Ask – ‘What Business are we in?’

Paul Sloane

The CEO of Black and Decker once said, ‘People don’t go into a DIY store because they need one of our drills. They go because they need a hole in the wall.’ Wonderbra in their internal communications to staff say this, ‘We do not sell underwear. We do not sell lingerie. What we sell is self-confidence for women.’ Harley Davidson does not sell motorbikes. It sells the concept of freedom to middle-aged men.

What is it that your business really sells? What is the true value that customers get from your products or services? When you know the answers to these questions you can start to conceive new ways to provide that value. It is the starting point for real innovation.

Many companies make the mistake of defining what they do in terms of their products or services rather than by the benefit that the client derives from those. Here are some examples

• Companies that thought they were in the horse-drawn carriage business but were really in transportation were wiped out by automobiles.

• Companies that thought they were in the ice supply business but were really in food and drink storage were eliminated by refrigerators.

• Companies that made slide rules failed to realise they were in the technical calculation business and were made obsolete by graphics calculators.

• Companies that thought they were in the CD business but were really in music were replaced by digital downloads.

• Companies that thought they were in the typewriter business but were really in communications were put out of business by the word processor.

What business are you in? Why do your customers buy the goods or services you provide? There are several ways to find out:

1. Ask your customers.
2. Ask people who consider your product but do not buy it.
3. Observe your customers and see how they use your product.

And of course the answer may well be different for different customers. Some people choose a certain marque of car to make them look good, others to feel safe and others to enjoy the ride. Unless you know exactly why prospective customers will buy your product you are unable to properly market or sell. Worse still you will be blind to the alternatives, the opportunities and the threats which exist.

Change how you define your business from your product to your product’s benefits for the customer. So instead of saying, ‘We make typewriters,’ say, ‘We help people communicate effectively.’ Instead of saying, ‘We are an innovation management consultancy,’ say, ‘We help clients develop new sources of revenue and profit.’

One definition of innovation in business is an action that extends customer value. So if we want to innovate we need to understand what it is that the customer really values. Then we can set our minds to the task of how to extend that value. Start every week by asking these questions:

• What business are we in?
• What do customers really value?
• In what other ways could that value be delivered?

These questions are always worth asking. The insights they lead to can be the source of potent innovation in your products and services.

Paul Sloane

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