Growth

Customers determine strategy

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The best laid plans of managers count for nothing if the customer has not been consulted.

I came across a “strategy” document the other day. It was really impressive and the process had been designed to reignite the growth of the business, which had stalled. Quite a few people had contributed and suggested many changes to existing practices. There were quite a few pages of decisions taken to change the way they were doing things.

 

Three things immediately occurred to me. First, despite the list of changes, the document made no mention of who would ensure those changes took place. Second, my enquiries revealed that no one had asked the customers whether the proposed changes would alter their buying habits. In other words, there was no evidence the changes would lead to increased sales. The third concern was that there was no way of measuring the effect that any of these changes might have on sales; even if sales improved it would not be possible to identify which, if any of the changes was responsible.

 

There is an old saying in management: “You can’t manage what you can’t measure”.

 

Because of the great effort that had been put into this strategy, I was slow to question its effectiveness. It may be that just in this case, the company might defy the basic law of growth, which is that the product has to contain a value proposition for a customer that is better than the value proposition of the competitor. The only way to discover whether a product has an appealing value proposition is to ask the customer.

 

You might go to an enormous amount of trouble to develop a product or modify an existing product in the thought that it will be the next “you beaut” thing and fall flat on your face when you discover that it is not what the customer wants. Motorola spent $5 billion on the Iridium satellite phone system. Guess what? The whole enterprise went belly up because Motorola thought the idea was so big that customers would love it. Customers voted with their feet and said, ‘Who wants an expensive unique satellite device when I can do down to the local shop and get a mobile phone?’

 

Strategy begins and ends with the customer. It involves discovering what the market wants and then identifying whether the business has the resources to deliver a product that meets that need with a competitive advantage. It then involves allocating the resources necessary to bring the product to the market. Sometimes you can come up with a great new product customers hadn’t realised they wanted, but they usually have a pretty good idea If you go ahead with a strategy that ignores this fundamental axiom, then the strategy might not be as effective as you might like.

 

So if growth has stalled the first thing to do is talk to customers and find out why they are buying less or defecting to competitors. If you try and guess their response rather than spend the time to get their in-depth feedback, or if you simply decide that you know what is wrong without involving the customer in the discussion, it is unlikely that you will come up with a strategy that alters the customer’s buying patterns.

 

Even if you do talk to customers and get rich feedback that indicates how you can come up with a competitive product, the next part of strategy is the allocation of resources. So many decisions are made and people leave the meeting with the clearest belief that they have come up with something special. Then, several meetings later, nothing has happened and people wonder why. The answer is that they have not allocated resources that are necessary for the successful implementation of strategy.

 

Even if they do this, they are often surprised much later that things haven’t worked out as well as they had hoped. The reason generally is that they have not introduced a measuring tool to check to see how the strategy is working. Things rarely go perfectly. When adopting a new strategy it is inevitable that adjustments will be necessary as the business goes to market. Unless there are measuring devices in place to test the effectiveness of the strategy, opportunities to make meaningful improvements to the product or service might be missed until too late.

 

So, just remember that the market determines strategy and if you ignore this and go it alone without touching base with the market or your customers, there is a high risk that the growth strategy will stink.

 

 

To read more Louis Coutts blogs, click here.

 

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