Month: April 2018

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How to show why your product is valuable to a customer

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As product developers, we need to ask ourselves early and often whether what we are creating has any value to a customer.

There seems to be a belief that anything can be sold, no matter how rubbish it is.

That may only be the case in movies or in urban myths about salespeople – it’s not what we see in real life.

The action of buying and selling is so fundamental to human society that it cannot be based on anything other than the transfer of value from one person to another to be sustainable.

So, how should we approach the act of understanding the potential for value, creating it and communicating it to a customer?

Geoffrey Moore in Crossing the Chasm has a model that we can use to think our way through this as illustrated in the diagram.

We start looping round the model with FOR.

There are customers out there for our product, and there is everyone else. We are focused on creating something for our potential customers.

The quickest way to failure is to try and please everyone, so we need to be laser focused on the set of people that could buy what we have to offer.

The next stop in the model is WHO.

Only some customers need our product right now. The others may later, or may already be using something else.

The customers who are effectively thrashing about in the water and are in danger of drowning are the ones that we should focus on.

So then we move onto THE.

The product, that is. Our product may be a inflated rubber tube attached to a rope, or a heavy duty iron bar.

That may be how we think of our product – as a set of features and attributes. Our products were created using specific things and perform in a certain way.

Customers don’t care…

What they are concerned about is the next step in the model – the IS A.

Our product is a lifebuoy. Or an anchor. One is clearly a more appropriate one to throw to the person in the water.

Because of what happens in the next step – THAT.

The lifebuoy is something that the person can hang onto until being rescued.

The final part of the model is UNLIKE.

This is an important step that is often missed.

We might have lifebuoy to hand. We might also have a life jacket.

Which one would we throw into the water?

Both will float, but the lifebuoy is clearly easier to hold onto and float, unlike the life jacket.

If we can put all these elements together in a simple statement, we will be able to say why our product is valuable to a customer.

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What is the difference between strategy and tactics – and how do goals and objectives fit in?

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We often hear the words strategy and tactics, usually closely followed by goals and objectives. Is there a consistent way in which we can use them when thinking about a situation?

A good starting point is Liz Ryan’s story about how an old boss defined strategy as how to get out of the woods.

Thinking about a situation like being lost in deep woods is a good analogy for a problem we have to solve.

We know we need to get out but we can’t see very far ahead – so what are we going to do?

Jeremiah Owyang writes about strategy being done above the shoulders and tactics being done below them.

Strategies are about options. Tactics are about actions.

Before we delve into that – Mikal E. Belicove reminds us of the GOST model – Goals, Objectives, Strategies and Tactics.

A goal is somewhere we want to be – like an X on a map that marks where treasure is hidden.

An objective is something we can attain – a specific something – like getting hold of a ship.

A strategy, then, is to evaluate the options we have and select the ones with the greatest chance of success.

Strategies and tactics are linked – head and hands working together.

We decide that we will go a certain way, and that means we must do specific things in order to succeed.

Is it any use trying to get these words straight – will it help us in any way?

Yes. All too often, we see what others do and think that the way for us to succeed is to do the same things.

But, all we are seeing in action are their tactics. We don’t understand the strategy that led to the selection of those tactics.

All too often the ways that worked for others will not work in the same way for us.

Steve Jobs, for example, was apparently a tyrannical perfectionist whose near obsessive character built Apple into what it is today.

Should a modern CEO therefore cultivate a tyrannical, perfectionist and obsessive character?

Most would and should hesitate at the idea.

The classic quote about strategy and tactics is from Sun Tzu, who wrote Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.

Strategy and tactics must be intertwined and executed in context. Some strategies work better than others depending on the environment.

If we’re large, we should use overwhelming force. If we’re small we should move quickly and be hard to catch.

We’ve got to find a strategy that is right for us – and then select and execute tactics that will help us win.

It’s really that simple. But that doesn’t mean it’s easy.

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What is the optimum size of team or group you can manage?

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How big should a team be? Is there a right size that can be managed effectively or a recommended approach that works for organisations?

To come up with an answer we need to look at what the organisation does and where it is in its lifecycle to come up with a model that works in its particular situation.

