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Damn The Recession – Full Speed Ahead
I’m reminded of a story told to me about how the military trains their troops for urban warfare. I can’t confirm its complete accuracy, but the message is strong regardless of whether its completely accurate.
Given the close proximity when fighting in urban areas, one of the biggest fears and dangers is hand grenades. The reason for this (outside the obvious) is that the first response is to back away from them. This presents two problems:
- First, it puts the soldier in a defensive, reactive position – making them vulnerable to frontal and flank attacks; and
- Second, it exposes the least protected and most vulnerable parts of the body to shrapnel.
So, they teach soldiers that, in closed quarters, when a grenade is thrown, aggressively advance toward the grenade. This is taught for two reasons:
- First, the soldier maintains greater control – as the saying goes the best defense is a good offense, and
- Second, if the grenade is behind the soldier they have their backpack to protect them from shrapnel and there are far fewer critical organs exposed to one’s back.
I bring this up because of the mood that seems to be taking over in many markets. I’m hearing increased incidents where markets appear to be falling apart. Customers, under the claim of “spending freezes,” are cutting projects – unwilling to listen to logic. This, legitimately, is causing great concern among sales executives.
The natural reaction, just as it is with the grenade, is to retrench and be conservative. Shift investments to other markets or merely wait it out. I’d be lying if I didn’t tell you I think about this from time-to-time as well.
That defensive position – just as with the grenade – is the wrong one.
Now is the time to attack. The fact that customers are less willing to listen represents a big challenge – AND A BIG OPPORTUNITY. Listen, when I first got into sales, I was told the sale began when the client said no (so there are lots of sales opportunities today). Those companies that build great sales process and structure will be able to talk with people that NO ONE else will be able to talk to.
Let’s stop talking about recession as a reason to cut back growth expectations. Recessions only matter to companies that have at least 30% of a market. If you have less than 30% of the market your opportunity lies in taking business away from your competitors – and that’s a lot easier to do in a bad market than a good one.
Now is the time where superior offerings can shine – if you’re willing to put the muscle and process behind getting people to listen. Your potential customers need you more than ever, don’t let them down.
Damn the recession – attack and relentlessly execute.
Bigger Markets – The Key to Growth
One of Jack Welch’s most famous strategic decisions was the decision that every GE business unit would be the #1 or #2 players in their respective markets. That decision became the basis of his “#1, #2, fix, close or sell” strategy.
In the 1990s, however, several young executives challenged Welch, saying in essence, that this strategy was costing the company significant growth. They claimed that business unit leaders were defining their markets so tightly so that they could justify their position. As a result, the market focus became smaller and growth opportunities were being missed. Welch rethought his strategy and required all business unit leaders to “redefine their markets so that they had no more than 10% market share.” The rest, as they say, is history.
I confront this challenge every day with my clients (and several times this week). Far too often, companies and the salespeople that support them define their markets by the commodity they provide. I can’t blame them – after all, the last few years have been characterized by significantly increased competitive pressures, and now the talk is of an economic downturn. The concern is that if you don’t focus on providing the commodity at least, there won’t be enough revenue to show for at the end of they day (or quarter, fiscal year, etc.).
These competitive pressures have had the effect of forcing sales and marketing types into a deeper marketing myopia. It’s contributing to the commoditization trap that I’ve been writing about over the last four years. As counter-intuitive as the advice “When the pressure is on justifying your commodity, move away from focusing on your commodity” is, when companies follow this advice, they grow their markets, increase their commodity sales, and protect their margins.
We have the benefit of looking at the Welch strategy and adjustment to guide our actions going forward. Here’s a 2-minute history lesson:
When Jack Welch took over 1981, GE was being called a “GDP company.” This meant that the belief at the time was that GE’s growth was going to be limited to the growth of the market – and no more. If you can remember the growth rates in 1981, you’ll realize there was no excitement in that.
Welch’s first focus was to break “the GDP trap.” He realized that the only way to do that was to be the best in a market (which he defined as #1, or #2). This coincides with the advice I regularly give companies: There are only two types of companies – Best Companies and Me-Too Companies. Only best companies can sustain above market rates of growth, and, especially, ROI.
