Tuned In: Uncover the extraordinary opportunities that lead to business breakthroughs.

Winning in a Down Economy (Step 5 of 10)

On October 11th, we introduced the idea that Winning in a Down Economy does not start with blindly cutting costs. Instead we outlined a strategy for tuning in that market leaders have adopted. In the ten weeks that follow, we're covering the ten steps to getting your organization aligned quickly to a new market reality. This post is the fifth of ten. Steps 4-6 address the areas of product and portfolio planning with an emphasis on increasing the relevance of your solution offerings.      

Step 5: Find the 'Bright Light'
"Some people think they are concentrating when they are merely worrying."
- Bobby Jones

What's your plan of attack to get through the next two years? The leaders we've talked to have already identified that what was good enough to get their companies to where they are today is not going to be good enough to keep them there. Some key aspects of their business will need to change, and quickly. And while they may not know exactly what the changes are yet, most have established a frame of reference for this transition ... creating a new two year plan.   

If you've followed our recommendations from Steps 1-4, you've gathered a large amount of market data to sift through. The buying environment, customer problem areas, test results from new solution proposals, investment priorities the market demands, even your ability to execute ... should have all been profiled by this point. Now the challenge shifts to analyzing all of this data. 

This is where tuned in leaders shine and separate their businesses from the rest of the pack. Identifying the patterns that make sense and an innate ability to filter through the useless to focus on the things that matter most is their gift. How do they gain these insights? 

They ignore everything but the bright lights. 

The data you've collected will have lots of bad news in it. Buyers are locking down budgets, cutting staff and freezing investments on all non-revenue generating purchases. Your sales may be down and the future outlook uncertain. Progress on a new product or a new initiative you launched may have stalled completely with evaluators. It can get pretty depressing when you take it all in. Tuned In leaders absorb these data points to be sure but they also possess two characteristics that push them past all of the obstacles they present:

1. They know from experience that there is always a plan for success available so they keep digging until they find it.   
2. They focus more on what's working than what isn't. 

The bright light is the set of data that is showing a positive trend. Perhaps it's the services business that you hadn't been paying much attention to. Or, a particular area of your website where visitor traffic has grown significantly. A channel of distribution, geography or product line that is outperforming the rest of your business. Or, maybe an external trend that has just recently emerged that lines up to a competency you have but have not yet exploited. Find it and you've got the first brick in the foundation towards your recovery. 

In every market segment that we researched, we found companies who ignored these trends and allowed new competitors to emerge and in some cases claim leadership of their segment. In a very high percentage of these cases, the start of this breakout occurred in a down economy. While the leaders were all tuned out, focused on cutting costs, and ignoring the bright lights that existed, new entrants were fixated on them and built businesses that resonated.  

Don't be afraid of being called an optimist. Now is the time to find the good things that exist in your business. Build your plan to connect to them and your opportunity will come into a much clearer focus. 

Winning in a Down Economy (Step 4 of 10)

On October 11th, we introduced the idea that Winning in a Down Economy does not start with blindly cutting costs. Instead we outlined a strategy for tuning in that market leaders have adopted. In ten weeks that follow, we're going to cover the ten steps to getting your organization aligned quickly to a new market reality. This post is the fourth of ten. Steps 4-6 address the areas of product and portfolio planning with an emphasis on increasing the relevance of your solution offerings.      

Step 4: Rate your 'Incremental Impact'
"A prudent question is one half of wisdom." - Sir Frances Bacon

How many of you would have predicted the turnout we had in the recent presidential election if we had asked you a year ago?  The environment changed dramatically in the last 12 months didn't it?  For that matter, in an issue even closer to home, how many of you would have predicted the changes you have made in your investment and life management strategies in the past 30 to 60 days? As we've talked with friends and associates, it seems that many have reconfigured dramatically while others have at least taken a good hard look at the potential value of everything they are spending money on. What seemed like a good idea even as short a time ago as this summer might be completely out of step with the market today. So you did the prudent thing, got some fresh advice and re-prioritized.  

Why don't we do the same in our businesses?

Your company has it's own portfolio of products and services to sell to your customers. Your time and investment dollars are precious. You want to ensure that you're spending that capital wisely ... on the types of solutions that resonate and draw the crowds. Anything else is too much of a risk.

