You don't just redesign your business' processes; you also redesign your customers' processes. Here's how…
|
Tuesday: Return Driven Strategy |
|
I’m excited to share with you an important insight in this article. For those of you who aren’t familiar, RDS is a pyramid-shaped framework with 11 tenets and 3 foundations. When utilized properly, these principles enable businesses to achieve high performance levels and returns. For this article, let's talk about an important aspect of RDS’ 8th tenet: Map and Redesign Processes. Keep reading to learn what it truly means to redesign the overall customer sales experience.
|
|
|
You don't just redesign your business' processes; you also redesign your customers' processes. Here's how… Think about your sales experiences as a customer. What are some of the things that disappoint or frustrate you whenever you’re trying to buy a new product? Out-of-stock goods? Uncustomizable products? Nosy or pushy salespeople? When mapping the customer sales experience, one of the natural bottlenecks often turns out to be the salesperson. Think about this: Many customers encounter a salesperson and often have a natural aversion towards purchase, hesitant to disclose their true needs. Whether in real estate, home electronics, or hiring consultants, there is a natural fear that the salesperson may attempt to sell more than what the customer needs. This issue becomes evident when a salesperson approaches a customer and asks: “Can I help you?” … and the most common customer response? “I’m just looking.” Consider two types of transactions: In the first, customers purchase and choose a product through a salesperson who has a fixed set of offerings. In the other transaction, a website allows customers to self-select and deliberate from a myriad of offerings, unhampered by the pressure of a salesperson. As seen in the second transaction, with the barrier of sales pressure gone, the customer is free to purchase at will, and may even choose to purchase more features than if a salesperson tried to “upsell.” With no bottleneck, business exchanges can flow more freely as need fulfillment is sought more openly and willingly. Redesigning the Customers’ Processes The advent of the Internet and the World Wide Web allowed for a number of new business models to come out. InsWeb is a case in point.
Just a brief context: Many different types of insurance policies exist—car insurance, home insurance, insurance of personal valuables, etc. InsWeb noticed this and thought that with the Web, a one-stop shop for insurance could be made. The goal? To get people to think about InsWeb when they think about insurance! … but here’s the thing: Few people reading this would recall InsWeb, and with good reason. InsWeb was unsuccessful in its attempt to fulfill an unmet need. People do not think about insurance as an isolated subject. Instead, people tend to think about car insurance when they buy a car. They think about home insurance when they buy a home. They think about life insurance and disability insurance after getting married or having children. Simply said, a portal that aggregates insurance products of different types doesn’t fit within the customer’s natural processes. A one-stop shop for insurance might have made sense from an industry or vendor standpoint, but not from a customer standpoint. So, with 10 years of publicly available information from 1998 to 2007, InsWeb’s earning power levels had never been above zero. On the other hand, Walmart was able to redesign its exchanges in retail in many different ways. One example is the strategy to provide the vital few offerings people need or want instead of the costly many.
The reason for this is Walmart realized how much consumers value time and convenience. In many departments, such as toys, Walmart carries fewer selections of products than its competitors. Instead, the company focuses on selling products that are in-demand. Besides, very few customers enjoy parking their vehicles at one store, shopping, getting back in their car, driving to another store, parking and shopping again, and so on. Using this information, Walmart has focused on having just the 20% of goods that sell 80% of the time. When coupled with prices as low as or lower than other retailers, the convenience of a smaller but “more popular” selection overwhelms the need for an exhaustive selection. This has resulted in customers bypassing the inconvenience of visiting several stores, and focusing so much of their purchases in just one store—particularly, Walmart. So… what can we learn from these two business cases? Balance is still important. Just because a business has removed one of the natural bottlenecks to sales—the salesperson—and taken advantage of newer business models, that doesn’t mean the redesigned process or strategy will certainly be successful. Businesses still need to consider the customer perspectives when redesigning processes. No matter how good a strategy is, it won’t make a HUGE positive difference if it doesn’t actually fulfill an unmet need. What type of business do you want your business to be: An InsWeb or a Walmart? Be a Walmart in your own business dealings! Redesigning to Improve the Brand According to Professor Joel Litman and Dr. Mark L. Frigo in the book, “Driven,” better maps, better planning, and superior navigation are critical elements of a high-performing business… and when redesigning processes, return-driven managers strive to relinquish attachment to previously held ideals. Just because an activity has been done a certain way for decades does not mean it needs to continue to be done that same way in the future. By rearranging processes, realigning relationships, and redefining and better understanding needs, managers find new ways of fulfilling otherwise unmet needs. Dr. Wayne Dyer, a popular self-development author and speaker, states this concept elegantly: “When you change the way you look at things, the things you look at change.” This means successful firms better understand the key exchanges between their constituents and the core reasons for why exchanges occur. These businesses seek to better understand unmet needs and how to better fulfill them, examining the entirety of the offering and not simply the functional aspects of it. — If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you found this week’s insights interesting and helpful. If the average person were asked about which country comes to mind when he or she thinks about watches, there is no doubt that Switzerland would be among the answers. Learn more about the Swiss watchmaking industry’s near collapse as seen through the lens of Return Driven Strategy in next week’s article! |
