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Bogus business ideas
Popular ideas that raise havoc
by John Graham
If 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.
© 2004 Graham Communications
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John R. Graham is president of Graham Communications,
a marketing services and sales consulting firm. Mr. Graham is the
author of four books on marketing and sales, including Break the Rules
Selling: Success Strategies that Beat the Competition (Superior Books).
Mr. Graham writes for a variety of marketing and sales columns for
business and trade publications and he presents his Magnet Power presentations
at company and association meetings. He can be contacted at 40 Oval
Rd., Quincy, MA 02170; by telephone at 617-328-0069; by fax at 617-471-1504;
or by email at j_graham@grahamcomm.com. The web site is grahamcomm.com. |
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