Red and Yellow Strategies. Business psychology
I disagree with Jobs and Bezos
Customers do have a vote
The idea of strategy as a high-level vision does more harm than good, even in the past. This misconception is probably why 50% to 67% of strategic plans fail—the gap between strategic intentions and day-to-day operations is too significant. In a world where companies struggle to shorten the interval between acquiring signals from the field and strategic reactions, seeing a strategy only as a broad vision is dangerous.
The authors of the book Designing for Growth, Tim Ogilvie and Jeanne Liedtka, clearly distinguish design thinking from strategy. They insist that "strategy tells us where we want to contribute—who we will serve, what makes us uniquely suited to serve them, and what we hope to accomplish as an organization by doing so." Design thinking, in turn, "helps us actually solve those problems by exploring how" because "design thinking won't tell us who to serve, or why."
"Design thinking" is a set of tools helping connect product decisions with customers' needs. Not normally associated with devising a strategy, design thinking is often used by product managers, industrial designers, marketers, and others. On the one hand, this view is logical—the design-thinking approach is considered to be too application-oriented for long-term business decisions. For example, board members and top executives should not discuss insignificant details of a company's products such as the color of a button in a mobile app. On the other hand, design thinking helps dive deep into customers' needs and experiences. Making a high-level choice without this data seems risky in today's world.
The way any organization works
Companies as diverse as Apple, ByteDance, Shell, a corner shop, or a shoe repair store all share the same basic principles upon which any organization works.
Any organization has customers; therefore, members of the firm identify and satisfy the needs of people external to the company. For example, clients may want to save time and effort while shopping and a business can focus on this wish.
A company attempts to fulfill consumers' desires by creating outstanding values for them. For instance, online marketplaces may provide user-friendly interfaces and fast delivery services, helping customers save time and effort.
The firm uses assets, both tangible and intangible, to create values. Online marketplaces use servers, software, chains of fulfillment centers, and pools of subcontractors to deliver purchases faster and make the buying process easier for clients.
The company performs business processes to create, maintain and develop assets. Strategic planning, operational planning, logistics, software development, and technical support are some examples of such processes.
The organization builds up and maintains corporate culture to improve performance and foster creativity.
The authors of the book Designing for Growth, Tim Ogilvie and Jeanne Liedtka, clearly distinguish design thinking from strategy. They insist that "strategy tells us where we want to contribute—who we will serve, what makes us uniquely suited to serve them, and what we hope to accomplish as an organization by doing so." Design thinking, in turn, "helps us actually solve those problems by exploring how" because "design thinking won't tell us who to serve, or why."
"Design thinking" is a set of tools helping connect product decisions with customers' needs. Not normally associated with devising a strategy, design thinking is often used by product managers, industrial designers, marketers, and others. On the one hand, this view is logical—the design-thinking approach is considered to be too application-oriented for long-term business decisions. For example, board members and top executives should not discuss insignificant details of a company's products such as the color of a button in a mobile app. On the other hand, design thinking helps dive deep into customers' needs and experiences. Making a high-level choice without this data seems risky in today's world.
The way any organization works
Companies as diverse as Apple, ByteDance, Shell, a corner shop, or a shoe repair store all share the same basic principles upon which any organization works.
Any organization has customers; therefore, members of the firm identify and satisfy the needs of people external to the company. For example, clients may want to save time and effort while shopping and a business can focus on this wish.
A company attempts to fulfill consumers' desires by creating outstanding values for them. For instance, online marketplaces may provide user-friendly interfaces and fast delivery services, helping customers save time and effort.
The firm uses assets, both tangible and intangible, to create values. Online marketplaces use servers, software, chains of fulfillment centers, and pools of subcontractors to deliver purchases faster and make the buying process easier for clients.
The company performs business processes to create, maintain and develop assets. Strategic planning, operational planning, logistics, software development, and technical support are some examples of such processes.
The organization builds up and maintains corporate culture to improve performance and foster creativity.
Not all these activities are equally vital. A company can outsource some assets or business processes, and its corporate culture may be far from perfect, yet the firm can still be relatively successful. If a firm does a poor job of identifying customers' wishes, excellent processes or a friendly culture will not help it keep afloat. Top executives of a Chinese smartphone manufacturer may never see their consumers in the United States or Europe in person. Nevertheless, they will not be able to lead their business to success without understanding customers' needs.
