I’m excited to hear the story of growth everyday in the CEO and salesperson lexicon. I’m beginning to see more and more companies looking to invigorate the marketing and sales initiatives that grow their markets. The danger is that people are still asking the wrong question regarding these initiatives.
I originally wrote this post four years ago and it’s still on point. I thought I’d share it with you again:
I recently had a conversation about some marketing initiatives. As we were outlining our objectives, I was asked the question, “How much are you comfortable spending on this initiative?” While this is a very common question – it is the wrong one. This is the kind of question that leads to poor execution. It is also one of the reasons people who are not sales and marketing people look at marketing with disdain.
The right question is actually a series of four or five questions. As you are planning your 2007 marketing program, I encourage you to ask them.
- Question 1: What do we want to accomplish? Or, what is the result we want?
- Question 2: What will it take and/or what we will have to do to accomplish our intention?
- Question 3: What resources (time, money, and energy) will be required to complete the actions that you determined by answering question 2?
- Question 4: Are we comfortable and/or capable of expending these resources (time, money, and energy)?
If the answer to this question is ‘no’, then you must go through the following additional decision tree:
- Sub-question: Are we comfortable accepting a result below our initial desires?
- If the answer is yes, then repeat questions 1 – 4.
- If the answer is no, then you must consider whether the effort should be taken at all.
While this approach requires both marketers and executives to think more, it is the only process that has any chance of working over the long term.
As I’ve discussed previously (here and here), one of the underlying requirements is to allocate your limited resources (time, money, and energy) effectively against those activities that have the best chance of advancing the organization towards its critical objectives.
I’ve seen too many organizations work extraordinarily hard without achieving their desired fast-growth results. One of the major causes is that they under-invest in too many initiatives. Under-investing is the result of focusing on a desired budget instead of focusing on the desired result. Don’t make that mistake.
At the beginning of the year, I asked you to take a 90-Day Snapshot of your first quarter. I asked you to define success on April 1, 2010.
Well, April 1 is two days away – How did you do?
My top objective was to add 4 new franchisers to our prospect list. We added three and one is already been filtered out. So, I didn’t hit my objective this quarter, but we definitely made some progress and have learned a lot about what we really need to do to be successful.
Now it’s time to take your second quarter snapshot. Here it is:
Stop what you’re doing and answer this question:
It’s July 1, 2010 and you’re reviewing the second quarter of the year. Precisely how will you measure success? What will it take to give yourself an ‘A’?
Are you done with the list?
Now, choose the single most important item – if you could only achieve one item on your list, what would it be?
Why is answering this question so important? Because we all have a tendency to try to do too much and to lose focus. The key to success, especially in challenging markets, is to focus. It is far, far better to over-allocate resources to fewer opportunities than it is to underallocate resources to many. Don’t ever lose sight of what is most important – and ensure that you over-allocate your resources – time, money and energy – to that.
Want to exponentialize the results? Have every single person in your company answer the same question and post the answers in a central location – or company wiki.
If you’d like the benefit of public accountability, share your most important success in the comments section.
Mine? To successfully launch our new salesperson leadership program tentatively titled The Sales Genius Network.
I posted this at the beginning of last year. This year I’m going to post it at the beginning of every quarter to remind you to define success before taking action.
Stop what you’re doing and answer this question:
It’s April 1st, 2010 and you’re reviewing the first quarter of the year. Precisely how will you measure success? What will it take to give yourself an ‘A’?
Are you done with the list?
Now, choose the single most important item – if you could only achieve one item on your list, what would it be?
Why is answering this question so important? Because we all have a tendency to try to do too much and to lose focus. The key to success, especially in challenging markets, is to focus. It is far, far better to over-allocate resources to fewer opportunities than it is to underallocate resources to many. Don’t ever lose sight of what is most important – and ensure that you over-allocate your resources – time, money, and energy – to that.
What to exponentialize the results? Have every single person in your company answer the same question and post the answers in a central location – or company wiki?
If you’d like the benefit of public accountability, share your most important success in the comments section.
Mine? Add four franchisers to our pipeline.
Growth is disruptive. It requires change – all the time. There is nowhere that this is more true, and more difficult to deal with, than in the area of your client/customer base. It’s unfortunate, but the customers that get your business to one level are often the barrier to getting you to the next level of growth and profitability.
