If you’re fascinated by business strategy, by how you can address a market differently than everyone else, you might enjoy this story. If you’re just trying to be like everyone else, skip this one and crawl back into your hole.
I recently had coffee with the founder of a successful company in the outdoor product world. I own several of his products and wrongly assumed that he’d attribute his success to a product strategy (i.e., best product wins).
His response to my strategy query was interesting, surprising and informative. He said it was really all about relationships.
If you think about successful product companies (i.e., those that charge revenue for tangible things) such as Apple, Nike, Ford or one of my local favorites, Avery Brewing, you’d expect their core competency to be product development. And for many, it is.
There’s an inherent problem with this core strategy, however. It typically requires constant reinvention. What was cool yesterday is out-of-date today. In addition, you typically need large marketing budgets—though this has changed a bit with the online world.
Companies that succeed with a product-driven strategy must build robust and quick product development competencies, and they have to keep feeding the fire. Some customers are asking “What have you done for me lately?” And loyalty to a brand is fleeting without some other anchors.
One model I employ to help companies talk about strategy dictates that you must “win” with one (possibly two) of four possible strategy components: product, service, relationship or distribution model. If you choose product, you need to move beyond competitive to either distinct or breakthrough to carry the day.
Back to my CEO/founder friend. … He knew his product had to be at least competitive (e.g., as good as his competition) or he’d be out of business. He also knew he couldn’t afford to continually reinvent his products, and he didn’t have a large marketing budget to work with.
So on Day 1 (quite a few years ago), he started building a relationship machine. He set out to meet all the potential influencers in his category. He put in what we’d today call a CRM system to track all their interactions. He found sale channel alliances. He focused on customer education. He made sure he owned the customer relationship so that when there was an inevitable problem, they’d come back directly to his company rather than a retailer and he’d wow them with great after-purchase service. He and the other senior leaders in his company spent many hours listening to their customers and responding with upgrades to address their needs. And, of course, he had good (but not revolutionary) products.
What allowed him to succeed was the deliberateness and maniacal focus on this strategy. He was passionate about his products and the markets that they served, but he wasn’t seduced into trying to win on multiple fronts, expanding into unknown areas and chasing product greatness over deep relationships.
Most products become commoditized at some point. Knockoffs abound, and someone will do it cheaper or faster than you can. If you choose a product strategy (or service, for that matter), you must be prepared to constantly innovate or your offerings will grow long in the tooth and you’ll be like everyone else, probably with declining margins and market share, trying to sell on price.
There are a lot of ways to succeed, but be deliberate about your choice. Be different!
Todd coaches CEOs to higher levels of success. He is a former CEO and has led teams as large as 7,000 people. Todd is the author of, Never Kick a Cow Chip On A Hot Day: Real Lessons for Real CEOs and Those Who Want To Be (Morgan James Publishing).