Consumers' desires can be examined in various ways. Some companies conduct massive consumer research before they start strategizing. Amazon's leadership prefers another way—they bring as many products to the market as they can, realizing that some will fail, but those that succeed will bring the company excess profit. In another example, top managers of an Eastern European company manufacturing industrial equipment must visit their customers' facilities at least once a quarter to keep up with their changing requirements.
A strategy in detail
It is believed that a strategy comprises a number of broad, high-level decisions providing a company with a mission statement, inspiring vision, encouraging goals, and strategic focus. However, this is only a part of the task. If all these aspects are based on incorrect assumptions about customers' needs, they will lead a business in the wrong direction, and the price for this mistake may be high. For example, brick-and-mortar retailers strategically underestimated their customers' desires to save time and effort by purchasing online and overestimated consumers' need to see and touch a product before buying it, which paved the road for online competition.
Any business earns money by delivering value for clients. This objective is possible only if the business maintains and develops its ability to identify customers' needs and updates this data regularly. This assignment cannot be delegated to the marketing department and collected information cannot be used only for refining products. Essential strategic decisions must be made with the use of this data.
Steve Jobs' approach
In the "Steve Jobs" biopic (2015) the main character, played by Michael Fassbender, tries to convince his friend, Steve Wozniak, that a company should not listen to its customers. Wozniak tells him that "serious customers want to customize" the computers, so they need ports, and Jobs replies: "They don't get a vote. When Dylan wrote 'Shelter from the Storm,' he didn't ask people to contribute to the lyrics. Plays don't stop so the playwright can ask the audience what scene they'd like to see next." Jeff Bezos once said: "Market research doesn't help. If you had gone to a customer in 2013 and said, 'Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?' I guarantee you they'd have looked at you strangely and said, 'No, thank you."
There are entrepreneurs and managers believing that this is the best way to innovate—create a perfect product and then persuade the consumers to buy it, presumably as Steve Jobs thought and Amazon evidently does. This approach definitely exists but it is the most expensive way. For example, it took Apple three years and millions of dollars in investments to create the iPhone, and it is hard to imagine what would have happened to the company if people had not loved the product. Amazon survived after writing off losses of $170 million caused by the Fire Phone failure, but the company was already gigantic and profitable at that moment, so they could afford it. Up to 35% of startups fail because there is no market need for their products, and not all companies are backed by investors with bottomless pockets.
In many cases, a company's leadership should not literally ask customers what they want because the clients do not know. As Henry Ford quipped, "If I had asked my customers what they wanted, they would have said a faster horse." This principle does not mean clients should be completely ignored, either. Collecting insights into customers and observing them in their day-to-day life or work can invite many fruitful ideas. For example, Ford knew (or guessed) that people wanted to move faster (a need). Therefore, he provided them with a solution (a value). Once, when Steve Jobs criticized Samsung for launching a 7-inch tablet for being too small to be used with fingers, he mentioned that "Apple has done extensive testing." Thus, not all the decisions made by Apple during those years were based on one genius's opinion.
Conclusion
A CEO of today's organization should find a balance between the pure innovation of creating something that customers cannot yet imagine and employing consumer studies that reveal many fruitful insights. Jobs, Bezos, or Musk may inspire us, but we should not neglect thousands of less-successful entrepreneurs led to bankruptcy by their innovative products designed without considering clients' opinions. Some companies successfully apply design-thinking methods to strategic decision-making, for example, using the Customer Journey Map or in-depth interviews. As such, any tool helping a company's leadership better understand their customers' motives is valuable. However, adopting design-thinking or similar methods consequently means that a strategy cannot take the form of a vision. If the strategy is based on customers' needs, it can align all the strategic choices—from the intent to enter new markets to detailed product specifications—with the needs of the present or potential consumers. This process brings integrity, which many strategic plans lack. It allows to link many decisions, even minor once, in marketing, sales, logistics, HR and even finance, with customers' expectations. Strategizing does not start with a vision. The vision, as well as the other parts of the strategy, is a result of diving into customers' needs, fears, superstitions, dreams, and desires.
