Many businesses are built and developed around an ability to produce and deliver a product or service to a particular customer with a specific need. Initially, the business enjoys great successes as their offering is aligned with a customer’s need. This early success can lull a business into a false sense of security – but, often, the underlying reason or reasons for success are not what the business thinks they are. But, since revenue is flowing and the business is making money, no one is too concerned for the future. Instead of a play to win mentality, many businesses work hard to defend their position with customers – often at the expense of a long-term strategy for sustainability and competitive advantage.
In technical organizations, those in charge of developing products may be more comfortable working in the scientific method, addressing controllable variables. Other businesses define themselves and their industry far too narrowly, and thus miss out on valuable opportunities to solve customer needs. Still others believe that they are in a growth industry and that no competing product or service will be able to unseat them from their advantageous position. All of these attitudes are dangerous and allow companies to plod along toward an inevitable fate while the signs of their eroding business go unnoticed. Let’s look at some of the thinking that contributes to this.
Four Myths That Will Kill Your Business
The early success and adoption that businesses experience lull them into a false sense of security. In many cases, their product is practically selling itself. For this reason, the business focuses on production-related activities such as: incremental feature development or operational efficiency goals to drive more profit out of the existing offering. Marketing is viewed as an unnecessary cost. However, these organizations are making a fatal mistake. They are building businesses that are focused around delivering a product in an efficient way. The longer this cycle continues, the further the business moves away from the source of its original success – satisfying a customer’s need in a way that is pleasing to that customer. Let’s take a look at four misconceptions that drive behavior in many businesses. Don’t worry if you see your own organization making these mistakes – it’s never too late to re-evaluate and revise your strategy.
Myth #1: You’re in a growth industry
There is no such thing as a growth industry. Let’s take the example of value added resellers (VARs) in the information security industry:
For years, these businesses enjoyed high margins and strong earnings. The critical mistake was that they define themselves as a reseller. At the time, the customer’s demand for new security products was massive and seemingly insatiable. Many resellers failed to recognize subtle changes in the market – as security environments became increasingly complex, products difficult to understand, and regulatory factors drove increased need for additional skills, the customers started looking for service providers that could deliver the security products they needed, but also provide the support and management to ease the burden of the complexity and regulatory demands. It turned out that customers didn’t necessarily want or need to own the security products. They wanted to protect their business and avoid audits and fines by showing that they are compliant with regulations.
Another class of business evolved that could answer the new customer need – the MSSP model. With security as a service offerings eliminating the need for capital outlay and providing a streamlined way to demonstrate compliance, VARs were at a loss to compete. Margins eroded and customers eventually moved toward a service provider to delivery their security services and, in many cases, eliminate their need to own a product.
Had the VARs been conducting ongoing market and customer research, they would have been able to identify these trends and adapt. Instead, many were caught off-guard and many VARs shut their doors, or struggled to evolve by adding consulting services or partnered with MSSPs.
Myth #2: There is no competitive substitute for your product or service
Let’s expand upon the VAR example: VARs worked hard to maintain relationships with security product vendors. By doing so, they achieved certification levels, obtained favorable pricing, and cultivated the ability to move products through to the customers in a profitable and efficient way. They believed that nothing would disrupt their competitive position as the only choice for the acquisition of security products. I suppose they were right. But, they failed to plan for customers to solve their need in a totally different way.
Had VARs defined themselves as security companies, helping their customers to stay ahead of complex and evolving security challenges, they would have approached their business in a different way and perhaps spent time evolving holding their position as the obvious choice. They would have had to be wiling to make their old business model obsolete in order to maintain a leadership position in the security industry. Instead, they defined themselves as being in the VAR industry, and many companies died, along with that industry.
Myth #3: Operational efficiencies will secure your future
This is a tough one. It is true that operational efficiencies can secure your short term future. You can drive mass-production, improved profit margins and overall quality. Unfortunately, if you only address these facets of your business, you will likely miss out on the critical opportunities to innovate. A production or service-delivery centered business model concerns itself with delivering a product or service in the highest quantity, at the best quality for the lowest possible cost.
In the end, the business becomes focused on things the customer doesn’t care about. Your customer is not concerned with how you deliver a product or service. They are concerned with whether or not their need is answered. Initially, when the business is aligned to the customer’s need, operational efficiency gains can contribute to a health business. But, for long-term sustainability, businesses must be willing and able to make trade-offs to continue to identify, understand, and solve the customer’s need.