The only way a fast growth company can sustain fast growth is to find ways to increase its leverage. Fast growth must be geometric, not arithmetic. As your business grows, so does it complexity and its cost structure. You must find customers who are capable of paying you a multiple of that increase. The failure to do that will cause the business to be overwhelmed by complexity, and it will stall and stop growing.
Additionally, the most important asset you have to support fast growth is focus. You must serve a core customer base better than anyone in the world. If you growth plan has you catering to larger customers, or customers dealing with bigger problems, continuing to focus on your legacy customers merely holds you back from fully serving your future ones. Its an unfortunate truth about growth.
Sustainable fast growth is all about allocating resources to your highest value activities. And sometimes, that means you have to say goodbye to people that were very important to you.
I was speaking with a group of CEOs in Detroit today. The speaker before me had been discussing the typical business cycle: envision – growth – mature – decline – envision – etc. As I was talking about the keys to creating demand, I commented that I don’t believe that the traditional business cycle is a requirement. I believe that it can, in fact, be broken. I shared that my business cycle looked more like this: envision – growth – mature/envision – growth – mature/envision – growth – etc.
I asked the group, “while companies typically wait for decline before they take the envisioning and new growth phases seriously, why couldn’t they envision the next, potentially disruptive, growth cycle while they were in the growth or mature stages of the traditional cycle?” I shared how companies like Intel do exactly this – they strive to make their offerings irrelevant while their current offerings are highly profitable, not afterward.
One CEO challenged me, asking if there doesn’t come a time where a business can’t envision and trigger a new growth cycle before the decline. He asked if there weren’t many cases where a business needs to go through the decline stage and the cutting and retrenchment that goes with it, while it creates new markets and new offerings allowing it to potentially grow again.
I responded that a) growth by no means is a guarantee or an entitlement to business. Certainly times come where the fundamental purpose of a business is no longer relevant and growth fades and disappears – trees don’t grow to the sky and neither do businesses. I added that b) if a business stays maniacally focused on who its customers are and continues to build a deeper and deeper understanding of their customers, they can reinvent themselves before the decline happens.
I believe that this answer is on-target 95% of the time. As I’ve had more time to think about the question, I realize that there is a third part to the answer. If a business is in the growth and early mature phase, and is unable to envision the next growth and maturity phase, then it is time to sell the business.
This is true for two reasons. First, it is at this point that the business is at it’s highest valuation and is the most attractive to buyers. Of course, the buyers are not necessarily wise here, but that’s not the seller’s problem. Second, the seller (or the investors) would be far better off taking money from a sale and reinvesting it in another company or set of offerings that are in the envision or growth stages.
There are only three reasons that a business doesn’t follow this advice:
- The misguided belief that a business can create the next growth business while “milking” the decline cycle.
The reason you can’t do both is because the declining business eats your resources when the new growth business most needs it, and the declining business diverts attention and focus when the new business most needs your attention.
Even though the declining business is declining, it will still represent more revenue – and even profits – than the growing business. This makes it the master. So while you’re balancing the needs of the declining business with the needs of the new business – two types of competitors take you out. The upstart, who has no declining business to worry about; or your other established competitors (or worse yet the one who is consolidating the industry) who’s dedicated to the cash cow. Just take a look at Merrill Lynch (before being bought by Bank of America), Time Warner, or Dell to see how this game plays out.
The time to focus on the “next big thing” is while you are experiencing success, not when you are struggling. Please don’t misunderstand this point. If the next big thing is not directly aimed at your current core market, then it’s a distraction and you should follow the third part of my answer – sell. If you master the first unbreakable rule for creating demand, which requires a maniacal focus on knowing and understanding your core market better than your core market understands itself, you can initiate new growth cycles while you’re in the current one.
I had a meeting yesterday with a prospect. The prospect made it clear that he didn’t think an effective go-to-market strategy could be developed without first going through a very in-depth assessment/validation process that involved numerous conversations and analysis with customers, potential customers and people who have turned them down.
Sure, maybe 20 years ago, focus groups, customer interviews, and traditional research provided insights that could bring a company real value. That value, however, has been on an accelerating downturn since then, and today, it can actually hurt the company doing the research because it creates an illusion of certainty.
Think about it. The world has changed fundamentally. Business is down, no one knows when or how the growth will return, and buyers are required to do more and more with less and less. So, what does this company (and BTW, I don’t mean to pick on this company as their desire is highly representational of business in general) want to do? They want to ask their customers what they want, why they buy or don’t buy, and what would they need to do to get these customers to buy (or buy more) from their company.
