Netflixocrites

I can’t even begin to count the number of tweets I’ve seen in the past week or so harping on Netflix’s stock price drop on its announcements of customer attrition and reorganizaton.

Is the firm’s actions the right move or the wrong move?

I don’t know. But I’ll tell you what ticks me off: The number of people who blab on and on about how organizations need to innovate and reinvent themselves and make difficult decisions, and about how bigger isn’t better yada yada yada — and then turn around and blast Netflix for its recent decisions.

Isn’t Netflix doing exactly what many of these people have been advocating ever since they appointed themselves business strategy experts?

These people are nothing but Netflixocrites.

If you have canceled your Netflix subscription, I’ve good news for you: Your decision isn’t a proof point that Netflix made a bad decision.

Advertisement

Breaking The News On Twitter

I honestly and truly wonder what it is that motivates many of you to be the 7,657,423,012th person to tweet a news item.

Do you really think that you’re the first to tell your friends and social network that Steve Jobs resigned? Or that Google acquired a Motorola division?

Do you not scan at least a few tweets in your Twitter stream to see if anybody else tweeted the “breaking” news you’re itching to share with the world?

Does being redundant and useless not bother you?

It would be one thing if you were linking to a source that maybe not everybody read (I linked to Josh Bernoff’s blog post, so maybe I’m guilty as charged as well). But when you link to a HuffPo or TechCrunch article, you’re providing a link to the same story that 7,173,147,882 people before you did.

I have a theory that addresses the wonder I expressed above: Attention-deficit disorder.

No, not like the medical community defines it. Not “the co-existence of attentional problems and hyperactivity.”

No, I mean attention-deficit as in: Doesn’t get enough attention, and needs to call attention to oneself.

If you’ve got other theories explaining this behavior, let me know. I really do want to hear them. Because I honestly believe that if I better understand this behavior, maybe it won’t drive me as crazy as it does.

Ten Things You Need To Know So You Don't Suck When Giving A Presentation

I’ve written an eBook on how to give great presentations (or, at least, how not to suck so bad at giving one). It’s available for free for the first 1,000 people who download it. After that, the laggards who are late to the party will have to pay through the nose to be able to get their hands on this.

Right-click on the following link, and save the PDF file to disk by selecting “Save link as…”:

 

TenThingsYouNeedToKnowSoYouDontSuckGivingAPresentation

Well, the first 1,000 people got their free download, and so the eBook is no longer available here. However, it is available on Lulu.com for the measly price of $2.49.

Click on the book image to go to Lulu.

Becoming A Better Manager

A few days ago, as I was approaching the time for my scheduled mid-year performance review, I joked on Twitter that it’s a shame that my boss has to repeat himself every time we do a performance review.

I was only half-joking. Because it’s true. He does repeat himself. Every boss I’ve had has had to repeat him or herself. In an attempt to improve my “performance”, they’re always trying to get me to do something I either don’t do today, or don’t do very well.

It’s not that I can’t learn to do those things better. I don’t want to.

There are three levers a boss can pull to get me to change:

1) Plead with me. This generally doesn’t work, although I must admit I sometimes do what he asks me to for his sake, not for mine. I feel bad that I make him repeat himself, so I throw him a bone, and do something he asks.

2) Reward me. Believe it or not, this doesn’t work very well. What am I really going to see monetarily for changing my behavior? Two or three thousand dollars more a year? Not only is that not enough to motivate me to do things I don’t want to do, it misses an important point: Money simply isn’t my main motivator. (Apologies to my wife and kids).

3) Fire me. Go ahead. I’m actually delusional enough to believe that I’ll find another job in a reasonable amount of time.

In becoming a better manager, you’ve got to mentally calculate two scores regarding your subordinates: 1) their LAP score, and 2) their Freedom score.

LAP is an acronym for Look, Act, Perform. Like it or not, every boss has a mental picture of how s/he wants any particular subordinate to look, act, and perform. Sometimes these expectations are encoded in one’s performance metrics, but, in my experience, all of the mental expectations around LAP are never fully elaborated.  (There is the possibility that the boss’ LAP expectations are wrong or unrealistic, but we can’t deal with that problem here).

Now I hate to burst your coddled little bubbles, but there are precious few people (more specifically, knowledge worker types) — maybe 10% — that score really highly on the LAP dimension. Most of us are simply above average (that was a joke — if you don’t get it, look up Lake Woebegon). Seriously, though, we all tend to score higher on the formal assessments we have to go through — but many of these reviews simply don’t capture all of the boss’ expectations.