Rating how well your products will sell next year doesn't have to be as hard as most make it. But, when we get stuck up in inside-out discussions like ... can we achieve the same growth rate as last year? ... you're focused on the wrong end of the analysis. Start with a simpler test instead. How much of an 'incremental impact' does each product in your portfolio offer today? The best way to do this is to take the outside-in approach of identifying the problems your offerings solve and then surveying your customers, evaluators and potentials, asking them to vote on:

1. Their priority for investment in solving specific problems? 
2. The impact to their businesses of solving each one?
3. The time line it needs to be solved in to have an impact? 
4. What the 'perfect solution' would look like?   

This snapshot will help you plot the urgency, pervasiveness and willingness of your buyers to pay for each of the solutions you offer. The ones with the highest incremental impact will jump out of this analysis. Are they the same today as they were last year? last month?  Quite likely that the answer is no. Market conditions have changed. Just because you have had a star product in the past doesn't mean it will continue to be. Similarly, others that have been sleepy might be a higher priority right now. A third category of potential solutions might be those that a minor amount of work can help you create the 'perfect solution' that will trigger new sales opportunities. 

Rate what you have and identify solutions you can create that require only a small amount of investment for you to offer an upgrade that resonates. You might be surprised by the results and be able to focus on the high impact offering that will get through a tough environment in 2009.     

Winning in a Down Economy (Step 2 of 10)

On October 11th, we introduced the idea that Winning in a Down Economy does not start with blindly cutting costs. Instead we outlined a strategy for tuning in that market leaders have adopted. In ten weeks that follow, we're going to cover the ten steps to getting your organization aligned quickly to a new market reality. This post is the second of ten. Steps 1-3 address the areas of assessment and increasing the reliability of your decision making. A key starting point is to accept that no matter what you've done or not done in the past, today you are tuned out.    

Step 2: Understand the New Buying Environment
"Only buy something you'd be perfectly happy to hold if the market shut down for 10 years." - Warren Buffet

If you don't believe in trickle down economics, you'll have to at least acknowledge trickle down fear. The fear that permeates Wall Street is trickling down to your buyers ... faster than we'd all like. The conversations that you will have with them in the coming months and years will almost certainly have a new beginning, middle and end that can only be described as vastly different from the ones you've had in the past. In this environment, it would be foolish to assume that past techniques, messages and perhaps even your products work anymore. 

When Geoff Moore published Crossing the Chasm in 1991, he talked about a phenomenon that he saw in technology companies that caused them to fail in the mid-adolescence stage. He found that start-ups were wonderful at explaining breakthrough technology to visionary buyers and getting them to pay a lot of money to be the 'first to market' with a new innovation. But, as the companies scaled and their markets matured, they began to encounter more and more mainstream buyers who were 'pragmatic'.  They didn't care about innovation, they just wanted to know how you solved problems they had and who else you had served successfully so they could reference them. Many start-ups failed at this stage because they were unable to adapt. 

The environment we are in today has another similar chasm. It's crossing from speculators (those who purchased based on hope) to conservatives (those who validate everything before they buy). These buyers are not interested in improving productivity and growth anymore as much as they are focused on survival. Their mantra's.  Safety first. Proven results. Show me how I'm not going to get fired for taking this risk. Interestingly, you will likely be isolated from all of this because it NEVER comes up in direct conversation. Buyers now being the sophisticated consumers that they are have already researched online and talked to third parties before they engage with you. They're loaded for bear when they do.  

Does this sound like your market right now? 