ARE YOU KIDDING ME?! Can you imagine the selection bias that would exist in that research? Remember, research is only as good as the data and those contributing the data that is used to create it. Who’s going to spend the time (even 5 minutes) to answer questions such as these? I don’t know about you, or your customers; but mine are so busy that they can’t get to the things that are important to them, let alone stuff that is important to me.
Yesterday, it may have been worth it for buyers to spend the time answering questions like these. They both had the benefit of more time on their hands and providing that type of information could lead to better offerings and service. Today, however, if a current provider isn’t creating adequate value there are an unlimited number of alternatives that are only too happy to innovate and take your business.
The First Unbreakable Rule For Creating Demand is Know and understand your customers better than they know and understand themselves. If you find yourself saying you need to hire someone to interview your customers, it’s a pretty good bet that you don’t know your customers well enough. All hiring someone else to “interview” will do is give you the illusion of knowing your customer better, while actually moving your further away from truly understanding them.
Here’s what you get when YOU seek to understand your customers: intimacy, deep relationship and an invaluable education. Understanding is an iterative process. It requires leadership. Leadership means, well, leading. It involves risk because, a) there is no certainty you are right and b) you’ll make mistakes. If you want to create demand (and enjoy the higher margins and growth that creating demand provides), it’s your job to figure out what your customer’s want.
If all you’re asking them is what they want, all you’re getting is what they know – and what they know isn’t enough to get them the results they want (if it were, wouldn’t they already be getting those results?). You’ll gain absolutely no advantage with these answers; and likely you’ll focus your resources on those areas that created value yesterday and are unlikely to create value tomorrow.
If someone else is asking the questions for you, all you’re getting is the interpretation of what a researcher (who has no true vested interest in creating market leadership in your space) hears. All the things that aren’t heard – or said – are lost. So, with research in hand, you’re still at step one to really understanding. Don’t get me wrong, the report can be great to provide “justification” to an internal board – but it has no impact on actually succeeding in the market any faster.
Gaining a true understanding of your customers on your own is hard work and it takes a long time. It sounds so much easier and faster to just hire an “expert” to interview them – but it’s not; it’s just the opposite. So, if something is hard work and takes a long time – when’s the best time to get started?
I pride myself on being an optimist. A long time ago I had a coach who told me that he could describe the current business environment at the time and forever in the future. “Opportunity mixed with difficulty,” he said. He added, “And what’s more – the greater the difficult, the greater the opportunity.”
I also pride myself on being a realist. And I have to admit that I’m getting a bit concerned about the buzz I’m hearing in business circles. While I certainly think the increased optimism and focus on growth on the part of business executives is much healthier than the “we’re all doing to die” feelings of a few months ago, I’m concerned that many may be deceiving themselves.
Today, in my twitter stream I’ve seen a number of headlines, such as:
- 6 Ways to Prepare for the Coming Upswing
- Dow, S&P Hit New ’09 High
- Pace of Job Losses Sets Stage for Quick Labor-Market Rebound
- When recessions end, stocks win
What concerns me is not the optimism, but the messages beneath the headlines. I’m worried that executives are viewing the “economic recovery” as a certainty and typical of previous recoveries. Now, just a few months ago, executives were convinced that we were never going to emerge from recession, today it appears as though the champagne has been put on ice.
As my opening paragraph indicates, I fully believe that the next 12 – 18 months represents TREMENDOUS opportunity – FOR THOSE BUSINESSES WHO MAKE THE CRITICAL, PAINFUL, AND NECESSARY CHANGES TO THEIR BUSINESSES.
• If you think for a second that the price concession your buyers have grabbed from you in the past 12 months are going to be given back without significant oppositions, you’re in for a rude awakening.
• If you think discretionary spending (both in corporate markets or consumer markets) is going to come back to previous levels, be prepared to be shocked.
• If you think your traditional, non-value creative sales approaches are going to work like they did in the past, be prepared to watch your margins disappear.
Here’s the point: Just because the environment feels less painful, don’t reduce the time you spend thinking about your business and its direction. Don’t slow down any actions you planned because, “things aren’t so bad.” While you should certainly be preparing to for a recovery, you should be asking yourself: how have you fundamentally changed your business approach and maybe, even, your business model. If you haven’t, there’s a good chance you won’t notice the recovery – whenever it does happen.
