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How Old Dogs Can Learn New Tricks in our Age of Change. By Brad Hosmer This article is unpublished. However, an expended version of this article was published in the 2002 edition of "The Handbook of Business Strategy." Click here for the expanded version. Successful companies are generally founded on the ability to exploit a particularly good idea. The idea originates with some combination of intuition and market research. This leads to a market need or opportunity. With skill, a little luck, and a lot of hard work this combination often produces growth and profits. But many mature companies (I call them "old dogs") never advance beyond their original smart idea. Instead, they become stagnant as their growth reaches a plateau. With no growth, profits are squeezed. Working harder fails to produce improved results. An obvious victim of this scenario is General Motors. Its successful earlier marketing strategies propelled it to the top of the heap in the worldwide auto industry. But today GM finds itself struggling to keep pace with an ever-changing marketplace. It has shown itself unable to leap beyond its decades-old strategic vision. In contrast, Hewlett-Packard has repeatedly displayed the ability to re-invent itself as its markets have changed. Recently, for example, it even spun off its original brilliant idea into a completely separate company, a move unheard-of in any industry, yet an action enabling the remainder of the company to concentrate on newer markets. HP had found a way to respond to changing times and keep itself growing. What separates those companies that achieve long term growth and success from counterparts that stagnate and plateau? There are many reasons but one stands tall among the rest. Companies that fall behind tend to view their markets as if gazing through a narrow stovepipe at a leaf flowing down a river. They see markets as static and isolated. Imagine peering through the stove pipe yourself, focusing as you do on the leaf. From this vista, the leaf and everything close by it looks just fine. But what's beyond your limited view? A waterfall maybe? And the leaf, unbeknownst to you, is heading straight for it! Many old dogs are guilty of this kind of stove pipe visioning. They read and understand, their markets with just such a narrow and limited viewpoint, ending up fixated on a very limited spectrum of information. Their resulting business judgments are based upon scattered and disconnected information, causing them to fail to observe approaching threats, and discounting or ignoring important changes that signal business opportunities. Consider the case of one high-tech textile company that embarked on the development of a high performance premium fabric for the soft luggage and sport bag market. Their new fabric combined greater-than-normal durability and much-improved color retention. When rolled out onto the market, however, the dynamic new invention was a dud. Customers in their target market expressed no interest whatsoever in purchasing (at a premium) a product with these attributes. Thus the product just wouldn't sell. In the end, the company had to abandon production of this "spectacular" new product and face the fact of failure. What should it have done, in hindsight? Had this old dog broadened its view of its marketplace, conducted research that identified truly relevant customer information, i.e., what exactly did its customers want (or need)?, its decision making process might have been more effective. Drawing on more reality-based information, its resources could have been put to better use and a successful product launch the end result. Does your company operate this way, sniffing about like an old dog, peering at the world through a narrow pipe? If so, note here a few methods for widening its view. Method #1: Scrutinize carefully your company's current customer list. This is where your business really lives and dies. A few points to consider: - Is your list growing, shrinking, or in a state of stagnation? - Why is it doing what it's doing? - Have any major customers gone away, or have new ones signed on? Why? - Are you passing on unproductive customers to other vendors? If not, why the heck not? - Are your productive customers being held on to? If not, what's preventing this? Experience tells me that many old dogs allocate far too many resources to maintaining their existing customer base, essentially treating all customers alike. Sometimes small, marginal accounts receive inappropriately lavish attention while nowhere near enough time is allocated to more profitable customers. By widening your view, using the above questions, you can evaluate your current customer base accurately and concentrate your efforts where they will do the most good. Method #2: Widen your view by seeking out customers similar to the best ones in your customer base. By proceeding in this manner, you will automatically begin to adopt a broader view of your market potential. Example: A colleague of mine once acquired a small, locally oriented manufacturing firm, definitely an old dog operation. One of his first moves, smartly, was to analyze the customer list with an eyes toward identifying his acquisition's best customers. He found that one company stood head and shoulders above the rest. He next searched out similar companies, then, upon compiling a list, systematically called on each company to tell them what he could do for them. Before long many of these became his customers. Because of his "wide viewing," he turned an old dog into a lively, eager pup. Method #3: A third way to use the wide view approach is to by searching for new product or service opportunities outside the bounds of currently served markets. Unfortunately, stove pipe approach is employed all too often when trying to develop new markets, often basing the entire strategy on limited, familiar information. Avoid this pitfall by implementing the following actions. - Write down everything you know about competing products or services. - Write down everything you know about the intended new market. By preparing a comprehensive dossier of information in these two areas, you will likely avoid great wastes of time, money and effort. It sounds simple but it's profoundly true. Knowledge of your competitors and your intended customers can determine success. Example: Recently I worked with a client company that had taken great pains to develop a novel software application. Despite an initial period of success, however, my client found it near-impossible to generate any further sales. We concluded that it had made the mistake of assuming all its prospects would respond exactly the same way as those first ones had during product launch. I worked with them to implement a wider view approach. In doing so, we carefully researched their market, pinpointing reliable and genuine customer needs. It eventually turned out that most of its customers experienced needs quite different from what my client company had been assuming. Retooling the software package based on these reality-based needs, the appeal of the product soared and new customers came out of the wood work. Like to teach your old dog company a few new tricks to improve business conditions for the better in our bewildering Age of Change? If so, kick away that old stove pipe and widen your view. By doing so, desirable new business opportunities will present themselves and you in turn will recognize them and take swift action. Fail to make this change, however, and you may instead find your company drifting uncontrollably down river, picking up speed as you approach the falls, sailing over the brink to certain disaster. Mini Case History Viewing the Wide, Wide Picture: A Company That Did It Right! Several years ago a company was started to meet the needs of one major player in the computer industry. This company began as a "board stuffing" house, assembling PC boards with components supplied by the computer company. Over the years the company added to its responsibilities by taking care of the purchase of the components needed for the final assembly. As time went on, it began offering this service to other companies, reducing its reliance on that original, single customer. Still later it added many new engineering and design services so that, eventually, it became a prominent provider of a complete turnkey package of engineering, design, procurement, and manufacturing. What had started out as a contract "board stuffing" house transformed itself into an integrated supplier of specialty electronic modules. This company's use of a "wide view" catalyzed this progress. Had this approach not been followed, the company would have surely dwindled and disappeared. That's because its original big customer now no longer exists at all, the many changes and upheavals in the computer industry having long since done it in. Bradley E. Hosmer, CMC, heads The Beta Consulting Group in Concord, NH, specializing in improved sales, marketing and new business development for generating profitable growth. For further information please contact Mr. Hosmer at Beta Consulting. |
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