clayton christensen

Ignore Your Customers on These Four Occasions

~ Jeff Severts ~ Leave a comment

Listen to your customers.  This advice is so old and so sacrosanct that I suspect Jesus used it while managing the apostles.

“Hey team, we just received a parchment survey from a very upset customer.  Apparently, at that last Sea of Galilee event, we were not getting those baskets of fish and loaves out fast enough.  Let’s sharpen our focus, people!  Leperpalooza is just around the corner and we need to be on our game!”  

The logic behind listening to your customers is blindingly obvious, so unlike the typical business book, I am not going to spend three thousand words trying to convince you it’s a good idea.  Instead, I would like to argue that in some situations, you should not follow this advice.

Here are four scenarios in which you’re better off consulting a clairvoyant than listening to your customers:

1.  Don’t ask your customers about anything related to money

First of all, never give customers the option in a focus group or on a survey to tell you your product should be cheaper. Their answer will always be yes.

Furthermore, don’t ask them to compare the price to other facets of your product.  If you give them a list of features or benefits and ask what they value most, they will consistently pick price first.  Even hedge fund managers talking about their mink-lined underpants will claim that price is most important to them.

And in the name of all that is holy, whatever you do, don’t ask them to tell you how much you should charge for the product.  The answer they give will have no relation to what they will actually pay.

Why are customers such unreliable guides in this area?  I don’t know, but here’s my speculation:

First, we are asking customers to cooly and rationally project what they will do, when spending money is instead an emotional, visceral action.  Few customers would ever predict that they would spend $1000 on a handbag, or $500 for an Oak Ridge Boys concert ticket.  But in the real world, these things happen all the time.

Secondly, most of us spend our entire lives being price takers.  This can make us feel powerless.  Participating in a survey may feel like a chance to finally stick up one’s middle finger at the powerful price setters.   Take that you monopolistic #&@$!

If you want accurate guidance on how much you can charge for your product, there’s only one reliable way to get it.  Put your product into the market at your favored price and see if customers are willing to pay it.

2. Don’t ask your customers about their vices or virtues

Many psychological studies have demonstrated that the vast majority of us think we’re better than average, whether it’s our attractiveness to the opposite sex or our ability to safely pilot a car.  I call this LWS–Lake Wobegone Syndrome.

This is why, if you’re anything like me, you are shocked every time you look in the mirror.  “Who the hell is that guy?” my internal voice screams.  The cold, uncompromising reality of the mirror clashes violently with my Adonis-like self image.  Where did my hair go?  Where are my rippled biceps?  And for some reason I am completely surprised every time, even though I looked into that same heartless mirror one short day ago.

Perhaps there’s an evolutionary advantage to this constant self-delusion.  Maybe believing we could outrun that lion saved some of us on the Serengeti thousands of years ago, giving us the confidence necessary to shave a few tenths of a second off our two-hundred-meter sprint times.  I don’t know.

Whatever the reason, LWS is very real and will show up anytime you ask customers to predict their behavior in ways that threaten or enhance their self image.

For example, everyone wants to believe they’re being responsible stewards of this planet–even coal company executives.  Several years ago, in the early days of environmental awareness, a paper goods manufacturer asked consumers if they would buy towels made from recycled paper, even if the quality of the product was a bit reduced.   The vast majority said yes–enthusiastically.  In fact, they said they would even pay a bit more because it was the right thing to do. Far be it from them to continue pillaging our forests just so they could avoid the inconvenience of washing a rag.

Using this research, the company launched a line of paper towels manufactured from recycled paper.  The quality was a bit less and the price a few cents higher than their conventional towels.  The results?  You guessed it.  The recycled towels collected dust on store shelves.

Please don’t misunderstand me.  I’m not saying people will never buy environmentally-friendly products.  I’m just saying that more people will predict they will buy them than actually will, even in this age of Teslas and organic house paint.

So people will overestimate their virtues, but what about their vices?  Well, let me ask you this:  How accurately will people estimate the number of hours they spend watching TV each day?  Or how many calories they consume?  Or how often they let their kids eat Pop-Tarts for breakfast?

You know the answer of course.  Customers will very consistently underestimate how often they commit these sins.  To do otherwise would defile their self image.

Listening to customers too closely in these kinds of cases can cause you to overlook lucrative business opportunities.

3. Don’t ask your customers what new products or services you should create for them

First of all, this is not their job, it’s yours.  And because it’s not their job, they haven’t been thinking about it.  So when you start interrogating them in a focus group, their answer is generally going to be some form of, “I don’t know.”

