Debunking the Myths About Successful Companies
Jan 24, 2019
In the course of writing our book Tuned In, we analyzed hundreds of successful companies and determined that most have a single dominant focus that drives their approach to business. Think of it as a ‘‘company personality’’ that determines how an organization structures itself and behaves in the market. The most successful organizations are tuned in. Whenever leaders create products or services—for potential new customers or even entirely new markets—they seek to solve buyer problems first.
However, we have identified three other common organizational cultures. When an organization allows one of these three cultures to dominate, the resulting approach to business is very different from the one we outline in the Tuned-In Process:
• Innovation Is Everything
• Revenue Cures All
• Customers Know Best
While most tuned out companies exhibit at least a small amount of each of these driving behaviors, one usually dominates. And the choice directly correlates to their success (or failure). Let’s explore each of these in further detail.
Debunking the Myth That ‘‘Innovation Is Everything’’
These days innovation is hot. Check out all the magazine articles, business school courses, and books on the subject, and you’ll find countless examples detailing how innovation creates breakthroughs. This has led many organizations (start-ups in particular) to focus exclusively on their ability to innovate and to create a disruptive
breakthrough that will make them famous. But directionless innovation is a common road to the business scrap heap.
The culture of ‘‘Innovation Is Everything’’ breeds tuned-out behaviors. Innovation-driven leaders tend to listen only to themselves, although they do track competitors religiously. These companies fixate on ‘‘one-upping’’ alternative products in the marketplace. And they obsess about who’s getting credit for the most clever or unique inventions.
Focusing on ‘‘changing the game’’ is not inherently a bad thing. Some organizations are really good at creating and marketing innovative products—Bose, Nike, and Brookstone are three that come to mind. Unfortunately, what we tend to see more often are companies that innovate for innovation’s sake, using inside-out thinking. In other words, they create products that are new, hip, and cool or have new, never-before-seen features. But these feature-laden products and services aren’t developed in response to buyer-defined needs. While it is possible that a product or service created by a tuned-out, innovation-driven company will catch on, it is much less likely than if the innovation were specifically designed to solve market problems. As a result, these innovation-led companies invest big resources in hopes of a big win (much like a baseball player swinging for a home run on each pitch). Their risk of failure is huge.
We realize we’re being a bit radical here. But consider the piles of money plowed into innovation during the dot-com boom. Venture capital firms funded innovative e-commerce companies, innovative Web tool developers, and innovative portal sites that sounded new, hip, and, well . . . innovative. Anything with an ‘‘e’’ in front of it qualified. But unless they solved an underlying problem, most of these exciting innovations have become distant memories. Remember: the truly successful Web companies, such as eBay, Yahoo, and Amazon, solved market problems.
We’ve also noticed that many innovation-driven companies obsess over competitors’ moves and try to make incremental (and innovative!) improvements to what the other guys are doing. This approach assumes that your competitors are already connected to the things your market values most and that the game is just a simple matter of establishing a clear area of superiority (through innovation, of course). Another problem with this approach is that you tend to create products and services that are ‘‘better’’ than the other guy’s because they are bigger, smaller, faster, or cheaper. Too often, your customers just don’t care. Focusing on your competitors is a tit-for-tat game that rarely produces a market leader.
However, there’s an important distinction to be made here. It is possible for a tuned in organization to learn about an unresolved market problem connected to another company’s product. For example, buyer interviews might reveal that people are ready to pay money for a product that they describe in terms of the competitor’s product (‘‘a good-quality haircut in half the time that I would need to spend at the hairdresser in town’’). Creating a product to solve this problem is definitely an example of tuned-in behavior, even though the market problem is expressed as a comparison with an existing product.
But, in the end, a corporate personality built around innovation by itself has a low probability of success. Obsessing over the competition’s product, or over your own product’s increased performance or new features, means you aren’t focused on the most important success driver: the market problems faced by your buyers. And, believe us, there is no such thing as the creative dreamer, sitting in an isolated office, who builds products that succeed every time. The dreams may sometimes hit a chord, but the vast majority of products made by innovation-driven companies just don’t resonate with the market.