On the surface it sounds nice. Combining Zappos.com with Amazon sure sounds like a powerful combination. Both companies care about their customers obsessively. Both are innovative. And Amazon has sure built an amazing distribution system.
But, I’m not sure. While I don’t follow Zappos.com or Amazon closely, I wonder if the sum is less than to total of the parts. While it certainly hasn’t been a wise idea to bet against either of these companies, I wonder if this won’t be looked at more as a distraction than an accelerator.
The purchase of Zappos.com accentuates the fogginess to the question: What is Amazon? The purchase by Amazon opens up the question as to whether the internal cultures of these companies will actually mesh. Will all of the things that made Zappos so special transfer after the purchase in the long-term?
It seems to me that Amazon is following the path of Ebay, who built a tremendous business by disrupting the auction and classified advertising businesses. Ebay was a world-beater and could do no wrong. Then, in the name of synergy, Ebay went on a buying spree. The result has been a company that has gone nowhere.
Apple, on the other hand, has followed the path of going deeper and deeper to delight its core customers and to allow new customers to find the core. As the graph below highlights, Ebay was a far better performer than Apple from 2001-2005 (disclaimer: I am by no means saying that stock performance is the key factor in judging success, I’m merely using this to highlight a point). As Ebay spread itself thinner, Apple became a far better performer and has outperformed Ebay by a factor of 8!
My recipe for success is that results equals focus times velocity. I wonder if both companies wouldn’t be better off in the long-term if they had pursued their own paths and increased their focus. We’ll never know. But in this time of celebrating the marriage of two wonderful companies, it’s a question worth asking. What do you think?
UPDATE: Just read a take on the merger from Seth Godin. While he doesn’t clearly express his opinion about the merger, his observations echo my thoughts. When you look at the list of “what Amazon is buying,” it doesn’t contain anything that Amazon hasn’t already built – thus making the rationale less than clear.
I finally had some time to catch up on some reading and I finished one of my favorite annual publications – Warren Buffet’s annual letter to shareholders. I realize that much has already been written about his letter and I’m not writing to reiterate any of what has been written about the letter.
Interestingly, the most insightful, important insight (IMHO) for business owners got not comment (at least that I saw). In the letter, Buffet shared his four prong focus:
In good years and bad, Charlie and I simply focus on four goals:
- maintaining Berkshire’s Gibraltar-like financial position, which features huge amounts of excess liquidity, near-term obligations that are modest, and dozens of sources of earnings and cash;
- widening the “moats” around our operating businesses that give them durable competitive advantages;
- acquiring and developing new and varied streams of earnings; expanding and
- nurturing the cadre of outstanding operating managers who, over the years, have delivered Berkshire exceptional results.
With the possible exception of point 3, I can’t think of a more succinct, direct and effective filter for management decision-making. (My isssue with point 3 is that it is easily misunderstood by businesses and causes them to diversify their business focus, Berkshire Hathaway is a holding company that owns 60+ highly focused businesses).
Do you want more growth? Give yourself a grade on these three critical pieces to success:
- Improving your financial strength;
- Creating and reinforcing a sustainable, unfair competitive advantage; and
- Recruiting, retaining and recreating great people to support great process.
Now, write down the most important action you can take in the next 90 days, and the next year to improve your grade in each area (or to sustain ‘A’ performance for areas where you gave yourself an ‘A’).
So tell me, what are you going to do?
Last week, I was sent a query from a reporter doing a story on the mistakes salespeople make during a recession and how selling is different in a recession. As I wrote my answers to her questions (and knowing that at best an excerpt would be used), I though I’d share my full answers. I hope they help as you guide your sales efforts. Questions are in italics.
1. As a sales manager/trainer, what is the most important lesson you have learned when coaching salespeople through past economic downturns?
The most important thing I’ve learned in guiding salespeople in any environment, but especially in a downturn, is to maintain concentration and confidence. It’s very easy to get focused on what is being “lost,” which erodes confidence and causes salespeople to enter a scarcity mentality. Getting salespeople to focus on what is happening and on the opportunities that do exist is critical. When salespeople focus on what is happening instead of what isn’t happening, they’re able to take an assertive approach and build their confidence. When they’re not focused, they become increasingly reactive, and in a down economy, being reactive is the equivalent of being thrown by the waves in a hurricane.
