Is your company unintentionally creating executive blind spots?

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One of the nice things about being a very senior executive with a multinational company is that the job comes with perks.  Sometimes, however, these perks can have the unintended effect of isolating key decision-makers from the very information they need most. 

Example:  For decades, the top executives at America’s leading automobile manufacturers always drove the latest models—washed, maintained, and looked after by in-company employees.  How on earth could they possibly know about quality, maintenance, service or other issues faced by ordinary customers when they never encounter them? 

Example:  One of our telecommunications manufacturing clients used to routinely give the latest handsets and toys to its key executives.  As a result, these folks never had to go into a phone store, never had to deal with inefficient or even hostile distributors, and never had to compare their offerings with competing products.  It was only when the company radically changed this policy and forced its folks to go directly through the same channels customers had to use that they realized that their once-unassailable advantages with customers were starting to erode. 

Example:  A mobile telecommunications operator routinely had its operations staff make sure that the cellular signals in the headquarters office and even key residential areas inhabited by senior executives were strong, reliable and consistent.  Imagine the surprise these executives felt when friends and relations expressed their infuriation with spotty coverage, dropped calls or weak signals—after all, this never happened to them!

The message?  Sometimes, buffering senior people from exposure to ordinary experiences unintentionally gives them a false sense of security with respect to the quality, reliability or convenience of your offerings.  This in turn can breed dangerous complacency and a lack of urgency with respect to underlying problems.  In best-practice companies, in contrast, there are mechanisms to make sure that direct contact with customers is a part of every executives’ normal job.  At Amazon.com, for instance, executives routinely spend time on the phones with customers.  At Ikea, a few times a year executives and line-level staff work together.  At Continental and Southwest airlines, it would not be unusual for executives to spend time at the ticket counter or handling baggage.  We’ve found that there is no substitute for first-hand experience when it comes to creating the impetus for improvement. 

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Consumption Chain - customers value a complete experience, but companies organize otherwise

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A short recent piece in Fast Company highlights a point that I make over and over again in our executive programs and with clients:  customers value a complete experience, while companies organize themselves by a different logic, often one that has to do with efficiencies.  The article (September, 2007 edition, page 27) features a senior leader at GE trying to sell to the Olympic organizing committee of the Beijing Olympics.  Here’s the stunning revelation they discovered:

“We have always geen good at winning customers in a specific space - for example, our energy experts can sell to energy folks.  But when governments spend billions of dollars on Olympic projects, they don’t want to be sliced and diced by the same company.  Our number-one revelation is that customers don’t necessarily organize their buying behavior the way we structure our business.”

To learn more about how to create complete customer experiences, you can read Chapter 4 in McGrath and MacMillan The Entrepreneurial Mindset (Harvard Business School Press, 2000).  To see how the technique can be used to drive growth opportunities, see chapter 2 in MarketBusters:  40 Strategic Moves that Drie Exceptional Business Growth (Harvard Business School Press, 2005). 

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Competing with your customers as you grow

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A conversation taking place among colleagues over at the Kellogg innovation blog/web forum (http://marketdrivengrowth.blogspot.com) has to do with how you can move into spaces that are occupied to some extent by your customers,with the goal of making the whole pie larger for everyone.  The dilemma is that customers can mistrust your motives, but at the same time you need them to get whole ecosystems going or to develop certain kinds of innovation.  It’s a point that we often make - you have to create a whole product or solution before anybody will buy anything. 

One key issue that has been raised by both Clayton Christensen and Geoffrey Moore is that success of a more or less vertical integration strategy depends heavily on the evolutionary stage of your industry—in new spaces, vertically integrated players tend to win out.  In more commoditized spaces, advantage can go to specialists.  The shift inevitably causes channel conflict and some dismay. 

Here was my response:

One technique we have had good success with is using ‘discovery driven
planning’ to model the possible outcome
of a cooperation and show potential partner/competitors what the outcome
could look like in the event of success.  You can also show the
checkpoints at which you could stop further development if things go
adversely for either party. 

Somewhat more aggressively, if you can identify low-power partners who
stand to gain more from partnering with you than a better established
player can, you can benefit by leveraging their capability to create a
new space / ecosystem and eventually bring the larger players into your
orbit in the interest of not being locked out of the now-attractive
area. 

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Competitive Separation vs. Competitive Advantage

edit Posted by my colleague, Bob Cooper, for Driving Organic Growth group.

In an effort to further the discussion comparing competitive advantage vs. separation, I would like to introduce a very powerful tool developed by McGrath and MacMillan that is summarized in perhaps the greatest business book ever written � The Entrepreneurial Mindset. The tool is the Attribute Map and it shows the dynamic nature of how your target customers react to your offering�s attributes:



The labels going down the table POSITIVE, NEGATIVE, OR NEUTRAL describe the type of reaction from the customers. Obviously, the more positive and less negative the better. The labels on the top of the table BASIC, DISCRIMINATORS, and/or ENERGIZERS define the intensity of the reaction.

For the BASIC category:
- A POSITIVE defines table stakes � you need these attributes to play and you are conspicuous by their absence (Non Negotiable)
- A NEGATIVE defines attributes that the customer is willing to tolerate (Tolerable) if there is no other alternative.
- A NEUTRAL is one that has no or little impact (So What) on the customer but does add cost

The DISCRIMINATORS
- Differentiate between competitors to influence the purchase decision. The POSITIVE (Differentiator) attribute is in the positive direction and the NEGATIVE (Dissatisfier) is in the negative direction.
- The NEUTRAL is an influencer to the purchase decision but is not directly related to the purchase

The ENERGIZER:
- Attributes are so powerful that they overwhelm the purchase decision either positively �the Exciter � or negatively � the Enrager


An example, I usually illustrate the power of the Attribute Map using the history of the Big 3 auto dealers in the 70�s and 80�s when the Japanese initiated their onslaught of the U.S. market. At this time the U.S. consumer TOLERATED the poor quality of their automobiles from Detroit because there was no alternative. The Japanese came in pushing their superior quality and created a revolution since their new offering EXCITED the U.S. consumer toward their cars and shifted the attitude towards the Big 3 from TOLERABLE to a negative DISCRIMINATOR or even to ENRAGERS. Your ideal move against competition is to EXCITE your customers with a new offering while at the same time shifting their attitude towards the competitors to the negative. Interestingly, car quality is now considered a BASIC attribute. This dynamic shift usually occurs over time � this dynamic is what drives the Fair Value Line discussed in the last positing to the right in the Value Map.

Now lets discuss competitive advantaged vs. competitive separation in the context of the Attribute Map. If you have a strong competitive advantage, i.e., you are superior to competition, in an attribute that is considered a DISCRIMINATOR or an ENERGIZER by your customers, then you will achieve competitive separation. If your advantage is in an attribute that is BASIC or even worse, a NEUTRAL, you will not achieve competitive separation!! The goal should be competitive separation, not just advantage. Never assess your competitive position without real insight into what your customer really wants/needs.

Another issue is when is �just good enough� ok versus �best in class� or �unique in class�; the latter two usually costs vs. the first. Again, realizing that competitive separation is the goal, you should focus your added efforts to achieve �best or unique in class� for DISCRIMINATOR or ENERGIZER attributes, not BASIC or NEUTRAL categories.

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