The starting point is to look at effectiveness.

The military has a history of requiring teams to effective – lethally so.

The smallest unit in the Roman army had 8 soldiers led by an officer and with two support troops.

The equivalent in a modern army is a squad, with 7 to 12 soldiers, although a smaller sub-team known as a fireteam with 4 or fewer members is the smallest cohesive unit.

The word cohesive is important here – as the team needs to work together and be cohesive to be effective.

Success as a whole depends on the coordinated use of cohesive teams and this is as true in military operations as it is in business or the public sector.

The next thing to look at is management

We sometimes think that teams work for their managers – a good manager can get better performance out of the team.

An alternative view is that people in cohesive and well performing teams are more likely to work to support each other and avoid failing in their role than they are to please a manager.

A manager’s role, in that case, may be more about coaching and helping a team to bond than about telling them what to do and how to do it.

That suggests that hierarchy is necessary to scale how people work.

Each team that actually does something should have between 4 and 8 people.

Fewer than that may mean they don’t have all the skills they need to be effective, while more than that means coordination becomes a problem.

Above the coal face – where things are done – we need structures that enable coordination and communication.

Technology can help here – but face to face communication can help in a way that emails and phone calls can’t.

The size of management groups will therefore depend on how much time leaders have to talk and meet with their team. If they spend every day communicating, then they can have more direct reports.

They might also want to do some work, however, and perhaps having more than 7 or so people looking for time with them will eat into that.

Finally, we should consider the phase of growth the company is in.

George Bradt, the co-author of First-Time Leader, writing in Forbes describes how to think about teams during different growth phases.

He shares the story of Devanshi Garg and the approach taken by Icreon Tech when entering the U.S.

In the beginning, Garg suggests, we need a team made up of people that think like founders – partners who can do many things, adapt to situations and solve client problems.

Later, as we grow to more than 10 people, we need to think of our company as an extended family. We know most people and how they work.

Over 30 people, we need hierarchy – developing leaders and supporting them with effective management systems.

In the end is there a magic number?

I’d go with Michael Lopp’s formula. Seven plus or minus three.

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What is the most important model for a B2B CEO or MD to know?

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There is one business book that Steve Jobs said deeply influenced him – The Innovator’s Dilemma by Clayton M. Christensen.

Here’s what happens with a company. The founders have an idea and create a product of a service. In the beginning the product has some core functionality and some users take it – perhaps its cheap and does the main things they need it to do.

This is the low end of the market – where adequate performance is just fine.

Over time, the founders improve the product and build the company. There are more people, more iterations of the product and it gets better and better and just climbs up the S-curve of performance.

At some point, the product satisfies the needs of virtually all its customers – even the ones demanding high end performance and superior quality.

The company is now established, has lots of customers, is profitable and seems to dominate its space.

What are the founders doing now?

Perhaps they’ve been replaced by executives and have retired to a beach somewhere.

The execs come in with suits and briefcases and do what the company does best. The double down on the products that are doing well creating even more capability and features.

The only companies that can afford their high end tools are the large, established ones. The little customers aren’t attractive anymore.

The market doesn’t really need these whizz bangy things but, well, the execs might as well keep going and offer more options.

Along the way, they might create some new tech or capability, but its not really that interesting to customers and doesn’t get attention or resources – everyone’s focus is on the main earners.

Some of the people working on this other cool stuff get dejected and think about leaving and starting out on their own.

They ditch the suits, come to work in t-shirts and shorts, perhaps on a skateboard, and get on developing the tech that the large company rejected in a new startup.

This new tech is newer, probably faster, cheaper, easier to maintain and so costs much less than the older, more established technology of the incumbent.

The suits are going to find that they are standing at the edge of a precipice – they just don’t know it yet.

The startup tech is adopted by the low end of the market. In its new, unrefined form it does what is needed by these customers and starts building market share.

Soon, its climbing a new S-curve.

Finally, the suits look down in horror and see that the startup has hoovered up all the small customers they have been ignoring.

It’s now too late to create competing technology. Perhaps they can buy the startup and survive that way. Or else that’s it – they’re now walking dead and business is moving wholesale to the new company.

