Seeing the cracks they can’t

“Care more than others think wise.
Risk more than others think safe.
Dream more than others think practical.
Expect more than others think possible.”

– Howard Shultz, CEO Starbucks

A few weeks ago, we talked about the unique ability of market leaders to see past what their customers can see. It is market leaders that, when asked, “Why fix it if it ain’t broken?” respond with, “because I see the cracks that you can’t see”.

Starbucks debuted a new logo several days ago, and the announcement was not without its naysayers. Customers and marketing pundits alike criticized the company for the new design and the decision to change it at all. Discussion boards lit up with questions and comments: “I think this new logo is a bad decision”, “Why is it that when a company has any kind of milestone (good or bad), their executives feel it is necessary to mess with the company logo?” or “Why must companies feel compelled to tinker with what is already working?”

Granted, consumers may still be bruised from recent faux pas when it comes to abrupt logo changes. In October, Gap changed their 20 year old logo and customers found out the next morning when they logged into the website; no prior announcement, no preparation, nothing. After more than 7,000 impassioned and angry customers complained on Facebook and across media outlets, the company retracted and reverted back to the old logo.

Starbucks, on the other hand, has subtly lead customers to this point of change. It’s like the frog in a boiling pot of water. If you drop him in at once with the water already boiling, he’s going to jump right out (thank you, Gap). If you drop him into lukewarm water and slowly increase the temperature, you’ll have a nice pot of stew for dinner.

Historically, Shultz has closely protected the brand he worked so hard to build. After expansion threatened Starbucks in 2008 and 2009, he stepped back into leadership, scrapped new location builds, strengthened existing stores, rolled out new store designs and slowly introduced customers to a new idea of a Starbucks experience, one broader than “coffee shop”. In his video announcing the change, Shultz says of the logo redesign: “We’ve allowed her to come out of the circle in a way that I think gives us the freedom and flexibility to think beyond coffee”. This change allows Starbucks to stretch, breathe and move towards the untapped markets they’ve been planning for long before the logo redesign was announced.

It takes courage for a company to make a change like this. But when the change is managed responsibly, like this example, customers eventually see that the change is just another logical step in the process towards growth, towards delivering the solutions and fixing the cracks that the market doesn’t have eyes to see today.

Fifteen years ago in Pour Your Heart Into It, Shultz identified one of the values that remains a backbone of the brand today:

“When things are going well, when the fans are cheering, why change a winning formula? The simple answer is this: Because the world is changing. Every year, customers’ needs and tastes change. The competition heats up. Employees change. Managers change. Shareholders change. Nothing can stay the same forever, in business or in life, and counting on the status quo can only lead to grief.”

If you’re going to be a market leader, you can’t move forward with your eyes fixed on the rearview mirror. If instead, you focus on untapped opportunities, you’ll be able to gently guide customers to a place where they cautiously release their white knuckled grip on the way things “were” or “are”, and partake in the change as the company proves that “new” is better.

“See”, you’ll say, “that wasn’t so bad, now, was it?”

And they will agree.

______________________

Filed under: Uncategorized

More

“He carried a ladder almost everywhere he went and after a while people left all the high places to him.”
– Story People

What is your ladder going to be this year?

How are you going to get ahead in work? In life? What are you going to do to take your position or your organization to the next level? How will you enable yourself to be more, notice more, achieve more? How will you enable your organization to do the same? How are you going to make yourself or your organization into the one that gets left with the high places?

Filed under: Uncategorized

Overcoming the Fear of Extinction or Suffocation

In many organizations, there is an attitude of self-sabotage among workers. This is based on two types of fear: extinction or suffocation.

The fear of extinction rides on the rusty hinges of scarcity. Jobs are scarce, people and technology are not. Some employees don’t want to learn new technology because they fear that the technology will replace them in their job. The secretary that refuses to learn how to use computer programs to do her job more efficiently is self-sabotaging based on fear of extinction. If she learned how to do her job with the help of technology she would be four times as efficient. But if she was four times as efficient, only 25% of her day would be filled with activity. If only 25% of her day is filled with activity and she doesn’t know what else to fill it with, people might start to question the need for her position. And that scares her.

