No focus group ever told Sony it needed to create a small rectangular piece of plastic that people could use to play cassette tapes with high fidelity sound while moving around (The Walkman). No focus group ever came to the conclusion that vinyl analog devices (albums) needed to be replaced by smaller pieces of plastic that played back digitally (The Compact Disc).
Sony developed many new consumer items that we now take for granted. The company’s track record for innovation has been impressive, starting with the transistor radio in 1955, and following over the years with products such as the Walkman, the Discman, the first mini-disc player, video cameras and gaming consoles – all at premium prices. With every breakthrough, the people at Sony seemed to know instinctively there was no future in producing products for which a market already existed. They realized that if a business waited until demand was already there, it would be starting as a commodity provider. As a commodity provider, profitability is always under siege and, as margins are compressed, there is no money left to take chances and make the mistakes that creating breakthroughs requires. Witness Sony’s more recent, and less spectacular, entries into the laptop computer and MP3 markets.
In the past, Sony understood that to drive and sustain profitable growth, they had to create demand with innovative products, not merely fulfill demand with “me-too” items at a lower price point. In today’s hyper-commoditized world, any business that wants to drive growth has to do the same. Sony, in many ways, has forgotten that and it shows on their bottom line.
Demand creation is different from demand fulfillment. It requires different strategies, different tactics and different sales and marketing processes. In my consulting work I constantly hear companies say they are trying to create demand. The problem is they use business development strategies designed for situations where demand already exists. Instead, they need to focus on unique solutions, created in response to new, previously unknown customer problems.
Let me be clear – the only way to avoid being a commodity provider is to create demand. Creating demand means making your offering unique, remarkable and divergent. However, the moment your offering becomes divergent, you introduce complexity and change. You must adopt a selling process based on recognizing the changes your solution will cause and monetizing the value of those changes.
The other challenge when you decide to be a demand creator is your ‘safety net’ goes away. You can’t rely on research or past results to make your marketing decisions. Old solutions don’t solve new problems. Of course, one of the reasons for this blog is to provide you with encouragement and support as you evolve into a demand-creation company that has mastered the art of unearthing problems customers didn’t know they had… and solving them with approaches they can’t find anywhere else.
Until next time, Doug
As I’ve mentioned I spend much of my time working with companies to introduce divergent offerings and create demand. If you are interested in learning more about I do this, I encourage you to visit my website: www.imaginellc.com.
For those of you that don’t know me, I read a lot of books. What’s a lot? In a slow year I’ll read 50, and when I’m really into it, I’ll read 70 (and that doesn’t count John Grisham’s books). And I love bookstores. I’m in one right now looking at several books. Three of them have chapters, or subchapters, with some form of the title, “What is strategy?” For a word that is used so frequently and given so much importance, it’s distressing to see how difficult it is to understand. Don’t get me wrong – I’ve been there. I spent two years trying to understand what strategy was and what it meant. I only ended up more confused than when I started. I hope to clear that confusion for you in the next two paragraphs.
Strategy is simply the process or structure whereby trade-off decisions are made in pursuit of a desired end. Let’s translate that to English. The purpose of strategy is to guide your decision making when it comes to how you use resources. You only have three resources: time, money and energy. No organization that I know has enough of any of them, so you have to choose how you are going to use them. That process or structure that you use is, de facto, your strategy.
What’s that mean? Everyone has a strategy, even if they don’t know what it is. Your challenge is to make sure that your strategy, your process or structure, is effective. How can you make sure that it is effective? First, you must know what your desired results are. You must clearly articulate, document and communicate those expectations. Second, you must make an honest assessment of where you are now. Then you must focus on managing those little decisions everyday with one simple filter – Is this the activity that will have the greatest impact towards removing a barrier that is preventing our desired result? Or will this mobilize one of our greatest strengths to achieve that result. If the answer is no – don’t do it. That decision alone will make your strategic process one of the top 10% in business.
Until next time, Doug
By the way, in my work with companies from a variety of industries, I’ve learned what those key barriers to successful growth are. If you’d like to see how your growth strategy stacks up or where it needs improvement I invite to view The INTELLIGENT GROWTH Diagnostic on my website.
Be a ‘Purple Cow.’ Pursue the ‘Wow’. Make it ‘priceless.’