2. Is selling during a recession different from selling at any other time? Why or why not?
Selling is and isn’t different in a recession. The difference lies in the customer’s mentality. The customer is more likely to be in a defensive posture and to shut down. This means that salespeople need to focus even more on connecting with customer issues and diagnosing the causes of problems, they must make their offerings indispensable. Additionally, salespeople must spend more time ensuring that the customer a) fully understand their problem and b) that salespeople monetize the value of their offerings/solutions. If a selling proposition fails to provide hard evidence of return, the “softness” of the proposition will be overwhelmed by the fear of risk from the buyer and the sale will stall. What’s not different about this, is that this is what salespeople should be doing in any market. They’re able to get away without doing this work when “the tide is high,” but in this environment mistakes are not forgiven.
3. What is the most detrimental mistake salespeople make in a down economy?
The biggest mistake they make is they lose focus. The natural tendency in a down market is to try to put more and more opportunities into your “pipeline” or opportunity filter. This is what I call the wide approach. However, because customers are in a heightened state of fear and the work a salesperson must do to make a sale is greater going “wide” is deadly. We call this going wide instead of going deep. The right strategy in a difficult market (any market really) is to go deep – but few salespeople (or businesses) actually do this.
4.Why is this mistake often made?
The reason for this mistake is twofold:
- Fear – salespeople start getting worried, take on a scarcity mentality and start focusing on volume of “opportunities” rather than the depth or quality of them.
- Lack of strategy – the reality for most salespeople is that they are less “the cause of sales” in good times, than they just happened to be there when sales got made (I don’t mean this a derogatorily). When times get tougher and buyers retreat, salespeople have not developed the skills or planning to truly penetrate and create opportunities. I often say that the definition of a great salesperson is someone who can be selling when there is nothing that can be bought. This is how relationships are built and developed.
5. What can be done to correct this mistake?
- Training – the unfortunate truth is that most salespeople need to be taught again how to sell. They’ve operated in a “rising tide” environment for so long that they’ve become lazy and stopped competing. Selling in difficult markets is different than in growing or neutral markets. Every industry has the feel of “decline” to it. New skills and new approaches are needed.
- Focus – The three most important aspects of selling in a difficult market are: focus, focus and focus. We are advocates of what we call Warboards – lists of key targets that we are pursuing. This idea is by no means new or original – frankly all great selling organization utilize a similar approach. Our prototype recommendation is on what we call The Focus 50 (this number is adjusted depending on company issues), which is comprised of The Top 20 (the 20 best opportunities that we are working with to close in the short term) and The Farm 30 (the 30 best opportunities that we are developing). 80-100% of sales efforts should be focused on Warboard accounts.
- Monitoring – One of the first things President Barack Obama did when taking office was to institute a daily economic briefing to mirror the daily national security briefing that Presidents have been getting for decades. The same thing should be done in selling organizations. On a daily or weekly basis (depending on the situation) there should be a Warboard Review meeting. Every Warboard account is reviewed in a rapid fire manner. This increases accountability, requires salespeople to maintain focus on accounts, and identifies opportunities and, more importantly, log jams faster. We find that within a month of instituting the Warboard Review meeting the entire sales culture changes for the better.
The most important thing you can do for your business right now is to start reconfiguring it for what the world will be after recession. Forget what your business was – that’s irrelevant now.
I was struck by an article in Business Week magazine about how headhunter giant Heidrick & Struggles is completely redesigning their business model. CEO Kevin Kelly commented, “What keeps me up at night is not Russell Reynolds, Korn/Ferry, Egon Zehnder, and Spencer Stuart, our direct competitors, but what is going to happen to this industry. We have a 55-year-old business model, and how many companies do you know that survive, given a 55-year-old business model? How do we do something that is more transformational?” As a result, Kelly’s future plans call for Heidrick & Struggles’ search business to be reduced from its current 95% to no more than 50%.
While I am not familiar with Heidrick & Struggles or with Kelly – I give them complete credit for looking at what their business needs to be rather than what it is. As I speak around the country to CEOs, I’m struck, and at times distraught, by how unwilling business leaders are to view their world from the prism from what is rather than what was.