This disruptive cycle is the dilemma faced by the innovator.

We often think that companies go out of business because they fail to innovate.

According to Christensen, that’s not the case. The incumbents do their core business really well. They don’t invest in their fringe ideas because the return on investment isn’t proven – and they make sensible asset allocation decisions in proven markets and technologies.

Those perfectly sensible actions allow the startup to take root, grow and eventually disrupt the incumbent’s market.

A B2B CEO or MD needs to know which S-curve their company is on – the incumbent’s or the startup’s – and where it stands on the slope.

They need to know that before doing anything else.

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What we should learn from the golden arches

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I watched The Founder last night – the story of how Ray Kroc took McDonalds nationwide and created the phenomenal company that now operates across the world selling burgers.

The film is emotive – showing how Kroc tried to work with the McDonald brothers to grow a fantastic new idea but then, after being frustrated with the way in which they didn’t embrace his vision, was shown that he had been thinking about his business all wrong.

He wasn’t in the hamburger business, he was told. He was in the real estate business.

The way in which Kroc wrested control of McDonalds from the founders was by realising that the value of the business lay in the land under it rather than the burgers that were cooked on the land.

Owning the land gave him control – he could control what was done on his land.

This is the same insight that Steven Levitt and Stephen Dubner explore in Freakonomics. The landholder gets the value – a great brand selling in a great location has to pay more to be sited there – so the landholder gets to charge more.

The other thing that Kroc saw was the brand.

All across America, as he travelled, he saw crosses and flags, crosses and flags.

They signified America – a god fearing, law abiding country – a country for families and wholesomeness and apple pie.

His vision was to see McDonalds as a brand for America – with the golden arches just as iconic as the cross and the flag.

That was the insight that made him – a 52 year old salesman – who was able to see how a brand for a restaurant could convey just as much meaning and signify all that felt good for people at that time in that place.

The film shows other points. Kroc worked harder and longer than anyone else. He had human frailties. He was misunderstood and mocked.

Which goes back to the old saying – first they ignore you, then they laugh at you, then they fear you and then you win.

Kroc is shown listening to motivational tapes – the kind that we still can get and listen to today that extol the value of persistence.

Talent is not enough. Genius is not enough.

Persistence is what matters – when the going gets tough the tough get going and all that kind of guff.

At the end its all still complex.

Kroc built an empire – and in the film he’s pictured as someone who wanted to win at all costs, someone who wanted to crush competitors and have it all.

But the point is that he saw something that no one else did in the same way then.

He saw just how much people yearn for meaning – the golden arches mean something – a place of safety and sanctuary for families.

And that’s why they just keep coming.

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Is there a difference between an expert and a beginner?

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Adam Fisher of Soros Fund Management says in Tim Ferriss’ book Tribe of Mentors that finding an area of expertise is a bad idea. Just learn how to learn and we can figure things out.

That’s an interesting thought – because we become experts by getting to know almost all there is about something.

How do we do that?

We study and we practice.

When we are experts – when we know something, then we’ll come up with adaptations on existing ideas and even our own original ideas.

On this… all too often people say that everything has already been written. There is nothing new under the sun.

But we’re discovering new things all the time. New species, new places, new ways of understanding how our brains work.

So, how do we learn?

We study and we practice.

We take in ideas, think about them, let them take root and grow in our minds.

Perhaps the problem is that we are looking for signs. Looking for validation.

If we appear to be experts – if the world accepts that we are experts – then does that make us expert?

Is it our expertise that shines through? Or are other people just so good as coming across as expert that they fool the rest of us?

What is the point of all this?

The point is that there is a difference between what is and what appears to be.

When we start learning something new – we don’t have to pretend to know it – we can be open and take in ideas and just learn.

When we have many years of practice behind us – we don’t have to pretend that we know – we can be open and share our ideas.

It’s the bit in between that can get us – the part where we have learned enough to be dangerous and think we know, but not where we know how much we still have to learn.

It’s very Zen. Before Zen, mountains are mountains. Then mountains are not mountains. And then, mountains are once again mountains.

It’s just going to take time to get it.

