Category Archives: Customers

Would You Like To Buy The Brooklyn Bridge? – An Infrastructure Sales Story

I have been thinking a lot about infrastructure lately. There are many different types of infrastructure out there. While I am primarily in the High-tech infrastructure environment, almost every other industry has its own type of infrastructure (think oil, airlines, brewing, etc.) and for me, it is hard not to think about things like the Brooklyn bridge when you start talking about infrastructure. I think by way of analogy, I’ll stay with bridges in general and the Brooklyn bridge in particular for this discussion, because it enables me to make the general points I want to make about infrastructure sales and business decisions, and there are a ton of very cool facts that I was able to discover, and hence would like to share.

“The Brooklyn Bridge looms majestically over New York City’s East River, linking the two boroughs of Manhattan and Brooklyn. Since 1883, its granite towers and steel cables have offered a safe and scenic passage to millions of commuters and tourists, trains and bicycles, pushcarts and cars. The bridge’s construction took 14 years, involved 600 workers and cost $15 million (more than $320 million in today’s dollars). At least two dozen people died in the process, including its original designer. Now more than 125 years old, this iconic feature of the New York City skyline still carries roughly 150,000 vehicles and pedestrians every day.” Or so says History.com. (http://www.history.com/topics/brooklyn-bridge.)

I find this to be very interesting. Here is some infrastructure that was built 135 years ago and is still in service. In fact, it could be said that based on its load and traffic, it is doing more now than it was doing 135 years ago when it was put in service. It cost $320 M in today’s dollars, but probably could not be built for fifty times that ($15 Billion) today. It was basically designed to last 100 years, but at 135 years it is still going strong.

Please note these facts. I will be getting back to them.

When it comes to selling infrastructure, there is one man that historically stands out, head and shoulders above all others: “George C. Parker (March 16, 1860 – 1936) was an American con man best known for his surprisingly successful attempts to “sell” the Brooklyn Bridge. He made his living conducting illegal sales of property he did not own, often New York’s public landmarks, to unwary immigrants. The Brooklyn Bridge was the subject of several of his transactions, predicated on the notion of the buyer controlling access to the bridge. Police removed several of his victims from the bridge as they tried to erect toll booths.” (https://en.wikipedia.org/wiki/George_C._Parker.)

What this teaches us is that if you are going to sell infrastructure it is important to identify the proper customers.

What this also shows is that George was a man who was way ahead of his time. If he was selling infrastructure today he probably would be incredibly successful selling infrastructure to those that are actually in that business, and would not have to spend the last eight years of his life behind bars in Sing Sing prison.

It is also important to understand the engineering associated with some of the existing infrastructure (at least in the US, and probably elsewhere – look at the London Bridge for example), as people go around trying to make a case to replace it. The engineering associated with older infrastructure usually far and away exceeds the stress requirements that were to be placed on it. This probably cannot be said today. As costs have skyrocketed, engineers are now designing and building structures as close to the required loads and specifications as possible in order to keep those costs low. That means they also do not last.

In other words, in the past infrastructure was usually built to last. In addition to old bridges, think about all the pictures in magazines (and on the web) of the old copper pot stills being used at the various breweries (my personal favorite), and bourbon and scotch distilleries. I am sure that all the manufacturers of commercial distillery equipment would like to replace them, but I suspect that also isn’t going to happen any time soon.

Again, looking at our favorite infrastructure example: “(it employed) a bridge and truss system that was six times as strong as was thought it needed to be. Because of this, the Brooklyn Bridge is still standing when many of the bridges built around the same time have vanished or been replaced.” (https://en.wikipedia.org/wiki/Brooklyn_Bridge.)

For comparison sakes, a newer piece of infrastructure, the Tappan Zee bridge was put into service, in the same area, about 70 years after the Brooklyn bridge: “As another example, the original Tappan Zee Bridge was opened in 1955, and construction of its replacement is now underway. A 2009 New York state report on the original bridge described its design as “non-redundant,” meaning that one critical component failure could result in large-scale failure; the bridge was featured in a History Channel show entitled “The Crumbling of America.” The new bridge is being designed with a 100-year lifespan; info about the “New NY Bridge” is available” here. (http://www.mondaq.com/unitedstates/x/287844/Building+Construction/Lifespan+of+a+Bridge+Span.)

And there is also: “After years of dawdling while the bridge crumbled, state officials say they are rushing to complete a review of the most feasible solutions to the problem of the Tappan Zee. But a decision is still two years off and a new bridge would require eight additional years and as much as $14.5 billion to build, they say.” (http://www.nytimes.com/2006/01/17/nyregion/a-bridge-that-has-nowhere-left-to-go.html.)

“The bridge was built on a very tight budget of $81 million (1950 dollars), or $796 million in 2014 dollars.” (https://en.wikipedia.org/wiki/Tappan_Zee_Bridge.)

This would indicate that more recent infrastructure is usually neither designed to last as long as some of the older infrastructure, nor is it as reliable and cost effective as some of the older, over-engineered variety.

This would lead many to the position that for some of the older infrastructure, it would be much more economically feasible to repair it, upgrade it, maintain it, than it would be to replace it. This is despite what many of the current infrastructure suppliers might want or even indicate. If it is working and can still continue to work, why would anyone want to build another bridge, right next to the still working one, to carry the same traffic.

