Why the enterprise is the next hub of innovation
Back in 2011, eHarmony was the online dating standard. That is, until startup OkCupid rocketed to internet popularity. Just like that, eHarmony realized it needed to start attracting a younger generation, fast. Instead of completely reinventing its core product, eHarmony incubated its own twenty-somethings with online dating startup called Jazzed.com.
In lieu of relying on an official YouTube channel, the National Football League created their own microsite for exercise videos. NFL Up! showcases popular professional football athletes performing a variety of exercises to inspire fans to both watch and replicate the workout routines of their NFL heroes, and in turn, raise the league’s brand visibility across all ages.
And in Intuit’s Small Business Group, their in-house subscription-based publication turned readers into paying QuickBooks customers. But Intuit’s agile marketing strategy used SEO as the number one driver for sales, preserving their position as the leading financial and tax software company (despite early stage fintech companies clipping at its heels).
eHarmony, the NFL, and Intuit – all leaders of their respective industries. All at one point or another found themselves suddenly fighting to stay relevant to their customers. Why? Silicon Valley startups were trying to disrupt the industries that these companies had dominated. Then as now, disruption from more agile startups is cause for great concern in the enterprise. With new ankle-biters emerging from the incubators of downtown San Francisco seemingly every week, larger, more established companies have to think of new ways to innovate in order to preserve their position in the market.
But eHarmony, the NFL, and Intuit do have another thing in common: Josh Schachter. As an experienced product leader across tech, sports, and finance, Josh has helped enterprise companies compete against some of tech’s most promising startups using those startups’ own tactics—and win in the process.
He’s spent the greater part of his career introducing the “startup model” to legacy companies, guiding them through major changes as they innovate and build products for today’s tech-first world. After years of being the in-house “startup guy”, Josh now works at BCG Digital Ventures. He partners with BCG’s most influential clients to help them incubate, build, and launch some of their first tech-driven products.
“BCG Digital Ventures is playing into this larger trend of corporate venture capital,” Josh says, “We’re focused on establishing powerful innovation labs in legacy companies so they can have the same agility and ingenuity as today’s greatest startups.”
Not only are these labs essential, but they’re also a business imperative for older companies to avoid being taken out by early stage ones. But for Josh, the self-proclaimed “startup mercenary,” he’s up for the challenge. In his eyes, the enterprise sector is the next hub of innovation.
Understanding the customer journey
Josh points to one of the most critical aspects to a large corporation’s web or mobile services – making user experience its number one priority. It’s not about providing every piece of information for the customer to figure out. Rather, it’s giving users exactly what they need so accomplishing a specific goal in their product becomes effortless. While a science backed data-driven approach is key in these product decisions, building elegant technology products is a fine art, which is why, in recent years, larger corporations have called in the experts.
“At BCG Digital Ventures, not every initiative is created equally, so of course we don’t apply the same framework for building and measuring products across the board,” Josh says. With every initiative BCG Digital Ventures takes on, the only “non-negotiable” is data. Whether it’s market research, qualitative, quantitative, data is the foundation for a solid product no matter what size the company.
“There’s definitely more gravity around qualitative research when we’re going through initial product ideation – what we call the innovation process – but once we enter our incubation phase and have a pilot product, we layer in analytics to take that data-driven approach,” Josh says.
“Data becomes tantamount, if not paramount, to other vectors,” he continues. “In fact, data should drive each decision on your roadmap, especially when you’re incrementing and improving your product.”
Data is the key to iterating like a startup (and compete with them, too).
“That being said, when you’re working with pilot data, you need to supplement it with qualitative information. Because if there are only a few hundred users using a new app, gaining statistical significance is tough. So, a good entry point to incubating and improving, say, a new app for a big bank, is to deeply understand their customer lifecycle,” Josh explains.
From acquisition to onboarding and engagement, data informs a product team on how to iterate the product to drive a specific user behavior.
“When I’m trying to iterate on a product, I need to carve out segments based on the customer lifecycle, like acquisition, signup/download, registration, et cetera. That way, I can look at each stage in isolation from one another. Then, I’ll look at how each stage works in succession of one another,” Josh says. “Because each stage of a product’s lifecycle is only as good as the previous one, right?”
BCGDV framework for product decisions
One step at a time
Whether it’s with segmentation, funnels, or retention capabilities and reports, Josh always drills into the data to understand user behavior. Are they signing up? Are they logging in? Are they onboarding?
“Onboarding and priming a user for a great first-time use is critical,” Josh says, “because once users are in the app and using it, I’m focused on learning how these users engage, so I can understand how the product encourages our users to take a certain action and come back again.”
When working with his clients at BCG Digital Ventures, Josh likes to break down the product into three clear stages – subscription (or engagement), retention, return-engagement.
“Sure there are major differences with each company; however, I find this to be a very intuitive product framework to describe to my clients,” Josh says. “But there’s a caveat – all those stages don’t really matter unless the onboarding sets a user up for success, right?”
Josh harkens back to his time with eHarmony and Jazzed.com. Like many online subscription-based communities, eHarmony was only as successful as the number of users who got through the entire onboarding, which included completing an intensive survey, qualifying for the service, and then learning how to navigate the site. According to Josh, there’s a way to guide your users through a series of detailed actions, but the first step is to understand what your users are doing in order to figure out how to encourage them to take the next step.
In these multi-step onboarding processes, Josh and the BCG Digital Ventures team take clients through one of his favorite exercises: activity waterfalls.
“First, I identify the behaviors you want to trigger for a key action in your product. Those key actions should have some kind of direct or indirect correlation with your goals, adoption, subscriptions, whatever,” Josh explains. “At which point, you want to identify the percentage of your cohorts that are actually hitting those milestones. What’s the percentage of my users that have started onboarding? The percentage that have completed onboarding?