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What managers can learn from pilots

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Charlie Munger, the Vice-Chairman of Berkshire Hathaway, has strong views on picking the best ideas from different disciplines and use them to become better at what we do.

In Poor Charlie’s Almanack, a collection of Munger’s writing and speeches, he talks about broadscale and narrowscale professionals and how the former can learn from the latter.

Broadscale problems are ones that can only be solved by using ideas from more than one discipline.

Take management, for example. Good managers need to understand accounting, psychology, economics, technology, logistics among other skills.

It is possible to be an expert in just one area, like engineering, but if we don’t understand how accountants think we’ll find it hard to explain what we are trying to do to them.

The thing is that focusing on a specialist area – narrowscale thinking – is how we get to be very good at something.

But, one of the criticisms of academia is that the system forces people to know more and more about less and less – and so the insights that emerge can be hard to apply in practice.

Munger suggests that one solution to developing broadscale knowledge is to find the best elements of narrowscale education and then scale them up and suggests looking at pilot training as an example of the best kind of approach.

He talks about how pilots are trained in a strict six-element system.

The starting point is formal training. We need to have a broad knowledge of practically everything that is useful to fly a plane.

How often are managers formally trained in management methods before being put into a management role? That’s an investment more organisations need to make.

Training alone isn’t enough. We need to practice until we are fluent at what we are trying to do.

It’s one thing learning about economics. Being able to model supply and demand to maximise total revenue is a different thing. Hint – we should almost always raise prices…

We also think a lot about what we want to do – goals we want to reach. This focus is good, but we also need to think about what not to do, the things we should avoid.

Then we need to spend more time on the things that are more important. That might seem obvious – but how often are we distracted by things that take a lot of time but have little to no impact.

Pilots are trained to always use checklists. And they are better at it than doctors – leading to the quip that this is because doctors are involved while pilots are committed. Doctors who have pilot experience must have an advantage…

Finally, just because we’ve done a course doesn’t mean we know all there is to know – we need to maintain knowledge over time, with more lessons and more practice.

Pilots are required to spend a certain amount of time flying to maintain their license. All professionals need to spend time on continuous professional development – but do we?

A lecturer of ours once said that when we graduated we would have a Masters in business administration. That did not mean we were masters of business administration.

Not yet anyway.

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What happens when a group has to decide what ice cream to serve?

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We are warned about how groupthink destroys creativity with sayings like a camel is a horse designed by a committee.

People making decisions in groups have sent astronauts to the moon and started two world wars – they have created the modern world and carried out genocide.

So, when is groupthink good and bad and can we recognise the difference?

One thing that often happens is that a group tries to reach a solution that is acceptable to everyone.

This usually results in a bland compromise – with everyone being served vanilla ice cream.

Is the way we live a compromise then?

Our societies operate within a framework of laws set out by a group of people who set out to debate and agree acceptable ways of living.

The difference is that each legislator fights for his or her constituents, and it is the process of debate and negotiation that results in laws.

Perhaps there is some insight in that process.

If a group of people try and decide what is best for a group as a whole, then at best they will come up with vanilla ice cream.

At worst, they will come up with the idea of fighting another group and starting a war.

Neither option is particularly attractive.

What seems to work better is people doing things that are in their best interests and standing up for what they want.

It’s more like a market, where everyone has a choice where to put their time, energy and money.

The individual decisions that they make create larger flows of decisions in the population, from which collective ideas and choices emerge.

This bottom up approach results in a more robust way of life and forms democracy as we know it.

As Churchill said democracy is the worst form of government, except for all the others that have been tried from time to time.

We can’t avoid operating in groups – that is the way society is organised and functions.

What we need to be aware of is how quickly groups can start to function poorly. All we need to do is look around the world at conflict zones to see how this happens.

Individuals acting in their own interests but cooperating in a group tend to come up with societal structures that have a chance to endure.

Decisions imposed on groups have to be enforced – and lead eventually to a more coercive form of control and government.

So… to make groups work better, we must try harder to think for ourselves.

But even then, we’ll probably vote for vanilla much of the time.

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How to write a case study to use in marketing a business or a person

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We will all need to come up with case studies for something or the other at some point.