However, just because it was initially built well doesn’t mean that it shouldn’t or doesn’t need to be maintained. Infrastructure requires continued investment in order to maintain it: “The repairs, ordered quietly last October by the city’s Department of Transportation, are intended to fortify the concrete-reinforced steel-mesh panels beneath the bridge’s traffic lanes, which were found to be deteriorating by construction crews at work on a repaving project last July, officials said yesterday.….. the city’s Transportation Commissioner, attributed the problems to ”normal wear and tear” on the 115-year-old bridge…..He added that the steel girding and concrete that must be repaired, which were put in place during a 1954 repaving project, ”were installed with a life expectancy of 60 years,” and had therefore fulfilled most of their engineering mandate.” (http://www.nytimes.com/1999/02/05/nyregion/as-concrete-falls-city-moves-to-fix-brooklyn-bridge.html.)

And of course, 20 years later more maintenance is needed on the Brooklyn bridge, only now, the cost is climbing: “The cost of repairing the Brooklyn Bridge is expected to hit $811 million — a roughly $200 million increase from estimates made only last year, The Post has learned. When the mammoth project to renovate the 133-year-old span began in 2010, the price tag was even lower — $508 million.” (http://nypost.com/2016/11/11/brooklyn-bridge-repairs-expected-to-cost-811m/.)

So, where does all this bridge information leave us when it comes to selling infrastructure?

I think the first thing to note is that unless the infrastructure is at risk of immediate failure, such as the Tappan Zee bridge is deemed to be, it is going to be very difficult to replace. You may be able to add to it. You may be able to augment it. But the financials usually do not make sense for a full replacement. It is going to be a tough sell to get a customer to buy something that does much the same as the thing it is trying to replace.

It also looks as though capacity is going to be the prime driver for infrastructure expansion and augmentation. The more cars that want to get across the river, the bigger the needed bridge, or the more bridges that are needed. New features and elegant designs of bridges are pretty cool, but the objective is to still get cars across the river as efficiently as possible. Form is nice, but it is function that predominantly drives infrastructure acquisition.

And I think finally, there is an excellent business to be had repairing, maintaining and improving the existing infrastructure. As we see above, even incredibly expensive bridge repairs are economically preferable to what would be the exorbitantly expensive cost of replacing the infrastructure. The Tappan Zee replacement bridge is expected to cost between $4 Billion and $15 Billion. The original Tappan Zee cast $81 Million. The financial math becomes pretty obvious, pretty quickly.

Focusing on how to improve the existing infrastructure, extend its life and help it to be used or run more efficiently are going to be keys to a customer first mentality that the good sales teams are going to need in order to be successful.

I think this is going to be especially important as customers are rapidly learning that the new infrastructure they buy today is not going to last as long as the old infrastructure they already have today.

If you don’t believe me, just look at the bridges.

Products and Markets

Good sales people only need a couple of things to be very successful: the right products and the right markets. The corollary here is that even with these things, bad sales people will not be successful. That’s why they are referred to as bad sales people. The question then arises: How can you tell if you have bad sales people, or the wrong products, or are in the wrong market? This is a set of questions that senior management must always answer every time a sales target is missed.

I’ll deal with the sales person discussion first.

Sales people are invariably success and compensation driven. They are also usually in a leveraged compensation type of role. That means that the level of their total compensation is directly associated with the amount of sales that they generate. Sales people are essentially risking part of their compensation, and betting on themselves in that they will be able to not only achieve their sales goals but also exceed them in order to maximize their compensation. Think about that for a minute.

People in marketing don’t take this risk and have their total compensation directly linked to the number or the success of the parking programs and campaigns that they create. People in research and development don’t take this risk and have their compensation directly linked to the number of products, the time it takes to develop products or the customer or market applicability of the products they develop. Accountants don’t take this risk and have their compensation directly linked to the quantity of numbers they crunch or the time it takes them to crunch them.

They may be indirectly linked in the form of management reviews, ratings, and bonuses, but for the most there is not the quid pro quo defined “if you do this, we will pay you that” sort of compensation relationship that you find in sales.

What this usually means is that when viewed over reasonable time frames, sales people are either successful (achieving or exceeding their sales targets and getting paid lots of money, receiving both recognition and rewards as compensation) or they don’t get to be sales people for very long. They can’t afford to be bad sales people because they won’t make enough to survive. They usually either thrive, or don’t survive.

So despite what every investment prospectus may say to the contrary (past performance is no indication or guarantee of future success), if the sales people have been successful in the past, and they are still sales people, it is a pretty good indication that they can be expected to continue to be good sales people.

What is interesting is that despite this knowledge, most management will immediately examine and possibly blame the sales team should each new sales objective not be met. I think that this is because it is the easiest approach. After all, we all know that sales can’t really be that difficult, and that sales also comes with a two drink minimum for the cover charge.

What I’m going to briefly look at here, is what do you do when you have a proven sales force, but you aren’t achieving the market success that you are looking for. That means that you need to be looking at your products and your markets.

Let’s look at the next easiest factor to review, the market.

For this analysis I am going to pick something that we can all probably agree is a good product, that being energy efficiency. It can be an actual product that reduces energy consumption. It can be a service that results in reduced energy consumption. In this analysis it is a hypothetical product that has a definable value in the amount of energy consumption that it reduces.

So in what market would this energy efficiency product do well?

That market would not be, as one might erroneously think, the market where the most energy is consumed, and hence the greatest savings could be generated. If that were the case all products of this type would be very successful in North America and the US specifically since it is one of the biggest consumers of energy in the world. While there continues to be a growing interest in energy conservation, the success of energy conservation products in the US has not been commensurate with the energy consumption market opportunity. In fact, energy consumption has increased over the period of time, not decreased. This is due to the relatively low cost per unit of energy in the US.

The greatest market opportunity would more correctly be identified as the market where there is the highest cost per unit of energy consumption.