The #1/#2 strategy worked and forced GE’s operating units to become “Best” or to become somebody else’s problem. Business historians know that GE’s product/revenue mix changed dramatically over that time – and it still does today under Jeffrey Immelt.
Once the “Best Issues” were addressed, that strategy became ineffective and reduced the risk executives were willing to take to grow business. The problem with that is that the only strategy worse than taking risks is to avoid taking them. This (albeit slightly oversimplified) is what led to Welch’s change to the “define your markets so that you have no more than 10% market share.”
The strategic byproduct of this action was that it forced GE’s operating units to redefine themselves to become more than just commodity providers – they became problem solvers. They stopped focusing on the commodity of CAT scanners, and began to focus on enabling hospitals to run their radiology units more effectively. Instead of [fulfilling demand] they [created demand]. The result: they sold more of their commodities BY NOT FOCUSING ON THEM.
Taking this approach is by no means easy – if it were, GE wouldn’t be so famous for having done it. The transformation can be painful and leaders and managers throughout the entire organization will need to learn new skills and new rules to play by. Short-term pressures will constantly “tell you” that you must make these changes “later.” You’ll fall back on old habits and your customers won’t immediately understand the rationale for the change. They may even tell you that they liked things just fine the ways things were.
Very few companies will ever attempt this transformation – and of those that do even fewer will stick with it and successfully make the transformation. While the process is painful, the failure to make this change means that margins will continue their accelerated compression, you’ll have to work harder, expand and cut as markets expand and recede, and your reward will be market rates of return – at best.
If you would like a copy of The Five Unbreakable Rules of Creating Demand, send me an email (doug@imaginellc.com), and I’ll send you a complementary copy.
Oompa Loompa’s and Fast Growth
Implementing an effective go-to-market strategy can be, and usually is, very frustrating. Go-to-market is different from other aspects of your business. Go-to-market is based on making mistakes – lots of them, quickly. The key is to be constantly correcting them.
I was working with a frustrated client today. This client recently left a significant position with a major company in the northeast to start a coaching business.
He’s been working on breaking into his market for the last eight months. Needless to say, he is frustrated with how slowly the market is responding. This frustration is not at all unusual and I’m not at all surprised that it’s coming after about eight months focus.
Most of my work with this client focused on how to take what we’ve been working on deeper. He wanted to talk about doing something different – or just easing off the gas peddle – “maybe I should just let this thing take its own course,” he commented to me. I felt for him. It’s difficult to stay with what appears not to be working. I, myself, often use Thomas Edison’s quote “Insanity is doing things the same way and expecting a different result.” When I was a financial advisor, I always found the toughest decision to make is when to focus on the long-term and when to I realize it’s time to change.
I’d like to tell you that there is a scientific answer to this question, but there isn’t. Whenever I confront this challenge (and I do frequently, both personally and in advising clients), I always think of Willy Wonka & the Chocalate Factory and Veruca Salt. Veruka’s cry of, “I want an Oompah Loompah and I want one now,” led to her destruction. It’s much like the cry – I want a flood of new clients and I want one now. Sometimes, it just takes time.
Here’s what I think. An effective go-to-market strategy takes 12 – 18 months of consistent focus to bear real results. Hitting on the right combination of strategies and tactics can cut that time down to 9 – 15 months. If you’re lucky, you’ll get some quick wins early to give you confidence to get through the pain. During this period, it is critical that you pay attention to the market. Zig, zag, go deeper, refine the message. Whatever you do, stay at it.
Most people won’t do this. They’ll give up – too early. It’s too bad, but it’s true. As I’ve counseled many clients, there is a reason that few companies set out to be ‘average’, yet most become exactly that – or worse.
By the way, this isn’t unique to fast growth. I have a client who owns a personal training studio. She’s my trainer and I was talking with her one day about my frustration. When I started working out, I had more energy and starting looking better pretty quickly (much like my clients feel when they pick up new messaging and they repackage their material). I told her that, now that I had been working out for several months, I wasn’t seeing any new results (much like my client’s frustration). She cautioned me to stick with it. She told me that even though I wasn’t ‘seeing’ changes, changes were occurring. She warned me that this was the time that most people who quit an exercise program do so. She promised me that if I stuck with it, it would be worth it.
She was right.