The other score to take into account is the Freedom score. This score is based on the extent to which an individual truly has and needs freedom to do what he or she wants to do, likes what s/he is doing, and is good at it. Maybe one in five of us score very highly on this. Our freedom to do exactly — and only — what we want is continually being challenged by bosses, clients, etc.

And we all have varying levels of acceptance with varying levels of freedom. I don’t think most of my bosses have really understood this: I do what I do because I need a very high level of freedom. I understand the tradeoff. I could never be one of those guys on Wall Street sitting in front of a trading screen all day — even if I could make a million dollars a year doing so.

Putting the two dimensions together yields the matrix below, with my (non-scientific) estimate of how many people fall into each box. The reality is that most of us are in the middle — decent performers with a decent level of freedom.

Show me somebody who scores really high on both dimensions, and I’ll show you a candidate to be CEO of your firm. Show me somebody who scores highly on LAP but low on Freedom, and I’ll show you someone about to find a job with another company. Show me somebody who scores really low on both dimensions and I’ll show you someone about to be shown the door at their company.

Here’s what makes managing so hard: In an attempt to raise someone’s performance (i.e., LAP score), managers are often inclined to take actions that reduce the subordinate’s Freedom score. This is where the Law of Unintended Consequence kicks in. With someone like me, reducing my Freedom score is likely to reduce my LAP score.

The hard part of managing is that managers have to figure out when to adjust their expectations, and when to reduce freedom.

An interesting thing happened in this most recent review session: My boss realized that he likes to do some of the things I really hate doing, and he suggested that if he do those things, he could then turn them over to me to see it through to completion — which I’d be more than happy to do.

I may be able to improve my LAP score, after all.

Pet Peeve #42: Bad Graphs

Disclaimer: I have a lot of respect for eMarketer. They do great work, and although I’m picking on one of their graphs, I mean them no disrespect.

OK, with that out of the way, take a look at graph below. See anything wrong?

Here’s what ticks me off about it: The 58.4% bar stretches all the way across the graph.

Think about this for a moment. This chart can be translated into words: “Talent was cited by 58.4% of marketers as a web analytics challenge. Actionability was mentioned by 47.3%. Finding insights was the third most frequently mentioned challenge…..” And so on.

What a snooze that would be. That’s why we use charts and graphs — they’re a more efficient (and perhaps effective) way to communicate something.

But when you stretch a 58.4% bar all the way across your graph you diminish the efficiency of the graph because you make viewers work harder than they have to to interpret the graph. A bar that occupied about half the space allotted to the graph would be perceived as having a value of about 50%.

But in the graph above, with the 58.4% bar taking up the whole space, it’s not only not intuitive that the value is 58.4%, but it makes it harder to interpret the other bars.

I see this kind of thing in a lot of presentations. Sometimes it’s the result of not consciously thinking about, but sometimes it is intentional. Like stretching a 20% bar across the space of a graph is going to make people think that 20% is a really big number.

Next time you construct a graph and chart for a presentation, think about how you use the space. And round the percentages down to no decimal places (exception: when the numbers are less than 10%).  When people have to work harder than they should to understand what you’re talking about, you’ve lost a little of your potential effectiveness as a presenter.

Financial Services Regulations: Intellectual Monstrosity

I spent a couple of days last week attending the Federal Reserve Bank of Chicago’s annual payments conference. If you’re involved in the world of retail payments, you should really attend this conference next year. As with other good conferences, what really differentiates this one is the quality of attendees. Lots of really smart people in the room, and what made it even more interesting was the mix of merchants/ retailers, FIs, academics, consultants, and vendors.

For me, the highlight of the conference was the closing session titled “Where Are We Headed?” Based on the panelists remarks, I think the consensus answer to that question is “further down the toilet we’ve already been flushed down.”

The four panelists were Glenn Fodor, Vice President, Morgan Stanley;  Ronald Mann, Professor, Columbia Law School; Omri Ben-Shahar, Professor, University of Chicago Law School; and Richard Epstein, Professor, University of Chicago Law School.

Unfortunately for Mr. Fodor, the three academics really dominated the discussion. What the three professors had to say, however, was very enlightening. Their comments touched on:

1. Financial product safety commission. Mr. Mann commented that the prevailing theory underlying the prevailing approach to regulation is that people will spend and borrow more than they should — causing greater level of distress — and that we need to impose behavioral limitations through regulatory actions.

