Insightful article by ADAM HARTUNG: Listen to competitors, not customers! I have attached the link along with the full article…
http://www.forbes.com/2010/01/06/innovation-customers-competitors-leadership-managing-marketing.html?partner=artctrlinboxmain
Listen To Competitors–Not Customers
Adam Hartung, 01.06.10, 3:10 PM ET
It may be apocryphal, but Henry Ford supposedly said, “If I had asked my customers what they wanted, they would have told me a faster horse.”
It is not apocryphal that within a few short years of creating the modern personal computer market, International Business Machines abandoned the PC. Its customers, who were data center managers, told them there was no future in the PC. Of course, that verdict came a few decades early. It cost IBM a lot of revenue.
Both stories illustrate the grave risk that lies in listening to customers–especially in listening to them about innovation and market shifts, which we’ve been seeing plenty of and which will surely not let up in 2010.
All kinds of businesses turn to their customers for insight. “Voice of the customer” research projects are a hallmark of currently popular lean manufacturing setups. Companies that use customer resource management programs (Salesforce.com is one) typically turn to their biggest customers for input, because Pareto’s law tells them that 20% of their customers produce 80% of their revenue. But there’s no reason those biggest customers should be particularly perceptive.
In reality, customers rarely know what they want, beyond more, better, faster and cheaper. Customers, especially big ones who are locked in to your solution, don’t seek out anything really new, especially if it means they’ll have to invest in new tooling, systems or processes. They don’t look for change. Mostly they want only to tilt the adversarial customer-supplier relationship in their advantage, hoping they can persuade you to help them save money. And you mostly just want to sell them more stuff.
“Customer insight” is all about short-term tactics. It leads to things like deeper volume discounts, matching competitors’ prices, higher product quality, improved service, less carried inventory and more automation–all in exchange for bigger orders. It all reinforces the short-term business.
Most managers are happy to rely on such input. It sounds very good, and it appears to help defend and extend the existing business. But it doesn’t tell you how to prepare for or take advantage of market shifts–shifts that will take away customers in a heartbeat, wiping out your profits and your revenue.
When markets shift, those customers will abandon your solution overnight, and they’ll blame you for missing the shift. Just look at how fast information technology departments swung to servers connecting to PCs, shutting down mainframe and mini-computer data centers and wiping out thousands of green-screen terminals. That almost bankrupted IBM. It did kill Wang, Lanier and Digital Equipment, and it made Dell, an unknown, into a powerhouse.
To win higher returns over anything beyond the very short term, listen a lot less to your customers, especially your biggest ones. They’ll tell you mainly what you already know. Instead, pay attention to competitors. Especially those on the fringe.
Tribune Corp. was a powerhouse media company in 2000. It had a foothold in television, owning local stations and parts of cable channels, including Food Network. It was an early Internet leader, investing in America Online and co-founding CareerBuilder.com, Cars.com and other Web sites. But its heart was in the newspapers its success had been built on, led by the Chicago Tribune. Believing that newspapers were still, as they always had been, protectable products with moats around their geographic markets, Tribune paid handsomely to buy several papers, including the Los Angeles Times.
As the decade progressed, Tribune’s management kept asking their biggest customers, their newspaper advertisers, what to do. The advertisers asked for ads tied to content, better information on readership and tie-in promotional ads. They also asked for multi-placement deals, including insert discounts. Tribune complied with those big advertiser desires in hopes of further growing ad sales.
Tribune’s leadership never heard the bullets that hit them.
In the decade’s latter half, newspaper subscribers started getting more and more content from the Web. But Tribune laughed off the idea that people would substitute Web sites for newspapers or (horrors!) bloggers for reporters. Tribune’s leaders never imagined that their subscriber rates would actually decline.
They assumed they had a lock on local advertising to individuals with their papers’ classified ad departments, and on major advertisers like auto manufacturers, auto dealers and movie distributors and theaters with their display ads. “Craigslist is for hookers” was how one exec expressed his view of the online selling site that he didn’t realize was already destroying his business. And eBay was “a big online garage sale, not a place where you could sell things of value, like a car.” Google ad placement was no threat because it wasn’t “local.”
Then the classified ad buyers disappeared. In 2006 the auto companies shifted 25% of their newspaper ad budgets to online media. Movie studios slashed their newspaper spending in favor of online clip promotions and lists of local theaters.
When Sam Zell led a leveraged buyout of Tribune in 2007, he said on numerous occasions that he read four newspapers daily, he believed people would keep reading them and advertisers would keep buying space in them to reach their local customers. He was wrong. Within two years Tribune was bankrupt. Asking customers what they wanted had done nothing to help management anticipate the market shift. A close eye on competitors across media would have shown the inevitable change as it approached.
