A True Story
I’m sitting in a quiet room at the Millcroft Inn, a peaceful little place hidden back among pine trees about an hour out of Toronto. It’s just past noon, late July, and I’m listening to the desperate sounds of a life-or-death struggle going on a few feet away.
There’s a small fly burning out the last of its short life’s energies in a futile attempt to fly through the glass of the windowpane. The whining wings tell the poignant story of the fly’s strategy — try harder.
But it’s not working.
The frenzied effort offers no hope for survival. Ironically, the struggle is part of the trap. It is impossible for the fly to try hard enough to succeed at breaking through the glass. Nevertheless, the little insect has staked its life on reaching its goal through raw effort and determination.
The fly is doomed. It will die there on the windowsill.
Across the room, ten steps away, the door is open. Ten seconds of flying time and this small creature could reach the outside world it seeks. With only a fraction of the effort now being wasted, it could be free of this self-imposed trap. The breakthrough possibility is there. It would be so easy.
Why doesn’t the fly try another approach, something dramatically different? How did it get so locked in on the idea that this particular route, and determined effort, offer the most promise for success? What logic is there in continuing, until death, to seek a breakthrough with “more of the same”?
No doubt this approach makes sense to the fly. Regrettably, it’s an idea that will kill.
“Trying harder” isn’t necessarily the solution to achieving more. It may not offer any real promise for getting what you want out of life. Sometimes, in fact, it’s a big part of the problem.
If you stake your hopes for a breakthrough on trying harder than ever, you may kill you chances for success.
There is one excerpt that I find extremely interesting:
Since the first Wal-Mart was built here in 1962, the company has focused on one goal: low prices. That no-frills approach still defines the retailer. Founder Sam Walton drove a 1979 Ford pickup truck even after he made millions. Top executives today work in shabby offices surrounded by cubicles. And at a reception for reporters here this week, the fare included Crab Rangoon, shrimp skewers and lasagna — all from Wal-Mart or its wholesale division, Sam’s Club, of course.
Such single-minded drive has turned Wal-Mart into the world’s largest retailer. But in recent years, it has also resulted in sluggish sales growth, as the company has been consistently outstripped by its cooler, more innovative rival, Target Corp.
This supports my theory that the only reason Wal-Mart is trying to do this is to support its stock price. It needs a story to tell Wall Street (I’ve been there), so analysts will continue to pump up the stock.
Sam Walton did not build a great company by focusing on “sales” or “stock price.” He focused on being something exceptional to a core group of people. Sam didn’t worry about the people who didn’t come into the store – he made sure the ones that did come in came back. When the focus stops being on what it takes to be great and, instead, focuses on short-term issues such as stock price or this year’s revenue, it’s the beginning of the end.
Spencer Johnson, in The One Minute Salesperson wrote:
If buyer’s don’t trust us, don’t feel a need for our services, don’t believe that [we] offer more help than other choices, or aren’t in any hurry to buy, they won’t accept any assistance.
The purpose of professional business development is to build these four ingredients:
Trust – Do you demonstrate that you understand the client better then the client understands themselves?
Need – Are you focused on the problem your buyer has or are you focused on your solution?
Help – Does the buyer view you as an enabler to their objectives or a peddler of yours?
Hurry – Does your solution address a problem that demands attention?
I’ve never visited a Wal-Mart. Never been inside the building. The closest I’ve been is when I picked someone up in a Wal-Mart parking lot. I have no desire to go to Wal-Mart.
Now, I have been to Target (though my wife goes to Target more frequently than I do). I don’t mind going to Target and I’ve bought more than my fair share of stuff there.
Now it appears that Wal-Mart is not happy simply being the world’s largest retailer. They want people like me (actually, people like my wife) to start frequenting Wal-Mart instead of Target. I would advise them not to do that.