But even if they were thinking about it, they would have a hard time helping you imagine products beyond mildly improved versions of what they currently use. They, like the rest of us, are trapped in their current context.

There’s an old Henry Ford quote that goes something like, “If I had asked my customers what they wanted, they would have said faster horses.”  He probably didn’t say it, like most quotes you find on the Internet, but it nicely illustrates the point.

Great leaps forward in technology (cars, mobile phones, the Internet) are obvious examples of products that could never emerge from customer conversations.  But as Clayton Christensen illustrated in his The Innovator’s Dilemma, even modestly new products or technologies can be met with skepticism by customers.  Only innovations that offer more performance on today’s axes of utility will be greeted enthusiastically (e.g. bigger televisions with sharper images; chocolate chip cookies with more chips; etc.)  Do we really need to ask customers whether or not they would prefer more of something they already like?

4. Don’t ask your customers why they do what they do

There are exceptions to this rule.  Exceptionally gifted qualitative researchers, with the right research subjects and some luck, can sometimes pull this off.

And it’s often worth trying, for if you can figure out why people do what they do, it can be powerfully useful.

But generally, people don’t know why they do what they do.  They either literally can’t articulate the reasons, or the rational part of their brain deceives them and claims credit for the things the emotional part is controlling.  Dan Kahneman refers to this as the man riding the elephant.  The man (your rational brain) thinks he’s really in control, but the elephant (your emotional brain) can actually decide to do whatever it wants to.

On the rare occasions when customers truly understand what’s going on in their head, there are often good reasons why they don’t want to be honest about it, either for the reasons cited above (vices or virtues that challenge their self image) or for the simple reason that they may find it uncomfortable to reveal it to strangers.

So go forth and listen to your customers, just as the old adage suggests.  Just do so carefully!

Five Telltale Signs Your Company’s Strategy Stinks

~ Jeff Severts ~ Leave a comment

This article borrows heavily from Richard Rumelt’s book, Good Strategy/Bad Strategy, given to me by my friend, Joe Thacker. This is one of only three business books I recommend you read (most business books are only suitable for propping open windows with broken sash cords.)   The other two you must spend time with are Clayton Christensen’s The Innovator’s Dilemma and Sun Tzu’s The Art of War.

Actually, I’m just kidding about The Art of War.   That’s the book everyone recommends when they want to sound really sophisticated. Personally, I have never found any modern business meaning in Mr. Sun’s pearls of wisdom, such as this gem: “Be extremely subtle, even to the point of formlessness. Be extremely mysterious, even to the point of soundlessness.”

So that leaves us with just two. Mr. Christensen’s book is required reading, widely considered to be one of the seminal business works of the second half of the twentieth century. And Mr. Rumelt’s Good Strategy/Bad Strategy, despite its unimaginative title, should likewise join the petite canon of business literature.

Good Strategy/Bad Strategy is a Michelin-starred, seven-course tasting menu of brilliant insights.   What I’m about to serve here is a doggie bag full of his scraps, warmed up for you on a paper plate with a splotch of mustard on the side. If you find any of the following bits interesting, do yourself a favor and order his book.

Here’s my top five indicators of a suspect strategy:

1.  The strategy starts with a “vision” and a “mission.”

Do you know the difference between the two? Be honest now. Well, I certainly don’t. I do know one way in which they’re the same, though. Nobody in the organization can ever remember them.

This is a shame, because a “vission” (or “mision” if you prefer) is supposed to be there to inspire. How can people be inspired by something they don’t remember?

For a vission to inspire, it needs to be really, really good. And short. In practice, it’s rarely either, much less both.

Great, mission-driven organizations (e.g. the Mayo Clinic; the Red Cross; Harvard University; etc.) can stand for centuries. There’s something magical about such institutions, and corporations are right to try to mimic them.

But that magic is often rooted in authentic and meaningful missions that are deeply woven throughout those organizations’ histories. Let’s face it, most companies do unexciting work and have little hope of finding deeper meaning in what they do. Some stretch so far to make a tenuous connection to “improving lives” that the CEO must cringe every time she is forced to recite it.

“Jeff’s Plumbing, where our mission is to improve peoples’ lives by allowing them to relieve themselves whenever they need to.”