Building The Bridge: A Story About How to Cut Your Sales Cycle In Half
Imagine Media, the publishing arm of The Imagine Companies, has released a new book titled, “Building The Bridge,” the first in a new series of business education novellas written for entrepreneurs building fast-growth businesses.
The novella tells the story of Eddie, a successful financial advisor who is stuck in the trap of commoditization. The story follows Eddie as he discovers how to reignite his career by becoming an expert in the solving the problems his clients face instead of using the traditional strategy of only being an expert on the solutions he offers.
The series is written as a guide for entrepreneurs and sales professionals and is based on Doug’s decades of success in overly commoditized markets. Copies are available at www.imaginellc.com/resources/knowledge-products.htm.
Davidoff is the founder of the Imaging Companies, a Maryland-based international business consulting firm and author of three previous books and co-author of “Parenting the Office.” His “Intelligent Growth” programs have helped hundreds of companies transform their sales process into one that creates value for customers.
The Hidden Truth About Creating Value: If You Don’t Create It, You Destroy It.
Over the last month, I’ve received several questions about creating value. For those who are not familiar with my views on this subject, creating value is the foundation for everything a company does to accelerate or sustain growth. If you do not create value, you are a commodity. If you are a commodity, your growth and profits are at risk.
Value, in the business sense, means providing something people are willing to pay a premium for. This is the only useful definition of value for fast-growth businesses. If your company doesn’t do something your customers are willing to pay more for, you are not creating value. You may be doing things that enable you to keep your customers, but you are not creating value.
This applies to everything you do. It is especially important when you assess your business development efforts. Here is how to determine whether or not your sales and marketing efforts are creating value for your company. Answer this question: Would your prospects be willing to pay for the opportunity to read your advertising or talk to your salespeople? If you need an example, look at the people in your industry who charge admission at conferences and other events to let people hear them talk about what they do. Look at the people who publish their ideas in the business journals people pay to read.
Think about it. The next time you go on a sales call (or go on a call with one of your salespeople) ask yourself, was there enough value created in the conversation that prospects would have paid for it if they had to? Was it a special event? Was it a conversation where the prospects sincerely appreciated getting some insights that could help them do their job better? My experience says the answer more than 90 percent of the time is, “No.”
Here’s the critical point: Value is binary. If you are not creating it, you are reducing it. If someone meets with your salespeople and they wouldn’t have paid for the privilege of the sales call and they end up buying anyway– they are buying in spite of your salespeople, not because of them – and that’s dangerous. Every activity has a cost, whether it’s time, attention, opportunity or money. Any time a customer or prospect interacts with your company and they don’t feel they’ve received more benefit than what it cost them in time, they feel cheated. Your salesperson has reduced the time your prospect has to work with without providing enough value in return. Even if the interaction is “neutral,” neither negative or positive, the prospect has lost the opportunity to take advantage of other opportunities.
If you want an example of what you don’t want your salespeople to be, think about checkout people at the grocery store. They may be friendly, collect money and sometimes provide some assistance by bagging your ice-cream separately, but the transaction doesn’t add value to your grocery-buying experience. In most cases, it reduces the value of the transaction because of the time you lose dealing with them. Grocery stores have employed checkout people despite the lack of value because, until now, they didn’t have an alternative. When our local supermarket introduced self-checkout, customers (including me) took advantage of the new service quickly. Imagine that — by taking out the “service component,” the perceived value was actually increased. Talk about being a commodity.
Want another example? Travel agents used to account for just about every airline ticket sold to travelers. But guess what — they only communicated value, they did not create it. They were nice and everything; but people used travel agencies in spite of the travel agent. Once direct booking became viable and travel agents began charging for service to cover their costs, people deserted them in droves. I wouldn’t want my sales efforts to rely solely on the fact that there isn’t an easier alternative…yet.
If you want to know more about how to create value, click on the blog post on the bottom or view the article on my website that explains this further.
Until next time, Doug
By the way, not creating value is only one major barrier to growth. I have an excellent tool to help assess what other barriers to your growth may be. If you are enjoying my blog, take a look at my Growth Barriers Diagnostic.
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Resources
Doug's Washington Business Journal Columns- Intelligent Growth Articles
Third Wave Selling Blog
Products to Grow