The other type of fear, on the opposite end of the spectrum, is the fear of suffocation. This is the fear seen at the desk of a worker at the department of public safety. This fear stems not from scarcity, but abundance. This is the idea that the job is still going to be there tomorrow regardless of how many customers you serve today. There will always be people that need a driver’s license, so it doesn’t matter if he serves 7 or 70 customers today. Either way, he’s going to serve the same unending flow of people tomorrow. If he serves them faster today, that just means he has to serve more customers before quitting time. And he fears suffocating under all of the work.

In both scenarios, the worker is trying to preserve his or her well-being. They sabotage the outcome of their work by not producing what they’re capable of producing. Neither the secretary nor the DPS worker is as efficient or effective as she or he can be in order to prevent extinction or suffocation.

But here is where their formula is flawed.

What these two don’t realize is that they’re measuring the future on the wrong rate of return. The secretary fearing extinction is thinking that her rate of return for work will diminish. The more efficient she becomes, the less work there will be and the less of a need for her position. The DPS worker, fearing suffocation, tells himself that the faster he does his job, the more he’s going to have to process, which means he’s going to keep getting the same rate of return for his work. No matter how fast he works, the work will always be there and he’ll be getting paid the same amount. “So why don’t I just relax, take my time and just do what I can within the eight hour day?”, he thinks.

However, there is a different outcome possible in this scenario. Workers that ignore the fears of extinction or suffocation and instead look for ways to approach the problem with a different mindset will ultimately end up changing the rate of return. They’ll even end up altering the scale of measurement. When the secretary becomes more efficient at her job by using new technology, she clears her day of the mundane tasks and leaves room for new ideas, new ways of doing things and new projects to come through. More work flows through her pipeline, enabling different parts of the organization to reach solutions faster, lifting organization as a result. When the DPS worker chooses to approach the customer not from a work flow perspective, but a problem solving perspective, the worker is open to new ways of thinking and approaching the situation. He frees himself to find ways to improve the problems rather than simply process paperwork. He has the potential to satisfy customers in a different way and change the environment of the organization as a whole.

Over time, this shifted perspective can change the status quo in the organization, enabling workers to serve the market in new and different ways. Re-channeling the fear can have long-term benefits to the system.

Coming soon…an example of what it looks like when a leader refuses to accept the status quo and ambitiously forges a new path as a solution to an age-old problem. Stay tuned!

Filed under: Uncategorized

Confident Market Leaders

It’s very safe to operate in the predictable realm, in the one where you do what’s asked of you – from customers, suppliers and distributors. But if you move past that – away from satisfying demands – and instead focus on building enough confidence in what your company does and what you have to offer, you’ll realize a new kind of market potential.

This holiday season, Apple^® is expanding its distribution channels to more retailers in order to sell the iPad to more customers. Ever the aloof manufacturer, Apple has communicated to retailers in no uncertain terms that if they want a piece of the apple pie, they’re going to have to play by the rules of Apple. Apple is controlling everything from distribution message and methods to price.

At first glance, you might question why Apple is being so harsh. After all, when a manufacturer sells a product to a distributor, both sides stand to gain, so one would think that bargaining power is equal. The manufacturer holds the “killer app” and the distributer has the economies of scale access to the customers. So why is Apple so free to take charge?

Because they’re confident. They know what they have to offer and they’re not shy about it.

So many companies get caught in the race to the bottom. They’re so focused on what the competition is doing and  matching every step that they trip over themselves and fall away from their purpose for existing. Apple’s snarky behavior has been known to ruffle feathers with customers and suppliers. They’re known for not listening to customers. But, they know that what they’ve got is more than you can imagine at the moment. And that gives them the power.

By strictly controlling the product and distribution, Apple sends clear messages:

• We are confident that our product meets your needs and it will be valuable to you.
• Can’t find the product in your price range? Feel free to keep looking, but you’re not going to find our product any cheaper. If you want the cheaper version, look for our competition’s product.
• You don’t like our price? Not a problem, because we’re not selling the product to you.
• You don’t like the product? That’s okay, because we had someone else in mind when we were building it.
• You still don’t like the product? Don’t worry; over time, you will because the market will. We’re confident of that.
• You like our product? That’s good; we knew you would.

When you stop looking to please the market, and instead focus on courageously expanding into areas that are new, or different than what the market is looking at, you can free your company to focus on surprising the customer. Instead of looking eye-to-eye with your customers, look beyond them.

