small business

Why you can’t be all things to all customers

 

Originally published on October 14, 2014 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-marketing/customer-service/you-cant-be-all-things-to-all-customers/article21016160

When you first start your business, the ideal customer is simple – she’s anyone who walks through the proverbial door with money in their pocket. How do you decide what services to offer her? Usually, you’ll take on anything that sounds even remotely close to what you think that you can do.

This is what I might call the “yes, absolutely we can do that” phase. Of course, once the client is out the door, “yes absolutely” is quickly followed by, “who do we know that actually knows how to do what the customer is asking for?”

Saying yes to customer requests is a very exciting phase of building a business (or a new business division). And, frankly, that excitement should never completely go away.

Customer requests do two things: they identify market needs, and they push entrepreneurs to think about their next product or service offer.

As your company matures, you tend to realize that you can’t be all things to all people.

But that’s okay. As you figure out what it is you do best, there may even be some existing customers that you have to let go – and that’s okay, too. The key to sustained business success is to identify a substantial, pre-qualified group of customers who are willing to purchase your products or services at a profitable price-point.

Identifying your core clients – so that you speak their language, support their interests, and listen to their feedback – is the most important job in business. Here are three steps I like to suggest:

1. Generate a comprehensive list of both your current and the potential target customers that you have in mind.

2. Once you have that universal customer list, identify the target groups that you think have the highest potential. Study the wide range of attributes that you believe are important for a prospect to become a customer of your company. You need a cross-section of criteria that include demographics (characteristics such as business sector, title, age, gender), psychographics (psychological factors such attitudes, values, likes and dislikes) and geographic attributes (proximity to your business or its distribution network). To be clear, you must go deeper than simply describing where your customers live or how old they are. You need to work across all the ranking areas to create a useful customer profile. For example, simply specifying adults aged 18 to 49 who live in Washington D.C. is too broad. Create profiles of your various target groups based on what they like and don’t like, and on what they think, watch, eat, wear, visit, experience, and so on. Essentially, you need to think of your customers not as points on a graph, but as people.

3. Create a ranking system to measure the quality of the leads (potential customers) that you are trying to sell to. At my company, we use a tool we created called the Lead Quality Index™ (LQI). Essentially, it’s a grid. We list potential customers down the left-hand side and our ranking criteria across the top. We use categories such as corporate sector (e.g. retail, consumer goods, services), title (co-ordinator versus CEO), location (Toronto, rest of Ontario, rest of Canada, or beyond) and mindset (forward-thinking, pioneering versus market follower). The LQI is no guarantee of success, but it helps us think through and stay focused on our highest potential opportunities.

We only have so much time in a day. Staying focused on who we are selling to and what we can offer them is all-important in establishing long-term, mutually beneficial relationships.

The voice of the customer needs to be heard throughout your business. Remember, you don’t buy what you make — you create your products and services to sell to other people, so it’s their vote that counts.

I was once on a conference call to plan the relaunch of a national store brand for a leading retail chain. Because many of the client’s products required explanation to shoppers, a member of the chain’s merchandising team asked if they should set up the stores’ ‘help’ section to suit the needs of the company, or the shopping behaviour of the customer. One of the owners piped in to say, “set up the section to the liking of the customer, and I’ll adapt.” He had it right.

As Wal-Mart founder Sam Walton famously said: “There is only one boss; the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”

Bottom-line: Know your customer. Think like a customer. Delight the customer. In return, they will delight your bottom line. And they’ll point you in the right direction for the future.

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Americans want to be Bill Gates. Canadians want to be careful

Originally published on July 15, 2014 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-digital/innovation/why-improv-comedy-is-the-key-to-business-success/article19072177/

Someone recently asked me if I found any differences between the audiences I speak to in Canada and the U.S. The answer is yes. “Americans want to be Bill Gates. Canadians want to be careful.”

I’m not sure why this is. While Canadians are known for their more conservative approach in general, our entrepreneurs were at least as daring as the Americans’ in opening up the West, building the national railway, and pushing back the frontiers of communications, medicine, and technology. Still, when I speak about entrepreneurship and innovation in the U.S., there’s buzz about success and fortune; you can almost hear the American Dream springing to life. In Canada, however, the word entrepreneur is still painfully associated with the term ‘small business.’

Across Canada, at cocktail parties and banker’s offices, our should-be heroes of industry and innovation are still too often dismissed as wild risk-takers who needlessly put their savings and financial security on the line. But entrepreneurship is so much more than that. Businesses that employ fewer than 500 people in North America have accounted for two-thirds of job growth in the past 10 to 20 years. The dreamers and the risk-takers are the growth engine that drive our economies. So let’s not label the entrepreneurs behind these businesses and the opportunities they pursue ‘crazy.’ Rather, let’s go with ‘crazy important.’

Still, there is something to be said for the Canadian approach to entrepreneurship. While we need more people to take initiative and champion change, there’s merit in doing so conservatively. I like to advise entrepreneurs to dream big, but proceed with caution. What exactly does this mean? There is never a shortage of opportunities in business; they’re everywhere. The key to success lies not in putting all your hopes — and life’s savings — into the first Big Idea you see, but in taking time to define the very best venture you will actually choose to pursue.

In last month’s column, I addressed the process of bringing together your team to generate great new business ideas. We talked about the power of the group dynamic and the “Yes, and…” process that enables your team to generate a wall of Post-It notes full of ideas.

Once you’ve done that, however, you need to begin culling those ideas into a manageable short list. More importantly, your ideas should be relevant to you, your business and your prospective customers.

Sounds obvious, I know, but judging by the number of times that I read about companies selling off non-core assets or dropping unprofitable clients, I realize that dreams of glorious short-term returns too often overcome solid analytical thinking.

