Tag Archives: strategy

Fail to Research; Fail to Secure Market Share

As companies seek to gain a competitive market position and execute on their business objectives, various problems can crop up. In the last post, we examined a case study on inventory control as one issue that needs addressing. In this installment, we will look at a case study involving loss of market share:

A company in the Northeast had always been able to sell enough product to secure a 15-20 percent local market share within the primary price range and portfolio of designs. As other competitors began to outsell this company in the local market, the owner commissioned some research to determine what percentage of the market share had been lost. Upon discovering that their share had dropped to 9-11 percent, the executive team became worried.

Why would this company’s–or any company’s–market share deteriorate to this point? Experience shows that one common reason for the decreased market share might be increased competition. As other competitors, whether established or new businesses, begin to offer viable or even more attractive alternatives, your business may begin to lose a percentage of share  in the local market. Another possible reason for declining market share could be perceived poorer quality in the products offered. Rumors of a company’s demise can fuel such a perception and scare buyers away, allowing other businesses to take advantage of this image problem.

The solution to declining market share varies according to the source of the problem. If bad image and rumors appear to be hurting the business, the owner must move quickly to dispel any rumors and improve company image through a bold and highly visible public relations campaign. For example, companies can generate goodwill by meeting with influential members of the local community to let them know that any perceived problems are being taken care of and that the company plans to be making products in the community for some time to come. This exposure can often be gained through attendance at chamber of commerce and other local business group meetings.

To overcome competitive advances, the executive team must aggressively outmarket and outproduce competitors in each niche market. By beating them in head-to-head competition, the problem is solved while the company’s reputation for high quality products is enhanced. In terms of quality initiatives, management should devise ways of improving quality in all projects, passing the word along to all employees, suppliers, and subcontractors that quality is becoming an issue and that only those who can produce quality work will remain a part of the team.

Stabilizing and regaining market share demands that the team know the local market inside and out. While calculated risks are allowed if the executive team feels confident that they can get product manufactured and sold quickly, the potential success of any such project must be measurable in terms of researched demand for the product line the company plans to produce. Clearly, companies must target opportunities that allow them to make their best products at competitive prices. By keeping abreast of new developments and new competitors attempting to make an entry into a particular market, the team can revise plans–and keep buyers from running to the competition.

 

The House on the Sand Went Smash

As a youngster, I remember learning a Vacation Bible School ditty about the wise man and the foolish man. In the song, there was a great rainstorm. One builder had built his house upon a rock, and that house stood firm. The other had built his house upon sand and the house fell down (went smash!) The morale of the story is to make a sure foundation before beginning an endeavor whose outcome is important.

Most businesses know that they need to do some business or strategic or turnaround planning. Planning is vital to creating shared mission and eliciting commitment from stakeholders in the outcome(s). Most executive teams, however, underestimate the value of educating employees to prepare them to execute the plan and achieve the desired results.

We all want employees and managers who maintain a cool head and concentrated focus. What is our role, however, within executive teams, to help our people become prepared? We would assert that our role is to lead and influence through empowerment. Empowerment enhances employee engagement and reduces the likelihood that only executives will be expected to take responsibility for outcomes. 

Skilled employees are usually made, not born. Therefore, key employees deserve professional education and job training. Be constantly grooming your staff to take on more and more responsibility. Much like a second-string player on a sports team, a second generation of managers should be in waiting, ready to step in when called. This intentionality is also very useful in succession planning, because those who vacate their positions already have trained backups who would be ready to perform the role should their predecessor no longer be able or willing.

Grooming Effective Managers

Continuously analyze employees for management potential through an interactive process of interview, observation, and written response. Be on the lookout for employees in all areas who posses strong analytical and evaluation skills, combined with the emotional intelligence to handle changes effectively and appropriately. Give your people the opportunity to prove themselves worthy of consideration for grooming.

When evaluating management candidates, leaders will often try to determine, through an employee’s actions or words, the employee’s perceptions about the company’s mission. A demonstrated commitment to the mission shows promise. Using individual interviews and feedback sessions, leaders can determine whether employees understand chain of command and critical success factors for business success. Asking employees how to improve the productivity of their part of the business, their own execution, and corporate profitability can reveal (through their responses and actions) whether they understand the key levers of management.

Education and Training

Those who can consistently make recommendations for company improvement should be considered for management positions and be given an opportunity to refine their skills through education and training. The employee development need not be formal; the one-to-one mentoring of high potential employees can yield significant results. Formal workshops and continuing education offered within your industry or organizations serving people in key roles can sharpen skills, focus, and performance.

Personnel files should document employee attendance at educational programs as well as innovative solutions they have offered to real problems. These files serve as the basis for performance reviews as well as management development. Difficult work assignments containing known problems offer the high potential employees to contribute on  meaningful decisions. If unsatisfactory decisions are made in these situations, the employees can be coached and mentored through what should have been done differently and learning will occur.