Think about this concept:

*

So many companies operate in the bottom left-hand quadrant. They listen to what their existing customers want and on the needs that existing customers can articulate. Many times they fail to look at the potential that exists in the untapped market space by building products and offering services that customers aren’t even aware of yet.

Look at your market, think about the trends and think about the gaps. It’s safe to operate in the bottom left-hand side. But eventually, you’ll reach the edges. It takes courage to get past the edge, but it’s the kind of courage that will be good for you in the long run.

——————–

* Graph from Competing for the Future; Hamel and Prahalad, 1994

Filed under: Marketing, Messaging, Steadfastness

Cross-Fitness for the Organization

Contrary to conventional wisdom, proficiency isn’t always the best way to achieve a goal. Sometimes, proficiency can lead to deficiency.

Take running, for example. I’ve heard many a runners’ mantra that the way to improve running performance is to run exclusively. They run over and over, but eventually hit a plateau. Initially, the runner’s caloric output is high because the body uses more energy than normal to get used to the new patterns. As the body becomes more efficient it uses less energy to burn the same amount of calories, so the runner has to work harder to get equal output as before.

This same holds true for individuals as people fall comfortably into a pattern of behavior. Someone may get used to a specific approach, mindset or process that achieves results. The individual repeats the behavior in multiple areas. After all, why change something if it’s not broken?

There is a blindside, however, in repetition and mastery. When an individual masters something, he becomes less dependent on external resources to master the process and more dependent on his efficient mastery of the problem itself. Similar to the runner who runs exclusively, the individual who repeats the pattern requires less energy over time because the behavior has been mastered. All of the sudden, it becomes easier to develop a strategy because she’s done it before. It becomes easier to enter a new market because he relies on past experience to get him there. But in the meantime, the individual is subtly separated from the fresh insights afforded by a changing external reality.

Thus, individuals – and by extension, organizations – absently self-sustain instead of externally replenish with resources, individuals or other ways of doing things to achieve results. Processes cement around doing things the way they’ve always been done, hiring the same people or entering markets in the same way and the organization hits a plateau.

So what’s an organization to do? Well, what’s a runner to do?

Cross-fitness.

It’s counterintuitive, but if a runner wants to improve his run, he’s got to do more than just run. Moderate swimming, for example, increases a runner’s lung capacity and strength, resulting in improved speed, endurance and performance. By doing something outside of running, the individual actually becomes a better runner.

Within an organization, an individual who seeks external discovery in the unexpected advances farther than the internally oriented individual. The individual is exposed to ways of thinking, relating, approaching and executing that were not there before. All of the sudden, the avant-garde becomes the new normal, and you leave the laggards in the dust.

Filed under: Challenge, learning, Strategy, Vision

Why pay attention to your employees?

  

I’m continuously mulling over the give and take between manager and employee. For example, should a manager coach her employee or does that responsibility fall to the employee? What happens if management doesn’t act as referee for employees? Is it wrong for management to stifle creativity or is that the manager’s right within the organization? Is the manager a mentor, or should they be if they’re not?

Let’s continue to unpack another idea: is it necessary for managers to pay attention to their employees?

Daily demands of work can certainly keep a manager busy. There are always meetings. And phone calls. And “fires to put out”. And then there are those pesky requests from senior management to “measure this” or “change that”. It’s a part of the daily grind, that’s for sure. These distractions are daily and explicit reminders of the job that needs to be done; the requirements for fulfilling the position.

Have you ever thought, though, about one of the implicit requirements for fulfilling the position of manager? There is one requirement of particular interest today, and it is the connection between employee and manager that is bridged by a manager’s attention. Too many times in management there is no feedback loop from manager to employee confirming or acknowledging the job being done. There are assumptions, of course. Managers think, “They’re still getting paid; they know they’re doing the right job”. But over time, for the employee, this assumption from management can lead to doubts.

Envision for a moment, a 5 year old boy on the playground. He’s struggling for the attention of mom and dad. He’s just scaled the monkey bars yelling, “Ma, look at me! Look what I did! Isn’t that cool?” and he’s looking for two things: attention and confirmation. “Great job, Hunter! You did that so fast! Try the big slide next”, says mom. Hunter skips away, swelling with pride and energetic to tackle his next challenge.

