Stumped about building your business? Here are 7 ideas...
The economy is slowing down, that much we know. Trade protectionism may rear its ugly head. Business sentiment is cautious. Amid this backdrop, business development executives are facing a more difficult task. How do we grow business? How do we create greater value? How do we ensure that we meet expansion KPIs all within a shrinking environment? In this article, we share 7 key ideas that have helped even large companies like Raytheon, Best Buy and Starbucks ride difficult times and thrive when everyone else was struggling.
(The terms in these 7 ideas were coined by Professor Jeanne Liedtka of Darden Business School who also created them.)
(1) Diving Deep
If you have a commodity product, or if there are many competitors in your industry offering the same thing, then the only way you can compete is by price. In this situation, the lowest cost producer is the one who will win in the end. But what does this do to the industry? It actually sucks it down to the lowest common denominator, and no one in the industry benefits. Don't go the price route. Instead, look at your differentiated value proposition. What are you really offering that no one else is? I like to use the example of Montblanc because, let's be honest, a pen is a pen. You can achieve the same outcome with a thirty-cent ballpoint pen as you can with Montblanc's $500 pen. Yet, why would one shell out all that money for something that can be achieved with thirty cents? Simply because MB's value proposition is NOT in writing, it is the symbol of luxury, of prestige, of success.Many of MB's writing instruments are purchased NOT FOR WRITING! Its value drops once you have used it! Therefore, Montblanc's unique value proposition is its ability to command respect from people who perceive you writing with such a pen.
So ask yourself: What can I uniquely offer my customers with my commodity product such that I can create greater value with it?
(2) Swimming for the Surface
In a sense, this is the antithesis of the first idea. Supposing you have a very niche product, one which you developed for a specific customer for a specific industry. Its application is so unique that there is no one else who could really use it. Or is there? This is the case that faced SAP. SAP was started in 1972 by five IBM engineers in Germany. It so happened that a customer reached out to them to create an end-to-end business solution to track inventory, purchasing, invoicing and the like. There was no such solution in the market, and there was no such demand. When the engineers brought this up to senior management, they scoffed that this, and told them that their core business was in mainframes -hardware - and not software. They were told to concentrate on their real business. Undeterred, the 5 engineers quit IBM and set up a company called SAP to develop that customer's product. And once done, they then asked themselves, "I wonder who else needs a product like this?" And thus was born this mega successful ERP company that now leads the world.
Ask yourself: "Who else can we offer our custom solution to?"
(3) Swimming Sideways
When the iPod was first launched, it was a mega success and became Apple's largest, single contributing product. It was much larger than the computer business. Then engineers at Apple realised that their success could be upended by a telephone company who tacks on a music player into their phone. So, in order to pre-empt this attack, Apple decided to launch their own phone with a music player. But not without a lot of consternation in the company. Management was very concerned that the new product - a music-playing phone - would cannibalise and even wipe-out their largest revenue contributor. But in the end, the threat of being leap-frogged won the day and the iPhone was launched! But, to their surprise, not only did the iPhone become its record producing product, revenues at iPod didn't not fall! Now they had two strong revenue pillars! So what did Apple do? They swam sideways by looking at what else they could offer their customers that they wanted but were offered by others, and integrated that into their products. This is called adjacency.
Ask yourself: What other adjacent services can we include in our product/service so as to enlarge the value to our customers?
Do you recall the days when there was a fax machine, a scanner, a photocopier and a printer, all sitting on your desk? Each did a specific and separate function. Today, we have one machine to do all four, and much faster too! In fact, it is extremely difficult to find a dedicated machine anymore (and if you did, it would be very expensive since demand is so low!) So, bundling has a way of increasing the value of your product, and cause disruption. Oh and one more thing - the cost to bundle is usually much lower than the perceived value that the bundle brings to it! This allows you to reap higher margins.
Ask yourself: What products, or services, can we bundle together so as to provide greater value to our customers?
(5) Seeking white space
If Bundling was the accumulation of products or services to provide greater value, then Seeking White Space is simply the bundling across business units. When different business units come together to create a new product or service, it does so by seeking white space in the competitive arena. White space in the economy is that space that no one is servicing at the moment. Such a space could be too small for larger competitors, or simply too difficult for others to integrate into their solutions. Yet, when you bring together the capabilities of different business units to bear, you may be able to attack these spaces and gain new business when earlier you could not.
So ask yourself: Which other business unit can I collaborate with to offer even higher value to my customers?
This is the bundling of different companies/organisations, coming together to offer a broader spectrum of solutions. For example, many technology and fast-moving consumer goods companies collaborate with third party logistics (3PL) companies to hold inventory, assemble, or even provide warranty service for them. Some 3PL companies even manufacture the goods. Hence, companies like Apple, Samsung, and Xiaomi take care of the demand side of the business - driving marketing and product design - while the 3PLs take care of the supply side. After all, those companies will never be able to beat the logistic companies in their own game, so rather than provide that function at a higher cost, they outsource this function, bundling across organisations to create a networked solution, and ultimately lowering costs.
The question to ask therefore is, "What function can be better done by another company which we can collaborate with to improve our overall costs and product efficiency to our customers?"
How many of your, dear readers, simply buy Starbucks' coffee to go? If you are one of them, then you are Starbucks' best value customer. You see, Starbucks has already costed in the rental space for you to sit in their cafe, enjoy the ambience, use their free Wi-Fi, and keep some other customer out. But, if purchased the coffee to go, technically you paid for services you didn't consume, and that makes you a high value customer! The fact of the matter is that people will pay more for experience than they will simply for product. In fact, in today's economy, there is a growing trend of self-service not so much as a means to lower costs, but as a means to increase experience. Some restaurants allow you to cook your own meals - with the chef by your side, of course! Some allow you to pour your own wine, so there is no sommelier. And you do all these and pay more at the same time! A win-win strategy, if ever there was one.
The question to ask is, "What experience can I design into my product/service to make it even more valuable to my customers?"
Doing the same thing
Someone once said (and this was misattributed to Einstein), "The definition of insanity is doing the same thing over and over again, and expecting different results." Even if Einstein didn't say it, it is a very wise saying. Many businesses operate on the mistaken notion that hard work will lead to good results. Yes, doing the right work hard is good; but doing the wrong thing well will quickly drive us down the path of failure! In fact, the speed at which business is turning these days makes what we did this morning irrelevant for what we will do this evening! So the key is doing the right thing - and not doing things right - to grow your business in today's economy. And if the right thing suddenly becomes the wrong this, as is wont to occur, then it is time to tweak your product or service. I hope these 7 reframing techniques will allow you to see your situation in a different light, and to boldly go where no man has gone before.
I wish you all the best!