Myth #4: Technical R&D is the key to the future
When enjoying the early successes of a breakthrough product, it’s easy to get caught up in the excitement and organize the business around the new capabilities. Organizations must remain focused on satisfying customer need. This means engaging marketing to help drive understanding of the customers and the market. These findings can help drive the future direction of a technology to ensure that it continues to remain popular with customers. Additionally, it allows the organization to discover the changing needs of customers and to guide the direction of R&D efforts so that the organization continues to evolve as a need satisfying organization, rather than a product delivering organization.
Continuing with our analysis of the evolution of the security industry, the application of artificial intelligence and machine learning to the security industry is going to be a fascinating study. The threat landscape has evolved to a point where human intervention is not enough to contain threats. Much like MSSPs appeared to answer the customer’s evolving need to simplify the management of many security devices and to demonstrate compliance with regulatory requirements, enterprise immune systems are now being developed to answer a new and painful customer need – the attack surfaces are so broad and the attackers are so sophisticated that they can no longer be mitigated by traditional MSSPs. The key to success for the organizations developing these services is that they must remain centered on solving the customer’s need and not become a product delivery-focused enterprise.
Embrace These Truths and Drive Long-Term Sustainability for Your Business
Satisfying Your Customer’s Need is Your Central Purpose
You must define your business in the context of the need you satisfy for your customer, rather than as service-delivering or goods-producing operation. Taking this view of the world will cause you to develop a deep understanding of your target market. You will start to make decisions that are focused on giving your customer the experience they want. This is how one creates real value – the kind of value that can’t be eroded by a cheaper price tag or gimmicks. You’ll have real sticking power.
You Must Go on the Offensive
It’s a dog eat dog world out there and if you build your business around a goal of maintaining your current position by incrementally improving your product or service, you’re leaving yourself vulnerable to competition. And, that competition may come from places you wouldn’t expect. Much like the electric companies didn’t expect another source of power to come along and threaten their ownership of the electric market, you could also be caught off guard. The businesses that enjoy true long term sustainability and growth are the ones who make appropriate investments in R&D – not just to improve their current product, but also to find new and better ways of solving the need.
It seems counterintuitive, but you must be willing to make your solution obsolete in favor of a better one. I think it’s fair to say that electric companies are wishing they had been spending more of their R&D cycles on alterative sources of energy (new ways to satisfy the customer’s need) instead of pouring all their effort in finding more efficient ways to produce electricity in the traditional way (incremental improvement of the current product).
Operational Excellence Will Not Secure Your Future
Of course, driving quality and controlling cost are important business practices and should not be ignored. However, you must understand and embrace the truth that your long-term survival hinges upon your ability to innovate and continue to satisfy a need in the market. So, don’t lose sight of who your customer is, what their needs are, and always be searching for ways to satisfy them. Your customer doesn’t actually care what goes on behind the scenes to solve their problem – they just care that it’s solved. Be careful to prioritize customer satisfaction over nominal gains in operational efficiency.
The Human Element is Critical to Your Success
Organizations often place the smartest technical people in charge of developing a new solution, but this is often not the best approach. While highly intelligent and skilled at a technical level, these individuals tend to work with data they can understand and control. They’re comfortable with scientific methods of study, experimentation, and controllable variables. In an effort to work they focus their efforts on product research, engineering, and production. They shy away from addressing inconvenient factors and uncontrollable variable such as the ever-changing whims of customers and fickle markets. The result is an imbalance where products are delivered around the physical delivery and operational considerations instead of around the customer’s need.
Additionally, they tend to believe that their ideas are so great that they will speak for themselves. This results in a severe lack of communication within the business. Ultimately, the lack of communication results in rifts developing between the product development efforts and the business units that are charged with selling a product or solution. Without buy in from the sales management and team, a product or service doesn’t stand a chance. Addressing the human element and ensuring close collaboration and communication between technical and sales teams must not be overlooked.
Building your business around satisfying a customer’s need creates long-term sustainability. In the end, your customer doesn’t care too much about what goes on behind the scenes. They only care that their need is met. In order to do this, you must truly understand who your customer is and what need you are meeting.
Marketing drives this evolution in thought. By understanding that your marketing efforts begin long before your product or services is created, you put yourself in a position to deliver overwhelming value to your customer. Marketing is so much more than creating the content needed to entice a customer to buy from you. Marketing is defined as a tightly integrated effort to discover, create, arouse, and satisfy customer need. With this view in mind, you can see that marketing actually extends across all areas of your business – from research all the way through customer satisfaction and retention. Is your marketing team contributing to all areas of your business today?