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Clawing Our Way Back to Prosperity

The good news is parts of the economy are recovering. The bad news is, while you were getting your house in order during the recession, so were your competitors.

Today hungry rivals want to eat your lunch. Many customers still hesitate to buy. And the outlook remains uncertain.

So how do you achieve lasting, profitable growth in this environment? For guidance, let’s look back at the strategies one industry leader used during the downturn, while keeping an eye on first principles.

Surviving the storm

After coming on board at Hewlett-Packard, Mark Hurd did a remarkable job reviving the computer giant’s prospects.

HP’s former CEO brought rigor, experience and fresh leadership. He slimmed the organization and introduced fiscal discipline. Acquisitions and restructurings fueled growth.

But despite these moves, the bleak economy caused sales and profits to skid at HP and many other firms.

After cutting back and reorganizing wherever possible, HP and companies like yours have shifted their focus to the top line and achieving profitable growth. The question remains of just how to get there lastingly.

Deep in the crisis, a New York Times story entitled “Does H.P. Need a Dose of Anarchy?” outlined a solution that holds important lessons for all of us.

It advocated harnessing HP’s fabled culture of innovation to deliver “that prized and perennial Silicon Valley trick: surprise and astound.”

The reasoning was compelling for the firm, which had begun to trim R&D, and has its merits for many companies.

Yet 20 plus years of marketing complex offerings to demanding corporate buyers have shown me that’s only part of the solution. Other often overlooked keys to success must be leveraged if you want to thrive over the long term.

Which silver bullet for profitable growth?

It’s good to surprise and astound, something dynamic companies excel at.

To also convince risk-averse corporates and their tight-fisted bean counters to sign big checks, however, we must understand and meet their true needs.

What’s the best way for a company to do that?

In numerous interviews I’ve conducted in person for HP itself and for other vendors of technology-based offerings, CIOs, line-of-business executives and other senior managers in customer organizations have consistently told me it takes more than whiz-bang features to get their attention and land their orders.

They say it takes the vendor’s ability to grasp, demonstrate and deliver the business benefits these hard-nosed customers seek for their companies.

Typical benefits I’ve heard them ask for include: “Will we bring innovative offerings to market quicker? Will we respond faster to emerging customer needs and changing market dynamics? Will our current business processes run better? Will we develop new ones more efficiently? Will we increase employee productivity? Will we cut costs further?”

Bridging the crucial divide

The goals and thinking of these customer decision makers are thus frequently far removed from the speeds and feeds that are the lingua franca and vaunted achievements of most technology companies.

As a result, growth at too many vendors is stymied by this invisible divide, which separates corporate customers wanting to buy business benefits from vendors anxious to sell them technology products.

For many vendors, the biggest barrier to success resides in recognizing and bridging this crucial gap.

Here, then, lies an unspoken key to compelling advantage and profitable growth that smart companies have mastered.

They are the ones who have learned how to bridge the gap — by bringing customers and their worlds into the mindsets, strategies and daily activities of their businesses, from the executive suite down through management and into the labs and product development.

Managing for success

According to The Times, HP’s Hurd kept four vital management quadrants in his head: operations; products; business and technology trends; and competitors.

On reading this I asked myself, but where are the universes of customer decision makers and what they’re measured on, what they value when making purchases, how they view and compare vendors competing for their business?

Hurd’s laser-like focus on metrics to turn his company around may explain this omission.

Yet at many companies this absence isn’t surprising. The crush of daily business and the culture gap mean they often overlook not just the need to listen to and deliver what corporate customers want, as we’ve seen.

They also overlook the fact their offerings must answer convincingly the pivotal question on every customer’s mind: “Why should I buy the product or service I want from you and not from your competitors?”

Here lies another key to prosperity smart companies turn to their advantage.

So as fundamental as the four quadrants are for good management, they must be framed to serve what I believe is the overarching mission of any successful company: Meet customers’ needs better than competitors do, lastingly and at a profit, in carefully chosen markets

This means putting customers and their worlds at the fulcrum of every business organization, and measuring the excellence of management quadrants by how well the quadrants serve that mission.

How to claw our way back today and tomorrow

After exhausting the benefits derived from tightening operations and scaling back wherever possible, companies need to figure out how to achieve profitable growth in today’s challenging environment.

The obvious answer is to keep developing and refining new products and services. More importantly, as we saw earlier, vendors must design their products and services to deliver the benefits customers want to buy, not just the buzz many engineers want to sell them. Doing so ensures you have the offerings customers want. Step one.

But remember, you’re not the only vendor on decision makers’ radars. To stand out in the latter’s minds from your competitors and avoid profit-eroding price wars, you must differentiate your offerings based not only on customers’ needs but also on their views of your offerings vs. those of your rivals.

By taking this equally essential step, you will have both what customer decision makers want and a competitive advantage they will perceive, value and act on in your favor at a profit. Step two.

Last but not least, achieving profitable growth requires concentrating company efforts on market segments that offer the greatest opportunities for success at the lowest risk, as defined by how customers view your strengths and weaknesses compared to those of your competitors.

Two cardinal rules

In this strategist’s book, then, surviving and thriving in any challenging environment — not just as the economy recovers — means management must always abide by two cardinal rules:

Know the customer imperative. What do customers say they want? What do they say makes your company and its offerings strong and your competitors weak? How do customers think, feel and act when considering and comparing products from your company and from your competitors, and then purchasing them? And what does all this mean for your offerings and how you differentiate them from rivals’ offerings?

Heed the customer imperative. Tailor, align and measure every management quadrant and every company decision on strategies and tactics against that imperative.

By knowing how and where to act, your company will thus be able to focus its competencies, resources and people to answer profitably the defining question customers ask — and the only one that ultimately matters in every company — “Why you?” and not your competitors.

Michael Saklad, the author of “Clawing Our Way Back to Prosperity,” is a business strategist who advises and coaches companies and their executives on how to achieve lasting, profitable growth in highly competitive environments. You can reach him at the e-mail link below.