At the risk of being trite, this recession represents a giant reset. Properly navigated, it also represents opportunity. I’ve said before that the underlying cause of the recession is a failure on the part of businesses to create value. Reality, at least as it exists today, has proven that much of the revenue and profits that businesses enjoyed were an illusion. Today, you must decide if you are going to pursue a strategy of real, sustainable profits or are you going to attempt to recapture the illusion.
If you are going to ignite your growth engine again, you must focus on your core business and your core customers above everything else. The problem is that many businesses don’t know what their core business is (it got lost in the illusion) and even fewer know who their core customers are. How do you identify your core and reignite growth? Here are five questions to get started:
- List the problems you solve.
- From that list, what are the problems you solve uniquely well? (This is the answer to the question: What can you be the best in the world at?)
- List the types customers/clients you serve?
- From that list, who are the customers/clients you serve you uniquely well?
- Now, what would you have to do to build a business that focuses on the intersection of your answers to question 2 and 4?
I was talking with a friend of mine, who is also a business owner. He was kvetching about some challenges he was having getting the people in his business to make the changes he wanted. My friend’s company is highly entrepreneurial, on pace to do about $3 million in revenue and he’s looking to position the company to do $10 million. He was asking me how Imagine Business Development might be able to help him develop a go-to-market strategy to accelerate his growth and his profit.
We got into a conversation about some of the barriers he faced to achieving such growth and the conversation turned to some of his internal barriers. While I’m paraphrasing to some degree, my friend said, “I realize that we’re not the easiest company to work with. We’ve had quite an entrepreneurial culture and most the people here aren’t really used to having accountability, but we’d be looking to you to help us get things done.”
Now, I’d like to say I’ve never heard those words before – I can’t. Actually, I hear them too often. I understand how difficult and challenging running a small or mid-sized business enterprise (SMEs) is. SMEs have to be better than the “big boys” and we’re given fewer resources to do it. We rarely have access to largest pool of top talent (they’re often busy slaving away for Fortune 500 companies). As the leader or member of the senior management team, there is so much you are responsible for that the most important question you find yourself asking is, “What am I not going to get done today.” With all of the challenges of running an SME (and the odds against you), the one thing you can not tolerate is a lack of accountability.
My friend needed to correct some critical misconceptions before working on developing or implementing a strategy. Chief among the misconceptions is that accountability is optional. I define accountability as, “doing what you say you are going to do, when you say you are going to do it.” Further, “if for some reason you are unable to, you alert any impacted parties before it’s an issue.” Additionally, accountability is a two way street – executives need to be as accountable to those below them on the org chart as they expect their reports to be – if not more so! In my experience, the number one reason that companies fail to build a culture of accountability is that the CEO expects people to be accountable, but fails or refuses to be transparent and accountable to the rest of the organization.
The thing about accountability is that it can’t be delegated, outsourced, or rationalized. You’re either accountable or you’re not. Here’s the other thing about accountability – it’s not something that should or needs to be managed. If you have a top performer, accountability is wired in. The leader’s challenge is to be clear on expectations because once you tell a top performer you expect something, they go to it. When John F. Kennedy said, “We will put a man on the moon and return him safely by the end of the decade,” the engineers got to work. Kennedy’s job was to provide the goods (the funding, the leadership, and the talent). Had Kennedy failed to provide the resources he would have looked stupid, rather than brilliant.
Let me put this as simply as I possibly can – developing a good strategy is useless if it’s not built upon accountability. Forgiving accountability for any reason is a death knell today. And that’s the part of my friend’s statement that really steamed me, “we’re an entrepreneurial company – we’re not used to accountability.” That’s ridiculous, and I’m sick of hearing it (I hear from lots of people). True entrepreneurs are the most accountable people in the world. We have to be – if we’re not, we go bankrupt. Here are some “entrepreneurial companies,” you tell me if they have a tradition of accountability:
Lack of accountability is not entreprenuerial – it’s lazy! And lazy won’t work.
I haven’t sparked as much conversation with a blog post or observation as I did with my recent post McStarbucks in quite some time. My employees, my friends, and my clients have all analyzed, taken issue with and empathized with the post. One client summed the feelings up best when he said, “Yeah, I guess I just don’t want to believe that [the points made in the post] because I’ve been such a fan [of Starbucks].”
The most frequent (and at times aggressive) question I’ve gotten in response to the post is simply, “Okay Doug, what should Starbuck do?” It’s a great question and one that I’m going to attempt to answer.