Probably the reason Wal-Mart wants more is that they need to justify their growing (and some would say inflated) stock price. To do this, they are willing to risk what has made them special. For all of the talk about Wal-Mart’s ability to take costs out of the equation, no one will ever convince me that this was their ‘secret sauce.’ As a matter of fact, it was the very fact that Wal-Mart’s competition always focused on the cost issue that gave Wal-Mart an unbeatable advantage. While K-Mart was investing in technology to reduce costs while being all things to all people; Wal-Mart was focused maniacally on serving the paycheck-to-paycheck customer. Wal-Mart’s success was the unrelenting focus on being something special to a specific group of people. Now, they are turning their backs on them and trying to move up-market.
I remember reading Marcus Buckingham’s book, The One Thing, where he quoted the head of Wal-Mart’s grocery division telling a group of business executives that Wal-Mart is not particularly interested in people who don’t live paycheck to paycheck. Wal-Mart’s focus, he said, was on providing a special place for people who live paycheck to paycheck. Wal-Mart built a great business with that philosophy (while I have never been in a Wal-Mart, I do admire the company).
I encourage you to read John Moore’s commentary on the story about how Dunkin’ Donuts is trying to compete with Starbucks to get a picture of how difficult it is to appeal to a group that is not inclined to use your offering. Even if Wal-Mart insists on doing it, don’t make this mistake with your business.
What is the difference between a prescription drug and an over-the-counter drug? Basically, one drug requires the authorization and prescription from a qualified medical professional who prescribes the medication to address your particular malady. The other drug does not. You don’t need a doctor’s guidance to purchase an over-the-counter drug. You simply buy it and take it as directed on the package.
Why do some drugs need to be authorized by a qualified professional and others do not? Because the FDA has determined that some drugs can cause significant damage, if the drug is not used properly. Put another way, if you misuse a prescription drug, there is the possibility that significant harm will come to you. It might even kill you. The FDA wants to protect you from this danger and requires you to have the guidance of a physician when you take it.
You may be asking yourself: what do prescription drugs have to do with fast growth? The answer is, a lot. If all you are offering a customer is a solution they can find anywhere, you are not creating value. On the other hand, if what you are offering them is a solution to a problem that would not otherwise be solved, that’s another situation altogether. And, if like a physician, your oversight and direction in the application of that solution is necessary to assure the proper outcome, so much the better.
The key to staying out of the commoditization trap is to create a higher level of value for your customers so that they do not shop elsewhere. Once their problem has been diagnosed, they may be worried enough to go to another doctor for a second opinion, but it’s not because they’re looking for a cheaper drug.
How can you apply this analogy to your business? Remember that the key to staying out of the commoditization trap is to create significant value for your customers by solving problems that would not be solved without your involvement in the process.
To do this, ask yourself: What harm can come to your customers if they fail to apply the solution you offer? What if they apply it incorrectly? What if they select the remedy from one of your competitors? What if they decided they could live with the pain and didn’t seek out any solution at all?
Your answers will determine the amount of value you create for them. If the answer to “what can go wrong?” is “nothing”, then you are selling a commodity. You will not be able to charge a premium for your services. Your focus will always be on reducing your costs to make a sale, and you find yourself trapped into implementing a sales model designed to support selling those commodities at lower and lower margins. And unless your company is Dell or Wal-Mart, that’s a prescription for disaster.
I had an interesting conversation this weekend about employee loyalty. There was a concern about the effect of a lack of employee loyalty on businesses today. I replied that I was not worried about employee loyalty because I don’t think there is any reason that employees should be loyal to a business.
It is a business’ responsibility to make employment something that their employees want. The easier it is for employees to change jobs, change careers, or start businesses, the better. As more and more Fortune 500 companies lay off workers, demand more productivity while cutting wages, and in general show no appreciation for employees as assets, a revolution is taking place. Small and mid-sized businesses have been the driver of employment for some time. In that area, the balance of power in the ‘war for talent’ is turning to employees. More people are turning down the industrial-age proposition of trading ones values and ideals for economic benefit. These days, more people want both – and they deserve it.