If you are like most, you probably would agree to some degree but also have to admit that you don't know what you don't know. Which is why you need to find out right now. Don't waste another day sending a selling team out into the market unarmed using poor techniques, wasting your buyer's time and your money. Take action immediately to:

1. Analyze the decisions made in your market in the last 30 days and conduct direct interviews with the decision makers to find out why you won or why you lost. Was there some new threshold that your buyer encountered in justifying what was urgent, pervasive and willing to pay? Did your sales team create unwanted barriers in the decision? For the no decisions, did the problem go away? Ask 15 of them and record what you hear. 
2. Contact executives that are running the businesses in your target market and conduct an open-ended interview about how they are running their companies today. Tell them you are trying to determine what products and services to offer that would be more suited to today's economic environment and you'd like their perspectives. Ask 10-12 of them and write down everything they tell you about the culture, systems and buying process. 
3. Analyze the moves of your competitors and try to predict the likely outcomes of the strategies they are launching (or legacy approaches they continue to use).  What made them strong (and you strong) last month may be different when mapped to how buyers purchase today. Identify any openings to increase your share of the market that IS buying. 
4. Rate your portfolio of offerings for how well they produce Quick Wins and quantifiable ROI. All buyers will be looking for these things whether they express it or not as they add safety to a new purchase decision. Are you making it harder or easier for them to validate a purchase from you?
5. Open up the lines of communication. Ensure that your communications to your channel are positive and demand the same from them to their buyers. No one will buy from a desperate sales representative in this market. They'll be seeking assistance from a trusted advisor. 

When you've completed this process and charted all the results, you'll begin to see a new picture of your business. One that probably has some baggage to shed but also some real opportunities to pursue. You will only know that when you stop looking at the market from your perspective and start filtering your thoughts, strategies and action plans based on what the buyer thinks. 

Understanding the buying environment will arm you with the data you need to not only decide what adjustments to make but communicate them with enough authority to make them stick. 

Winning in a Down Economy (Step 1 of 10)

On October 11th, we introduced the idea that Winning in a Down Economy does not start with blindly cutting costs. Instead we outlined a strategy for tuning in that market leaders have adopted. In the next ten weeks, we're going to cover the ten steps to getting your organization aligned quickly to a new market reality. This post is the first of 10. Steps 1-3 address the areas of assessment and increasing the reliability of your decision making. A key starting point is to accept that no matter what you've done or not done in the past, today you are tuned out.    

Step 1: Embrace the new Reality
"A pessimist sees the difficulty in every opportunity; an optimist sees an opportunity in every difficulty."   - Winston Churchill

Your business is a different one today than it was 30 days ago. What should you do about it?  Interestingly, most will do nothing. It seems we're trained to think only in one dimension ... our plans for what we want to accomplish. We've seen this before. In less than two years after the stock market devalued .com businesses, a high percentage of them went out of business. Did they fail because their stock price went down?  Or was it when their buyers realized they had nothing of value to offer? And unfortunately, the root cause of this wasn't that they were a .com business (many did survive and thrive mind you). Rather, it was something much more sinister. 

Their leaders tuned out to a fundamental change in the market. 

Far too many .com organizations maintained exactly the same culture, perspectives on work style and outdated belief systems that traditional mechanisms of doing business would be 'disintermediated'. They failed because they never changed their perspective from inside-out ambitions about what they would accomplish to outside-in realities about how to align to their market. 

How do you accelerate this perspective shift?  Get passionate about embracing the new reality. One of my colleagues at Pragmatic Marketing, Jim Foxworthy, offers this simple suggestion ... go discover what it really is by getting out of the office and talking to some of your buyers.  In a recent post to his clients, he emphasized that it's more important now than ever. 

The Most Valuable Person in the Organization

The nightly news is obsessed with the downturn in financial markets. Pundits talk about a financial “nuclear winter” and advise business leaders to pack away a year’s worth of cash – perhaps in a mattress.

With all this negative news, it occurred to me that many of you will be thinking about your role in the organization, and worrying about the stability of that role. Should you lay awake at night and wonder if you will lose your job? Will “they” cut your pay? Maybe YOU are “they”, and you are wondering how to lead in such difficult times.

How do you know what creates the most value for you and your organization? How do you play a role to ensure the future of your organization?

Like many difficult questions, the answers are simple. Not easy – simple. Because the most valuable person in the organization is the one who represents the voice of the market.

Let me repeat that: the most valuable person in the organization is the one who is in touch with the market. The one who leaves the building and listens to your buyers, then brings that critical information back inside so others can make better decisions.

The most valuable person in the organization is not defined by title, but by task. And the single most valuable task in times like these is to re-establish your intimate understanding of your buyers and their problems.