Adapting to Change

Over time, employees will learn to adapt to changing events in the operating environment. The first few times a managerial candidate faces unforeseen circumstances, it may be difficult to revise the game plan to suit the conditions. With effective coaching and a sprinkling of successes, however, the new manager will learn to handle tough situations without the need to involve a higher up.

Every business has its share of unpredicatable events that can influence performance. While these events cannot be anticipated exactly, they can be expected and planned for in a hypothetical sense. As employees become more flexible in the way in which they carry out their responsibilities, they will be able to aid the business plan execution by adapting to change more quickly and accurately.

 

Locating the Buyer Need

Is your organization in the habit of finding unresolved problems? If not, chances are high that you are currently–or will be soon–losing market share to more nimble competitors who are “tuned in” to buyer habits and frustrations. Many industries suffer from the slow and steady move to products and services that have largely become commoditized. Once your offering is viewed as a commodity, you are no longer competing on value; the playing field is reduced to price only (or at least as a primary decision criteria.)

One of the categories that suffered this fate about 15 to 20 years ago was televisions. Appliance stores (as opposed to the modern day consumer electronics big box specialty retailer or boutique provider) were where people shopped. When looking for a TV, most consumers would walk down the aisles of sets in their beautiful shades of grey or black. Sales staff may follow or approach and offer to explain or demonstrate features of a model you may have paused near. Most buyers, however, came in to the store armed with some knowledge about prices or consumer ratings and were planning to buy a certain model…until they came across a TV with a sticker that asked the simple question, “Ever lose your remote control?”

How did Magnavox determine that the Remote Locator function (in which pressing the power button causes the lost remote to beep several times) was a missing ingredient in the TV viewing experience of many viewers? Did they simply ask, “What problems do you have with your current TV?” No; instead, they asked penetrating questions about how the TV fit into the lives of consumers. They looked at family dynamics and how TV viewing paralleled relationships with other daily activities. What they discovered was that 80 percent of Americans admitted to losing the remote control; over half of the viewers lost their remote more than five times per week. Inanimate objects like sofas, pantries, and refrigerators swallowed up the devices when the owner wasn’t watching!

The typical consumer may never have offered up that losing the remote was a problem associated with TV viewing. The TV manufacturers were not responsible for the loss of the remote (though family members and friends were certainly thought to be culprits!) Yet, when asked if the loss of remote was a problem, most readily agreed that it was.

Note that the technology used in the Locator was not novel or cutting edge. But, Magnavox had created a temporary competitive advantage among buyers of TVs for whom keeping track of the remote control was now seen as a problem that technology could solve. While some may argue that the company was fortuitous in “stumbling upon” this idea, in fact, it was very deliberately planned.

Magnavox published survey data to validate the problem. Some of the key findings included:

  • 55 percent of respondents admitted losing the remote control 5+ times/week.
  • Of those who lost the remotes, 63% said that their average search to regain the device was about 5 minutes.
  • The remote was most likely to show up in/under a piece of furniture (38 percent), in the kitchen or bathroom (20 percent), or in the refrigerator (6%)

What was the process of discovery and meeting a previously unstated need?

  1. Magnavox tuned in to a problem that TV buyers really had.
  2. They created a product experience to solve it.
  3. They shared the powerful idea with the market. (Through survey results)
  4. They communicated to the market in ways the target audience wanted to hear.

Instead of taking a traditional, worn-out R&D approach, consider changing how your company develops and commercializes product ideas. Send team members out to collect data that can drive design, packaging, messaging and other aspects of product positioning. You will be better off for the new approach!

Don’t Mess With…the Customer Perspective

A deep understanding of your target audience is the only way to create ideas that resonate and break through the noise of modern life. Being able to connect authentically and directly to a buyer persona’s culture is an effort in alignment. Alignment is not just for vehicles–it is critical to business success! When people begin to see your product or service as a part of their identity, then you have built a connection with stickiness to it!

Keep America Beautiful launched a campaign years ago aimed at deterring littering. In it, an actor made to look like an Indian cries when he sees trash detracting from an otherwise majestic scene. While an emotional memory was built through the public service announcement, a cultural connection was not formed and very few behaviors were changed. Littering is still a problem today. (In fact, one of the things that irks many are cigarette butts all over the ground, thrown out car windows, and piled up at entrances to office buildings.) Why smokers can’t keep their butts to themselves is a mystery! 

A market research project in Texas sought to understand who litters. What they found in terms of demographics were that 70 percent of “litterbugs” were males, who also usually had the following characteristics:

  • they are young
  • they drive trucks
  • they drink beer
  • they have a “king of the world” attitude

The research project led to a marketing campaign recommendation to engage culturally with these young males. Ever heard the slogan, “Don’t Mess With Texas?”  In the mid 1980s, actors and athletes were recruited as spokespeople for a new breed of PSA in which the stars shouted out the now famous slogan. For instance, two burly defensive football players from the Dallas Cowboys team during that era are depicted roadside, picking up trash and vowing that they want to give litterers a personal message!