The buzzwords (and the books sales) are many. Putting them to work is more difficult. I do not have any problem with the ideas offered by Seth Godin, Tom Peters or the many authors that are writing about delivering a remarkable customer experience. As a matter of fact, their writings have given me tremendous insights that I use everyday.
The problem with most efforts to provide amazing experiences is that businesses often forget that the customer, not the business, decides what is remarkable and what isn’t. You have to remember, too, that what is remarkable for one company, may not be remarkable for another.
The purpose of creating a remarkable experience is to make absolutely certain no one can find a substitute for what your company offers. When there is no substitute for what you offer, you cannot be commoditized. When you cannot be commoditized, then growth, loyal customers and profits are yours for the taking.
Want a definition of a remarkable experience? How about, Reading my mind?
Really, that’s all your prospects, customers and clients want. They want what they want, the way they want it (preferably, without having to ask for it) – no more, no less.
Now let me give you an example of what is not remarkable.
Recently, a meeting at Starbucks with a client of mine ran long. We decided to get lunch; and, so as not to break our chain of thought, we went to the restaurant next to Starbucks – Fuddruckers. Mind you, we did not go to Fuddruckers for a ‘fabulous dining experience.’ We went to get a burger and a table so we could continue our conversation.
Clearly, this Fuddruckers has undertaken and effectively implemented customer service training. When I placed my order for a hamburger, I communicated that I wanted: cheese, ketchup, lettuce, onions and tomatoes (the way I always get my burgers) and that I did not want fries (my nutritionist would be proud). The order taker then communicated every other option I could have, most of which I did not understand. Placing an order for a hamburger had never been so difficult.
Then we went to the table, where a very kind employee introduced himself to us, told us his name and said that if there was anything else we needed, at all, we should speak to him. He asked if that was alright with us, we responded yes, and he closed by asking us if this was a “good deal.” Okay, I thought, a little over the top; but, hey its Fuddruckers, you’ve got appreciate someone who shows that type of energy in their job. Over the course of our lunch he interrupted us six times asking if we needed anything. Unfortunately, what we needed was to be left alone.
I’m sure that he was doing what he was taught to do. Be of service. Show energy. Smile. Have fun. He did all of these things. What he didn’t do was give me what I wanted.
The Four Seasons, on the other hand, always seems to know what I want before I do. If I want assistance there is someone there ready to give it. If I want to do it myself, they leave me alone. They read my mind, and as a result I pay significantly more for a room than I pay elsewhere. Why? Because the staff there has been trained to respect their customers and treat them as they themselves would expect to be treated under the circumstances. They pay close attention to what their customers are doing at any particular moment and “read” their level of need. That’s how they always seem to be reading my mind. It’s a level of attention for which there is no substitute. I simply can’t find that feeling having someone read my mind anywhere else at any price.
Then there’s Fuddruckers. Will I ever eat there again? Sure, as long as it’s the most convenient alternative and the prices stay low.
Do you want to create a remarkable experience? Start asking yourself: “What are my customers really buying?” Then focus maniacally on delivering exactly that – nothing more, nothing less. The results can be…priceless.
Until next time, Doug
By the way, there’s a questionnaire I use with my clients to help them figure out what their clients are really buying and I’d like to share it with you. Just send me an e-mail, with your name and e-mail address, or click here.
Every now and then, a book that focuses on non-business issues tells us more about running an effective company then one written specifically for businesspeople. A few years ago it was Moneyball by Michael Lewis. This year it’s Freakanomics, by Steven Levitt and Stephen Dubner. If you haven’t read the book yet, go out and buy it now (or click here).
I found several great lessons in the book, but the most important one for any business leader to understand is the power of incentives and the unintended consequences they can produce. One obvious example is incentives that are created by sales competition schemes or awards. When I was at Merrill Lynch, most of the awards programs (like President’s Club or Chairman’s Club) were based on annual production. All year long, we would work on our “business plans” which were focused on building long-term revenue. But every September, like clockwork, the brokers would check to see which “club” they had a chance to make. If they were close to the sales level required for one club or another, but weren’t assured of reaching it, all of a sudden their business mix would change ever so slightly to increase short-term revenue. The fact that these short-term gains were often achieved at the cost of long-term opportunities got lost in the scramble to take advantage of the incentive provided. For our sales team, the incentives undermined the discipline of long-term investing we had been coached to follow all year. For the managers, the unintended effects of the incentives were to remove the carefully structured alignment between the company’s goals and those of their clients. A double whammy of unforeseen consequences.
