Please be careful about this kind of journalistic hype! There are plenty of less-thoughtful folk out there who will just pick up the headlines and set off doing dumb things urged on by discussions like this.
‘Transformation’ is about the most exaggerated and over-sold concept in strategy these days. The reality for most organizations is that they should – boring though it may sound – just press on with continuous improvement and careful business development. Getting their top management worked up about transformation risks distracting them from the critical task of actually running the business and building strong performance.
Many examples that get this kind of hype are either glaringly obvious or modest adjustments to existing business. Netflix is hardly being a strategic genius in seeing it needs to deal with streaming, and plenty of companies see benefits in focusing on specific niches without claiming it’s a ‘total transformation’.Â
Unfortunately, a tranformational approach to an otherwise decent business can do extreme damage – anyone fancy selling a few sub-prime mortgages? .. how about another Enron? .. or maybe eBay should hook up with Skype and transform the way their buyers and sellers transact?

Bruce feels the word ‘churn’ should only be used for customer relationships based on contracts, e.g. in banking, mobile phones, media subscriptions. It’s not always simple, even then – many people have bank accounts with which they have no activity, so are these really ‘customers’ for any practical purpose?

Overall customer-loss fractions vary considerably as a relationship develops – typically a high fraction churn in the first year, a smaller fraction in the next, and so on. So it’s only possible to know what to do on customer retention if this cohort-by-cohort pattern is understood.

Very many major firms in contractual industries fail to report churn accurately [for this and other reasons] – Netflix even got sued by investors who claimed they had been misled by its churn reporting.

An important result of misreporting churn is that analysts and the firms themselves frequently estimate ‘customer lifetime value’ quite inaccurately – and therefore the ‘value’ of a customer base.

Differing churn rates amongst distinct customer segments can cause overall churn rates apparently to change, when in reality so such change is occurring [start with 50,000 customers churning at 20% and 50,000 churning at 10% and the overall rate will appear to fall] – which can lead to incorrect marketing, pricing or other responses.

… all clever stuff, and if you need to know more, investigate Bruce’s work some more.  

For non-contract situations, purchasing repeat rate [fraction of customers in one period who also purchase in the next] or repurchase rate [fraction who buy the same brand on the next purchase occasion] are more relevant. [Bruce recommends Farris et al, Marketing Metrics, 2006].

Whilst I see that transactional data can only give true churn measures in contractual cases, we do need to understand it in some way in other cases. E.g. I have in recent times come across a law firm, a consulting firm, and a marketing agency, none of whom were conscious of client losses. In each case, when we asked how many clients they had, they reported the number with accounts, though very old ones were sometimes informally disregarded. Key to helping them was to identify how many clients of which type and size were active, or lost, or [which was key] merely dormant. This can’t be known from the transactional data, but as in many other cases had to be found out by asking. This is how my friend Lars Finskud at Vanguard Strategy works his magic in consumer goods, pharma, and other sectors.

• The choice of strategic ‘position’ [what to provide, to whom and how, relative to rivals] is a very rare activity.
• Substantial strategic initiatives [acquisition, new market entry etc] occur occasionally.
• By far the majority of the task is steering [a.ka. implementing] the strategy from period to period.

So – how come the attention in all the textbooks and journals is in precisely the opposite priority?

This took me on a tour around some interesting examples – Blockbuster vs Netflix in video rental, Alibaba.com [China's eBay-beater], IKEA, etc. And also onto Michael Porter’s ‘What is Strategy?‘ article [HBR, Nov/Dec 1996], which got me really annoyed, because it totally dismisses everything except the first task – though that shouldn’t have surprised me I guess.

See a draft of this new section here [forgive the baby steps approach, but it has to work for new-comers to strategy as well as you experts!].