Going a little further with the market size versus unit cost example, the average cost of a kilowatt hour (kWh) of electricity in the US is approximately $0.10. The cost of the same kWh of electricity in Brazil is approximately $0.165, or almost 65% more expensive. That means the value of the energy savings per dollar spent on the energy conservation product will be 65% greater in Brazil than it will be in the US.

There are approximately five times as many kWh per capita consumed in the US as there are in Brazil, making the US by far the bigger market opportunity, but the value per unit savings in Brazil make it the more attractive market (at least initially) for energy savings products. When it comes time to create a business case where money is being spent in order to reduce future expenditures (save money in the future), greater savings will always equate to a better business case.

In short, it will be more difficult (currently, from a financial business case point of view) to sell energy conservation products in the US than it will be to do so in Brazil. From this point of view, the better market would be Brazil.

At a very coarse and high level this is the type of market analysis that needs to occur for all types of products when preparing to enter markets, as well as when going back and analyzing why a market objective may not have been met. It answers the question is the market the right fit for the product. It also clearly points out that one size will not actually fit all.

In looking at the final scenario, we will assume that the again we have a competent sales force and in this case have identified a market that we wish to address. Again there will need to be almost the same product versus market analysis done in order to identify if there is a proper fit.

If we use the same energy conservation product example from above, we see that while the US is a massive energy consumer the relatively low cost per unit of energy versus the rest of the world makes it a relatively poor market for energy conservation products. In other words, energy conservation products do not do as well in the US because US energy consumers (both corporations and individuals) can afford to not conserve (as much) due to the low costs per unit of energy used.

This would mean that for a global energy conservation product to be successful in the US market it would have to attack the market from some direction other that specifically based on the value of the energy saved. It would have to take the more difficult road of trying to quantify the value other “soft” benefits associated with the product.

These types of soft benefits could include but not be limited to: Attractive designs (Apple is a master at this), incremental functionalities (can the energy conservation product do other things besides save energy – a smart phone analogy), social responsibility (casting the product in the “greater good” social category versus solely in a corporate fiduciary role), and corporate leadership (the business case may not be great now, but in the future when energy costs are expected to increase it will be, and then you will be ahead of the curve). I am sure there are many others.

As noted these are soft benefits in that it is difficult if not impossible to define their value. That is not to say they don’t have value. They do. It is just difficult to quantify. However, price is always readily definable. And it is always difficult to sell a product with a definable price, but not a commensurately definable value.

If you find sales people capable of selling a product with a definable price, but not a commensurately definable value, you should do all you can to keep them.

Management will invariably first look at the sales teams when sales objectives are not met. A significant reason for this is the difficulty in looking at, or worse, trying to change markets or products. I do think in most instances it is the specifics associated with the markets and the products that will need to be addressed when sales targets are missed, as opposed to replacing sales people.

I have found that most of the time issues arise with obtaining sales goals because of the desire to sell a specific product into the wrong market, or the desire to sell the wrong product into the desired market. If the product is not readily modifiable, other more receptive markets need to be identified. If the market is the target, then the product needs to be modifiable to meet the specific needs of that market.

The sales force is indeed important, but it has always been about products and markets.

A Race to the Bottom

I had a phone call drop the other day. It wasn’t a big deal. In this wireless world I think we have all had phone calls drop. We also get static, interference and garbled messages, but hey, we’ve gotten used to it. The difference was that this call wasn’t a wireless call. It was a call using a land line desk phone. Come to think of it, having a land line call drop isn’t such an uncommon event these days either. I have commented in the past that not quite good enough is now good enough. I think this is just a symptom of what I call a race to the bottom.

Benjamin Franklin once said:

“The bitter taste of poor quality remains long after the sweetness of low price is forgotten”

I think for a very long time this was the case. It was accepted that there was a trade-off between quality and price. However it seems that times have changed. What was once true in a handmade, almost artisanal world does not seem to apply quite so steadfastly in the modern, mass production, readily interchangeable, short life span high technology world of today.

It used to be that you could get things cheaper but they invariably didn’t last as long as the more expensive better made items. This was a period when it took a while to make just about anything, and it was a requirement that it last based on what it cost to acquire. Back then when you bought something you expected to have it for a while. You expected quality almost directly in proportion to the price that was paid. You paid less, you expected less. If it wasn’t high quality you were going to have to live with that mistake for a while. As a manufacturer your reputation rested on every product you made.

I think the new approach today is to ask what is the best “relative” quality available at the absolute lowest price. Now it seems that the search is for as much quality as is obtainable at the lowest price. It is a somewhat subtle change in the relationship between price and quality, but I think it is an important one. I think in today’s world Ben Franklin would be asking what the minimum quality level is that can be endured at the target price point.

We are no longer buying quality. We are buying price and hoping for quality.

I guess that there still is a relationship of sorts between quality and price, it’s just that now it seems almost impossible to up-sell a customer (raise the price) based on quality. If you are not the cheapest, your chances of gaining the sale are probably going to be severely hindered by the other product that is the lowest price. Customers for the most part seem to view products as readily substitutable with each being able to perform essentially the same functions as the next, hence the “why pay more” approach.

I think it can also be traced somewhat to the public perception in the change of relative life expectancy the products. The shorter the life expectancy of a product, the quicker the next generation or replacement product hits the market, the more it seems that there is a tolerance for lower quality. It came out quick so a few bugs are always expected initially. As we have moved into the disposable high technology world, it seems the more tolerant the market is of lower quality, as long as the product is available for cheap.

Just over fifty years ago Gordon Moore noticed that technological capabilities doubled roughly every eighteen months. It seemed everything got either twice as fast or half as small on a very regular basis. This observation strangely enough became known as Moore’s Law. It basically ushered in the era of short product life cycles and rapid product replacement.

