Looking for patterns is only human, but for me, it’s a passion. And over the past year, the team here has talked with well over a hundred C-level leaders of organizations – across diverse industries, geographies, and types. And we consistently hear the same problem. (A pattern!)
Sure, each of them faced unique challenges, but over time a theme presented itself. These leaders wanted to achieve growth but were challenged by dynamic competition and changing customer needs. But, more than that, they were missing a key ingredient to building strong growth strategy: complete insights about how customers make decisions.
Let’s be honest, most of us have been in strategic discussions where the customer didn’t even come up in conversation… which is crazy. It’s actually common practice to make strategic decisions without considering what customers are looking for and why they choose one offering over another.
And why is that? Isn’t that risky? We’re talking about accomplished, intelligent executives – not rookies. People who are responsible for big decisions that drive the growth of their organizations - decisions about sales, product, or marketing strategy. Shouldn’t they – no, shouldn’t we – know better?
The truth is that, while we know that beating the market over and over requires constant vigilance of customer perceptions and a nimble strategy, the traditional tools we’ve had available to help us are sorely lacking.
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Rita Gunther McGrath says it well in End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business: “Strategy is stuck. If you dropped into a boardroom discussion or an executive team meeting, chances are you’d hear a lot of strategic thinking based on ideas and frameworks designed in, and for, a different era… But virtually all strategy frameworks and tools in use today are based on a single dominant idea that the purpose of strategy is to achieve a sustainable competitive advantage… And it’s no longer relevant for more and more companies.
She goes on to say, “Most executives, even when they realize that competitive advantages are going to be ephemeral, are still using strategy frameworks and tools designed for achieving a sustainable competitive advantage, not for quickly exploiting and moving in and out of advantages.
The concept of sustainable competitive advantage assumes that customer needs remain relatively unchanging. In the past, perhaps when there was a slower pace of change, it wasn’t as vital to keep a pulse on your customer at all times – you could make strategic decisions based on what you thought you knew, and you had a better chance of being right.
But, that was then, this is now. Today, we have quickly changing customer perceptions, and assuming to know the customer’s mind is a dangerous game. We can no longer depend on that same competitive advantage to drive our growth into the future. We have to listen to customers, and we have to act quickly on what we learn.
But how? A McKinsey study found that while most major companies understand the need to adapt to the marketplace, they often don’t have the tools needed to succeed. What’s needed is an agile organization that is constantly innovating, capitalizing on new opportunities, and evolving with the customer. They found that the highest performing companies deliberately go about assessing their strengths and weaknesses so they can prioritize actions to achieve their vision.
Growth strategy has changed. It’s no longer about sustaining a specific competitive advantage over time – it’s about developing a strategy to sustain growth over time.
Ultimately, growing a business comes down to one thing: winning the customers’ choice.
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As our co-founder Joe Urbany says, this boils down to a simple 9 word imperative: Be different from competitors in ways important to customers. Therefore, nothing is more important than understanding why and how your customers make decisions in the context of your competitive market.
And, of course, this is changing all the time.
To compete in today’s market, no one can get away with a few SWOT analyses, some 5-year strategic plans, and annual planning cycles. We need new tools that show us where to focus, how to build growth strategy, and how to win.
After writing “5 Reasons to Break Up with SWOT Analysis," many of you replied with “Yes, but what do I do instead?!" So here’s my answer (and, warning, it includes a shameless plug!):
At Vennli, we’ve seen that your process for identifying opportunities for growth provides a unique source of competitive advantage in itself. If you can build and execute better strategy than your competitor (and be faster!), then you win.
Traditionally, market research and growth strategy development have been considered separate activities. We bridge the gap by translating current customer insights into growth strategies for immediate action.
This makes strategy fun. And it immediately builds a sense of urgency to act. For example, recently a major industrial company discovered a troubling gap between their customer experience and their sales strategy, and they immediately implemented tactics to differentiate themselves from competitors and are already seeing results. A large automotive group quickly captured insights to transform how they market their services to recent car purchasers. A venture capital firm identified weaknesses in a portfolio company and recommended tactics to improve their market position, thereby strengthening their investment.
However, regardless of how you develop strategy in today’s fast-paced market, two patterns of good strategies hold true:
- It must come from a deep understanding of how customers make choices. The hard truth is that the customer’s viewpoint is the only one that really matters. If customers aren’t choosing us, then we aren’t in business!
- It’s never done. Strategy isn’t an annual activity; it’s ongoing.
Lawrence Freedmans’s “Strategy: A History" defines strategy as the process of creating power. He shows that, throughout history, the best strategies have been fluid and flexible. Initial success doesn’t guarantee the future. When you win more power, you have to continually work to keep it. A strategist’s work is never done.
And we won’t be either. We are relentless in our pursuit of growth.