Friday, April 26, 2013
A little while back I noticed a flashing warning indicator on my car's instrument panel telling me that it was time service my brakes. I thought, "I'll call tomorrow when I have more time." Tomorrow turned into next month... and then the grinding started. When I finally got the brakes repaired, the repair bill was more than four times what it might have been had I heeded the warning light and not procrastinated.
Business leaders often procrastinate establishing or updating their business strategy. Refining strategy is uncomfortable because you have to acknowledge the goals that weren't met or the activities that slipped by the wayside. As well, it is sometimes less tangible than the metrics on your dashboard. For many busy executives, it seems impossible to take the time away from a hectic schedule filled to overflowing with customer fires, internal crises, delivering for customers, or closing new business. But what are the consequences of NOT stepping off the runaway train and spending time preparing for the future?
- Customers grow tired of inadequate service and take their business elsewhere. If you're lucky they don't take their friends with them.
- You are so busy serving existing customers that you don't have the capacity to bring in new customers, forestalling growth.
- Without new customers, you have no way to compensate for inevitable customer churn.
- Your employees are ineffective at best, and at worst, begin to burn out and leave. How much would it cost you if 50% of your employees were ineffective 10% of the time? For 200 employees, you may be losing a minimum of $1.5M each year!
- Your competitors pass you by.
- Worse yet, you burn out yourself.
Postponing the development of strategy may be a short-term strategy in and of itself, but it is ineffective. Unfortunately, the treadmill you're on keeps running, dragging you with it, until you choose to get off and re-adjust. For your business to succeed, you need to allocate time each year to evaluate and update your long-term strategy. In addition, you also need to set aside a smaller amount of time each month to test and refine it. By ensuring that you are regularly evaluating and refining your strategy, you ensure that your customers, competitors, or the market don't leave you behind.
This time for strategy must be sacrosanct; otherwise, it gets put off like my brakes until the penalty is much greater than the prevention. During the month of December, many customers are unavailable and you may find that you may be able to create opportunities to evaluate your business strategy. Schedule the time and "Just Do It!”
Wednesday, April 24, 2013
One of my favorite stories to illustrate the costs associated with lost opportunity centers around a major market research firm that decided to scuttle what was initially an eagerly anticipated new practice area. The firm decided that there wasn't a market for this new area and the associated research. A few years later, however, this firm’s biggest competitor had a booming practice – its largest by report volume and revenue – in this very same area. Not only that, but the competitor's most widely read analyst was writing about this area exclusively. Somehow, the competitor created a very successful business in the same market that was deemed unprofitable and unfit for entry by the first firm. How could one firm fail where a competitor succeeded so completely?
From a business perspective, it may make sense to scuttle a project when sales are lackluster and the new product or service simply isn't gaining traction. Yet, in this case and with the benefit of 20/20 hindsight and a competitive outlook, that was exactly the wrong decision. How could this research firm have made a different (and more profitable) choice?
In talking with executives, I identified three problems. First, their initial foray into the marketplace was too general; they didn't investigate and so couldn’t address the specific needs of their customer base, which they spent no time up front attempting to understand. So, the product they delivered didn't provide sufficient, immediate, and practical value. This oversight created their second problem: a marketing issue. Although undertaking a new practice area, targeted to a different role within existing client organizations, the marketing department didn’t equip the sales team to identify the right buyers. Nor did it equip sales with the right messages to effectively convey the new product’s value. This resulted in the third problem: poor sales execution. Because the sales team was uncomfortable and ill prepared, they gave up prematurely. Their rationale was, "We can't figure out who owns the function in the company that corresponds to this practice area, therefore we can't sell the research."
So the company scuttled what could have been a $100M opportunity. If they had spent time up-front to find out who would actually buy the new product and what specific research these prospective buyers were looking for, they could've avoided this disaster and saved a huge amount of money.
There are two lessons to be learned from this story: You need to clearly identify prospective purchasers and you need to spend time with them to understand how your product/services address Customer Purchase Drivers. As I've written elsewhere, customers base their purchase decisions on the attributes of a product or service that enable them to do four things:
- Make more money
- Reduce costs
- Mitigate risks
- Satisfy an emotional need
Only by understanding these Customer Purchase Drivers can you develop products and services that are guaranteed to be successful in the marketplace. Only by spending time with customers beforehand can you avoid making a $100M mistake.