I have mentioned several times that I am probably a dinosaur. I remember (vaguely) my parents color television. All twenty three inches of that then massive cathode rate tube screen. Wow, what a monster. I also remember the repairman actually coming out to the house once or twice to repair it. Of course this was across the approximately fourteen years of its operational life in their living room.

Now televisions are huge with many larger than sixty or seventy inches. Unfortunately they are only expected to last a few years. Then they either break and must be replaced since the cost of repair is now so prohibitively high as compared to a new one, or are just replaced by the newer level of product technological advancement.

My point here is that while the absolute cost of the product may have come down in both real and time adjusted costs, I don’t think the total costs across the sample period have actually been reduced. In other words, the total cost of ownership across fourteen years and two repair visits is probably far less than the three to four televisions that might be expected to be purchased across the same time period today. However, it is only fair to note that who can say what the capabilities of a television will be in fourteen years at its current rate of evolution.

It seems again if you have a short technology cycle, short life expectancy, readily substitutable, mass production product, such as televisions, or smart phones, or personal computers, or just about every other electronic platform in the market today, quality is not the concern. Price is. And when that happens it looks like the race to the bottom is on.

The reason that I have gone into such belabored detail on what is obviously a consumer goods example is that it has been the bellwether for the business world as well. Let’s get back to my dropped call scenario.

For the longest time the communications infrastructure was a source of pride. I seem to recall when “five nines” of reliability, no down time, and always being able to place a call were proudly pointed to aspects of both the public and private communications systems. You could not get a higher quality infrastructure.

So you didn’t. You got a cheaper infrastructure. It now experiences issues and outages that in the past were unthinkable. And over time people have accepted it. Quality was sacrificed for price. You don’t hear anybody asking “Can you hear me now?” We all seem to be okay with it. We seem to have lost the drive and desire for “better” and have just settled for “cheaper”.

I don’t know if it is the consumerist behavior driving the business world in this direction or the business world drive for newer and cheaper technology that is stoking the consumerist behavior. As the apparent acceptance by customers for low quality continues, even though there seems to be an inordinate amount of business focus on creating the “relative” quality levels in technology products, price becomes an ever greater decision criterion. This trend can only benefit the low cost producers and providers in the market.

When quality is addressed as a cost as in the “cost of low quality” as it is measured today in business, instead of a generated value to the customer, then I think the bottom may be in sight. Feature, form, fit, function and quality no longer seem to be viable differentiators in the eyes of customers. Price and its financial partner, cost, now seem to be all that matters.

Maybe Ben Franklin was right in his time. I think Kurt Vonnegut may be right in this time. He was the one that said:

“In this world, you get what you pay for.”

The only issue now, is that we don’t seem to be willing to pay for it.

Why Do It

There is a brand out there that struck advertising gold with their catch phrase “Just do it”. We all know who they are, so I will not go there. For sneakers, exercising and sports it was brilliant. How incredibly “Zen”. It truly tapped into the psyche of every would-be athlete on the planet. Like so many other marketing trends in society it seems to have also found its way into our business vernacular. I am not so sure this is a good thing. Like process for process sake, just doing something for the sake of doing it, without examining the value or reason for doing it in business can be a waste.

I think we need to remember what drives organizations and what should cause them to take actions. Organizations exist primarily to bring value to its share holders. It does this by providing value to its customers. It seems that too many times they have a tendency to confuse activity with progress, much the same way that process can be confused with control.

I am convinced that there are three simple driving forces for actions in business. I am sure there are many that would potentially argue this point and say that there are actually a myriad of driving forces for action in business, but stick with me for a moment. When I look at the root cause analyses of all types of actions in business, and boil them down to the basics, I still keep coming back to these three:

Actions can be customer driven.
Actions can be revenue driven.
Actions can be cost driven.

If there are business decisions that result in activities that when analyzed cannot be attributed to one of these categories, I would probably challenge that it is an action or activity whose relevance should be called into question.

In other words, if an organization is doing something that cannot be attributed to one of these causes, I would ask why they are doing it.

Customer driven actions are just that, actions that benefit the customer primarily without regard to any other considerations. This means that they can be actions that are not in the current financial best interests of the business at that time. They are “investments” in the customer relationship which will hopefully produce greater returns to the business at a later date.

These are actions that are the result of externally focused decisions. They are actions designed to further the relationship or build incremental trust with that specific customer. They are usually strategic in nature and are focused on the longer term view of the business, not its immediate profitability.

Revenue driven actions are actions designed to grow the business, either through the acquisition of new customers or the expansion of business with existing customers. Since they don’t specifically focus on business profits or margins (they are looking at the top line, not the bottom line) they can be mixed between external and internal in their business focus.

These actions tend to be shorter term focused than the long term customer driven actions in that there is some consideration to the business results that are input into the decision and action process.

Cost driven actions are specifically internally focused and are used to target shorter term results. They are the result of decisions that are usually focused on the business performance and are designed to directly affect profitability and margins.

Cost driven actions are not solely defined by infrastructure or staff reduction types of actions. Some cost driven actions can be taken as a method of avoiding or reducing known costs. For example, business actions such as corporate wellness activities can also be considered cost driven actions. They are solely internally focused. They are designed to help improve employee productivity by reducing stress and resulting sick days. They also help reduce corporate healthcare costs and insurance premiums by reducing the claims and medical costs of employees who are in general healthier because of them. All of these improvements directly affect the corporate bottom line.