So why does nearly every corporate strategy document start with this kind of tripe? Rumelt explains that at some point in the last twenty years we became infatuated with the fantasy of charismatic, vision-led leadership, and that we started to confuse it with sound strategy work–a far less sexy concept. Great leaders have Vision, the movement reminded us, so you can’t ever hope to be the next Jack Welch unless you gather your team into a conference room and force them to agree on a vission in a single afternoon.

The implications, Rumelt says, are that this, “ . . . siren song of template-style strategy—filling in the blanks with vision, mission, values, and strategies . . . offers a one-size-fits-all substitute for the hard work of analysis and coordinated action.”

The inevitable product of this kind of process is insincere and uninspiring, causing employees to groan and roll their eyes anytime the CEO turns her back.

2.  The strategy uses lots of big words

Rumelt refers to them as “Sunday Words”, describing them as “inflated and abstruse.” It’s a bit ironic that he uses the adjective “abstruse,” which I had to look up (it means difficult to understand.)

Whether you use the term “Sunday Words,” or my favorite, “Fifty Cent Words,” we all know them when we see them.   They are especially nausea-inducing when they are trendy, recent additions to the sometimes nonsensical vocabulary of the business world, like “disintermediation,” or “omni-channel” or “employee engagement.”

Why is this necessary?   To prove that the people who created the strategy are smart? Wouldn’t it be better to use language that is simple and unambiguous? Wouldn’t an inspiring leader insist on that?

Rumelt writes, “A hallmark of true expertise and insight is making a complex subject understandable. A hallmark of mediocrity and bad strategy is unnecessary complexity–a flurry of fluff masking an absence of substance.”

3.  The strategy doesn’t define the problem that needs to be solved

This is the most important part of any strategy, yet most organizations skimp on it or skip it entirely. A strategy is a proposed solution. It has no meaning if the problem is not defined.

My first employer, General Mills, understood this. The annual planning process there always started (and still starts today, I suspect) with a presentation of “Key Issues,” the problems that prevented each business from growing at the desired pace.   We worked hardest and longest on this first stage of our strategy development because finding the actual causes of what ails a business is very difficult. It’s much easier to stop at the symptoms.

The benefit of all that hard work was that the solutions we prescribed would fall quite naturally out of the problems we defined. As Rumelt declares, “When you cannot define the challenge, you cannot evaluate a strategy or improve it. If you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have either a stretch goal, a budget, or a list of things you wish would happen.”

4.  The strategy confuses objectives with strategy

I think we can blame the finance guys for this one. Strategy development in most companies starts with the board asking for multi-year projection of the business. This causes the CFO and his team to initiate a “strategic planning” process with the same enthusiasm that Chinese deep shaft coal miners feel when they enter the elevator cage each morning.

The strategy team, often an amalgam of cross-functional, mid-level management draftees who don’t have enough chits lying around to buy their way out of the assignment, will start with the numbers that the CFO wants in year five and work backwards. They will then, with as much creativity as committees usually muster, punch out a list of “strategies” that often look like this:

  • “We will grow revenues by X%”
  • “We will achieve a market share of X%”
  • “We will grow gross margins by X%”
  • “We will be an employer of choice”
  • “We will be a green, sustainable business and a good member of the community.”

These are not strategies. They are objectives. They are the ends, not the means.

Imagine if Eisenhower had declared that his strategy to win World War II was to win it.

As Rumelt writes, “ . . . most corporate strategic plans are simply three-year or five-year rolling budgets combined with market share projections. Calling a rolling budget of this type a “strategic plan” gives people false expectations that the exercise will somehow result in a coherent strategy.”

5.  The strategy doesn’t make hard choices

We have all seen strategy decks with long lists of “strategies” and initiatives.   Sometimes the lists are so long that they require fancy graphics to create some semblance of order or logic.

This, like the previous discussed theatrics around vission, makes the fatal mistake of over-estimating peoples’ attention spans.

But more importantly, these long lists reveal a leader’s inability to make difficult choices. I cannot possibly say it better than Rumelt, “ . . . the essential difficulty in creating strategy is not logical; it is choice itself. Strategy does not eliminate scarcity and its consequence—the necessity of choice. Strategy is scarcity’s child and to have a strategy, rather than vague aspirations, is to choose one path and eschew others”(the emphasis is mine.)

I once worked with a leader who would frequently make a speech about “the power of and instead of or!” We didn’t have to make difficult decisions, we just had to think positively and creatively about what was possible! This, that leader thought, was how you inspired people to do great things. You can guess how well that all turned out.

So we’ve identified the hallmarks of a bad strategy, but what characterizes a good strategy? You’ll have to read Rumelt’s book to find out.