But what happens to the kid that doesn’t get the parent’s attention? He keeps trying and trying, time and again, but each time the little seed of doubt in his mind, planted by non-attention and watered by non-confirmation, grows larger. “Maybe what I did wasn’t that neat.”; “Why aren’t they looking?”; “What am I doing wrong?”; “I wish they’d look over here!” Over time, the desire for attention still strong, other emotions slip in: defeat, confusion, dejection and deflation. Eventually, he stops asking for attention.

Instead, he gives up and sadly walks away.

Now take this story and project it to the manager/employee relationship. Do you see the similarities?

So many times, employees come into the department with new ideas, fresh thoughts and the courage to scale new heights. They want two things from a manager: attention and confirmation. There is some degree of 5-year old Hunter in every employee. Managers who recognize achievements hold the power to propel and those who don’t recognize achievements hold the power to defeat. Instead of coming up with new ideas, the unrecognized employee resigns himself to fulfilling the “contract”; he does nothing more and sometimes even does less. Complacency sets in. Lack of motivation plagues projects and the uninspired employee dutifully comes to work every day, being extremely careful to do little more.

As a manager, consider the implications. On the one hand, you save a lot by not paying attention. After all, it takes time away from your meetings and your strategic planning to stop and look at what your employees are doing around you. It takes effort to understand their cries for attention. And it takes courage to help them improve and be more. But on the other hand, should that be your problem? Is it worth the future of your department, the quality of your product or the satisfaction of your customers to ensure that your employees know that you are paying attention? That you’re confirming, acknowledging or recognizing the work they are doing? It’s your decision.

Filed under: Coaching, Management, Relationships

Cooperation or Competition?

  

Cooperate or compete? It’s a daily decision faced consciously and subconsciously by workers. Humans are selfish creatures by nature, wanting the maximum output possible, even if it’s at the expense of someone else. This leads us to a process scholars call the Prisoner’s Dilemma, a decision process mixed with motives and actions that are not zero-sum. Either both groups win, one wins and the other loses or both lose.

You probably made a few decisions today that involved this thought process. If you create a successful sales technique for converting customers in your territory, do you tell your colleagues or keep it to yourself? On the one hand, if everyone could improve their sales, the company wins overall. On the other hand, if they don’t know your secrets, you remain the star for a very long time. This is the heart of the dilemma. Do you give away all of your secrets altruistically, hoard them selfishly, or is the answer somewhere in between?

Competition within an organization has its positives; it stimulates improvement and encourages refinement. It’s like the sandpaper of an organization; necessary in short spurts but not beneficial all the time. A work environment of all-competition-all-the-time creates a “dog-eat-dog” environment where someone has to lose so that another one can win.

Think about the inner workings of your organization. Could you succeed with only half of your existing departments? Would your organization thrive if you had marketing but no one to develop your products? What about if you had sales without strategy? Or what if you had math teachers but no science teachers?

You may not realize it, but if you aren’t creating a system to drive cooperation instead of competition, you are indeed sacrificing one area for the other. It’s impossible for two people to win when the system rewards only one winner.

So how do you get people to cooperate?

I present to you two examples: the “Solomon Solution” or the “Jiffy Answer”. Whichever you prefer. Two examples of twisting the system and creating a forced decision process that encourages the maximum output in the long-run:

Solomon’s Solution

King Solomon was faced with a dilemma: two mothers, two babies – one dead, one alive – and one story, both claiming to be the mother of the live baby*. In this dilemma, there was an ideal solution but little control. So Solomon created a Prisoner’s Dilemma, letting the system drive human nature to reveal the ideal outcome. Solomon offered to split the baby in half, giving one part to each mother, in order to satisfy their demands. The mother’s could both come out with something, nothing, or one could come out with much more than the other. Either way, the mothers were going to have to take ownership of the decision. The real mother condemned the recommendation (not surprisingly!), which revealed her true identity; as opposed to the non-mother who agreed that the baby should be split in two. Solomon created a self-regulating environment that punished selfishness and rewarded cooperation. He didn’t force the decision; he let the decision process force the most beneficial outcome.

Jiffy Answer

For the “Jiffy Answer”, you’ll see the same decision paradox here: http://www.youtube.com/watch?v=AdYFVN35h5w. The two brothers are faced with the familiar equity argument. Two hungry stomachs, one piece of peanut butter bread and the dilemma of splitting the bread in two. In the short term, one brother may benefit more than another. In the long-term, it’s in their best interest to cooperate.