There may be some that believe that some actions are based on meeting legal or regulatory requirements, and should be categorized separately. I would argue that these too are cost based actions based on the argument that they are internal in nature (not affecting customers or revenue) and only affect costs in the form of what it costs to adhere to them, as well as what it will cost if they are not adhered to.

The tradeoffs between these decision drivers and actions are reasonably clear. There are the primarily short term affects of internally focused actions (such as cost cutting), the midterm effects of revenue growth actions (such as sales programs and discounts), and the long term aspects of customer relationship investments (such as faulty product replacements and customer satisfaction actions) and their effects and values to the business. There is the tradeoff between an external (customer needs) focus and an internal (primarily profitability) focus that must be balanced.

It is the business leader’s responsibility to continually monitor and balance the internal and external decision focus, and the short term – long term effects on the business. If they become too focused on the short term business performance, future revenue streams and customer relationships can be negatively affected. If they focus on the longer term and customer relationships, shorter term business performance may suffer due to the increased investments that are required.

Sometimes these decisions and actions can align and be complementary to each other. This alignment between short and long term decision and action, between internal and external focus then becomes relatively simple. Other times they will not be complementary in nature and tradeoffs will have to be made between the performance of the business today and the investment needed for the business to perform tomorrow. Cost actions will need to be balanced against investments in revenue growth and customer relationships.

I think the bottom line here (if you pardon the pun) is that customer focused decisions and actions are what keep any business or organization in business and should be prioritized above the others. After all, it is the customer that supplies the order that gets turned into revenue that ultimately drives profit. Forgetting, or re-prioritizing this axiom can in some instances occur briefly, but probably at the long term peril of the business. There are always other competitors in the market that regardless of their situation who will be willing to make the incremental investment in a customer.

I realize that I have greatly simplified the decision and action criteria here for an organization. However I do think that it is somewhat justified. We do have a tendency to make business as complicated as we want. I seem to have reached the point where I prefer a simpler approach as opposed to a cross functional team creating a new process and program to document the approach.

As I noted at the opening, it seems that too many times organizations undertake actions that don’t seem to support any of these key reasons for taking them. If there was a check and balance arrangement where processes or programs were reviewed with an understanding toward these criteria, they might be modified or removed all together.

Since this would be for all intents and purposes an internal only review, it would probably be classified as a cost base decision criteria and action.

Organizations have a limited number of resources. It seems in many instances they have an almost unlimited number of objectives and desires, many of which are somewhat conflicting. The business’s resources need to be spent or invested on those objectives that keep the customer in the forefront of the decision criteria and can best be aligned to provide the greatest return to the organization. These returns need to be balanced between the short and long terms.

The Customer Pendulum

Customers are interesting things. They are the source of all business’ survival. They are hard to find and easy to lose. Many times they don’t know what they want and are almost always not willing to pay for what they need. They are fickle with their allegiance and occasionally are not entirely forthcoming about their preferences. They are part of and are sometimes caught up in a changing environment that most of the time they may not be prepared for. It would probably be possible for a vendor to solve the customer’s problems, if only those problems would remain unchanged for any sort of measurable time.

But they don’t.

Customer’s problems change. The very act of solving one problem invariably creates, or at the very least reprioritizes another problem.

Please don’t get me wrong. This is the way of business very much in the same way of Darwin’s Theory of natural selection. I’ll use the evolutionary speed race between cheetahs and gazelles here.

Faster gazelles mean that only the fastest cheetahs are selected to survive as they are the only ones that can catch the gazelles. This means that the next generations of cheetahs are based only on the faster bloodlines.

Now, the next generations of faster cheetahs mean that only the fastest gazelles will be selected to survive as the slower ones will fall victim to the cheetahs. This means that the next generations of gazelles will be based only on the faster bloodlines.

Now only the fastest of the faster generation of cheetahs will survive.

And the pendulum continues to swing from one side to the other.

I am going to focus on business services here because I think it best illustrates the changing focus, and the swinging pendulum of customer desires. In the business world of services there are no gazelles and cheetahs, but rather there are prices and service levels. There may be those that may try to interject other variables into the service customer equation, but the reality remains primarily associated with these two variables. The interesting part of this price and service level relationship is that only one of them seems to vary at any given specific time.

In the initial stages of the vendor to customer relationship the primary variable will be price. (There may be times where this relationship may be referred to as a “partnership”. This would be inaccurate. Partnerships of the sort implied here take time to evolve. Particularly when there is an ongoing service based relationship.) When a customer is looking to enter into a business services relationship, they are initially looking for a vendor.

This is due in no small part to how most customers go about entering into a services relationship. They will invariably set a minimum required performance level for the services they want, and then look to the vendor that agrees to provide them the greatest cost reduction from their current spend level at the selected service level. That means they are looking for the vendor that bids / quotes them the lowest price.

Of the two variables previously noted, price and service level, they have fixed the service level and are trying to vary the price to the lowest level possible. If the price for the desired services is low enough (as opposed to the total attracted cost that they are currently paying) they will select the vendor and sign a contract. If it does not return sufficient savings the customer will usually stay with the service arrangement that they currently have and avoid any service provision change event issues.

Once the service contract is signed, the price for those services is now fixed. The customer focus will now shift to the service levels associated with the service. Requests for incremental service or services and faster solutions to issues and problems will become the focus.

It is at this point that a relationship can begin to become a partnership.

Businesses want to help with and solve their customers’ problems. That is the value they bring and why customers buy their services. One of the things to remember is that customers associate value with that which they pay for. That means if you give them something for free one of two things will happen. They will either associate no value with what you have given them (since it was free) or you will have established a new service baseline where what you have given them will be incorporated into what they expect going forward. You will in effect raise the service baseline performance expectation going forward.

