News

07.17.17

Could Your Customers Be Driving You to Distraction?

Todd Schrock, Advisor with The CEO Advantage

How to Overcome the Unique Challenges of Emerging Businesses (20-100 Employees) Article #2 in the series.

“Growth does not always lead a business to build on success. All too often it converts a highly successful business into a mediocre large business,” Richard Branson, Founder, Virgin Atlantic Airways, 1993 speech to the Institute of Directors, London.

Strategy at the emerging business stage is simple, although simple does not mean easy. It is found in the eternal search for better and sharper answers to this critical question: How will we create value?

The unique challenges at the emerging size (20-100 employees) bring great potential for distraction. Success in the market causes growth—often fast growth. Yet even that success brings an unsuspected deadly distraction: your own customers.

No, not all customers. Probably not even most. Rather, it is those customers whose real needs do not match your company’s unique strengths, making them more expensive to serve, harder to please, less likely to be loyal and less likely to recommend you to others with enthusiasm.

In the early, entrepreneur-driven stages of growth, most businesses pursue any and all customers. They do this for several possible reasons: doing so often brings a rewarding sense of validation to the company’s existence and the entrepreneur’s hard work. It certainly adds excitement. Also, chasing or accepting any revenue opportunity can be due to the pressure to make payroll, keep the lights on, fund new equipment and pay taxes. An entrepreneur may feel as if there is no choice but to run faster.

But not all customers are equal, nor all revenue opportunities beneficial. Not all contribute to your success in this emerging business stage. Chasing further growth without first hammering out a clear and uniquely appealing value proposition can distract you and your employees from your best opportunities.

While ignoring the need for a clear statement of value provided to the customer can work for a time, it will likely lead to plateauing revenues at inconvenient times. Further, the goal of chasing any and all growth can hinder profits, sap employee satisfaction and steal leadership attention from more important issues.

Pursuit of growth for growth’s sake also keeps your financial results at the mercy of your worst customers. It becomes a treadmill that is hard to get off. The best way to exercise strategic choice—to grow organically and with greater customer loyalty and profit—is to do the hard work of sharpening your value proposition before chasing after more growth.

How? Start by Prioritizing These Two Strategic Tasks:  

1. Focus on understanding your customers. What are their needs? What are the real reasons behind the stated needs? What benefits do your customers get from your product or service? What problems do you solve for them? Are their pains eliminated or gains achieved? (NOTE: Understanding the differences between customers can be more important now than the similarities.)
2. Clarify your company’s unique strengths. Engage your employees and customers in productive discussions to discover your unique strengths. It is possible that you will even find one or more capabilities that are not a strength yet but that you should develop.

While pursuing these two strategic tasks, create a cycle of experimentation. Uncover and test evidence for and against the hypothesis that you begin to form for each task. Next, engage the right people through candid dialogue. About what? Discuss alternative possibilities for combining these new insights into a powerful value proposition.

Which customers will you stop serving, or at least stop pursuing? Which customers will you focus on serving a better value proposition and with a greater passion? This value proposition will be the strategic sweet spot that can fuel success well into mid-market size.

As the founder or current owner, you likely provided the entrepreneurial genius behind the current value proposition. But like all entrepreneurial skills, this emerging stage requires you to diffuse that skill. You can do this by helping each employee remain focused on key customer needs and how to create specific value for the customer. However, it is a managerial challenge to build this employee mindset in the whirlwind of daily challenges.

Larger organizations will succeed as they continue to focus on these same core strategic issues, though strategy decisions will include additional dimensions appropriate to their size and market reach.

After clarifying and sharpening your value proposition, you will certainly flow those changes through adjustments to R&D, marketing plans, sales approaches, operational capabilities and even distribution options. But you squander money and effort and attention if you adjust those parts of the business without first revisiting the “How do we create value?” question.

“Profit in business comes from repeat customers; customers that boast about your product and service, and that bring friends with them,” W. Edwards Deming, Out of the Crisis, 1984.

In the next two articles, we will spotlight two additional deadly distractions that can undermine success.

Questions for CEO Reflection

• What is your value proposition? Can you write a clear statement of it in five minutes?
• Do you maintain a laser-like focus on your value proposition, finding ways to protect and enhance it?
• Does each employee know how the company creates value?
• Are you experiencing lower profits and divided attention due to chasing growth without first having a clear value proposition? What could that experience feel like if you grow two to three times more customers or employees?
• Is unfocused growth driving you to distraction through cash crises or multiplying of complexities? See the next two articles for how these two possible distractions interrelate with customer distractions.

CEO Rhythms Forum

If your company is in Northeast Indiana, consider expanding your circle of informal advisors by joining your CEO/Owner peers and me in a CEO Rhythms Forum, a new opportunity for those with the unique challenge of owning or running businesses of 20-100 employees.