Incentives are created in less obvious ways as well. To understand what unintended incentives you may have in place, ask the following questions:
- How is the sales team structured? Is it a sales/service model or do you separate the functions? Is it a hunter/farmer model or some other structure? There is nothing more powerful than having a strong incentive already imbedded in the structure of your sales program.
- Is the focus of the company on introducing products or in understanding customers?
- What does management talk about? What gets management excited?
- How would your culture be described? Do the unwritten, unspoken incentives support your strategy?
Virtually every time I have to work on improving the effectiveness of a sales organization, the problem lies in conflicts between different visions of what the desirable outcomes should be. Often, corporate strategy is looking for one result, while the sales team leaders are looking for another. When corporate strategy and sales strategy are not pulling together in perfect alignment, a fast growth company loses its momentum.
Remember, incentives are tools for changing behavior and outcomes. Be very careful how and when you use them. In other words, try to build incentives into your business development program from the beginning instead of artificially introducing them from time to time to juice your results.
Until next time, Doug
By the way, if you building or trying to improve the effectiveness of your sales team and would like some more tips on how to make sure you have the proper incentives built into your sales structure from day one, give me a call at 410.544.7878
“Our main consulting strategy is to convince clients that we do stuff they can’t do themselves, and that we deserve lots of money for it. The best way to do this is to always look good, and always sound like we know something you don’t. Because we do.”
From the Huh.com web site…
When you are finished reading this post, visit www.huhcorp.com. I don’t know who created this site but it is unfortunately the best (and wickedest) example I have seen of what most company websites are like. Instead of creating value, they erode it by focusing on what “we” do and cutting the prospective client out of the communication process right from the beginning.
Talking about what “we” do in marketing messages or sales presentations is a sure-fire way to begin convincing buyers that you are just like everyone else: nothing but a commodity. The reason is that the “we” message has everything to do with your company and nothing to do with a prospect’s problem. Think about it – when you talk to someone and all they do is talk about themself, how does it make you feel? You tend to begin discounting everything they say, don’t you?
There is no place better to see this communication dynamic in action than on the web. The web offers businesses a unique and powerful opportunity – the ability to control and regularly update their message for little or no money. No other medium attracts more buyers than the web. If you have a salesperson making a call on a potential client, it’s a good bet the buyer is looking at your website before the salesperson visits. If for some reason they don’t, and the sales call goes well, you can be certain the buyer will check you out after the sales call. Does you website deliver on your value proposition? The sad truth is that it probably doesn’t.
I say this because I have personally visited over 2,000 websites for the sole purpose of seeing if they deliver their company’s value proposition. While each site is slightly different (mainly the offer), they all sound the same. Most are “we” oriented and the tone of the copy is somewhere between defiant and defensive when they roll out their “me-too” list of offerings. The unfortunate part of it is that I know how much money was spent to create such a message.
Try this exercise: bookmark “huh.com” and share it with your co-workers. Sensitize them to how awful it sounds when your organization is bragging and operating in “we” mode.
Maybe then they’ll stop trying to get your clients to understand what you do and start making them feel understood. That’s the path that leads to fast growth.
Until next time,
In a previous post, I defined commoditization. But what causes it? The answer to that question is critical to building a highly profitable, fast-growth business.
Substitution is the cause of commoditization. How easily one offering can be substituted for another determines how commoditized something is. The reason Microsoft is able to sustain their amazing profitability is because, like them or not, you cannot replace them.
So, what if you’re a company that doesn’t have Microsoft’s market share? No problem. Just focus on the parts of your offering that absolutely cannot be replaced. In my consulting practice I focus on the proprietary business development model we have created and how that process uniquely addresses a client’s situation. Sure, it would be easier for me to focus my marketing efforts on the “features” and “benefits” of what I offer, but those are exactly the things that would make my consulting practice just like everyone else’s. Here’s my suggestion — Look at your advertising, sales and other marketing programs. Where is your focus? Is it on the things that are easily replaced, or is it on the unique approach, skills or wisdom that you bring to the process? As you read through your marketing and sales materials, ask yourself, “Could anyone else say this about their company?” If the answer is, yes, then get to work. Because if you can’t communicate what is unique and irreplaceable about your company, you’re on the fast-track to commoditization.
To learn more about how to avoid commoditization visit our web site or call me at 410.544.7878.