And once the new increased service level baselines are set the next generation of discussions (or contracts) will once again be focused on the price of the new service level.

And the customer pendulum will continue to swing, price, service, price, etc.

The point here is that despite their best intentions, vendors need to resist the urge to provide quick and cost free solutions in an effort to engender customer gratitude. There will always be times where quick support decisions will need to be made to support the customer, but it is always in everyone’s best interest to go back and revisit them after the issue has passed. Providing “freebies” provides some credence to the customer perception that once the price is set, they can continue to push for a greater scope of work to be provided.

A partnership has to have more of a connotation of a peer to peer relationship instead of a customer to vendor relationship. That means that there is a give and take instead of just an ask and take oriented relationship. If something is provided, then something should be asked for in return. It does not need to be strictly quid pro quo, but there needs to be some sort of cost or consequence associated with each request and action in a business services relationship.

Contrary to what we might feel, without some sort of cost consequence for their requests, many customers will only more deeply ingrain their vendor type perception of the relationship. The customer asks, the customer gets and it is up to the vendor to figure out how to provide it and continue to survive in the relationship. Businesses need to remember that making a customer happy by giving them things does not create a partnership. It usually just creates an expectation that more can and will be given in the future.

One of the best ways to stop the customer pendulum from swinging and creating a business partnership is to focus on the customer’s business service needs while remembering your own business needs. Being responsive as well as empathic regarding the customer’s issues will go a very long way in this regard. It is also necessary to educate the customer on the supply side issues in the service equation and the requirements that are required for a viable business relationship going forward.

I don’t know that you can ever get a customer to be fully empathic about the issues and costs associated with solving their service problems, but educating them about what it takes to provide them service can probably go a long way toward getting them to acknowledge and accept the bill that should be presented to them after the issues have been solved.

Sometimes You Don’t Sell

Sales people are an interesting lot. So are customers for that matter. When you put the two of them together there is no telling what will happen. Many times sales people have been conditioned to try and sell the next new shiny widget as the solution to all customers’ problems. Customers usually have a whole raft of out dated, earlier release, vintage, dull clunky widgets that could be the source of their current issues and unhappiness, which they had previously bought from the same, or other sales people. They might even have some earlier generation doo-hickies and possibly a thing-a-ma-bob or two. It will be the wise sales person that recognizes when yet another product purchase may not be what the customer wants or needs.

Widgets, doo-hickies, thingamabobs and even whatchyamacallits are all recognized product terms in the high tech business sector. It took me quite a while to master this vernacular. Pay close attention and you too could end up being technology prosaic master.

We all seem to have been conditioned to the idea that new products, new equipment or new technology are the answer to all customer issues that are usually the result of the old products that they previously bought. It is conveniently forgotten that the old products were the answer to the then previous issues. And so on and so on back in time.

Now I can see where a new product might be an answer to a customer request. I want a new car, or I want a new house might be one of those customer requests that fit this description. I don’t think I have ever heard a consumer say that they want a new electrical generating plant. They may not even want more electricity. They want to run their refrigerator or possibly their air conditioner (a particularly high level requirement for hot summers here in Texas). They don’t usually ask for a new phone system. They want to play “Words with Friends” (or some such other application) on their smart phone.

The point is that customers rarely request for a specific product or a new technology. They ask for a solution. These requests are normally phrased in the form of: “I need to do more…” or “I need to spend less …” In many instances it may in fact be a new product that is the answer to their needs. Something that runs faster, or reduces operational expenses is almost always available in the market.

But what happens when the customer already has plenty of capacity? They don’t need to go any faster. They may not want to buy another product because the products that they currently have work just fine. Still, they feel they have a need. If they feel they have a need then they do have a need.

When it comes to customers, perception is reality. Even if their perception does not match anyone else’s.

Sometimes sales people need to take a step back from trying to sell the next shiny widget, and get back to solving the customer’s problem.

I have talked about value many times in the past. Customers will exchange their money for something that they perceive to have value for them. All too many times sales people associate that “value” with some sort of physical product. However customers will only associate value with a product if it solves their problem. And sometimes it is not a new product that solves their problem. Customer value lies in the solution that is provided to them, whether it has a product or some sort of associated equipment or not.

Successful sales is based on the precepts of trust in the relationship between the buyer and seller, as well as the belief in the expertise of the selling entity in the solving the buyer’s issues. Vendors who focus solely on the sale of the next shiny widget eventually find themselves supplanted by someone else whose focus in on solving the customer’s problem or need. This inevitably comes about when the customer no longer trusts the vendor to be looking out for the customer’s best interest, but rather is focused on closing the next sale.

It is too easy to say the next release, next generation or next product is the solution that the customer needs. After all, it is most likely what the competitors (both incumbent and non-incumbent) will be saying. It is more difficult to look beyond the equipment sale and look at customer need and solution, but that is where both the customer trust and customer value are built.

Sometimes a customer may just need to be shown how they can better or more efficiently use the widgets that they have already purchased. At other times it may be issues associated with how the previously purchased widgets have been applied. Sometimes the current widget just needs to be fixed instead of replaced.

The approach here is for the sales person to make their customer’s problem their own problem. This can be done figuratively where they put themselves in the customer’s shoes and do the right thing for them, or it can be literally where they take ownership of the customers issue outright in a legal transference of responsibility for the source of the customer’s issue and thereby solve the customers issue by taking it away from them. In the figurative solution the sales person solves the problem as if it were their own problem. In the transference solution the sales person makes the customer’s problem their own problem and then solves it.

