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Archive for October, 2005

Explaining Customer Innovation

October 31st, 2005

One of the difficulties I encounter when explaining the concept of customer innovation is that the "Innovation" word is traditionally associated with products and technology. There is a section in The Only Sustainable Edge by Hagel and Seely Brown that eloquently defines Innovation from a much broader organisational and strategic perspective:

We underscore the importance of innovation but we use the term more broadly than do most executives. Executives usually think in terms of product innovation as in generating the next wave of products that will strengthen market position. But product-related change is only one part of the innovation challenge. Innovation must involve capabilities; while it can occur at the product and service level, it can also involve process innovation and even business model innovation, such as uniquely recombining resources, practices and processes to generate new revenue streams. For example, Wal-Mart reinvented the retail business model by deploying a big-box retail format using a sophisticated logistics network so that it could deliver goods to rural areas at lower prices.

Innovation can also vary in scope, ranging from reactive improvements to more fundamental breakthroughs… One of the biggest challenges executives face is to know when and how to leap in capability innovation and when to move rapidly along a more incremental path. Innovation, as we broadly construe it, will reshape the very nature of the firm and relationships across firms, leading to a very different business landscape.

Although Hagel and Seely Brown’s book provides a great analysis of capability-building and new innovation mechanisms at the edge of organisations (through new dynamic forms of firm-firm collaboration) and specialisation, their discussion largely omits the customer-firm colloboration, open innovation perspective. But, from Hagel’s most recent post and article in the Mckinsey Quarterly, this seems like it could be the subject of their next book! Here is a quote from the article:

Cocreation is a powerful engine for innovation: instead of limiting it to what companies can devise within their own borders, pull systems throw the process open to many diverse participants, whose input can take product and service offerings in unexpected directions that serve a much broader range of needs. Instant-messaging networks, for instance, were initially marketed to teens as a way to communicate more rapidly, but financial traders, among many other people, now use them to gain an edge in rapidly moving financial markets.

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Supplier-centric log on. Buyer-centric log-off?

October 17th, 2005

Lloyds TSB has moved a step ahead of the game in ID theft, by introducing a two factor authentication (2FA) solution to a pilot group of 30,000 online customers.   It’s all part of the bank’s BankSecure drive to shore up public confidence in remote channels.

Customers get an RSA-style tag which generates unique number every few seconds, which must be entered into the online banking portal before conducting transactions.

Of course, it’s a long way from the sort of federated single sign on (SSO) solutions advocated by most technology specialists, but it does represent a critical emotional step for the bank in recognising that the ID anxiety is increasingly centred not around ID theft, but around false ID use.

The ‘downstream’ ID-spend risk is just as critical as the ‘upstream’ ID-theft.

Credit to LLoyds for recognisig that the critical point of fear for customers does not lie in disposing of their back statements, but when they access their accounts.

Two right-side up thoughts occur to me:

1. The natural next step will be to offer a 2FA log-on in call centre environments too…as it can be used to prevent account abuse by internal staff.  I wonder if they will.

2. What happens at the end of a transaction?  Shouldn’t there be an equivalent rightsideup number-matching log-off process, through which the bank reassures the customer that the data session has been exited?  The customer would check the bank’s log-off code was accurate.

This would require something more than a number generator at the customer end of course, but a mobile phone could probably manage the task…

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