I approach opportunity assessment with a rigorous, three-pronged approach. I like to rank each business opportunity according to three criteria: global (which includes ensuring that each new idea aligns with your company’s high-level, strategic direction, its vision, its mission, and so on), sales and marketing (rigorously identifying the ideal customer, target markets, time-to-market, and the competitive landscape) and financial (analyzing the projected top-line revenue, contribution, productivity ratios, net profit, and so on). The bracketed examples are, of course, only a few of the concepts you need to think through; there are many others that your team will think of or may already have in place.

Before anyone on your team gets carried away by a shiny new idea, it’s extremely important that you rank each opportunity you are considering against all three of these criteria. Don’t fall into the trap of saying, “this is a great idea, even though it’s not in keeping with the long-term vision of the company. I’ll worry about getting back on-strategy next quarter.”

Unless you rank new opportunities thoroughly and objectively, ruthlessly matching them to your strategy and capabilities, you will have little chance of converting even the best new ideas into successful and highly profitable new products.

The moral of the story? Embrace the American dream, believe in the possibility of success, but exercise good old Canadian caution along the way.

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Why big data only tells half the story

Originally published on May 08, 2014 as a Guest Column in The Globe and Mail.

Thick Data vs. Big Data

For the past few months, big data has been on the tip of everyone’s tongue. I’ve been asked about it in conference and planning sessions, and I was recently stopped in the hallway by a client’s CEO to discuss its impact on business, industry and society.

The first thing you need to know is that big data is BIG.

It has been heralded as the next essential tool for market success. According to a research report by McKinsey Global Institute, “so-called big data will become a key basis of competition, underpinning new waves of productivity growth, innovation, and consumer surplus.”

To my layman’s way of thinking, big data is technology’s answer to the classic McDonald’s question: “Would you like fries with that?” It scours our electronic footprints to suggest related things that we may be interested in buying, owning or doing. Big data tries to predict our behaviour, in many ways, and as such it could become an indispensable tool for business builders.

How can small and medium-sized businesses use big data? Any startup building digital games and apps may be in a position to collect and scrutinize many terabytes of user data, enabling them to identify behaviours, problems and needs – and new growth opportunities – faster than ever. They can also test different versions of their software and measure the results instantly, so they can continually innovate and bring new products to market ahead of their competitors.

And if you’re not a super-smart IT company, you can still benefit from huge databases (in the cloud and elsewhere) that are increasingly becoming available to third-party users. For instance, retailers could tap into big data services that measure real-time consumer confidence, customer travel patterns, or even the weather – to find out whether to put swimsuits or umbrellas on sale tomorrow.

But big data has its limits. Giant generic databases may be able to tell you where your customers went yesterday, but they won’t tell you if those people were smiling along the way.

For business leaders, this is a critical insight: Big data tells us only half of the story. And it might even leave out the identification of opportunity, which is the most compelling part of the tale.

I’m not big on quoting academic principles, but there is one that has stayed with me since my undergraduate days in consumer behaviour 101: the concept of cognitive dissonance. Loosely defined, it’s the gap between consumer behaviour and feelings.

Consumers might be behaving in a certain favourable way (using your product), but that doesn’t mean they’re happy about it. They may, secretly or openly, crave a better solution. But they don’t know where or how to find it. It is in this gap that opportunity thrives – identifying and addressing the wants and needs of consumers who are still not satisfied.

This is why big data tells only half of the story. To understand the other half, I turned to Leslie Perkins, a seasoned qualitative researcher and strategic planner who now runs her own research firm. “Big data is global; it has a seemingly limitless ability to connect data points,” she says. “It sees patterns in all behaviours: social, consumer, political, religious.

“However, on its own, big data is limited by the intelligence of its analytics, and it lacks emotional insight. Big data’s effectiveness is dependent on analytics to connect meaningful data points, but numerical meaning and practical meaning are extraordinarily different.”

Ms. Perkins adds that big data cannot explain customer motivation or satisfaction, or whether consumers’ relationship with a brand makes them feel like an inspired advocate or an unwilling captive. “Big data is thin,” she points out. “It is simply the trace or outline of behaviours, without context or understanding.”

The complement to big data is not “small data” – it’s what social scientists call thick data. It’s filtered through the lens of human experience and interaction, enhancing numerical data with colour, observation and meaning – not so much a 90-year survey of weather patterns as a look at what people in a beach community do when it rains.

With big data, we use automated algorithms to infer meaning from the patterns in millions of data points. With thick data, we see the stories behind those patterns.

To understand how big and thick complement one another, consider the following comparisons:

  • Big data delivers numbers, thick data delivers meaning. It reveals the social context and connections between data points.
  • Big data is data-centric, thick data is human-centric.
  • Big data would answer where and how far you travel in an average week. Thick data explains the meaning of those trips, and which ones are valued and which ones are loathed.

Adding the qualitative insights of thick data to a foundation of big data adds depth to our understanding of consumers, and helps us do the following:

  • Segment markets based on factors deeper than behavioral metrics.
  • Enable deeper, more robust conversations with consumers.
  • Understand not just what consumers want to hear, but how they want to be spoken to.
  • Engage customers’ emotions to build loyalty and preference, and create brand advocates.
  • Achieve deep and disruptive insights that reveal the meaning and motivators that can change consumers’ perceptions and even affections.

When I coach business leaders I ask them to continually ask themselves one question: “What is keeping my customers up at night?” I ask myself the same question regularly. If I can understand and solve my customers’ challenges before my competitors do, then I will have a thriving business.

Big data is critically important. But it will never be a substitute for face-to-face insights or the understanding of human emotion as a motivator for every decision that we make – in business and life.

Balance both.

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