Sometimes when you put yourself in the customer’s shoes, either literally or figuratively you find that selling them something may not be the preferred or even desired solution. In this case the value that the sales person brings to the customers lies in the expertise that they bring to bear on the customer issue. Sometimes the solution is to externalize the issue (from the customer’s point of view) so that they don’t have to solve the problem. From a customer’s point of view having a problem taken away from them, either figuratively or literally means that they don’t need to worry about it anymore.

I have found that in the longer run customers will pay much more for the value that this peace of mind brings them, than they would for any specific product that may be the next shiny thing in some sales person’s kit bag. If a sales person can figure out how to actually remove an issue from their customer’s business, they will find that they don’t really have to sell any specific products, as the solution will be all that matters to the customer.

Why Ask Why

Have you ever asked yourself why you are doing what you are doing, right now, in the office? Most of the time we spend in the office seems to be composed of a pleasingly familiar set of activities that we have been doing for quite a while. We continue to do what we have been doing usually because at one time or another it worked on a problem. We received the positive feedback we were looking for and incorporated it into our routine. Not to sound too trite but I think we can all agree that today, and looking forward, the business world does not look anything like routine.

Believe it or not I was too young to really remember the 1960’s, but I have read about them and have watched innumerable movies that were set in the period. This of course makes me an expert on the 1960’s. After all this intensive research, and all the popcorn and sodas associated with watching the research, I think you can distill down an entire decade in American history into a two word sentence:

Question everything.

The reason that I have taken this half century retrospective (gosh, is it really fifty years ago?) is that it may be time to dust off the “Oldie but Goldie” catchphrase and start ruthlessly applying it to business.

It is easy to start down a simple road in business. The problem is that almost no road remains simple, or straight. There are always twists and turns, and probably even a few loop-the-loops in every business road.

I’m sorry; I got carried away with my metaphors there. I’ll try to keep that sort of behavior to a minimum.

My point is that every business needs to continually ask itself why is it doing what it is doing. Just because it started down what it thought was the right road a while ago doesn’t mean that it is still the right road today. Again, this is pretty basic stuff, but when it all gets boiled down to the basics, business is really pretty simple.

Business is about customers.

Now despite what the courts or politicians may rule or claim, businesses are not people. I think it is much the contrary, in fact I think it is the opposite: People are business. The business can’t ask itself why it is doing what it is doing, but the people can.

This brings us back to the comfortable routine that the majority of people in business have day in and day out, going down the road that they started out on some time in the past. The easy path, the path of least resistance is to continue down the path that we are on. A plan, program or model may have been put in place and work begun. Chances are that time has passed. At the risk of propellering off into rampant triteness again, if time has passed, chances are that times have changed.

The only real constant in business is customers.

When we begin to ask ourselves why we are doing what we are doing, any question we ask that does not have the word “customer” in it, and does not focus on how to bring value to the customer is probably a wrong question to ask. It will be this single minded approach to how we address changing what we do and why we do it that will enable businesses to navigate the necessary changes in directions, and different roads that must be traversed.

Small businesses are usually held up as models of outward facing, customer oriented businesses. I think this is probably correct. I also think that this is probably not due to any deliberate focus or business magic. I think the reason that small businesses focus on the customer is because they don’t have anything else to focus on. They are small businesses. By definition they do not have much in the way of internal infrastructures, or any of the other trappings of large businesses. They only have an idea or product and customers, so by default that is all they focus on.

It is usually not until a business becomes large and somewhat successful that it begins to focus on things other than customers. This is also the appropriate time to start asking the difficult questions. If you ask yourself the “why are you doing this / is it for the customers’ benefit” question, and you either can’t answer it or associate it with a customer value, then you need to start looking deeper at what you are doing.

Companies seem to begin to lose their way, and their customer focus when they start to concentrate on better ways to do things instead of doing things better. It’s a subtle but important difference. Focusing on a better way to do things means you are shifting your attention to how you are doing something. Focusing on doing things better means you are still focused on what you are doing.

In most instances (but admittedly probably not all instances) your customers will not be particularly interested in how you do something. They will definitely be interested in the result of what you have done. To put it another way, do you really care how a company builds a car? If the company uses all manual processes or a fully automated production line, does that materially affect your buying decision on the car?

Speaking only personally at this point, I don’t remember asking the car salesman those questions the last time I bought a car. I was more interested in the resulting product, its safety, reliability, efficiency, and most importantly if I thought I would look cool driving it.

This again is a good time to bring us back to asking ourselves why we are doing what we are doing. We need to always focus on and keep in mind if what we are doing is providing value to the customer, or if we are doing it for some other reason. Are we internally focused on our own systems, programs and processes and trying to hopefully provide ourselves value or are we focused on improving what we provide to the customer and providing them more value. It may sound a little strange but we need be relentless and ruthless when it comes to customer focus and what we are doing. If we don’t, when we take our eyes and minds off that customer for whatever period of time while we focus on some internal aspect of how we do things, someone else who is focusing on that customer will take that customer away.

The next time you walk into your office and begin your normal start of the day routine, you probably ought to ask yourself “why”.

Drop the Rope

Business, like life is about growing. Pretty deep, huh? Actually it is probably more aptly described as pretty trite and stale. In so many instances we seem to associate business and professional success with acquiring an ever growing reporting structure. The more people you have reporting to you, the greater the size of the pyramidal organizational chart that you sit atop of, the more successful you must be right?

This acquisitive approach to organizational dynamics is probably the leading cause of more lost business productivity that just about any other topic that I can think of. The time that is lost to the business based on the various organizational structuring, restructuring, acquiring and defending from being acquired, plans and discussions has to be boggling in its magnitude. I think it may be the largest driving factor in the zero sum gain practice of business and office politics.

