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January 06, 2006

Comments

Alan Mitchell

Thinking about it. I also had some comments on your other check-points.

1. “Value is created through the purchase process itself, not through the production process”.

Well, sort of. You could say that luxury or experiential retailing creates value through the purchase process itself. And that is not buyer- or person-centric. What is true, I think, is that person-centric businesses take a broader or ‘total’ view of value. While the seller-centric firm is concerned mainly the value of what he brings to market – of his particular product or service – the buyer-centric service seeks to address total cost/benefit, which includes the cost of acquiring the product and service, of using it (in the context of other products and services), repairing, upgrading, disposing etc. These are costs that (mostly) do not impinge on the seller, whose focus is on raising revenues by closing a sale. This is why sellers tend to ignore them.

Again, the real distinction here is not between purchase process and product but between whose overall costs/benefit equation we are trying to improve.

2. “Information divulged about the individual is designed to be sufficient for the individual’s purpose, not the organisations”.

The core point about person-centric services is that they see personal information as a personal asset/resource rather than a corporate one. Person-centric services help individuals make the best use of their personal information, maximise its market value, and so on. This is not on most sellers’ agenda. They want to use this information for their own purposes of finding and keeping customers. However, for transactions to work efficiently, the actual information divulged needs to meet both sides needs, not just one.

3. “Products and services are uniquely configured and priced for each user.”

Person-centric services start the value creation process with individuals’ needs and priorities (i.e. ‘unique configurations’; hence the critical importance of personal information, as per point 2 above), whereas most sellers start with a standardised product or service they want to sell. To that degree, person-centric services are ‘mass customisers’, by definition. (In fact, the notion of mass-customisation itself is inherently seller-centric. Its starting point is the standard product that the seller wants to sell more effectively . . . by ‘customising’ it.)

But starting with each individual does not mean that everything a person-centric service does will end up being uniquely configured or uniquely priced. As individuals, we are all different, but we have many similarities. There is nothing wrong with standardised products (and prices) which address common needs, especially if such standardisation helps reduce total supply costs. There are also many potential problems with customised pricing relating to ‘fairness’, trust, etc.

4. “The service question ‘how can I help’ is meaningful, and causes the customer to pause for thought.”

Wow! That is a really interesting, and important, point. One of the really big challenges – and therefore opportunities – for person-centric services is helping individuals clarify and articulate their wants and needs, which are often very hazy and not well understood even by the individuals feeling these wants and needs.

One of the truly important economic contributions of person-centric services will be their ability to do just this: to help people ‘pause for thought’ about ‘what helps’, and to gather, codify, aggregate, analyse and pass this information on to expert suppliers able to address these needs. This is how real demand webs (along with things like ‘co-creation’) will happen, as opposed to today’s archaic supply chains. This is central to the forthcoming BCCF discussion paper on Added Value Buying Services.

5. “The organisation breaks its own silos and boundaries to innovate on your behalf”.

Person-centric services will generate specialisms which are configured around how best to help individuals improve their economics (needs articulation, personal knowledge banks, personal information publishing services, added value buying services, solution assembly, etc). They will ‘break’ these silos and boundaries at their own peril. (Most silos and boundaries are generated for good reason).

This comment, I think, applies to product and service providers whose silos and boundaries are designed around their quest to improve the firm’s economics and which are incommensurate with the needs of customers. In other words, this is a challenge for sellers who wish to become ‘customer-centric’, not for person-centric services.

6. “Your (i.e. the individual’s) asset base conditions the service specification – not the organisations”.

I like this. It’s a direct follow-on from the core proposition of improving the individual’s economics. It’s organising supply around the individual, rather than individuals around the supplier. But for organisations with legacy systems it is damn difficult to achieve!

Alan Mitchell

Interesting set of points, Tim.

I would add one which goes before them all:

Buyer- or person-centric businesses earn their keep by helping individuals improve their own personal, economics (i.e. better use of their time, money, attention, information, emotional investments and so on).

This, I think, is the departure point from our current set-up which is focused on, and revolves around, improving the economics of the ‘producer’ – the firm – rather than that of the consumer.