Mr. Mann explained that this theory holds that products exploit consumer behaviors, and therefore need to be regulated. He did go on to say, referring to the proposed consumer safety commission, that it’s difficult to construct a federal agency for this.  As Mann put it:

“If you don’t know what makes a product “unsafe”, how can you have an agency to protect consumer safety?”

Epstein jumped in on this point, as well, commenting that “since the Obama administration doesn’t know what’s it doing, it might as well delegate it to an agency that doesn’t know what it’s doing.”

According to Mann, “there is a need in the market for credit products, and therefore, for risky products. Credit cards are an efficient way to borrow money — and the regulations negatively impact this.”

2. Disclosures. Professor Ben-Shahar has studied the role of disclosures in the financial services world, and has concluded that, by and large, they are ineffective. They lead to a “one-size fits all approach to risk” which, in turn, leads to negative impact for everybody. According to Ben-Shahar, there has been “no indication that an increase in disclosures has had any positive benefit.”

Epstein’s comment on this topic was that the government assumes that consumers are too ignorant to do anything but read government forms. But Ben-Shahar pulled out an example of one of these disclosure forms — a four-pager — and asked if anybody in the audience read it when they applied for a credit card. No one raised their hand.

What the professor did suggest, however, was that financial firms should show people how “others like me” deal with the payment burden –- and not just the total amount over the life of the loan.

3. Durbin amendment. None of the panelists were quite as outspoken — or as colorful — as Professor Epstein. Commenting on the Durbin amendment, Epstein called it:

“A monstrosity of the worst intellectual order”

According to Epstein,  the guidelines are “all nuts  — they only include incremental costs”, and that the result of the rules will be firms that are “too big too succeed” let alone too big to fail. Epstein agreed with a lawyer in the audience who suggested that the amendment will lead to financial firms creating affiliates with less than $10 billion in assets.

———-

I had a chance to talk with Epstein one-on-one after the session, and asked him to comment on my take on the regulations: That they represent a response to an environment (i.e., a market and economic environment) that existed in the past and is no longer valid. And a result of this changing environment, the regulations become less effective or relevant for both the current and future, and furthermore, will only help to retard economic growth moving forward.

He agreed. (Although, he might just have wanted to get out of there).

Comscore/ForeSee State Of Online Banking 2010

I always look forward to seeing Comscore’s State of Online Banking report and ForeSee Results’ annual Online Financial Services study, both of which were released this week. Lots of good stats this year, here’s what caught my eye:

Decline in debit as preferred payment type. No surprise that credit was down. But according to Comscore, the percentage of respondents who said that debit was their preferred payment was down four points, while cash increased a couple of points.  I’d love to see the generation breakdown of this. I know boomers and seniors aren’t big debit users, but Xers and Yers are. Can’t imagine them increasingly using cash in lieu of debit — unless they’ve been overdrawing on their accounts, and getting more disciplined about their spending habits.

Big bank dissatisfaction may be overstated. ForeSee found that satisfied customers total 80% at the Top 5 banks, 82% at the 6th to 10h ranked banks as well as at community banks, and 84% at credit unions. For all the noise that credit unions (and the #MoveYourMoney folks) make about the big bad banks and consumers’ mistrust of them, the differences that ForeSee found is absolutely nothing for credit unions to write home about.

Wells Fargo’s satisfaction number is up. It’s not unusual to see satisfaction numbers decline at a bank going through a merger. Customers of the acquired bank are almost always less satisfied with their new bank than their old one. I think that help explains the decline in satisfaction that Comscore reports at Chase/WaMu and PNC/Nat City. But Wells Fargo, which is in the process of integrating Wachovia, saw an increase in customer satisfaction of a few percentage points. Two possible explanations: 1) Last year’s number really sucked, or 2) They’re doing a good job with the merger. I think it’s the latter.

Online banking satisfaction is higher than e-retail satisfaction. Forbes recently picked up on a competing analyst firm’s report that “the websites of the six largest U.S. banks all failed a recent user-friendliness test.” Forbes concluded that banks “haven’t figured out the nuts and bolts of a simple website.” How about we put this in some perspective? According to ForeSee, satisfaction with online banking scored an 81 (1oo point scale, not sure if that represents percent or some calculated score). The top 100 e-retailers however, received a lower score at 78. And not that I would expect good scores from the government or non-profit sectors, but their satisfaction scores were even lower. The point: Banks ain’t doing so bad when put into some context.

