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Companies built on customer needs are all too rare

factory machine producing customized item based on customers' needs preferences style and requests

Originally published on December 22, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/companies-built-on-customer-needs-are-all-too-rare/article33213377/

After years of fussing over KPIs, management by objectives and zero-based budgeting, I am pleased to see more and more business owners coming to grips with one essential truth: without customers, there is no business.

It sounds so simple. But companies that are designed and built around the needs of customers are scarcer than tulips in December. Businesses are started for many reasons – to put bread on the table, scratch a creative itch, fill a perceived need – but rarely to serve a specific client base. Companies have to learn to put customers’ needs ahead of their own, and it’s a journey that will last a lifetime.

Some of the worst offenders are startups – particularly the high-growth tech startups that Canada is counting on to generate jobs and export revenues. Typically started by engineers and scientists trying to solve specific problems, these companies tend to be product-oriented. When they encounter a setback developing a new widget, they are more likely to tackle the problem with new approaches or technology than by talking with customers to ensure they’re still on the right track. Result: many startups go through a series of jarring, risky “pivots” rather than continuous, informed iteration.

But there are signs of hope in the Canadian startup scene. More companies are joining incubators and accelerators to learn entrepreneurship from mentors, advisers and fellow entrepreneurs. And increasingly these groups are pushing the idea that success doesn’t come from the lab, but from meetings with customers.

In Ottawa, Carleton University’s Lead to Win program is one of North America’s Top 10 university business incubators, according to Swedish research and benchmarking firm UBI Global. Lead to Win was founded in 2002, following the bursting of the tech bubble, to help Ottawa-area technologists become business founders. That meant immersing them in the entire business community: professional advisers, seasoned coaches, service-providers, other entrepreneurs, suppliers, investors, and, yes, potential customers.

“The research is clear: high-achieving technology entrepreneurs operate in a business ecosystem that includes many different stakeholders, including partners, critical suppliers, and market channels,” says Dr. Steven Muegge, an associate professor at Carleton University, and one of the organizers of Lead To Win. Companies applying to Lead to Win go through a rigorous opportunity review process to ensure they’re ready to benefit from the Lead To Win ecosystem in ways that create value for themselves and for their partners, Muegge says: “If the founders are only thinking about the product, they’re probably not ready.”

Although Lead to Win stresses an “ecosystem” approach, its key success metric is sales: companies that earn entry to Lead To Win must demonstrate potential to generate $1-million in annual revenues within three years. “A good product is not enough,” Muegge says. “Revenues are the proof that what you’re doing is valued by customers.”

Program advisers and mentors help the entrepreneurs to identify prospects, build a pipeline, train salespeople, work on their pitch, and arrange customer meetings. Advisers may even sit in on early customer meetings. But what they’re best at, Muegge says, is demanding progress on all of a business’s sales activities. “We train and support, observe and provide feedback, and keep metrics, but the entrepreneurs are ultimately responsible for sales. They know that, on Monday morning, someone is going to ask how your sales call went. It creates accountability.”

In Waterloo, Ont., they’re setting high targets for customer development. Communitech, an industry-led technology association, has launched a six-month sales-acceleration program called “Rev.” Its goal: to give startups the vision and process to scale to $100-million in revenue.

With the aid of experienced product, marketing and sales executives, Rev helps client companies master all the intricacies of sales: segmenting and targeting markets, pricing, developing key messages, building buyer and user “personas,” perfecting their pitch, and building and training a focused sales force. Rev also tackles a challenge most startups overlook: finding large distribution partners to scale up sales quickly. “These are aspects of building the business that most of our founders have never confronted before,” says Communitech executive director David Chalmers. “At Rev, we build that structure out.”

Companies enter Rev with a product or service, and some sales. “Rev tries to work with the foundation they’ve created,” Chalmers says. “But sometimes, there is a reset. When you’re growing companies, what you did historically, might not be the same framework that is required to take the company to new heights.”