Does this distinction matter, given that both sides have to meet and find some accommodation when they come to market?

I think so.

For any economy to be sustainably successful (I’m talking about commercially rather than environmentally sustainable here) both sides of a transaction need to benefit. So, for example, in a seller-centric environment buyers need to benefit from the value sellers bring to market.

Over the last century, sellers have been massively successful at doing this, unleashing a massive rise in living standards. So successful in fact, that we have come to believe that this is the only possible way of organising things. So that, in our current set-up, the only way for buyers or individuals to benefit is by first of all improving the economics of the firm. Only if the firm improves its efficiency, increases its revenues etc, can it create or unleash the value that can be passed back to buyers in the form of better products or services, lower prices, whatever. So all eyes are focused on how to improve the economics of the firm.

The intriguing question, however, is ‘what if we turned this on its head (or Right Side Up)?’. What if we focused first on improving the economics of the individual, and then looked to see what value this created or unleashed – value which could then be passed back to firms? (i.e. the same basic principle, but with a different directional flow.)

This would still create win-wins. But they would be a different type of win-win, revolving around a different centre of gravity: the individual, not the firm.

The easiest way to see the difference between these two scenarios is by contrasting marketing with buyer-centric services.

The marketer sits inside a specific firm and is charged with increasing that particular firm’s revenues (improving its economics). He or she usually does this by selling more. So he goes in quest of customers: to attract them, ‘delight’ them, keep them loyal and so on.

That is all wonderful stuff. But it is completely different to locating the go-to-market function with the individual with the aim of improving the individual’s economics. The individual ‘consumer’ doesn’t care two hoots whether a particular firm manages to sell more, more profitably, to loads of other consumers he doesn’t know. His priorities are different. He is interested in scanning the market to find the stuff that best fits his needs and preferences, at the best price, etc.

While the seller-centric model is structured around one firm’s dealings with many different customers, the buyer-centric model is structured around one individual’s dealings with many different sellers. This requires different processes and infrastructure, different types of information, different information content, different measures of success, and so on and so forth.

The seller-centric mind finds this utterly counter-intuitive if not positively dangerous. But, it turns out, if you do manage to improve the economics of individuals, all manner of potential benefit can flow back to suppliers. There are massive win-wins to be had here. Massive. But they are different to the ones most companies are currently investing most of their time, money and effort in pursuit of.

For example, it turns out that the reason why marketing is so expensive and wasteful is that it doesn’t address the needs of the buyer. So buyers pay little attention to it and don’t trust it. (The product may be designed to meet the customer’s consumption need; but the marketing is designed to meet the firm’s go-to-market need – to ‘sell more stuff!’). By addressing the go-to-market needs of buyers, buyer-centric services unleash the information, attention and input that sellers so desperately and expensively yearn for.

Similar effects unfold for a host of other types of person-centric service. By improving the economics of individuals, we discover all sorts of new and better ways to improve the economics of firms too. This is a win-win engine. But a different type of win-win engine – one which most seller-centric firms simply cannot see, just as most craft producers couldn’t see how Henry Ford could make more money by selling more cars at a lower price. (To the craft producer’s mind set, Ford’s approach was simply a disastrous formula for losing money on each transaction, many times over.)

I think this ‘business model’ issue – whose economics are you focused on improving? – is the ‘touchstone’ issue. Everything else follows from that.

Alan Mitchell

Tim K

Absolutely right, Alan.

Time spent justifying the boundaries and definitions of person-centric commerce is time wasted.

Far better to focus the spotlight on businesses (and not for profits) which are already person-centric.

But what indicators are there, that a business is person-centric?

Some thoughts:

1. Value is created through the purchase process itself, not through the production process.

2. Information divulged about the individual is designed to be sufficient for the individual's purpose, not the organisation's.

3. Products and services are uniquely configured and priced for each user.

4. The service question 'how can I help' is meaningful, and causes the customer to pause for thought.

5. The organisation breaks its own silos and boundaries to innovate on your behalf.

6. Your asset base conditions the service specification - not the organisation's.

There must be many, many more...

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