At Pragmatic Marketing, we often echo the words of Peter Drucker, who wrote: “The aim of marketing is to know and understand the customer so well that the product fits him and sells itself.”

Folks we talk to sometimes scoff at this quotation, telling us that “marketing” doesn’t do that in their organization. “Marketing” is the department that builds the web site or produces the collateral.

But Drucker is not talking about a title. He is talking about a task. Who in your organization is seen as the one who “knows and understands the customer”?

THAT person is the most valuable asset in troubled times. As money flows tighten, and credit becomes less available, each and every expense decision will become more critical to your organization. Which means that each and every expense decision must be grounded in data not opinions.

Who is the most valuable person in the organization? In times like today, it is the messenger of the market.

Are you that person? Would you like to know how to become that person?

Jim is spot on here. Discovering and embracing reality is Step 1 and it's not just the job of the leader. It's the first action all of us should take to develop a plan that will work. Without an accurate assessment of where your business is perceived right now, you are out of date and potentially out of touch. The data you have now is highly suspect because it's based on the past. The data your organization craves is a real-time assessment of what the changes in the market really mean and what leading indicators they should follow.

Will there be bad news in what you find out?  Sure. But there will also likely be some new opportunities that will emerge that you'll find your organization can uniquely solve. They may just be the ones to get you through this downturn. Or, they might even be your resonator.

Go find out what they are!

Winning in a Down Economy

We live in interesting times. The rapid changes that thrust Wall Street into a tailspin these past few weeks has created a business environment that is far different from anything we've seen in the past. The panic on Wall Street has rippled quickly from the investment community into the executive suites of all of organizations and down the line to each and every employee. Everyone is talking about how to react. What are the impacts to our nation? Our economy? Our business? Us?   

Towards the end of the week we began to see the first salvos on recommended action from leaders in the technology sector. One that caught my eye was The Tech Downturn: How long and how bad? from Jim Kerstetter at CNET. It started off with the usual prognostications for a long downturn and quoted several VC's who are advising their clients to "hunker down, cut costs fast and deep because those who do will be in the best shape to survive." 

This is where things start to get really stupid really fast.

We don't want to debate the financial realities of running a business right now nor the right of the investment community to counsel in ways that protect their investments. But, we've seen this act before and it ends badly. Companies whose very first action it is to cut often cut the wrong things and position themselves weaker than when they started. Why?  Because the moves they make are all based on the past and not the future. They're tactical and not strategic. And if there is one thing we know for sure, it's the future is going to be a far different environment than we are in today. You need a strategy that aligns you to where you are going, not where you've been. 

How many times have you seen a death spiral started by these actions? Making decisions without a complete and accurate view of what your strengths and weaknesses are in the world you will be living in for the next several months and years is nuts!  Yet, that's exactly what many companies will do in the coming months. They'll guess, assume and then tell the world they've made the changes to keep them healthy through this downturn when in reality, they have no idea whether they really are or not.   

We think there is a much better way, a more pragmatic approach to dealing with the situation that you and your business are now in. And we're going to take the next 10 weeks to talk about it in this blog and then package it together in an e-book and webinar for delivery in December. We're calling it Winning in a Down Economy: A Pragmatic Guide to Getting Tuned In. It will cover the top 10 things you should be spending your time on right now that will prepare you for a healthy 2009 and beyond.

For those of us impatient types, here are the cliff notes. The game plan will focus on three macro ideas:

1. Accept that you don't know what you don't know right now. Get real and increase the reliability of your decision making by gathering the data your organization craves about the market ... the thoughts of your buyers, their likely actions and your most valuable solutions to their problems. 
2. Develop a conservative plan of attack. The filter for your strategies needs to be built on a solid foundation ... a real connection to what the market needs now and what your organization has a unique ability to deliver and execute flawlessly.  Focus your action plan on that core. 
3. Overhaul your marketing engine. Now more than ever, you're going to need to be able to create an authentic relationship with your buyers that are based on a solid understanding the realities they face and how they want to do business with you. Provide a more flexible mix of services vs. hype that builds an experience that they'll appreciate.

