With the right combination of ingredients used in a strategic way, companies can create a sauce that becomes the foundation of myriad success stories. Over the coming months, this series will identify those ingredients and discuss why they are critical in today’s world. Then, once the ingredients are on the counter, the follow-up series will show how, when mixed together, they can help to create a sustainable business model: the recipe for success.
With all due respect to a great thinker, Michael Porter got it wrong.
Or (more subtly) what he constructed in the late 1970s and 1980s has run its course, and the world has changed to require a new paradigm. He said that the way to create strategy was to define it according to a sustained advantage over the competition. Throughout the last part of the previous century and into the 21st, organizations were furiously hatching their unique value propositions based on intense competitive intelligence, market trend analysis, and power dynamics frameworks. Businesses took that construct and were able to differentiate themselves from the competition first by mastering manufacturing processes, then by driving greater efficiency through distribution, and most recently by leveraging better information.
While these concepts were (and still are) valuable for companies, the world has changed dramatically in the past decade where manufacturing, distribution, supply chain, and information mastery have become table stakes and now pale against the strategic driver of the “empowered Customer.” The one thing that truly matters is how the Customer feels (yes, I said “feels”) about you and what products, processes, and experiences you design to enhance the Customer’s view of you based on their needs. Governments, B2C and B2B industries, and other institutions are facing what was the future (and is now a reality) where the customer, equipped with technology and abundant and accessible information, can and do behave differently—fundamentally transferring the power away from the seller and placing it firmly in the hands of the buyer.
Did you know that the ability to compare prices, get feedback, and shop different sellers from your hand is only about 13 years old? Today we all take for granted something that did not exist long ago: The ability to get data on the products/services you wish to buy in the moment. People are now able to explore products and services, and find the best deals from anywhere and not be beholden to the nearest seller—all due to the technological change driven by the intersection of information technology advances and mobile communication networks.
Every 20 to 30 years since the industrial revolution and the deployment of the steam engine, a technological advance fundamentally changes society and the way people interact and plan. The sequence of the train followed by the automobile, followed by the radio, followed by the airplane, followed by the computer have all drastically changed societal structure, but none have impacted the balance of commercial power like the smartphone. The entirety of the world’s knowledge is at a user’s fingertips, along with copious insight, opinion, and reviews.
Information and communication technology is the first driver of the fundamental shift in power away from the sellers of things to the buyers of things. Where you used to go to one place to buy a car (usually the place you saw in an ad or maybe the one your parents used), get the information on the available trim packages, and then settle on price…now you can easily read reviews of the dealer and the cars themselves, compare prices, and find any information you want of that model or the dealer selling it. In the past, information was controlled and managed by the dealer and /or the manufacturer, but they no longer control the data you use as inputs and they no longer control their own messaging—social media and specialized blogs have taken control on how products are viewed. Customers no longer need a seller to provide the information they need to make a decision. The acts of discovery and exploration with a brand prior to purchasing has moved to the Internet for many customers, and that expectation is fast moving into their expectations for when they are buying as part of a business buying decision, hence the move to e-commerce and technology-enabled selling for B2B sellers.
At the same time, the Customers’ expectation for what level of experience they have in dealing with the selling organization is also shifting faster than many companies can keep up.
The second driver is the expectations the Customer has about how sellers should interact with them. Organizations today are measured against the best customer experiences. It is no longer acceptable to be the best in your industry; you need to match the experiences Customers are having from best-in-class brands (typically digitally native sellers like Zappos, Harry’s, or Thrive Market) or from those entities that have established the emotional connection with their Customers (think USAA, Ally Bank, or Trader Joe’s). The empowered Customer now has countless choices and so much data that they can move their business dealings at the drop of a dime. Companies not focused on the customer experience are not only at risk of being beaten by the competition, but their existence is at risk as customers will move quickly to greener pastures.
Positive emotions based on how Customers interact with the seller bind them more strongly: They tend to buy more, advocate for a brand more, and remain Customers. On the flipside, negative emotion can greatly curtail all behaviors and lead to the Customer fleeing to a better experience with another seller.
There are plenty of organizations with great products that have lasting value, but even the most proprietary and unique products are really services in disguise. The value of the product lies in its ability to solve a critical need of a Customer. This means that even those companies that think their products make them immune to the empowered Customer face existential risk should the “service” they provide fail to meet expectations or become obsolete.
Customers are now in the driver’s seat in ways they have never been. Companies that do not adjust to serving them in the way they want to be served are at risk of disappearing. Focus on the competition. Focus on products or process. But the time to place Customers front and center has come. Remember: you sell to people, not wallets; and since nothing happens in a company until somebody makes a sale, companies have to focus now on the person and their expectations behind the sale – the Customer.
While a high-performing team can create success and momentum regardless of market or strategy, placing the Customer at the center of your organization – the aiming point for your mission - will at all times be the critical component to help businesses design selling and service experiences as well as refine products. Having a shared sense of mission is important, yes, but having the Customer as that North Star is the second key ingredient for the secret sauce.
Further Reading
Here are some books that have influenced me, for this post and otherwise:
Get Caught Up
The Secret Sauce: High Performing Teams