Megastars like Matthew McConaughey, Jennifer Love Hewitt, George Foreman, Owen Wilson, Chamillionaire, and Chuck Norris all did cameo endorsements for the campaign. YouTube videos show that it went viral. When a leading research organization suggested that a 10% reduction in littering would be good and 15% stellar, its team had no idea what a campaign that truly connected could do. In the first five years after the slogan was launched, litter in Texas was reduced by 72%!!!

Something else that really connected was Cadillac’s launch of is Escalade SUV. Escalades became iconic in hip hop culture, appearing in music videos, lyrics, and becoming the ride of choice for many to demonstrate status. John Manoogian, who oversaw external design at Cadillac, was asked why it became the bestselling full sized SUV for a number of years.  Rather than attributing success to something like product placement, he admitted that Cadillac missed its target audience with the Escalade. It was intended for  older affluent males. When it didn’t sell as planned, he visited a dangerous neighborhood in Detroit to see who else might be in the market for the luxury SUV. While the “business” that the owners of Escalades appeared to be in was not what bigwigs at headquarters may have wanted, he realized they had a winner. From there, it was a matter of building a strong marketing approach to reach the target audience and tweak the product based on feedback–just like any other niche!

What can be learned from these two “case studies?” Simply that we must not try to educate people into taking another perspective that is conducive to our personal or corporate success. Instead, we should find out what is important to the target and meet them culturally with an offering that resonates with their environment, way of living, and motivations.

 

SCARF Up Some Change

In an HBR blog post about organizational change this morning, Walter McFarland draws in the role of the brain in defining whether change efforts will meet with success. Some of the casualties of failure to adapt to changing market conditions he mentions include Sunbeam, Polaroid, and Circuit City. While each of these formerly strong companies is no longer in business, proponents of organizational change struggle to define why some are able to reinvent themselves and others are not, other than the nefarious “human element.”

Organizational change as a field of study has long maintained that change can be defined in linear, sequential terms and processes. What we are discovering, largely through examining principles of neuroscience, is that change is neither. Instead, McFarland, the board chair elect of the American Society of Training and Development (ASTD), argues that modern business dynamics would suggest that it is chaotic. It is the chaotic nature of change that creates the need for greater research. We live in a time when the need to constantly change is critical to competitiveness. Neuroscience may be a key to helping us steer organizations through adaptation more effectively.

Thompson and Luthans wrote that typical reactions to change “can be so excessive and immediate, that some researchers have suggested it may be easier to start a completely new organization than to try to change an existing one.” While industrial psychologists refer to this as “human resistance to change,” very few who study the phenomenon have identified how to lower the resistance consistently and pervasively. 

At the NeuroLeadership Summit, being held in New York this week, a panel discussion with senior executives and experts from The Conference Board, the Association of Change Management Professionals, Change Leaders, and Barnard College will explore the connection between neuroscience and organizational change, understanding how we can effectively deal with the human resistance to change. 

A new organizational change model is being proposed that takes into account how successful change functions in a modern organization, where work is conceptual, creative, and relational, and talent is portable. According to McFarland, activities that have contributed to the continuing poor performance of change initiatives include:

  • Perpetual underpreparation: change is always dreaded and a surprise to employees
  • A perceived need to “create a burning platform”: meant to motive employees via expressed or implied threat
  • Leading change from the top of the organization down: only a few individuals are actively involved in the change and either under communicate or miscommunicate with others

Top-down change (the traditional model) can trigger fear within employees because it “deprives them of key needs that help them better navigate the social world in the workplace. These needs include status, certainty, autonomy, relatedness, and fairness” — the foundation of the SCARF model. 

  • Status is about relative importance to others.
  • Certainty concerns being able to predict the future.
  • Autonomy provides a sense of control over events.
  • Relatedness is a sense of safety with others – of friend rather than foe.
  • Fairness is a perception of fair exchanges between people.

SCARF is a summary of important discoveries from neuroscience about the way people interact socially and is built on three central ideas:

  1. The brain treats many social threats and rewards with the same intensity as physical threats and rewards (Lieberman, & Eisenberger, 2009). 
  2. The capacity to make decisions, solve problems and collaborate with others is generally reduced by a threat response and increased under a reward response (Elliot, 2008). 
  3. The threat response is more intense and more common and often needs to be carefully minimized in social interactions (Baumeister et al, 2001).

Since organizational change is a significant social interaction in the marketplace, it is important to minimize perceived risk. Understanding how people tick, empowering them to vocalize their ideas, and creating better systems to engage them in the change process is best practice. More organizations need to get on board.