While this presents challenges for all companies today (mine included), I am confident this is actually a good thing for any company that wants fast-growth. I’ve felt this for some time, and reading Fred Reichheld’s, The Ultimate Question, made me sure of it. According to the book, Bain & Company surveyed North American employees who had worked ten or more years for the same company. Here’s what they found:
- Only 39 percent trust their leaders to communicate openly and honestly
- Only 28 percent say their company values people and relationships above short-term profits
- Only 19 percent (less than 1 in 5) can be considered a ‘promoter’ of their company
Here are my thoughts:
- If this is how my people feel, I don’t want them, so it’s a good thing if they leave.
- I place the blame for the way employees feel on the employers. It is management’s job to make their people feel valued and, in turn, make their people value the customer.
Think about all of the money spent on marketing and sales — all of the ‘customer outreach’ initiatives, loyalty programs, special offers, etc. How much money is spent to support making employees ‘raving fans’ of the employer? How much do you spend? How worthless is money spent on attracting customers only to have them end up face-to-face with employees who don’t feel valued?
Companies that create an environment where the employee wants to be a promoter for their employer will have an unbeatable advantage. Your employees are harder to satisfy than your customers. So if you can turn your employees into fans, you’re probably already doing everything it takes to make your customers big fans, too.
What would you pay for a 4’ x 8’ sheet of plywood? According to Home Depot’s website, it’s $15.99.
What would you pay for that sheet of plywood if you lived in Florida and a category five hurricane was on the way? My guess is that you’d probably be willing to pay a lot more.
I am not advocating price gouging. But the point is this: at the end of the day, every offering is a sort of plywood. That ‘thing’ we sell (whether it is products, services, hours, experiences, whatever) is just a form of plywood. Plywood has a limited value – it’s limited by what the competition is charging.
Industrial-age-based sales and marketing focuses the entire sales process on selling plywood. Plywood is a commodity. Hurricanes – those issues our customers/clients are dealing with provide a lot more opportunity to create value. If you want to accelerate your growth and increase your margins, stop selling your plywood. Start helping your prospects understand their hurricanes, the financial implications of those hurricanes and how to protect themselves from them. Do that and price stops being an issue.
I recently met with a new client at Starbucks to discuss how Imagine Business Development may be able to impact their go-to-market strategy. You may be thinking, “Big Deal.” The ‘big deal’ is that it’s not a ‘big deal.’ We think nothing of Starbucks (or any other venue) being a place to discuss important matters. Imagine, however, how you would have reacted to this as recently as five years ago? It’s amazing how different ‘normal’ has become.
This got me thinking. What else is different? I wondered: can you build a company with $20 million in gross profits without a single employee? (Why did I pick $20 million? No real reason, it seemed like a good place to start) Could you build this company and create equity value? Can you, in essence, outsource everything – sales, marketing, HR, technology, and service?
I think the answer is that you can; and if you can, you have to rethink everything we’ve accepted in the past about hiring and building a business. It means employees are not a requirement. I’m not endorsing the idea of no employees; I’m just asking you to think about it.
I think you can build a company like this, because the inherent value of any company is the intellectual property and wisdom they create. Wisdom is not a commodity. The job of your business and mine is to unlock the value of our intellectual property and our wisdom for the benefit of our customers. In any case, we should not ever allow ourselves to be slaves to old paradigms.
Make no bones about it. Lucent’s decision to merge with Alcatel is the admittance of complete and total failure on the part of Lucent to create value in any meaningful way. Had Lucent focused on creating value by solving the problems their customers didn’t know about, instead of just “monetizing” their patents, Lucent would not be merging. Who would have thought this would be Lucent’s fate when they split from AT&T.
Armed with patents, research, capital and an “installed base of customers.” Lucent got beaten badly. No matter how successful you look or feel today, the moment you forget that you’re only as good as your last innovation, and that commoditization impacts every business; your future becomes precarious. It proves that the most dangerous thing in business is complacency.
Andy Grove said it best – only the paranoid survive. Don’t let the death of another landmark company go by without giving some pause yourself. Stay hungry.