The biggest hurdle, he adds, doesn’t usually come from the market – but from the entrepreneurs themselves. “When CEOs come into this program, they have a good understanding of their business. Our goal in Rev is to work with them on the areas that require more due diligence and refinement, specifically those related to revenue attainment and growth. In other words, you need to see your business from the customers’ point of view, identify functional gaps, then build the necessary tools required for sustained growth.”

The good news is that once you accept that reality, your viewpoint shifts immediately. By the time Rev CEOs graduate from the program, Chalmers says, “Their go-to-market strategy becomes very transparent and their business confidence goes right through the roof.”

Open your eyes and ears to your customers. Success is waiting. Up there on the roof.

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Is Online Shopping on the Wane?

Computer graphic illustration about internet shopping in virtual world.

Originally published on November 11, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/is-online-shopping-dead/article32658017/

A few years ago, I was sitting with friends and talking about a job offer that one of them had just received. It was with a new online retailer of “everything gardening.”

I laughed. Then choked (elegantly) on my drink as we learned that our friend had already accepted the new position. For greater context, this Ivy League-educated professional had been wooed away from a Tier One international consulting firm to join a startup aiming to sell spades and seeds online.

It’s not that I don’t believe in the transformative potential of the Internet. I was and continue to be an avid online shopper for what I call non-tactile purchases: commodities such as books and music, where, once you’ve made your decision to buy, price and speed of access are the key, rather than place of purchase. I can even be pushed as far as buying shoes online from brands that I know and trust, feeling confident that they will arrive on time and fit as comfortably as the ones I just wore out.

But this was gardening! And gardening may be the most tactile of all pastimes. Avid gardeners spend hours of their scarce free time lovingly planning, shopping for, implementing and showing off their creativity and passion for the beauty of nature.

It just seemed counterintuitive to me that a hobby driven by touch and feel could be fed by a computer screen and two-day shipping. Of course, we all wished our friend luck and praised him for getting in on the ground floor. But it turned out we weren’t the only ones with reservations. Less than a year later, that “sure thing” startup laid off staff by the bushel, and it was back to Tier One consulting for my friend.

What made me think of this so many years later? On a stroll along Toronto’s Queen Street West, I passed one of the new Warby Parker “brick and mortar” stores. Warby Parker, for the non-hipsters among you, is an American company that formed in 2010 to sell affordable, good quality prescription eyeglasses and sunglasses. Despite its online roots, Warby Parker now has 40 retail locations, with many more planned, including both standalone outlets and mini-showrooms lodged inside existing boutiques.

Naturally I went online to read more about Warby Parker and this crazy new trend of shopping in stores. In an Inc. magazine article entitled Amazon Could Open up to 2,000 Grocery Stores, author Eugene Kim noted “Physical stores are becoming increasingly central to Amazon’s business ambitions as the company expands beyond its online-retailing stronghold and looks for new ways to reach customers.” New ways to reach customers? Incredible. Physical stores are now being heralded as innovative solutions to tech companies’ growth challenges. What Tier One consulting firm helped Amazon achieve this stunning breakthrough?

I get riled up about all this because I staunchly, consistently counsel companies not to chase all the shiny new toys. I know that online retail is not just a fad. But I will never believe that human beings will come to a point where they no longer need personal contact with each other.

A world in which we shop and do business cocooned in our homes or offices, void of smiles, advice and all human contact seems a dreary place to me. And it seems to miss the point that shopping is a personal experience, all about learning, growing and sharing with each other.

If you are a retailer, build the multichannel approach to reaching customers both online and off. If you are in business-to-business, the personal element is even more important. Get off your e-mail, tear yourself away from the Internet and do something novel: Pick up the phone or get in the car and go visit your customers. In real life, they don’t just want commodity service and the lowest price. They want more advice, more reasons to trust, and stronger personal relationships. These competitive advantages can’t be developed with the click of a mouse.

Remember, it’s called customer engagement for a reason.

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