A case study essentially answers the interview question of Can you give me an example of when you…?

So, why can they be so hard to write?

Perhaps it’s because we often default to thinking about ourselves – what we do and how we do it and start working on writing that up.

What is the end result we’re trying to describe? Is it that we made a customer happy?

Whether it’s for a business or a person describing how they did something in a particular role – the end result is that they made someone else happy about something.

Which means that they weren’t happy about something to begin with.

Neil Rackham’s best selling book SPIN Selling is perhaps the best model that describes what to do next.

In Rackham’s approach, good salespeople act as consultants acting in their customer’s best interests.

So, what does a consultant do?

Well, we start by understanding the customer’s situation – where are they right now and what is making them unhappy about something?

Perhaps they have been surprised by an unusually large bill for a commodity that has resulted in a big negative impact on their budget this year.

This has resulted in the CFO firing the financial controller and cutting staff and now the Board wants to make sure that this never happens again.

The problem is that the company operates in a fairly traditional way and is suspicious of things like financial markets, so makes decisions about commodities in the same way as it buys furniture.

But a commodity market is not like furniture. Prices fluctuate daily and are volatile – so prices could double or halve while decisions aren’t being made.

The implications are that the chances of being surprised again are quite high – prices go up and go down but have a nasty habit of being too high just when we are ready to buy.

The way in which we resolve the needs of the company might be to engage with a third party that will monitor the commodity markets daily on our behalf and calculate the impact of market movements on our position against a budget.

Such a report, issued to the CFO and financial controller regularly, would mean that they see changes early and can take a decision to manage their position and stay inside their budget limits.

Also, by being informed, they can manage how this information gets to the rest of the company and the Board so that there are no surprises.

A case study, in essence, is a story about how we made someone else happy.

This format will help us get the words down.

Next, we need to make it look pretty, but that’s another story.

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How to earn loyalty online

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We know its much easier to retain a customer than it is to find a new one.

The costs of acquiring a new customer run to many multiples of the costs of providing great service to an existing customer.

We all know this – but do we really understand it – viscerally understand what this means?

Robert Cialdini, the author of Influence: The psychology of persuasion had six principles that he found guided how people make decisions that guide their behaviour.

These are:

  • Reciprocity
  • Scarcity
  • Authority
  • Consistency
  • Liking
  • Consensus

In a nutshell, when someone does us a favour we feel obliged to reciprocate. We are galvanised into action when we fear we will lose something. We go with the experts’ views. We prefer to be seen as consistent. We want to be liked. And we often go along with the group’s view.

Things are different online – but the principles that affect how we react don’t change all that much.

The thing everyone wants from their customers is loyalty.

And customers are loyal to brands and firms that they trust.

One of the benefits of the connected world we live in is that it is much easier to redress an information imbalance.

For example, on platforms such as Ebay, the availability of seller and buyer scores and feedback mean that it is a better option to be a good Ebay citizen than a bad one.

It takes time to build a reputation, sale by sale, delivery by delivery.

People often pay no attention when something arrives on time in the expected condition.

It’s when things go wrong that the proverbial rubbish hits the fan.

That means an essential part of doing business online is to act in a trustworthy way. The incentive is to be good rather than take advantage of a customer.

In today’s connected world it’s not enough to be good – one has to make things much easier.

We are willing to pay for convenience. That’s why apps that make it easier to do things from order taxis to order food are changing how we move and eat.

That is a trend that will not change. Many of us are willing to pay a little more to park using our mobiles than carry around the exact amount of change.

So, how do we select with whom we should place our business?

Two of Cialdini’s principles stand out.

The first is that we prefer the most authoritative site. We would rather shop on Ebay and Amazon than on some unknown store or search engine.

The second is that of commitment and consistency. Once we have started doing things and engaging with customers in a particular way, we find it hard to change.

The point is that the online world is different – the content we put on our websites has to earn trust with customers, make things easier for them and come across as authoritative.

If they believe us, then they will engage and place business with us – and once that is done they will be committed and consistent in placing new business.

The good thing about the internet is that it makes information available to everyone.

So, when everyone knows whether we have been good or bad, it makes sense to be good for goodness’ sake.

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