Are you being kodak'd? Here's your pre-mortem.
According to the American Enterprise Institute, thanks to creative destruction, of all the firms that made the Fortune 500 list in 1955 – only 60 remained on that list by 2017. Infosight’s 2018 Corporate Longevity Forecast even predicted that, “at the current churn rate, about half of S&P 500 companies will be replaced over the next ten years.” Economic downturns will even accelerate this competitive volatility (defined as change in composition and ranking of the Fortune 100 index) by an additional 30%.
So let me take you into the future. Imagine it is now 2025, and on your watch your company went belly-up, unable to recover from the 2021-2023 recession. Why did that happen? What were the trends you missed, the signals you ignored, and the decisions you delayed which led to this demise?
In order to gain some perspective, we will focus on the following two business aspects:
De-averaging your response to customer requests
Customers are buying products for the experience they are having with it – Period!
With luxury handbags the experience being sought - the True Purpose - might be the visible envy of peers, but for an first time home improver it might be a perfectly set hole drilled by a drill your company manufactures.
2014 psychologists Kumar, Gilovich and Killingsworth showed how people report being mostly frustrated before the planned purchase of a product, but mostly happy before they bought an experience. In other words, putting a product in context how it is used will tie this memory up with the feeling coming with it.
For the hole-drilling case this, however, means that the fault for any crooked hole drilled by our D-I-Y customer will be attributed to the drill, possibly resulting in a replacement with a brand that promises accurate holes by everybody.
Whatever it may be, each of your products must have True Purpose(s), or it has no value. Obsess over finding the True Purpose and then create the best possible experience reaching and realizing it.
Focus on the experience as customer “expectations are never static — they go up. (…) People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’.” (Jeff Bezos)
Consequently, meeting the constant rise of expectations and the need to fulfill them will force you to improve your understanding of the customer.
The amount of data you are able to gather from interacting with customers through your marketing, your various points of sale and by product usage will give you never seen before insight on your customers, their behaviors and values. Back in 2012 Computational Psychologist Prof. Michal Kosinski proved that, based on an average of 68 Facebook “likes”, you could predict a person’s skin color with 95% reliability, their sexual orientation with 88% accuracy, and their political affiliation to 85%, along with a whole range of other information like drug and alcohol use, religious beliefs and whether their parents were divorced or not.
Your ability to segment, target and tailor value messages is key to your business success. Claiming to be customer-centric without being data-centric is no longer plausible, yet you need to be acutely aware of bringing technical feasibility and ethically justifiable conduct of business in line. Customers have become increasingly aware of both the value of their personal information and how it is being used, forcing a shift in the engagement from ‘are we compliant?’ towards ‘are we doing the right thing for the customer?’
Gaining resilience to the (un)expected
Harvard studies have shown that businesses actively driving their longer-term perspective achieved four percentage points higher annual growth during economic downturns as well as two percentage points higher total shareholder return. Take a stand!
It seems no matter where you look, from healthcare to entertainment, security to education, GAFA (Google, Amazon, Facebook, Apple) are extending their claws into all kinds of new flavors of pie. The same threat is present in the East, with companies like Tencent and Alibaba beginning to feel like the equivalent of a snowball that’s being rolled from sector to sector, picking up momentum, providing extraordinary experiences and removing friction for consumers, and gathering size and customers wherever it blows through. Verticals are converging and industry boundaries are disappearing. When will your industry be next?
Challenge yourself on your willingness and ability to question incumbent approaches and beliefs. Have regular war games where you task your organizations brightest minds (regardless of rank) how they would design, engineer, market and sell a product that would take your most successful product out of business. “A crisis is a terrible thing to waste”, Paul Romer once said, because downturns can shine a spotlight on the long-term health of a business, revealing vulnerabilities that might not have been as visible in good times.
Keep in mind that for any experience your product, a process for the task at hand and the person executing this process must act together. The True Purpose itself is composed of 3 pillars that, when balanced, will make an experience successful in the eyes of the user if:
- - The process value is brought in context with the need, belief and behavior of the person. - The product can intuitively voice its interaction with the person and vice versa. - The product has the right fit to purpose (=valence) for the process required for the task at hand
Unlike product and usage data, information on human behavior, needs and beliefs are not precise but rather fuzzy and changing. Thus, gaining awareness on trends influencing your customer and building-up a data-driven early warning-system can safe your future.
Ask yourself: Do you have a sufficient pipeline of “future bets” with high growth potential and do you have the right people and attitude to bring these to life?
Finding the True Purpose(s) of your products based on your customer/marketing, product usage data and combining them with your product design and engineering data will grant you with insights that help you staying ahead of competition by pinpointing the direction for finding answers for currently unmet or even not yet asked questions.
We never know what the future of 2025 will be in the business world with certainty, but we can anticipate the direction in which it is going. Let’s discuss!
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