Here's what many of you will find. There are great opportunities for you and your business ahead. They are just different than you envisioned them three months ago. That's neither a good nor a bad thing necessarily, just a reality. Deal with it and move on. The process of aligning should only come after you've tuned in. Otherwise, you'll find yourself aligning and aligning over and over again for the next several years. Until you align yourself right out of business. 

We look forward to the conversation over the next ten weeks. Enjoy the journey!   

Does 'what you do' really matter?

One of the statistics I share with audiences when talking about Tuned In is really starting to get them to sit up in the chairs. Turns out, more than 95% of small businesses fail within five years and more than 91% of new products are withdrawn from the market within 18 months. Nice batting average huh? 

In baseball parlance, this is significantly below what has become known as the 'Mendoza Line'. Mario Mendozoa was a professional player for the Pirates in the 70's who famously lasted about 10 years in the big leagues with a career batting average around .200 and actually hit .198 in 1979. It pops up on ESPN every now and then to bring a little laughter into the conversation about someone who is in a slump ... 'Chris Young is in a deep slump and is getting dangerously close to the Mendoza Line'.  Not something you want to hear your name associated with. 

So how does it feel to live in a world where our averages are below 1 in 10?  And that's just for survival because there's another similar small percentage that acutally go on from there to achieve some amount of success or maybe even become hits. Yet, the fundamental reason why this occurs is so basic that it's downright shocking that most of us miss it. Before you even start, did you ever ask the question:

Does anyone care about what it is we do and do we do it better than anyone else? 

Seth Godin recently posted on the misperceptions most of us have when we are developing and launching products to market. He says we aim for the 'hit' thinking there is always a fallback to build a successful niche solution if that doesn't work or maybe even drop our offering in with an aggregator who is making money in Chris Anderson 'Long Tail'.  We found this in spades in our research. People want to hit home runs by guessing and coming up with something that noone else has ever thought of. Then they introduce it and when noone cares, they start spending more money pushing it into a variety of niches to see if it will stick. Then when noone cares, they try to sell it or abandon the opportunity completely. 

How sad really. It's all backwards and it's a lot of hard work to achieve nothing. Why not start with a problem that people care about solving and build a product or service that completely solves it. Here's the really interesting thing we found when we talked to leaders who created breakout successes ... they weren't even trying to hit a home run!  Instead, they just focused all of their time and energy on a problem they found that needed to be solved and eventually came up with a solution so compelling that their business took off. It's the opposite of what most of us have been trained to think. 

If you want to avoid the pitfalls that 90% of us fall into, start with making sure what you do really matters to someone and that you really, really care about solving a problem for them. If you do, you'll be in the minority of people who enjoy what they do and make a lot of money doing it.      

Where will your hit product come from?

I got a lot of questions from the press this week on our tour about the new iPhone 3G. 1 million in sales in the first three days! People wondered how to companies create these 'hit' products, the things we were calling 'resonators'. My response was that they quite simply had created a perfect solution to a problem that a distinct group of buyers had ... in this case, the millenials desire to have a mobile social networking device that integrates their life with a mobile phone.

Some wanted to dig a little deeper. OK, so HOW do you do this?

One concept that drives these kinds of breakout successes is one we saw very few focus on ... creating a quantifiable reason for a buyer to switch from what they are doing today to a new product. We called this the 'incremental impact' which at it's simplest measure is the perceived difference between products. What you are trying to measure is how urgent and pervasive is the problem you are solving (or the new capabilities you are introducing) and how much are people willing to pay for it.

The 3G is hitting on all cylinders from this perspective.

Let's look at the specs. It's twice as fast, half the price and with new apps to improve photo sharing, GPS system and access to corporate e-mail through Exchange integration ... among others. The way companies like Apple figure these things out is identifying the things that are most relevant to improving the experience of existing buyers and attracting new buyers. Their initial launch had aleady hit a chord with 20-somethings (I can be a real-time social networker) much like the Blackberry did to corporate buyers (I can stay connected real-time to work from anywhere). Now the challenge moves to creating enough of an incremental impact to make existing buyers want to upgrade and new buyers (like maybe some corporate types) tip to giving this a chance. The answers of more speed, more apps and corporate links are the kinds of urgent & pervasive problems that buyers in both categories are willing to pay for. 