As an example, if you and I are peers, there are essentially two ways that I can advance in the organization with respect to you, and others in the organization, given the ever reduced nature of opportunities as you advance up the organizational structure. I can do something that truly merits my promotion into a next level up vacancy, or I can arrange it so that your team, or even better, you and your team report to me, then either I have been de facto promoted or you have been de facto demoted. Either way I am now relatively more important than you (and presumably others in the organization) based on the new reporting structure and my increased span of control.

Most of the time these sorts of restructurings and reorganizations are couched in terms of “increased efficiency” or “improved corporate alignment” or some other type of corporate speak.

Having been a veteran of these resource wasting political machinations I can honestly say that I have come up with a new approach to dealing with them. It may not actually be a new approach. It is the approach that I choose to use when I find myself in these political and organizational responsibility free for alls and tug of wars. There may be others that have chosen to use this approach, only I haven’t run into one of them yet. I have termed it “Dropping the Rope”.

In many of the business environments that I have previously been in, if you were not openly or aggressively looking to expand you span of control within that organization, you were viewed as an internal organizational target for acquisition to enable the expansion of someone else’s control.

What a “dog eat dog” view of internal organizational politics. Either fortunately or unfortunately, depending on which side of the acquisition process you have been on, with a few exceptions it has tended to be an accurate perception, at least for me.

Dropping the rope, as the name implies simply means that there is usually nothing to be gained in openly opposing these sorts of restructurings. Pulling against a force that you may, but more probably cannot counteract, is a waste of your effort. I have written in the past that ego is good in that it drives us to work harder in order to avoid failure and to achieve our goals. I have also written that there are times where one must check their ego at the door because it causes us to pursue unproductive goals. I believe that these sorts of political turf wars are some of those unproductive times.

That does not mean that you should just roll over every time someone makes a political foray into you area of responsibility. Far from it. It is always good to directly check with your reporting structure to vet out what is in effect business management sanctioned and what is just curiosity. Once you have verified that a political reorganization is going on, the time has already passed for counter arguments. If you have not been involved in the restructuring decisions any resistance to them will be viewed as an unproductive professional tantrum and obstructionism. It is time to drop the rope and get on board.

I have been careful to classify these events as a political reorganization. Reorganizations for the purpose of cost reduction, or to get closer alignment to the customer’s business structures are usually clearly defined as such. They also usually entail some sort of a reduction in staff. If there is a restructuring going on that does not involve a reduction in staff you can usually guess that it is political in nature. And as such it will probably not add value to either the business or its customers.

Therein lays the key. In a time when the business is internally focused on a political reorganization focus even harder on the value that you and your organization brings to the customer. If part of your value proposition is affected in the impending changes, simply identify it and clearly document that it is being transferred to a new responsible party.

Instead of taking time away from the customer based charter, instead of putting together all sorts of irrefutably logical reasons why the decided change should not in fact happen, instead of taking it personally that a responsibility that was once yours is now going elsewhere, focus on the customer and let it go. It is hard to believe but these things do have a way of working out.

I hope this sounds like the now logical but formerly painful, ranting, frustrated voice of experience. I have learned to trust in my abilities. I would suspect that you have as well. My experience in these situations has usually been that when I officially transition the function or responsibility in question, in due time I am contacted and requested to resume responsibility for it. Political expediency has a way of giving way to functional performance. The most recognized and valued performance in business involves customers and their money. A temporary political internal focus in a business will always give way to a need for customer performance.

Dropping the rope in an internal, political organizational tug of war quickly removes you from the distraction. It gets you out of the arena in question. It cleanly severs your ties with the responsibility in question. It enables you to remain professional and keeps you from being viewed as an obstruction to the desired organizational change. It allows you to stay focused on the customer.

Staying focused on the customer is everyone’s job. Periodically organizations do have a tendency to become internally and politically focused. These periods by necessity always pass. When they do it is usually those that have stayed focused on the customer based substance of the business, and not those that have been focused on the internal politics of the organization that tend to profit in the long run.

Diversify Revenue

It is very easy to fall into the trap of being very good at one thing. You start with a successful sale. You follow it up with a similarly applied successful sale, then another, and so on. Soon you have what you feel is the “recipe” for your product/service and a market. The key item to be aware of here is “a”, as in singular market.


 


Being very good at one thing is great while that market is good, but no market is good forever. You need to make sure you are diversified in your revenue sources.


 


I am in the communications and technology industry. It has been a rollercoaster ride for over a decade. Companies have flared up very large by taking advantage of the various technologies and needs bubbles, only to almost disappear completely when that particular market bubble bursts.


 


Good rules of thumb are to focus on the needs and uses of the end users of your product or service. This means you must potentially have to “see through” your customer, to their customer, if you are not dealing directly with the final end user of your product or service. As the communications industry learned in a very painful way, it was not the network that drove the end user; it was the end user that drove the network.


 


Examples of revenue diversification can include understanding the various demographics and needs within the market and grouping like ones as targets. This would be an example of vertical market definitions and diversification. Markets such as “Governments”, “Financial Entities”, “Education” and “Manufacturing” are good examples. That way you diversify yourself into specific markets that hopefully do not move fully in coordination with each other.


 


Another methodology is to move into complementary goods and services. If you are an equipment or product provider you may want to look at moving into providing services that are associated with your product. That way when customer capital expenditures are reduced, you can still generate revenue from the service associated with your product.


 


It sounds simple, and it sounds like common sense, but it seems that all too often in the heat of the drive for ever increasing revenues, we end up focusing only on what we have done well before, and not on other potentially unfamiliar markets that we should do well on in the future.