Customer contact preferences. According to the ForeSee report, “only 2% of online bankers prefer that their bank not reach out to them. The vast majority (65%) prefer emails.” I can see the email marketing vendors jumping all over this number. But I think ForeSee is taking some undue liberties here. The question they posed to respondents was “What is your preferred way of receiving communications from your bank about your account?” To my mind, that does not encompass marketing communications. And in that light, it makes me wonder why there are even 2% of customers that wouldn’t want their bank to communicate with them about their account.

Innovation Snobs

Let’s get a couple of things straight, right from the top: 1) I’m not against innovation, and 2) I apologize in advance to anyone who is offended by the title of this post, thinking that I’m referring specifically to them.

It’s just that I don’t see it as the cure for and salvation to everything. And, sorry, but there are some innovation “snobs” out there.

These innovation snobs continually harp on: 1)  How firms need to “innovate” their way out of just about any problem or situation they get into, and 2) How firms that don’t “innovate” are somehow missing the boat, or doomed to fail.

Sadly, innovation snobs often fail to understand a couple of things.

First, is the difference between product and organizational innovation. This difference is spelled out very well in a whitepaper from Harvard Business School professor Gary Pisano called The Evolution of Science-Based Business: Innovating How We Innovate. The paper states:

Alfred Chandler taught us that organizational innovation and technological innovation are equal partners in the process of economic growth. Indeed, one often requires the other. Today, the technologies driving growth are, of course, quite different than they were a century ago. But, the fundamental lesson — that these technologies may require new organizational forms — is as relevant today as it was then.”

Maybe it’s just my perception, but it does seem to me that the innovation snobs continually beat the drums for technology innovation, and fail to pay attention to the organizational side of the coin.

This is especially true in the world of banking, where the list of technology innovations over the past 20 to 30 years is quite impressive: ATMs, online banking, online bill pay, remote deposit capture, mobile banking, PFM, debit card, prepaid cards. The list goes on.

Yet banks have been slow to innovate organizationally. Product- and channel-centric departments still dominate. Most banks can’t calculate a reliable customer profitability number. And marketing ROI measurement remains a black art.

I had a recent conversation with a senior exec at a credit union who, for the record, is not an innovation snob. He recently saw Hal Varian of Google present some really cool ideas about how organizations could radically change they way they do things using data from Google.

My friend asked me if I thought some of the ideas were applicable to financial services. My immediate thought was “hell yes! this is amazing stuff!” followed by “but, most financial services firms can’t even integrate their own Web data with their offline data, can’t figure out how to use behavioral and not just demographic data to make marketing decisions, can’t look past their own data to make pricing and risk decisions, etc. — how the hell are they going to incorporate Google’s data?”

The second thing the innovation snobs fail to realize is that imitation isn’t inherently bad.

In a Harvard Business Review article called Imitation Is More Valuable Than Innovation, a professor from Ohio State University:

Found imitation to be a primary source of progress, even though that progress often went unrecognized by executives and scholars. He also discovered that good imitation is difficult and requires intelligence and imagination.”

The point is that if firms only did things that reflected their own innovations, there are a lot of things we’d be missing out on. Just remember, all my little Apple Fanboy friends, that Apple did not create the graphical user interface. That came from Xerox. I don’t hear the innovation snobs taking Apple to task for this, though.

But hey, I guess there’s a market for innovation snobbery, primarily in the form of blog posts for innovation snobs to reinforce each other’s view of innovation as marketplace savior. And who am I to criticize someone for meeting the demand for something that’s out there.

Making Offers On PFM Platforms

Congrats to @pglyman and @kplynch for their quotes in an American Banker ($) article on customized Web ads. According to Lynch and his eCommerce manager, Steve Kruskamp, the PFM platform:

[W]ould let First Mariner pitch products only to people that might be receptive…the bank might use Geezeo’s software to note customers’ auto insurance payments, even those made to a rival insurance provider charged to another bank’s credit card. The software could then present an ad for First Mariner’s own insurance — and possibly persuade a sticker-shocked motorist to dump his or her current insurance provider.”

That certainly is the promise of PFM. But there are a couple of things that I believe that banks and credit unions will need to do to really capitalize on this promise. The best way to think about these “things” is to put them into two perspectives:

1. The FI perspective. Before pitching an offer for some other bank/credit union (CU) product — especially an insurance product — the FI needs to know: Is this customer a good prospect for this product for us? In other words, seeing that someone pays a car insurance bill is nice, but that’s no big deal — you’d be making a good bet if you bet that 90% of your customers paid car insurance.  The more important questions to address are “does this customer meet our underwriting criteria?” and “would we make this customer a pre-approved offer?

