Articles
Bogus business ideas
Popular ideas that raise havoc
by John GrahamIf it sounds new, exciting, and intriguing, we want to believe it. We also
assume it’s true. While there may be exceptions to every rule, there
aren’t many in this case. Several examples tell the story.
We’ve all heard the term “customers for life.” Even though
the idea flies in the face of the reality, there are those who cling to it uncritically,
believing that in some miraculous way they can hang on to customers forever.
But ask any salesperson if this is possible and you’ll hear the truth.
Some customers last longer than others, of course. But they all have a lifespan.
To operate on the premise that they are forever is delusional.
“Customers for life” lasted as long as it did because we wanted to
believe that the impossible was possible.
Then, of course, there was Quality Management, or QM as it was known. This was
touted as the panacea for catching up with the Japanese and getting ahead of
everyone else. Companies large and small clawed their way on to this bandwagon.
At one engineering firm, work almost stopped as the employees spent a year, mostly
in meetings. When management figured out that little work was getting done, QM
disappeared quickly and silently. It all happened because we wanted to believe
that QM was the solution.
And who can forget the highly paid guru who advocated creating chaos in the workplace.
By his standards, a company like Enron is destined for unlimited success, while
Wal-Mart is headed for the scrap heap.
Creating chaos caught on because it was new, different, and exciting.
Then we wanted to believe that dotcom would change businesses overnight. Countless
companies and investors went for broke on the word of hoards of 23-year-olds.
The trip from going for broke to going broke was dramatic and short.
We are always ready to go for the simple solution, the instant answer, or the
magic potion. Each one sounds exciting, but most are also bogus. All appear profound,
but they are also in error. Here are seven popular business ideas that get companies
in trouble:
Bogus business idea #1. Valuing value added. This one
continues to enjoy undeserved popularity. What has allowed it to survive
for so long? The answer may lie in the fact that it is meaningless.
Most of what companies view as value added is either what they are doing already
or is worth so little it is devoid of value. Why is value added always what a
company––not the customer––wants to believe is valuable?
Value should play a key role in doing business, of course. That’s what
customers expect. But the focus should be on what customers value, not what
we think is important. That is inherent value, not something that’s
added. “Brands that have a simple promise and have delivered on that promise
for a long time top the fall 2001 Equitrend best brands study,” reports Research
Alert, Feb. 1, 2002. Once again, Craftsman Tools is at the top of the heap.
Its lifetime, no questions asked guarantee resonates with tool buyers. That’s
built-in value, not value added.
Bogus business idea #2. Over emphasizing profits. There’s
nothing wrong with the word profit. It’s what business is all about.
Not surprisingly, most business owners and managers put “making a
profit” as the #1 reason for being in business. While the response
may be 100% predictable, it is also way off base.
In fact, it may be a good idea to stay away from those who are obsessed with
profit. They tend to behave irrationally, often undermining strategies that make
for higher sales, customer satisfaction, and increased margins. Their distorted
thinking leads them to believe that cutting is the formula for growth.
What makes more sense is establishing conditions that produce profits, such as
creating and cultivating customers so that they conclude that doing business
with you is in their best interest. Those who are convinced that they have made
the right buying decision become enthusiastic and loyal customers––who
buy because they believe and don’t switch because of price. And customers
who buy produce what every business needs––profits.
But it all starts with the right focus, not on profits but investing in creating
customers.
Bogus business idea #3. Constantly pushing sales. It sounds almost subversive
to suggest that getting more sales can be a treacherous business objective. To
take it a step further, pushing for sales generally leads to price-cutting and
tarnishing the brand. It can certainly produce short-term gain––along
with the long-term erosion of market credibility.
Panasonic has long been a niche player in the personal computer business. Instead
of trying to buy market share with lower prices, the company has taken a far
more strategic approach. The company is expanding its line of
“ruggedized” Toughbook laptops that meet the demanding needs
of users operating in adverse conditions. Panasonic owns this particular
market with pricey laptops that set the standard for durability.
When Louis V. Gertsner, Jr. took over the CEO job at IBM in the early 1990s,
the company was languishing. Quickly, Gertsner assessed the situation and concluded
that the task was building IBM from the customer back––not the other
way around. The IBM focus moved from selling products to making customers, a
strategy that has taken the company to the pinnacle.