Debunking the Myth That ‘‘Revenue Cures All’’
A second culture and strategy we see often is founded on the belief that revenue and sales are always the most important goals. This culture often emerges soon after an initial round of fund-raising or some other infusion of capital. When companies enter a perceived growth phase (dictated by the strength of a market opportunity or some early wins), it is common for outsiders (such as investors, the board of directors, or your spouse) to insist on a strong sales focus. In larger organizations, a highly charged sales executive is often hired; some companies even make the new salesperson the president and/or COO.
‘‘Getting serious about sales’’ sometimes results in an initial brief period of success resulting from sheer force of will to push solutions into the market. But because the revenue-driven company will often lower its prices and cut corners as it hunts business—signing any contract to make the numbers and telling any story to close the sale—it’s not long before the organization becomes tuned out to the real market problems of buyers. Then the salespeople start making promises that the company can’t afford to keep. Non–revenue-generating departments (such as marketing, customer service, and product development) often suffer from reduced influence and resources. The company may even end up acquiring other companies and products to support the dynamic requests of sales, often resulting in duplicate offerings and lengthy integration programs that drive up costs without improving growth or customer satisfaction.
In many consumer products the ‘‘Revenue Cures All’’ approach results in jumping on the hype cycle. Some organizations spend huge amounts of money on expensive advertising in attempts to buy their way into buyers’ minds. These tuned-out organizations believe that TV commercials, direct mail, and other forms of interruption-based marketing are the tools they need to succeed. Instead of spending time understanding buyers and their problems, hype-driven companies spend time with their agencies working on campaigns to bombard people with slogans and messages. We’re not against advertising when used as a strategy to communicate powerful ideas that already resonate with people. The ‘‘Where’s the Beef ’’ campaign from Wendy’s worked because it communicated an answer to buyers’ problems. (Hamburgers had beef patties that were too small.) But the hype-driven company manufactures buzz that has very little to do with helping people solve problems.
Debunking the Myth That ‘‘Customers Know Best’’
There are thousands of books, countless blogs and forums, hundreds of conferences, and lots of plain old common sense that suggest an unrelenting focus on the customer is the best way to guide an organization. But there is a fundamental flaw with being a customer-driven organization: Your existing customers represent a small percentage of your opportunity, they have different market problems than noncustomers (buyers who don’t yet do business with you), and—most important—they only frame their view of your future based on incremental improvements to their past experiences.
For example, if a company in the late 1990s that made and sold portable music devices asked its existing customers what they wanted, they might have said ‘‘more storage’’ or a ‘‘smaller unit.’’ The companies that listened to their customers all missed the biggest market problems that were identified by Apple when they developed the iPod: the existing portable devices were too difficult to use and impractical for downloading and managing more than a few songs.
Don’t misunderstand us—we’re all in favor of great customer service. We just don’t believe that an obsession focused solely on your existing customers is the right way to design and build product experiences and to reach the total market. Eventually, the customer-driven company gets bogged down by taking baby steps to tweak features
in existing offerings (to please existing customers) rather than making the bold leap to develop new products and services that solve potential buyers’ problems.
Assuming that your customer knows best is a comfortable strategy, because it’s very easy to get feedback about how to conduct your business. ‘‘What do you want us to create next?’’ you ask. The customer is delighted to tell you. But you have listened to only a few people (those you already do business with) rather than many (the untapped market). Unfortunately, working only for your existing customers usually results in sleepy, increasingly unprofitable companies.
Excerpted with permission of the publisher John Wiley & Sons, Inc. from TUNED IN: Uncover Extraordinary Opportunities That Lead to Business Breakthroughs. Copyright (c) 2008 by Craig Stull, Phil Myers and by David Meerman Scott. This book is available at all bookstores, online booksellers and from the Wiley Website at www.wiley.com or call 1-800-225-5945.