monsanto

shirley-cunninghamMy first CIO 2.0 conversation with Shirley Cunningham, the CIO at Monsanto, was truly a 2.0 conversation. Shirley has a rich background. Hailing from Scotland, she held many positions in MIS departments (Management Information Systems) across various industries before joining Monsanto in the late 90′s through an acquisition. She became the global CIO 3 years ago.

As CIO at Monsanto, Shirley is a member of the strategy team. Becoming a member of the strategy team came with a change in role for  IT – that from being an order taker to a strategic partner sharing responsibility for the business’s growth. They morphed from being the implementers of ERP systems and other technologies to a team that now worries about customer space transformation though information and technology, advanced decisioning, and customer and product pipeline. And while the IT department at Monsanto supports all functions, most of its resources are dedicated to R&D and the customer space.

Being a strategic business partner rather than a support organization requires a deep understanding of the business – that is why over 35% of Monsanto’s R&D IT group has science backgrounds with 10% having PhD’s. They don’t just support the product development process – they are a key driver of it. This shift from being a more traditional IT department not only required a whole new level of leadership; it required a complete mindset shift. If you would have asked a random person in IT what they were doing a few years ago, they might have answered “I am an Oracle DBA.” Today, you are more likely to get the answer “I support a system that helps us collect $3.5B in revenue.”  People now think of their jobs in terms of the value that it delivers to the company, which is not just great for the company, but also energizing for the individuals. And therein lies a virtuous circle – when people are more energized, you have more innovation, more creativity and thus more energy and excitement.

They have a metric-driven culture. Not just one where they focus on understanding the cost of transaction and other classic metrics, but one where they measure the outcomes and values of technology usage. So they will measure the value of being able to assemble a genome on their product pipeline and their ability to commercialize products. A dedicated, and very agile, enterprise information management group helps them do that.

Word of mouth is very important in the agricultural space – with most of it happening in coffee shops. As some of those conversations are moving online, it will be very important for Monsanto to have a seat at those virtual coffee shop tables. That is one reason why Shirley thinks there is a lot of value in having employees be active in communities and social media. They are still in the early days, but plan on developing this capability in the future.

Monsanto is of course known for its culture of innovation – which is driven by its overarching goal to double the yield in agriculture within the next few years. They are passionate about innovations that impact sustainability and they think really big when it comes to their mission. This “change the world”  type attitude makes for a great innovation culture – one in which people constantly think beyond the boundaries. It also helps with the type of people they attract to the company.

Monsanto actually started an innovation lab – which is unencumbered by corporate standards – and where people can work on getting early proof of concepts. Employees first submit ideas to peer review, after which a VC-like board approves funding for further development.

Innovation at Monsanto is not contained to its corporate walls – they also co-innovate with suppliers and academia. Cross-enterprise innovation takes a lot of effort on both parties, and there always needs to be clear win for both of them.

Another interesting aspect of Monsanto’s culture is the fact that they are  non-hierarchical. They have been operating that way for 15 years and they seem to be one of the only companies that has been able to achieve this at scale. Solid lines and dotted lines like you would find in typical matrix organizations are non-existent – everyone has multiple solid lines. Those employees that come from more structured organizations take a while to get used to this non-hierarchical structure, but ultimately it makes for a great place to work. People know that they can walk in and talk to anyone, including the executives.

In closing Shirley had a few words of advice for executives at other companies – CIO’s need to step up and take ownership for things that they traditionally would not have done before so that they can have a bigger impact on the business, and they need to take more risks.

Well said – Shirley is clearly a 2.0 CIO.

Other things we talked about include:

  • What worked and did not work with the “two-in-a-box” concept of pairing up a business leader with a technology leader
  • The consumerization of IT and how all companies will have to be ready for that
  • How they deal with risks, like IP leakage risks, through awareness and education
  • The importance of being active on a local community basis while being a global company
  • The role of rewards and recognition within an innovation culture
  • The importance of a successful collaboration culture in an innovation culture
  • The role of values and the importance of reinforcing those values to ensure a good corporate culture

As usual you can listen to the conversation on the CMO 2.0 site (and yes we will be setting up a CIO 2.0 site soon)

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