So here's what's sparking this discussion: while the economy is showing signs of life, most of us are not expecting double digit growth in revenues or funding sources anytime soon. Beyond this, something deeper has changed. Operating norms of the past decade have been swept away in the financial crisis that erupted last fall. What's emerged is a renewed expectation of prudence, performance and accountability. In this climate it is not only harder to play as less money comes in the door but the rules have changed as well.
Economic pressures accelerate change. What types of pressure does your organization face? Examples around us include consolidation (auto, banking), new vs. old business models (media), new competition via expansion (some big box retailers getting even bigger) or competition via new entrants (on-line replacing brick-and-mortar).
What is your organization experiencing? Are you focused on short term survival – cash flow management, expense reductions? Can you look ahead towards growth, if so, how? If you were the CEO (or if you are the CEO) what do you do?
Friday, September 18, 2009
Manifesto for Smart Growth
Posted by Seth Rosenbloom at 3:51 PM
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7 comments:
Hmm..."prudence, performance and accountability." Maybe writing this is heresy for an initial new media blog post, but it could be argued (most likely by my father) that we are merely returning to a basic context of good business practice.
One recent example of the importance of context happened to me while I was working for a large retailer a year or two back. As a member of a leadership team who were festooned with new thinking, we could barely contain our excitement around the game-changing proposition of "solution selling" -- a sensible strategy that deliberately eclipsed the product-centric selling strategies of the past and ushered in the practical concept of selling customers a "solution" to their needs (products, services, etc.). Before the ink dried on our PowerPoints, however, someone unearthed a decidedly unvirtual written document that our company founder had issued sometime in the 1950's stating a desire for his employees to treat customers with the exact same approach that we foolishly believed we had invented. "Sell 'em a solution, and treat 'em with class."
My point is that no matter what large scale changes exist in our present-day economy, it is dangerous to tack too far from certain undeniable truths about human interaction and innovation that don't seem to change over time.
Those of us who have been in the foresight business for awhile now know that even the most innovative cats, more often than not, sculpt around what has come before.
I was listening to Business Daily the other day on BBC World Service and interviewer Stephen Evans was in Las Vegas talking to Harrah's CEO Gary Loveman. Evans asked what Harrah's was doing to address the drop in demand within their core gaming businesses. Since Loveman is a rather academic sort of CEO (Ph.D. in economics from MIT, former Harvard Business School prof), I expected his response to be pretty nuts n' bolts. It wasn't.
He said Harrah’s is focusing on its “best and most valuable customers”, “not reducing value to the customer” and ensuring their guests trips are “memorable and appealing”. Two-thirds of the way into his response, he finally got to staff levels and trimming expenses, but only after making it clear he was focused on ensuring his key customers’ experiences didn’t slip as his company reacted to new economic realities.
I found Loveman’s comments refreshing because top of mind to him is: what do my customer’s care about? what they are buying? rather than the mechanics of running a business, which is where so many of us tend to go in times like these. If you don’t keep the customer at the forefront of your decisions, you’re just shooting yourself in the foot and ensuring all your complex, war gamed, financially modeled, worst case predictions of doom will indeed come true. Before making decisions, business leaders should first sit down and remind themselves about the purpose for the business, the product or service of the business, the value of the business, what is absolutely sacrosanct about how the business must be run. Then figure out where to flex, trim, sacrifice.
Maybe this is motherhood and apple pie, but it seems to me that while you’re figuring out where to cut, you can also figure out how to invest in those business absolutes and get your first glimpse into smart growth as the economy starts to turn around.
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BBC World Service – Business Daily’s Stephen Evans interviews Gary Loveman > http://www.bbc.co.uk/iplayer/console/p0047lpn
David - You are right on. I worked for a parent company that implemented a "Customer Centricity" strategy. Looking back, I remember being resistant to this strategy, viewing it as overly simplistic. I also felt the strategy improperly subjugated the needs and importance of other stakeholders (i.e. employee, shareholders, and partners).
And then the subsidiary I worked for started to lose customers to such a degree that the whole company strategy unwound. I started to understand that employee, shareholder, and partner satisfaction was itself a product of happy and engaged customers; though not necessarily the other way round.
So why is this concept so hard to put into practice? In addition to my own concerns outlined above, I have noticed several other orthodoxies that threaten customer centricity implementation:
1) "The customer is me"
Too often, leaders make the mistake of believing that they are the customer. I worked in a consumer electronics company where our customer model was allowed to evolve with the CEO. Consequently, our model gradually disconnected itself from meeting the needs of the original 35-50 year old core customer target that we had been successful serving.
2) "Gaining clarity about who our customer target is will alienate or deprioritize other customers"
The drive for greater customer definition clarity can often scare folks who simply want to appeal to everyone. These folks see customer targeting as potentially coming at the expense of other customer demographics or groups. In fact, when a company can put in practice a clear target customer/strategy, that clarity generally finds appeal well beyond the target themselves, attracting sizeable halos of customers who may themselves identify or aspire to elements of the customer definition (lifestyle, service expectation, relationship with technology, etc.). Besides, who isn’t better off knowing what you stand for? Apple, for instance has used a very clear customer definition strategy to design products and experiences that appeal to a wide halo of aspirants. While some of those aspirants may not fit the Apple customer profile (mid-upper income design oriented technology enthusiasts), there are definitely many who have come to identify with certain aspects of it.