If you want to create hit products, pay attention to the little things that maximize your switching cost benefits. The iPhone is a good model for doing this right. 

         

Have you considered your product's positive incremental impact?

A critical aspect of getting tuned in is for the vendor to quantify the impact that the buyer receives when they buy and start using the product or service.  If we aren't tuned in to the unresolved problems that exist in our marketplace, we tend to build products that we think will make our buyer's life better.  Often, we substitute our needs for the client's needs and declare that rolling this product out will make their life "better."

By tuning in, we understand, from the buyer's view, what the impact will be.  There is an important refinement to this process that we often miss.  It isn't just "impact" that we are looking for, it is positive incremental impact.  We need to measure how their life will get incrementally better over their current way of solving the problem.  And when we measure positive incremental impact, it must be balanced by the negative impact that inevitably goes with it.

The simplest example is the net effect of paying for the product.  Yes, it improves my life, but that is balanced against the cost of acquiring the product.  If the price is higher than the perceived improvement, the market doesn't buy.  The negatives don't stop with price.  Add to that the "costs" of implementing, training, and downtime and now the positive incremental impact may become a net-negative.  Microsoft's Vista currently exists in this territory for many buyers.

If you think about your last "competitive replacement product" you may have experienced this.  Tuned out thinking leads to internal proclamations about the superiority of our product and how it will kill the competition.  Sure, your product is "better" but if you net that against the cost of your replacement plus their current investment in the competitive product, plus the disruption associated with implementation, training, and acclimation to your offering, the buyer may be in net-negative territory.  This explains why so many competitive replacements falter even though the replacement actually is substantially "better."

Finally, you need to remember that the positive incremental impact is segmented by persona.  For some buyers, the impact substantially outweighs the negatives while others really don't receive the same net-positive results.  Attempting to overcome this with any amount of marketing is simply an exercise in futility.

Impact versus value

Let’s be realistic. Not all potential product ideas are going to come from the outside. As much as we want to be Tuned In, there are times when an idea comes from our founder, the CEO, product development, a customer, or even a competitor. We feel an insurmountable pressure (or mandate) to proceed with the idea against all common sense telling us otherwise.

The Tuned In solution to this is called an acid test. When we are being pressured to build a product from the inside-out, we should first put the idea to a market test and let the market decide. Acid testing doesn’t take long and need not be expensive.

First you need a prototype that you can show. It doesn’t need to be a complete product or service. You could simply prepare a presentation, much like a salesperson would give, and show what you plan to offer. Call the prospective user and ask for 30 minutes and stick to your schedule. If you can’t define your product and solicit input in 30 minutes, you aren’t ready to test it. Reassure your contact that you are not selling anything because you haven't even started to build this product.

When you present the product or service, stick to the facts. Don’t tell them the benefits, just show them what it does and ask them what problems does it solve and what impact would it have on them, their family, or their company.

I like to use the term “impact to the customer” instead of the word “value". Value is one of those terms that means different things to different people, much like “quality” or “marketing.” Asking for the impact clearly asks “How is life going to get better for you by owning or using this product?”

There are lots of things that I own that have “value”, but there is a distinct subset of those items that truly had a positive impact on me, my job, my company or my relationships. Those are the tuned in products that resonate for me. Those are the ones that I would pay dearly to acquire, and yet, some of them were free of charge. It is indicative of marketing people who don’t understand the “impact to me, their customer.”

Top two reasons why new products and services fail

Why do most new products fail?

1. Organizations base new products on what their current customers request rather than an understanding of the unresolved problems that people will pay money to solve.

2. Organizations try to create a need in the market through expensive advertising or relying on an army of salespeople instead of building products that the market wants to buy. 

The most successful organizations tune in to their markets.

In this blog and in our upcoming book, we’ll introduce you to dozens of tuned in organizations that develop products and services that resonate with buyers and help them to achieve success.

People who run tuned in companies largely ignore the competition. Instead they focus their energies on the problems that buyers are willing to spend money to solve. By first understanding market problems, then building the products people want to buy, and communicating to buyers that we solve their problems, everything else falls into place.

Sounds easy.

Actually, it is...

…if you’re tuned in.