It’s nearly impossible to force different people to work uninhibitedly and full-heartedly towards a common goal. But by creating a system that puts human nature at the center of the solution, you can sit back and watch the paradox unfold within your organization, receiving the dividends while you wait.

_______________
*1 Kings 3:16-28

Filed under: Management

Short-term revenue gain at the expense of long-term profitability

In a Marketing State of Mind

  

Most customers like to maintain the status quo; it’s expected and satisfying when a transaction meets your expectations. It’s pleasant when one happens to exceed your expectations. And it’s maddening when one dashes your expectations, especially when it’s at your expense.

As a semi price-sensitive and exclusively devoted airline loyalty-program customer, I always fly Continental Airlines when possible in order to receive miles towards their One Pass program. When Continental joined the Star Alliance network it became possible to fly US Airways and still receive miles towards Continental’s One Pass. When the time came to purchase a ticket the US Airways ticket was slightly cheaper than Continental, so I took a chance and purchased it. Logging in today to check into my US Airways flight and confirm my seat, the seat map came up along with a message:

“You can either buy choice seats or receive a free seat [assignment] from the airline”.

I could purchase a “choice seat” (defined as all aisle seats except for the last two rows + exit row seats) for $30, or I could accept the “free seat” (defined as all other seats) from US Airways, which turned out to be a window seat. First of all, the aforementioned “free seat” wasn’t indeed free – it cost me $500 per leg of the trip. Perhaps now is also a good time to insert that for the past five years as I’ve flown continental more than 40 times, I’ve always had the choice for an aisle seat. Always. For free!

With US Airways, not only was I refused the option to choose, but I owed the company money if I wanted to maintain my status quo.

Doing business with a company is like a contract. A customer pays the company what he thinks the product or service is worth, according to personal preference or socioeconomic status. The customer holds up one end of contract while the company holds up the other end. If at any point in the contract the payer feels that the payee failed to satisfy the contract, there will be customer dissatisfaction.

In a broad sense, the fuel of a relationship between the customer and the company is the ratio between a customer’s expectations of “normal” as it relates to the product or service, and the actual outcome of the product or service. For example, I purchase an ice tea from Starbucks expecting it to taste a certain way. As long as the product tastes equal to or better than my expectations, the relationship is satisfied.

Holding all else constant:

if “expected normal” = outcome, or if “expected normal” > outcome, your customer will either continue purchasing at the same rate, or increase their likelihood to to purchase in the future. Either way, you’re looking at a positive trend and long term growth.

if “expected normal” < outcome, you risk the transaction being cancelled, a dissatisfied customer as well as a decreased likelihood of future transactions. You’re trading short term gain for long term growth.

Here is a chart that shows the three different ratios:

There is a positive trend when the customer experience meets and exceeds expectations. There is a negative relationship when expectations exceed experience.

Over time, the bar for “expected normal” can raise as interactions with the company continue. What used to be a nice service enhancement becomes an expectation in future encounters. It becomes your new expected normal for when you enter a transaction. You hold every firm selling that product/service to that level of expected normal as you make your purchasing decision. When you interact with a company that doesn’t meet or exceed that expectation, your level of satisfaction is affected.

So, back to the story:

At the $30 price for a seat upgrade, a measly 6% of the cost of the ticket, this may seem inconsequential. But it wasn’t, since I had expectations that were greater than the outcome. Not only did I reject the additional 6% aisle seat charge, I also re-allocated my remaining $5,000 travel budget for 2010 to Continental instead of US Airways. That may not seem like a lot of money for US Airways. However, look at their tradeoff: a potential 6% increase in revenue per customer for a 400% increase that they were promised sans poor experience. Now imagine that number multiplied by a greater volume of customers. Think about the magnified potential for this seemingly hasty company decision.

So, a few lessons learned:

• If you’re going to charge more money, be upfront about the cost at the beginning. It’s not a good idea to trick your customer when their switching costs are higher. You’ll get this deal, but you likely won’t get the next one. Short term gain at the expense of customer satisfaction is not good for long term profitability.
• By all means, exceed expectations so that likelihood for repeat purchase increases.
• Increasing customer share of wallet by improving customer propensity to repurchase is better than stiff-arming customers for more revenue per transaction. Both revenue per transaction and customer lifetime value should be examined together when making decisions that will impact customers.