“For example, if I go to the dating world, it would be the percentage of users that have completed their profile, the percentage that have then looked at somebody else’s profile, the percentage that have then sent a message, and so one.”
The importance of knowing these percentages is to understand how cohorts reach important milestones. And each milestone should take a user through the conversion funnel, turning an active user into a committed subscriber or a paying customer. When working with an event-based tracking solution, looking back on your data can give you the insight you need to know how you’ll earn your future customers.
Analyzing for a desired outcome
When incubating Jazzed.com, eHarmony was gearing up for a younger group of daters. Josh worked with the company’s data science team to figure out which sequence of events led to a paying customer. In fact, there are a number of ways to figure out what events lead to a desired outcome, but in this case, Jazzed.com opted for regression analysis.
“We ran a regression analysis on our users, which is a mapping of all our different user behaviors and the predictability of a subscription conversion based on those behaviors,” Josh says. For those who aren’t familiar with regression analysis, it can be simply described as a statistical model that estimates the relationship between a few variables, e.g. when X happens, there’s a certain percentage chance that Y will be the outcome.
It was through this regression analysis that Jazzed.com’s team was able to find a correlation between actions like the number of logins to the number of profiles viewed to the number of messages sent, for example. If a user hit certain benchmarks, there was an increased likelihood that they would subscribe.
Regression analysis is just one approach any type of product team could explore. Because as soon as a team discovers that key metric found through analysis, a product org can build features, send notifications, and revamp the onboarding process with the specific intent to drive more users to reach that benchmark. Using regression analysis isn’t just for early staged pilot products. It’s a metric continuously monitored, even when a product is scaled to a billion users. Some of the biggest brands, such as Facebook and The New York Times, have done similar regression analyses to understand how their customer journey impacts conversions.
Although performing regression analysis seems complex, it’s important to note that when a big company, like an investment bank or CPG manufacturer is experimenting with building new technologies, it doesn’t need to allocate a team’s expensive engineering resources on doing regression analysis.
Today, product analytics solutions grant data-driven product managers, developers, and growth marketers the ability to dive into the data without relying on a big team of data scientists or engineers. That way, data scientists can focus on building far more complicated reports, and product engineers can keep to scaling the product.
With the right product analytics solution, anyone on your team can get answers to these kinds of questions with flexible reports. And for team members with developer skills, doing regression analysis reports can be accomplished using querying languages.
Once a product team discovers the right metric, then it’s about optimizing all the features to ensure that most users hit that metric, too. Product teams often optimize its onboarding flow first. And when a company has built a web-based or mobile version of its product, the onboarding process is the perfect opportunity to establish trust with loyal customers.
“My current project is with a major financial institution, and we’re building a platform for existing clients of the bank to connect with digital advisors through this online portal,” Josh says.
For a company that’s building out a brand new digital product, on web or mobile, one of the greatest concerns is centered around keeping the digital experience consistent with the interpersonal or brick-and-mortar experience.
This is a common concern at the enterprise level. While keeping brand and UI consistent is key, the customer must innately sense that the company already knows them, and it’s business as usual – just in a new setting.
“Our audience is comprised of people who already have a relationship with the bank and trust the bank,” Josh says. “So in this online portal, we don’t need to build the relationship all over again; however, we still have to create consistency.”
According to Josh, onboarding processes like these are often delicate to build, mainly because every onboarding process has its own unique goal. “For other products, you might ask: Is your goal to create the relationship? Is it to get a subscription? Is it to qualify someone so it drive the product’s adoption?” he says.
In this case, however, a more delicate onboarding is crucial. “It’s really important to make onboarding a special moment for these users because that’s really what the product is all about,” he says.
During onboarding, the new online portal pairs a user off with an advisor, simulating the quality customer service that anyone would experience if they walked into a brick-and-mortar bank. And while being assigned an advisor is a small moment, it is also a pivotal one they wanted to get right. “That’s where the ethnographic and qualitative research comes into play, so you can really understand how messaging is going to connote your product’s value proposition,” Josh explains.
After talking to customers about what they would prefer – to be matched with an online advisor or choose one for themselves – Josh and his team decided to present a customer with a pre-matched human advisor would give their users a sense of comfort, to communicate that they were understood and were valued. And if users didn’t like their advisor match, they had the option to choose one for themselves. Josh was trying to replicate the experience of finding a financial advisor, a deeply personal experience, all through an online portal. And this online portal proved to not only be a scalable solution for the bank, but it also makes their financial services far more accessible to their customers. In developing a scalable solution for a major financial institution, BCG Digital Ventures also found a way to stay attuned with loyal customers.
Calling in the experts
Deeply understanding the customer in all settings is a key requirement when enterprise companies build their first tech product. For example, a customer’s expectations at a brick-and-mortar bank might be completely different from their expectations when using a web-based or mobile product. And that’s why a company partners with a team like BCG Digital Ventures. They’ve navigated the nuance, time and time again.
For larger corporations, nuanced product development is necessary because a corporation with decades under its belt doesn’t have the luxury of moving fast and breaking things. They need to get it right on the first try, and that can’t be done without the power of data.
In an age where corporations’ R&D budgets alone are larger than than some of the most well-funded startups, Josh and his team at BCG Digital Ventures see transforming today’s largest financial, healthcare, or CPG manufacturers into technology-drivers as incredibly exciting and lucrative opportunities. Certainly, innovation doesn’t happen with a push of a button. But it does when the startup model becomes the new process for the enterprise.