3) "Understanding the customer is someone else's job in our organization. Just look at my own performance objectives."
When organizational or individual goals are not aligned with customer-centric strategies, those strategies will fail. Too often companies merely preach customer-centricity, but in practice, encourage something entirely different. If you coach me to be customer-centric, but build my performance measurements solely around achieving certain financial goals (i.e. without any context for why those financial goals might actually benefit the customer), the result will not be customer-centric, but shareholder-centric. And as I written above, even that effort may fail, since Shareholders generally are happiest when the cash registers ring due to a clear value prop and identified customer need.
4) "Our customer is not the end customer, but the intermediary"
As important as intermediaries are (resellers, clients, consultants, partners, etc.), they too are motivated first and foremost by their ability to appeal to the end customer. In an era where supply chains still continue to operate at multiple layers, the more accurately one identifies the person at the end of that chain taking money from their bank account and putting it towards the product/service, the better all those upstream will operate.
Putting a customer-centric strategy in place is not easy. These processes take time as well as consistent buy-in and messaging from all leadership. Unfortunately, because both time and communications are scarce resources in today's economy, the push on behalf of the customer, once started, must be deliberate and supported at the highest levels.
Alignment in Disneyland
Last weekend was my 20th high school reunion (I am still in denial that I'm that old). I hale from a very wealthy Southern California community where recessions tend to affect size of portfolios vs. existence of them. Besides being surprised by the number of classmates recently returned to our hometown, my high school crushes who were still good-looking (a few extra pounds here and there though), and that the mean girls were nice and the nice girls not always so nice anymore, I was surprised by my former classmates views on the economy.
Based upon what I read in the press and what I experience in my current hometown of Seattle, the recession is winding down, growth will come back, although not very quickly, and all will be well with the world. Invest, spend money (conservatively) and be happy. A number of my former classmates think this is a farce. They believe that the government and press are embarked on a massive propaganda mission to avoid panic, cover-up how bad things really were and how close we still are to the precipice, and will get much worse before they get better.
Precipice or not, it does represent an interesting challenge for business leaders. Whether you believe we are out of the recession, we'll have a W-shaped recession, an L-shaped, or some sort of multi-dimensional, alternative universe, disneyland shape, there is not alignment out there. What I believe may be entirely different from the other executives in my company, my employees, my customers, or my suppliers, particularly in a world where my supplier could be in India, my customer in London, and I'm in Kansas (I'm actually in Seattle, but I do like Kansas as long as I fly into it vs. driving through it). And, therefore, my tolerance for risk, predictions on how others will behave and resulting decisions have an added level of unpredictability. Setting a direction and getting alignment on that direction across a business is going to be even harder.
Becoming great at understanding others' viewpoints on the economic outlook and how they will respond; and being able to build alignment on what direction makes sense for the company as a result, will be one of the most important skillsets an executive has in making our companies successful vs. just getting by...or worse.
I love motherhood. I love apple pie. And I couldn't agree more that a focus on the customer is the One Thing that can save a company, revive a company's spirits, encourage its employees to do their work that much more intelligently.
Today's business leaders need the same skills that leaders have always needed: intuition, adaptability, charisma, self-awareness. The recovery will not be dominated by people with the next great idea -- it will be dominated by those who have fundamental leadership skills and the courage to bring those skills to bear.
Cash is "King".
Raise prices where you can!
Change your billing and payables policies. Cripple "entertainment".
Acquire distressed companies that complement the existing businesses or extend market share.
Change executive compensation policies to reflect these attributes (ignore share price appreciation for the near term).
Pay attention to PR ... perhaps expand the PR efforts. Perception can reap changes rapidly.
Lead ... do not follow. Development, Marketing, Product Planning are key. Maintain operations with "rings of defense" depending upon the changing economy and the culture of your company!
I think the last commentator makes an interesting point about public relations. Since that's my area, I'd like to suggest that companies focus on what I think of as "good" PR rather than "bad" PR.
"Good" PR falls in line with the larger theme of being customer centric. Good public relations helps companies develop relationships by listening and aligning their businesses with true customer needs. Public relations is an ongoing process of mutual education and adaptation. When done well, it builds loyalty and support and helps businesses stay focused on what their customers (in the larger sense) need from them. PR helps raise awareness about your success and value. It also helps you address problems before they take hold or destroy relationships.
"Bad" PR is about pumping out a message/image with little regard for how well it matches reality or meets the needs of the people on the receiving end. I think that type of PR ultimately undermines a business by eroding its credibility.
A down economy is absolutely the time to invest in building relationships with customers and other key publics. Make sure they know what value you offer. Make sure you're attuned to their needs and concerns. And consider investing in research (new technologies make it much cheaper) so you can dig deeper into issues to position yourself for the future.
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