Until next time,

Lydia

Filed under: Marketing, Strategy

Wanted: A Mentor

Ruminations on Management
I came across an old paragraph that I wrote one day many years ago, in seeking a mentor in a manager. My modus-operandi stems from one of my father’s wise sayings: “always hang out with people who are better than you. They’ll pull you up to their level and encourage you to be more, to do more”. Naturally, this results in a high expectation of management, as well as a high calling of myself:

Wanted: A mentor that will challenge, teach, coach and encourage me to become a better leader in the business environment. Someone that brings years of experience in both succeeding and failing and who is willing to impart those lessons on someone who is still growing. Someone who will look at who I am today and see potential for what I can become tomorrow. Someone that will force me out of the box into very uncomfortable situations, but be there to give wise advice and support if/when I fail in those situations. Someone who will proactively seek to put me in situations that will grow my skills and abilities and push me out of my comfort zone. Someone that reads voraciously and synthesizes information into actionable application that makes his/herself, business and the world a better, more efficient and effective place. Someone that is constantly questioning, looking, learning and taking-in everything – and reminding others to do the same. Someone that is a very effective communicator, an empathetic leader, a wise counsel and in a state of constant improvement.

There is a scenario often played out in business called “success to the successful”, which is fundamentally about self-fulfilling prophesies. Two people, A and B are given an unequal amount of resources (e.g. attention or time). The theory follows that person A, receiving more resources, will succeed. He succeeds because of the resources, and his resulting success impels the giver to provide him with more resources, further fueling his success. At the same time, person B receives fewer resources. His lack of resources is the source of his failure. His failure prompts the giver to provide even fewer resources, further fueling his failure. The virtuous cycle for A continues as does the vicious cycle for B, ultimately satisfying the two self-fulfilling prophesies. If you expect people to fail, they will. If you give people the resources to succeed, they will rise to the occasion.

When you manage people, do it with the intent to make them capable of doing your job one day, or better yet, doing more than your job. This is more than an altruistic attempt at mentoring; it’s a profit-maximizing mindset that will improve the bottom line of your company. By challenging others and encouraging their potential, you not only improve who they are, as a by-product, you improve the organization as a whole.

Filed under: Career development, Coaching, Management

Receptive messages in receptive moments

In a market where scarcity of choice is extinct, a product (or service) gets little more than one chance to impress a customer. As I was browsing the back of my milk carton this morning, I read the following text:

Does that mean if I drink 52 cartons of this milk, I save only 4.8 lbs of synthetic nitrogen fertilizer from being used for the entire year? Or do I save 4.8 lbs of synthetic nitrogen fertilizer per week? What is synthetic nitrogen anyway? And what does it do to harm the environment? Why do I care?

As a new customer, who made this purchase decision based on a referral, I am still highly influential on my next purchase decision for organic versus non-organic milk. I’m not completely sold on the cost/benefit of organic products. So as I’m reading the back of the carton, I’m looking for incentives that will sway me one way or the other, especially my switching costs are higher (by a price factor of three) for this product.

A purchase decision based on trust (e.g., a referral) is the most powerful way to influence a new customer to try your product. But your product has got to be able to stand on its own and deliver an experience that will make the customer want to try you again. Your product gets once chance. And that one chance, that one experience determines whether or not your product becomes the customer’s new “must have” or “some product that I tried once”.

The devil is in the details. Every channel that you can use to influence your customers (advertising, promotion, price point, placement, packaging, delivery, product experience) should be directed towards the goal of retaining the customers who try your product. When I read the back of the box while eating cereal, the message didn’t compel me to go out and buy my next carton of Organic Farms milk. It made me think “so what?” and “why should I care”?

Also, if you’re going to use numbers to sell your product, put them in their proper context. Make your story believable.

When your product (or service) involves higher switching costs than the competition (whether it’s a higher price, longer learning curve, limited access, etc.) these marketing principles are even more important. Focus on receptive messages in receptive moments.

P.s. In case you’re wondering…the product experience (including taste) wasn’t enough to compel me to buy my next carton. My husband summed it up nicely: “it’s wet…that’s about all it has going for it in the milk category”.

Filed under: Marketing, Messaging