PricewaterhouseCoopers, Computer Sciences Corporation, Electronic Data Systems and other large information technology services suppliers listened to their customers tell them why they liked their proprietary implementation methods, and why they liked having local people with expertise service their accounts. They laughed at the offshore suppliers who could never understand their customers. Then Tata Consulting Services and Infosys implemented global delivery systems using highly trained labor at a 10th the cost, practically wiping out the domestic vendors’ traditional IT services business. Trying to save their companies, the old businesses’ leaders withdrew to handling large but unprofitable outsourcing contracts with which offshore companies wouldn’t compete. PwC was swallowed by IBM for a song, CSC survived on the back of government contracts and EDS almost failed before being acquired by Hewlett-Packard.
To succeed you have to obsess about competitors. And not just about traditional ones, but about fringe ones as well. What customers won’t tell you, the market will, through competitive activity. The signs were all there for Tribune and other media companies to see the user shift that was coming long before their newspaper ad revenues fell off a cliff. The emergence of strong offshore IT centers was obvious to anyone who looked. But by focusing on existing customers, especially large ones, these companies kept themselves blind to the changes that wiped out huge, profitable revenue chunks.
Cisco has a rule that it makes all its own products obsolete. It’s better to cannibalize yourself than to have your business devoured by someone else, so Cisco watches its competitors and either beats them or buys them. That’s one reason it has kept itself vibrant while Sun Microsystems and Silicon Graphics bit the dust in 2009.
Leaders can move beyond surviving and enter the world of thriving only if they obsess about their competition. Watch the competitors that grow, and watch the competitors that don’t grow, and understand why. Look at how customers behave, not at what they say, and see what tests they are undertaking with competitors–especially with fringe competitors with alternative solutions. See what revenues are shifting to other, often emerging, competitors, even if they’re very small. If you want to remain viable, your competition will give you more insight than all the strategic customer councils in the world.
Adam Hartung lives in Chicago and is a partner in Vector Growth Partners, a growth strategy consulting firm in suburban Washington, D.C. He is author of Create Marketplace Disruption: How to Stay Ahead of the Competition. Learn more at AdamHartung.com.
Why do NFL players keep changing uniforms? One word–MARKETING!
The National Football League (NFL) is considered the “top brand” in all of American professional sports. Why?
They protect it” very well, ensuring consistency among uniforms, league discipline beyond even what the court of law might “dish out” i.e. Michael Vick serves almost 2 years in prison…of course not playing a down of football during those two years, and then upon his being reinstated to the NFL, was suspended for a few games at the beginning of this season.
Regarding the uniforms, this year the league has been celebrating the American Football League (AFL) which merged with the NFL in 1970 (think Joe Namath…
and the “guaranteed victory” for the upstart New York Jets vs. the “mighty NFL” Baltimore Colts). As a part of the celebration, the “original” AFL teams, now part of the NFL, have been wearing the “throwback” unis! Lots of fun…get a load of the Denver Broncos’ unis! (below, left) WOW!!!
What’s the point here? Not only do they keep “designing, manufacturing, displaying, and showcasing” new uniforms for teams on a regular basis so those die-hard fans will buy those, but an even “deeper marketing point” is the emotion this stirs in those “Baby Boomer fans” who grew up in the 1960’s rooting for their favorite AFL team! It is not only about the product itself, but it is about the emotion that it stirs in the consumer, in this case, the NFL Fan. It brings back memories of childhood, teen-age years, or early adulthood and evokes generally positive, romantic-type feelings.
SO…THINK ABOUT NOT ONLY HOW YOU CAN “DISPLAY YOUR PRODUCT OR SERVICES IN NEW UNIFORMS,” BUT THE EMOTION THAT IT WILL STIR IN YOUR TARGET MARKET!
Dunbar’s number is 150.
And he’s not compromising, no matter how much you whine about it.
Dunbar postulated that the typical human being can only have 150 friends. One hundred fifty people in the tribe. After that, we just aren’t cognitively organized to handle and track new people easily. That’s why, without external forces, human tribes tend to split in two after they reach this size. It’s why WL Gore limits the size of their offices to 150 (when they grow, they build a whole new building).
Facebook and Twitter and blogs fly in the face of Dunbar’s number. They put hundreds or thousands of friendlies in front of us, people we would have lost touch with (why? because of Dunbar!) except that they keep digitally reappearing.
Reunions are a great example of Dunbar’s number at work. You might like a dozen people you meet at that reunion, but you can’t keep up, because you’re full.
Some people online are trying to flout Dunbar’s number, to become connected and actual friends with tens of thousands of people at once. And guess what? It doesn’t scale. You might be able to stretch to 200 or 400, but no, you can’t effectively engage at a tribal level with a thousand people. You get the politician’s glassy-eyed gaze or the celebrity’s empty stare. And then the nature of the relationship is changed.
I can tell when this happens. I’m guessing you can too.
WRITTEN by SETH GODIN
What is so important about educating your prospective clients and existing clients? Listen to this 15 minute podcast as we discuss this on “Livin’ the Dream” Radio Show…Click Here!
