How to become a market leader
by Pam Mitchell
What do market leaders have in common? The most common response to this
question is, “They sell more stuff!” But why?
Market leaders in any free market economy become the leaders because the
marketplace votes them in. How do they garner so many popularity votes? The
answer is the same regardless of industry or era. Market leaders always have
been and always will be those companies that provide the most perceived value
to their customers.
Many companies start with the objectives of the company and a statement of the
company’s own values. This is backwards thinking. The successful organization
starts with a statement of the customers’ values. Value planning, as opposed to
strategic planning, means that all the company’s plans are based on a solid
knowledge of constantly shifting customer value definitions in their market
arena.
Do you truly know what your marketplace values? Are there new ways of doing
business that no one in your industry has tried? Value planners first seek to
understand this customer value definition. Because customers often do not know
what they value until it is offered to them, market leaders often ask
themselves, “What is possible? What are the rules of business? Which ones might
we change?”
Value planners first examine all the possibilities, then choose a strategy
based on their perception of customer value. Below is a summary of the
seven-step value planning process.
1) Understand and communicate the customer value definition
The customer value definition is constantly shifting. Suppliers can change the
value definition in a market by offering something new. Did we as a computing
public know that we valued made-to-order computers before Dell offered them to
us? Probably not. It was only after the concept was presented and tried that it
caught on. Changing your value proposition may involve risk. You may not always
have focus group results on which to base change.
How often does the customer value definition change? Look at the top 10 lists
in just about any industry. They change every decade. Companies that stay
successful over the long term stay out in front of the changing customer value
definition. Knowing, reviewing and discussing the customer value definition
becomes ingrained into their culture. Everyone in the organization understands
that their purpose is to create value for customers, not to meet production
schedules or to move paper from the in-basket to the out-basket. Understanding
and delivering value becomes integrated into every fiber of the organizational
fabric.
2) Develop a mission and vision
Your mission is a promise that you make to your customers. Many companies
create a long, erudite mission statement that promises their shareholders that
they are going to become the preeminent global supplier of something. In short,
it says to the customers, “We are going to try to coerce you into buying more
stuff from us.”
The value approach tells your customers what value you plan to provide them. It
is a specific promise. It tells your customers why they should allow you to be
the market leader. It tells your workforce why you exist as an organization.
One example of this type of promise is from a job shop that promises to keep
its customers from experiencing manufacturing downtime. It reads, “Uptime, we
make it happen.” At the job shop, everyone knows their job is to prevent
manufacturing downtime at their customers’ plants. This is the reason they
exist as an organization.
The vision statement is a promise you make to yourselves. It paints a picture
of what you want your organization to look like two to five years in the
future. It creates a target at which everyone can aim. This can be selfish, and
is only for internal use. It might specify market share goals, revenue goals or
profits. It might also refer to new business or markets that you plan to enter
successfully. A good one will also talk about what kind of culture you plan to
create in the company.
Share your vision with everyone responsible for helping you achieve it, in
other words, the entire workforce. Establish two-way communication with your
workforce. Ask them, “What policies and business process do we have that will
impede our achieving the vision?”
3) Create specific objectives
A typical value plan has five to nine objectives. Many are financial objectives
such as revenue and profitability. They may also include some important
marketing, customer service, fulfillment or production objectives that support
the mission statement.
4) Create strategies to deliver more value than your competitors
Once you establish your target market, and have a clear understanding of the
customer value definition in that market, you can develop specific strategies
and action items to supply that value.
For example, Skidmore Sales, a first-class ingredients supplier to the food
industry, knows that its customers want the best quality ingredients for the
best price. It also knows that its customer base maintains low inventory levels
to ensure that the foods they prepare are fresh. They value next-day or
same-day shipments from their ingredients suppliers. Therefore, every decision
at Skidmore Sales is based on sourcing the best ingredients and minimizing
turnaround time on customer orders.
5) Create a company of owners
One of the biggest mistakes that executives and entrepreneurs make is expecting
people to care as much as they do for merely a salary. People behave exactly
according to their rewards system. If you reward people for being quiet and
showing up for work each day, that is exactly what they will do.
In contrast, a company of owners receives some benefit when the company
prospers, and feels the pain when it does not. They understand the financial
position of the company. They are encouraged to make decisions in the name of
the company’s mission. They participate in company decisions and are trained to
understand the implications of those decisions. Who is most likely to make the
right decision for the company, a person who is informed, trained and rewarded
or one who is not?
6) Get Lean!
Lean companies focus their efforts on improving their value stream and
eliminating waste. The value stream is anything they do to make their product
or service more valuable to customers. Everything else is overhead or waste.
Lean companies involve the entire workforce in generating ideas to eliminate
waste and streamline value creation activities.
Employees who are owners are not afraid to eliminate wasted movements or even
their own jobs. They know they will not be eliminated themselves, but rewarded.
They do not seek to hide waste, but to expose it. This is how owners think and
act.
7) Create accountabilities
The first reason most strategic planning processes fail is because company
plans do not reflect a dedication to the market’s customer value definition.
The second reason is because the plans are not integrated into individual
objectives. Each owner/employee’s objectives must support the value plan. Have
you ever worked for a company where people met their performance objectives,
but the company did not? In a company of owners, it makes sense to develop
individual objectives based on the customer value definition and the objectives
in the plan.
Is your company as successful as you would like it to be? Are you meeting your
goals? The solution is to think about how you think about your business. Do you
think in terms of how to coerce customers into buying more of your stuff, or do
you think in terms of how much value you can give to your customers?
After becoming one of our country’s first billionaires, Henry Ford said it
best: “The man who uses his skill and constructive imagination to see how much
he can give for a dollar instead of how little he can give for a dollar, is
bound to succeed.”