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In the old world, we defined value for our customers. We typically left the customer out of the equation while we defined and pre-packed the value. We then set out to persuade and convince the customer it was right for them.
Solutions vs. Products
In the new world, this approach is no longer effective. Today, the customer defines value. Customers want solutions. Solutions must be created dynamically for each customer. We can no longer afford to push "one-size-fits-all" or pre-packaged products. Although we've come a long way from Henry Ford's "they can have any colour they like as long as it's black.", we still expect our customers to make sacrifices in order to make our products or services work for them. Idiosyncratic preferences are inconvenient to us. Changing preferences are inconvenient to us. If we had things our way, we would design algorithms for every aspect of production and set up assembly lines and cheap labour to turn out lots of product. Every time an important customer's preferences change, we need to modify our assembly line. Every time an algorithm is challenged, we need to hire expensive, thinking labour. Just as we find our stride, the pace or direction of the race changes. As it changes, those who can't deal with complexity, put their head in the sand. Those who can, keep their head up and pick up the pace.
Change is Constant
Not only do we have the new dynamic of who defines value, but we also have rapidly changing perceptions of value. Where once we could create the right products and rest on our laurels, now we must constantly re-evaluate our value proposition. Value is just a perception and perceptions can change in an instant.
First, we have to accept that change is a constant. Then we need to figure out how to retain the entrepreneurial talent that exists in our organizations. As we systematize business and introduce necessary discipline, we often inadvertently create an environment, which is hostile to entrepreneurial individuals, but attractive to "professional managers".
Professional managers are great at implementing systems and enforcing compliance. This talent pre-supposes a known and understood environment. Professional managers flounder in complexity. Complexity and uncertainty is where entrepreneurs thrive.
In the new world, we need to manage our businesses as two separate businesses: OldCo - the part of our business which can be reduced to an algorithm and therefore can be systematized. And NewCo - the part of our business that responds to new challenges and opportunities.
The Knowledge Funnel
According to Roger Martin, Dean at the Rotman School of Business in Toronto, knowledge comes into our organizations through a funnel. At the top of the funnel, something is a mystery. It forces us to ask questions. As we begin to figure it out, we begin to form rules of thumb or heuristics. Once the rules of thumb become better understood, we are able to convert our knowledge into an algorithm. Algorithms allow us to hire cheap labour to do repetitive tasks. OldCo lives with algorithms. NewCo deals with mystery and heuristics. NewCo requires far greater cognitive faculties and never shies away from new data, no matter how disruptive it may be. OldCo managers must be great analysts. NewCo managers must be synthesists, possessing the ability to put information together in new and creative ways. This ability to synthesize is what enables them to spot and create opportunities before anyone else.
Once we understand that our business comprises OldCo and NewCo, we can become proactive about change. We can gather information about how the world of our key clients is changing and we can anticipate their emerging needs and changing priorities. We can then collaborate with them proactively to figure out how to address their new challenges. The OldCo part of our business is about following and repeating a known but rapidly aging success formula. The NewCo part of the business is more about "sense and respond" to our changing landscape. There is no algorithm because there are too many unknowns.
CRM as Digital Nervous System
In order to stay ahead of these changes, we must develop a digital nervous system that enables us to see and hear what's going on with our customers. OldCo must become adept at gathering customer information. NewCo must be adept at synthesizing and interpreting customer data.
Are your CRM and other supporting systems and processes set up to support both OldCo and NewCo?
About the Author:
Adrian Davis. President of Whetstone Inc., is a business strategist and trusted advisor for chief executives and business owners. He is a thought-provoking speaker and is frequently called upon to address senior management teams and sales groups on the subjects of corporate strategy, competitive advantage and sales excellence.
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