Here is a great article by MIKE SCHULTZ, President of Wellesley Hills Group…
Q. Why did the chicken cross the road?
A. Jack Bauer: Give me ten minutes with the chicken and I’ll find out.
The first time I heard the five questions I’m about to put forth as the five most important for services marketing, they annoyed me. Actually, the person who introduced them to me tended to annoy me in general. By proxy, I threw the important-question baby out with the annoying-lady bathwater. (I shouldn’t have done that, but I didn’t realize it at the time.)
The concept is the Five Whys. Popularized by Taiichi Ohno, the architect of the Toyota Production System, the Five Whys is a root-cause analysis technique, helping business leaders get past amelioration of the symptoms of a problem and instead address the underlying causes.
Essentially, the Five Whys is to problem solving and critical thinking as removing weeds by the root is to gardening. Fix a symptom in business but not the underlying cause, and the symptom is bound to recur. Fix the underlying cause (i.e., address the problem by the root), and you can gain lasting improvement.
In a manufacturing environment, the Five Whys might work like this:
Manufacturing Example Problem: The Production Line Stopped Again
- Why did the production line stop? Answer: We blew a fuse.
- Why did we blow a fuse? Answer: Because the bearings overheated.
- Why did the bearings overheat? Answer: Because there is insufficient lubrication on them.
- Why is there insufficient lubrication on the bearings? Answer: Because nobody oiled them.
- Why did nobody oil them? Answer: Because we don’t have a preventative maintenance schedule.
- Why don’t we have a preventative maintenance schedule? Answer: Silence.
(True, this example has six Whys. Number five is directional, not absolute.)
The idea is that once you’ve gotten to silence, you should be near your root cause. The temptation by many managers pressed for time (who isn’t) is to solve a problem at the first chance they see something they can tackle. Perhaps in our scenario above, the folks might have pointed a fan at the bearings, keeping them at a cooler temperature and lessening the overheating problem. Or, perhaps, someone might just switch the fuse, and then be ready to switch it again (and again and again). But they won’t get the deeper, more permanent fix.
In services marketing, too many activities are engaged, and too many decisions are made, without asking enough Whys.
Services Example Problem: We Don’t Have Enough Leads
- Why don’t we have enough leads? Answer: Because the partners aren’t getting enough referrals to build their practices.
- Why aren’t the partners getting enough referrals? Answer: Because the partners and the marketing group aren’t taking the actions needed on a regular basis to generate referrals and new business leads.
- Why aren’t they doing what they’re supposed to do to generate leads and referrals? Answer: Because work expectations focus on keeping them billable, and lead generation isn’t a top priority in the marketing department.
- Why are the partner jobs aligned so narrowly to billing, and why doesn’t marketing focus on lead generation? Answer: Because the managing partner hasn’t historically perceived revenue generation as an issue, and so across the board—from marketing to billable staff—there isn’t much concerted lead generation effort, and, in marketing, there’s no budget.
- Why? Answer: Now that it’s an important business problem to solve, why hasn’t he addressed this?
- Why? Answer: Silence.
I’ve seen firms stop after Why #1 and conclude that the partners need training. One year later…no discernable change in referrals generated. (Why? Skills may or may not be an issue, but even if the partners have all the skills, other factors, as we know, prevent them from generating leads.) Some firms stop after Why #2 and conclude that partners need personal action plans to generate leads and that marketing must make lead generation a priority. Twelve months later, even if action plans are built by the partners and the marketers, the actions aren’t taken. (Why? Compensation drivers, expectations of billing, and lack of budget win out over good intentions to get it done.)
No matter what might change to support referral and lead-generation efforts, if the managing partner doesn’t have his heart and actions in full support over the long term (see answer to Why #4), the initiative will head (without passing go, and without collecting $200) to the “flavor of the month” graveyard. Without leadership support, success of any kind of corporate initiative is in serious jeopardy from the get go.
Of course, there could be other Why factors that affect referral and lead generation. Perhaps the firm’s delivery of service isn’t as strong as they think it is and thus their reputation is suffering. Perhaps a major rainmaker retired and the rest of the team simply never took up the slack. Perhaps over the past five years the other firms have established themselves as thought and market leaders, and the firm is still the “best kept secret” with partners who rarely publish and speak? Perhaps the economy is down and every firm is suffering. All of those are possible root causes that would lead to different solutions.
Indeed, don’t ask the Whys, don’t get the problem solved.
In part two, Mike will explain how to use the Five Whys in a professional services environment.
Mike Schultz, author of
Professional Services Marketing, is the Publisher of
RainToday.com, the premier online source for insight, advice, and tools for service business rainmakers, marketers, and leaders. He is also the President of the Wellesley Hills Group, a management consulting, marketing, and lead generation firm focused on helping professional services firms grow. Mike can be reached at mschultz@raintoday.com or on Twitter@Mike_Schultz. Check out Mike’s Services Marketing Blog for more tips and insights.
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