Before I get to my answer, let me state for the record that I focus on and immerse myself in the world of small and mid-sized business enterprises. Further, I focus predominantly on B2B and high-end B2C providers, so Starbucks (being large and retail) is out of my wheelhouse. I’m taking up this challenge for three reasons: 1) because it seems like a fun thing to do, 2) I think some of the thoughts can stimulate ideas within the base of companies that I work with, and 3) my mom taught me not to say anything negative if I couldn’t come up with a better alternative.
One final caveat – Starbucks started going down the wrong path several years ago. The issues they’re dealing with are complex and simple, one-line solutions won’t do anyone a lot of good. So take these ideas in the context they’re intended- to provoke thought.
- As mentioned earlier it took Starbucks several years to get into this mess, so the first thing I’d do, if I ran Starbucks, is realizing that it’s not going to be a couple of months to get out. Starbucks violated the trust of core customers. Trust building takes a long time, and it takes even longer to rebuild.
- I’d look at the roadmap Steve Jobs created at Apple (point of clarity – I’d look at it, I wouldn’t copy it). Apple was where Starbucks is. They violated the trust of their core customers and almost lost their franchise as a result. What did Steve Jobs do when he came back? He cut. But, he didn’t cut for cutting’s sake – he cut to get back to the core. The primary focus of Steve Job’s first 90 days as CEO was to review everything in the product pipeline and cut the number that they were going to focus on. I don’t have the facts with me, but I recall he cut from 22 to 4 (2 for the business/design market and 2 for the consumer market). Jobs told Wall Street, employees, and fans that Apple was going to get smaller before it got bigger again. Apple has maintained that focus and has rebuilt their franchise to one that is stronger than ever before.Starbucks can do the same thing, but they have to get back to their core – “the coffee experience,” or “the third place.” They’ve got to get back to those who can love them the most – coffee lovers. If they want to expand the market, start catering to tea lovers (I realize they’ve started doing this). Create battles, rivalries, whatever; but get back to the lovers. Starbucks is not going to fix this without feeling the real pain. It appears to me that they’re trying to fix things without pain.
- If you want cut prices, don’t cut the prices of your core offering – coffee (and maybe tea). Here’s an idea – cut the price of wifi. Make it free for anyone visiting Starbucks – whether they have a T-Mobile account or not (or whichever provider they are using – I haven’t been there to hang out in a while, so I don’t know).
- Make it fun, enjoyable and/or useful to hang out there. My experience at Starbucks of late can be summarized as: loud, chaotic, dirty and congested. Clean the place up and keep it clean.
- Reduce the offerings, don’t increase them. Here’s a general rule – increase in good times; decrease and refocus in bad times.
- Appreciate and love your customers. Not with discounts (I’m worth more than a $2 cup of coffee) or “frequent buyer” programs. Just make me feel appreciated and loved. I used to love the fact that when I went to my local Starbucks, I didn’t have to give them my order – they knew it. Today, I’m happy if I can get eye contact and a genuine, authentic statement from a “barista.”
- Cut the number of locations by 1/3 and focus on making the remaining 2/3 great – and I mean great. Anything less than great from Starbucks is not going to be enough to turn the tide. By the way, get rid of (or rename) the in-store kiosks in supermarkets and other places – the service there is horrible, the people aren’t trained and it destroys the brand.
- Focus, Focus, Focus. Decide how you are going to be defined and focus manically on that. What is Starbucks today anyway?
- Stop worrying about the competition. I’ve heard Howard Schultz refer to Dunkin Donuts and McDonalds more in the last three months than he did in his entire first go around as CEO.
- Get back to having fun. I don’t get the sense that Starbucks is having fun and that makes me less likely to go.
There you go, 10 quick ideas. What do you think? Do you want to add some more? Take issue with any of my suggestions? Let’s hear it.
Robert Fritz, in his (great) book Path of Least Resistance: Learning to Become the Creative Force in Your Own Life, explains structural tension and how understanding this concept enables you to understand why people do what they do. Simply put, people will take the path of least resistance – which is typically going to be the path that presents the least pain or (this is important to understand), reduces the area of the greatest pain.
For example, understanding structural tension clearly explains why people tend to yo-yo with their weight loss efforts. As Fritz explains it (and I’m oversimplifying here), people who struggle with their weight tend to have competing beliefs. On one side, they have a belief that they should be healthy so they try to keep their weight under control; on the other, they have a belief that they like rich (fatty) foods. Rarely is their situation in balance.