FIs also need to know whether or not they’ve made an offer for that product to that customer recently (or ever). Good marketers establish rules for how many times an offer will be presented to a prospect/customer, and the frequency with which those offers are made.

PFM presents a scenario to blow this out of the water. See a payment, make an offer. Disregard past (or current) marketing activity.

One of the biggest problems I foresee for FIs’ PFM implementations is the desire on the part of the online channel group to prove the “ROI” of PFM by making offers willy-nilly, then beating their chests heralding the “incremental” sales generated.  The potential for an even more disjointed marketing effort than what exists today is looming large.

2. The customer perspective. Kevin (or Steve, I forget who said it) said that the bank would make offers to people “that might be receptive.” That’s definitely the right perspective. But easier said than done, I fear. How do you know when someone is receptive? Simply because they just paid for a product or service? That could be too late, no? If the car insurance payment that the PFM platform captures is that customer’s first payment, then you’ve pretty much missed the boat on this customer, no?

Let me oversimplify things here: There are providers I do business with today. And providers who I might do business with in the future. For a change in providers to occur, there has to be an impetus for change.

If you’re under the delusion that simply putting an ad under someone’s nose is sufficient impetus for change, please stop reading this, and go back to Ad Age, or some other advertising blog.

A bank or CU using PFM as a platform to make offers must provide some impetus for the customer to make a change. Conceivably, it could be as simple as “We could save you 15% on that insurance payment.” Or — and I like this one even better — “Our other PFM users’ car insurance payments are, on average, 15% less than yours. Click here for more info.”

In other words, the bank or CU should use PFM to help make a customer become receptive. And if it’s going to promise a savings, it better damn well better be able to deliver on that promise — or the credibility of the PFM platform will be tarnished.

——

I’m very bullish about the potential for PFM in strengthening the relationship between banks and their customers, and between credit unions and their members. I see PFM as a platform for engagement.  And properly utilizing the data that PFM promises to provide should help improve FI’s marketing effectiveness and efficiency.

But here’s the lesson: Data is like a bullet. Bullets can be very powerful, and having more bullets is certainly better than having less. But used improperly, bullets can be dangerous and harmful. And having more bullets doesn’t mean that you have to shoot more often.

What FourSquare Means To Financial Institutions

The Financial Brand does an excellent job of putting FourSquare into perspective for financial services firms:

Most financial institutions are trying to push people out of branches — especially for routine interactions — by encouraging use of self-service channels. But a Foursquare promotion encourages exactly the opposite: frequent branch visits. If your financial institution builds a Foursquare promotion around mayors, you will be taking those who are highly wired, leading-edge, early adopter tech junkies and encouraging them to come into branches more often than they should.

Building a Foursquare promotion around the mayors of your locations may feel like the easiest and most obvious way to tap this social media platform, but it is probably the worst thing you can do. For starters, it really limits the promotion’s audience. There can be only one mayor at a time and there will likely never be more than 2-3 people who could possibly ever overtake him/her. So if you have five branches, a mayor-based promotion would mean something to only around 15 people.”

Banks and credit unions are missing the real lesson here: People like to play games. We like friendly competition, and we like to turn routine things into games to spice them up, make them a little more interesting.

So what should banks and credit unions do? Make a game out of interacting with the bank/CU. No, I don’t mean getting 5 points every time someone does some as meaningless as check their account balance.

But what about applying “game theory” to PFM usage? Construct a budget, get 50 points. Categorize your quarterly spending, get 50 points. Help someone else “in the network” set up their budget, get 250 points. Or more broadly, make a deposit into a savings account for more than $100, get 100 points. Give up paper statements, get 100 points. For every $10 you spend with your debit card, get 10 points.

Sound like a loyalty program? What in tarnation do you think Foursquare is? (Side note: Hypocrisy kills me. There are people who criticize rewards programs for “buying” loyalty instead of “earning” it, and then turn around and rave about some social media concoction like FourSquare).

The keys to success are: 1) Constructing a points scheme that rewards meaningful interactions and actions (this is why I keep harping on the importance of the concept of customer engagement, and how to measure it); 2) Making it social so people can see how they stand relative to everyone else, and to encourage some friendly competition; and 3) Integrating it with enterprise-wide marketing efforts.

Of course, if you prefer publicity over profits, feel free to pursue that Foursquare promotion.