Bogus business idea #4. Going for simple solutions. Is
there a company anywhere that hasn’t left a trail littered with an
array of quick, simple solutions?
For decades, ad agencies have lived off of “pot-of-gold-at-the-end-of-the-rainbow”
projects. It’s often a “great ad campaign,” “a
fabulous web site,” or a “knock ’em dead” brochure.
The behavior mimics that of kids who drive their parents crazy until they
get the latest and greatest toy. The “but everybody has one” pleas
result in countless trips to the toy store.
Companies are no different. An organization approached an a marketing firm about
preparing a capabilities brochure. After asking a series of questions regarding
the proposed use of the brochure, the intended audience, and the overall marketing
strategy, it was clear that the client saw the brochure as a quick, simple solution
to a highly complex issue, one that demanded careful thought, research, planning,
execution––and budget.
Unfortunately, simple solutions are almost always bogus.
Bogus business idea #5. Adoping a “just do it” attitude. When
the poet T.S. Eliot wrote, “This is the way the world ends, not with a
bang, but with a whimper,” he may have had something else in mind, but
his words are the perfect description of the life-cycle of most business initiatives.
We launch lots of projects, programs, and campaigns with great fanfare––but
most end with a whimper. Whether it is the quarterly customer newsletter that
never went beyond the first edition, initiating a prospect development program
that stalls before it gets going, setting up sales training that fades after
the third session, or updating the company web site, the problem doesn’t
rest with the activities themselves. Failure is in the execution.
“Just do it” makes sense in getting a project off the ground. But
that isn’t enough. Without a plan, a process, and accountability for implementation, “just
do it” doesn’t get it done.
Bogus business idea #6. Becoming a price addict. A company president
tells about visiting a prospective customer with the local sales representative.
The prospect had been referred by a satisfied customer and had called the salesperson
to arrange the meeting.
“What more could anyone ask?” reported the company president. “This
prospect wanted to buy. Yet, the salesman kept throwing more into the
deal even after we had the order. To make it worse, the new customer hadn’t
asked for any special consideration.”
How often does this happen? A more important question is why? Why do we focus
on price even when the customer doesn’t?
The answer to these questions involves breaking what can be accurately called
“the price addiction.” In other words, we make the assumption
that the only thing that will grab the customer is the lowest price. More
often than not, it’s the salespeople who lead the customer to focus
on price.
Agway Feed & Nutrition dairy feed sales manager Frank Ziacik, Jr. works to
align with what his customers value. “The possibility of higher milk production
gets the attention of farmers,” says Frank. “That’s what they
want. They are willing to pay for results.”
If there is no value alignment, what is left for the customer to focus on? Price,
of course. Or, if we assume that price is all that the customer cares about,
then we fall into the price trap.
Bogus business idea #7. Viewing what you sell as a commodity. When
you speak with insurance agents about what they sell, you just may hear
something like this: “We sell what no one wants to buy. They only
buy insurance because they have to have it.” What an attitude! What
a sad way to look at the products you sell. No wonder we avoid insurance
agents whenever we can.
If we let what we sell become a commodity, we devalue it to the point that only
the lowest price makes sense.
What could be a commodity more than sand and gravel? But Cadman, Inc., the Bellevue,
Washington-based ready-mix concrete company, transformed various types of sand
and gravel into products that meet specific construction needs––and
they get a premium price for each one.
“A brand program should be designed to differentiate your cow from all
other cattle on the range. Even if all the cattle on the range look alike,” states
business writer Al Ries. Think about what Morton’s has done with something
as simple as salt or Arm & Hammer with baking soda.
If you see what you’re selling as a commodity, whether it’s insurance,
software, or chemicals, be sure you have the lowest price because that’s
the only way to make the sale.
In business, ideas don’t seem to count for much. A go-out-and-get-it-done
attitude gets the votes. Yet, it should be obvious that ideas affect not only
the way we think but the way we perform as well. Bad ideas––no matter
how popular they may be––still produce bad results.
John R. Graham is president of Graham Communications, a marketing services and sales consulting firm. He is the author of The New Magnet Marketing and Break the Rules Selling, writes for a variety of business publications, and speaks on business, marketing and sales issues. Contact him at 40 Oval Road, Quincy, MA 02170; 617-328-0069; jgraham@grahamcomm.com.