When they feel healthy (their pants fit), they experience very little pain from the belief that they should be healthy. Because they feel no “health” pain, they focus on their belief that they like fatty foods – so they overeat. Overeating conflicts with their “be healthy” belief and, eventually, they feel more pain from not being healthy (their favorite shirt doesn’t fit). Because they’ve been eating what they like, they feel very little pain from the “I like fatty foods” belief; so they, temporarily, change their behavior and diet. This works, until people start complimenting how they look, their shirt fits again and they have been denying themselves their favorite foods. Because of the denial the “fatty food” pain, becomes increasingly acute, causes them to overeat and the cycle repeats.
So, what does this have to do with growth and the current challenges we are dealing with in the economy. Let’s take a look at two, typical beliefs held by growing companies: “expand opportunities” and “control or cut costs.”
When the economy and markets are good and revenue is more than covering expenses, businesses feel relatively little “cut/control costs” pain. So they get lazy and, in the name of “opportunism” and poor strategic planning, pursue opportunities with little discipline. This causes costs to rise at a greater rate than the rewards of their investments. As a result of rising costs or a change in market conditions, the “cut/control costs” pain increases significantly. Add to that the “opportunity binge” companies have been on, there is relatively little “expand opportunities” pain.
Just as people who wake up and realize they can’t wear their favorite clothes, companies go on a “crash diet” and cut expenses with little strategic thought. The lack of strategy and discipline that applied in the growth cycle applies equally in the cut cycle and mistakes are made, weakening the company. Keep in mind, the companies beliefs have not changed – they still believe in expanding opportunities, it’s just that the “cut/control costs” pain has become more acute that the “expand opportunities” pain. Eventually, the cycle shifts as the “expand opportunities” pain becomes greater than the “cut/control costs” pain. And the cycle repeats.
This is precisely where the vast, vast majority of business find themselves – they’re in the exact same position as people who struggle to lose weight. Just like the diet shows, gimmicks and shortcuts don’t work for people, shortcuts don’t work for businesses.
What’s the solution? Stop the insanity (yes, that’s a pun for those that remember one of the funniest diet gimmicks ever)! Fritz says that if the focus is on behavior – change will not stick. Over long periods of time, behavior always follows structure. The answer then is to change the structure and to integrate the beliefs. In business, this means that you have to stop looking at “cut/control costs” and “expand opportunities” as opposite ends of the spectrum. You must get out of the good market/bad market mindset. Companies should always be cutting, controlling, and expanding.
Here’s my challenge for you: How can you combine strategy, structure and people to enable you do get the work done by four people to be done better by three? If you’re always asking (and answering) that question, growth will become consistent and market conditions won’t control your destiny.
Those who know me know I loves me some good quality steak – especially a medium rare New York Strip. They also know that the only thing that doesn’t go well with steak (IMHO) is a commercial pitch. So it is rare that I find myself enjoying a great steak at a business function.
Last night was the exception, as I had the unique privilege (thanks to the Washington Chapter of EO) to enjoy a fine steak at Morton’s and hear a presentation from Morton’s very own Chairman, CEO & President Thomas Baldwin. Mr. Baldwin was hospital, gracious, entertaining, and very insightful. I highly recommend the Morton’s experience. They made me feel welcomed and served me as an individual, even though there were more than 70 present.
Enough with the commercial – now to the point of the blog. Baldwin provided insights that every fast growth executive should keep forefront in their mind. Here are the highlights – ignore them at your peril.
- The road to good service is paved with mistakes – well handled (that insight is worth the costs of a year’s worth of Morton’s dinners).
- In response to how a premium offering deals with today’s recession: I can’t worry about the recession – I can only worry about the things I can control.
- In response to how Morton’s is managing during the recession: We’re controlling our costs, cutting overhead where we can, executives are not getting raises or bonuses – but the guest hasn’t seen any of it.
- Food is wine, wine is food – that’s our philosophy (it’s also probably why Morton’s averages 15-20% more per head than its competitors with little advertising).
- If it’s not perfect, we don’t send it to the guest.
- The whole idea is to be genuine.
- They train and reward – maniacally (my word, not his).
- People who work with you will fail. I will fail. The key is to keep it a minimum – and when it happens, fix it.
All those tidbits and a great NY Strip to boot – who could ask for more?