Svyatoslav Biryulin
Subscribe to this blog at the links below:
Consumers' desires can be examined in various ways. Some companies conduct massive consumer research before they start strategizing. Amazon's leadership prefers another way—they bring as many products to the market as they can, realizing that some will fail, but those that succeed will bring the company excess profit. In another example, top managers of an Eastern European company manufacturing industrial equipment must visit their customers' facilities at least once a quarter to keep up with their changing requirements.
A strategy in detail
It is believed that a strategy comprises a number of broad, high-level decisions providing a company with a mission statement, inspiring vision, encouraging goals, and strategic focus. However, this is only a part of the task. If all these aspects are based on incorrect assumptions about customers' needs, they will lead a business in the wrong direction, and the price for this mistake may be high. For example, brick-and-mortar retailers strategically underestimated their customers' desires to save time and effort by purchasing online and overestimated consumers' need to see and touch a product before buying it, which paved the road for online competition.
Any business earns money by delivering value for clients. This objective is possible only if the business maintains and develops its ability to identify customers' needs and updates this data regularly. This assignment cannot be delegated to the marketing department and collected information cannot be used only for refining products. Essential strategic decisions must be made with the use of this data.
Steve Jobs' approach
In the "Steve Jobs" biopic (2015) the main character, played by Michael Fassbender, tries to convince his friend, Steve Wozniak, that a company should not listen to its customers. Wozniak tells him that "serious customers want to customize" the computers, so they need ports, and Jobs replies: "They don't get a vote. When Dylan wrote 'Shelter from the Storm,' he didn't ask people to contribute to the lyrics. Plays don't stop so the playwright can ask the audience what scene they'd like to see next." Jeff Bezos once said: "Market research doesn't help. If you had gone to a customer in 2013 and said, 'Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?' I guarantee you they'd have looked at you strangely and said, 'No, thank you."
There are entrepreneurs and managers believing that this is the best way to innovate—create a perfect product and then persuade the consumers to buy it, presumably as Steve Jobs thought and Amazon evidently does. This approach definitely exists but it is the most expensive way. For example, it took Apple three years and millions of dollars in investments to create the iPhone, and it is hard to imagine what would have happened to the company if people had not loved the product. Amazon survived after writing off losses of $170 million caused by the Fire Phone failure, but the company was already gigantic and profitable at that moment, so they could afford it. Up to 35% of startups fail because there is no market need for their products, and not all companies are backed by investors with bottomless pockets.
In many cases, a company's leadership should not literally ask customers what they want because the clients do not know. As Henry Ford quipped, "If I had asked my customers what they wanted, they would have said a faster horse." This principle does not mean clients should be completely ignored, either. Collecting insights into customers and observing them in their day-to-day life or work can invite many fruitful ideas. For example, Ford knew (or guessed) that people wanted to move faster (a need). Therefore, he provided them with a solution (a value). Once, when Steve Jobs criticized Samsung for launching a 7-inch tablet for being too small to be used with fingers, he mentioned that "Apple has done extensive testing." Thus, not all the decisions made by Apple during those years were based on one genius's opinion.
Conclusion
A CEO of today's organization should find a balance between the pure innovation of creating something that customers cannot yet imagine and employing consumer studies that reveal many fruitful insights. Jobs, Bezos, or Musk may inspire us, but we should not neglect thousands of less-successful entrepreneurs led to bankruptcy by their innovative products designed without considering clients' opinions. Some companies successfully apply design-thinking methods to strategic decision-making, for example, using the Customer Journey Map or in-depth interviews. As such, any tool helping a company's leadership better understand their customers' motives is valuable. However, adopting design-thinking or similar methods consequently means that a strategy cannot take the form of a vision. If the strategy is based on customers' needs, it can align all the strategic choices—from the intent to enter new markets to detailed product specifications—with the needs of the present or potential consumers. This process brings integrity, which many strategic plans lack. It allows to link many decisions, even minor once, in marketing, sales, logistics, HR and even finance, with customers' expectations. Strategizing does not start with a vision. The vision, as well as the other parts of the strategy, is a result of diving into customers' needs, fears, superstitions, dreams, and desires.
Svyatoslav Biryulin
Subscribe to this blog at the links below: