Editor's note: This article originally published in Chief Executive.
Einstein had an approach for rapid problem-solving: ask the right question. “If I had an hour to solve a problem and my life depended on the solution, I would spend the first 55 minutes determining the proper question to ask, for once I know the proper question, I could solve the problem in less than five minutes.”
In an age of accelerating change, it’s all too easy to invert the ratio as we race to keep up. After all, we’re no Einsteins. But our research would suggest that Einstein’s approach is more apt than ever. The opportunity cost of charging down the wrong path is punishingly high.
For growth-seeking managers, we’ve found five questions worth the time:
What business are we in?
When we’ve asked chief executives this question, 90 percent have quickly responded with a rich description of the product or service they sell: “We are a SAAS-based CRM company,” “an asset management company,” a “natural foods retailer”, “a corporate benefits manager”. You get the gist. But this question is not about what product you sell. It’s about how you create value for customers.
Defining your business by the product you sell — while all too logical – is unhelpful, even hazardous. It misses how companies actually create meaning in customers’ lives. And, it leads to innovations that focus on adding features, but not value, for customers. Disney doesn’t just make movies. They make families happy. McAfee doesn’t just make software. They keep you safe. My favorite pizza joint doesn’t just make pizza. It’s where I catch up with my daughters and have some fun on a Saturday evening.
So how do you determine what business you’re really in? How do you avoid conflating the products you sell with the value you create?
Tell a story. Tell the story of your customer in their context. Capture the specific circumstance in which they are struggling to realize a desired experience. Tell the story without you in it. Don’t lose focus with unhelpful images such as “millennial males” or “small-to-mid-sized companies”. Be specific and capture the emotion of the narrative of a single customer trying to make progress.
This story-telling exercise can be energizing and enlightening. We are convinced that all growth-seeking CEOs should be able to answer the “what-business-are-we-in” question with a vivid story that stars the customer, not the company, and that captures the explicit way in which the company’s solutions can enter a specific circumstance to enable progress and fulfill desired experiences.
What opportunities emerge after we reframe our business definition around the customer’s job?
Leaders who view the market through a distorted lens of product features and functionality systematically overlook major growth opportunities. But when armed with an accurate understanding of the way that products and services actually create value for customers, new growth markets emerge.
Bob Moesta built a spectacularly successful business selling single-family homes to empty-nesters looking to downsize. His real advantage: the insight that he wasn’t in the business of making houses. He was in the business of moving lives. While other builders competed on the basis of their professional-grade kitchens, triple glazed windows, and smart home technology, Bob focused on removing the sources of stress and anxiety associated with moving, such as processing a lifetime’s worth of family memories and memorabilia, as well as dealing with the unknown costs of moving when living on fixed income and a tight budget.
Bob focused on providing free moving and a year’s storage in the price of his homes. In other words, Bob invested in dimensions of benefit that mattered to his customers’ jobs and cut features that simply added extraneous costs. In the year after this shift, industry sales were off by 49% and the market was plummeting, but Bob and his team actually grew the business by 25%.
"Innovation is more about minimizing risk by learning quickly than it is about embracing risk and seeking failure."
What are the major shifts transforming our customers’ lives?
A shift is neither as simple as a technology trend nor a consumer fad. A shift is a pervasive and enduring change in customer expectations and behavior that redefines the basis on which quality is measured and rivals compete. Shifts are not made manifest overnight, but they often exhibit the rear-view mirror effect of appearing tiny and distant until they are suddenly on top of you. Big banks, for example, could ignore PayPal, Quicken, Venmo, WePay, Bitcoin, ApplePay, Google Wallet, Braintree, Square, and Betterment — until they’re too big to squash or outpace.
We have published our research on the six shifts that are transforming markets and creating the opportunities and hazards of the future (see Meet Dawn: The Customer of the Future). The challenge is to interpret these shifts in the context of your current business. The opportunity is to create new markets and design growth engines for the future that are fundamentally different from the growth engines of the past.
Today, a retail bank might describe its primary businesses as: enabling financial progress (notice this is much different than enabling transactions, providing credit, and storing assets). When focused on financial progress for its customers, they could research relevant consumer and technology trends in order to identify critical shifts. For example, with 40% of the US workforce projected to be comprised of independent or “gig” workers, what new products and resources will customers need in this new world of work? As personal data becomes an asset class, how can they help customers manage (and optimize the value of) their data?
The important exercise for all growth-seeking CEOs is to map the relevant shifts and prioritize those that demand action. Answering the question will help leaders identify the opportunity areas where the growth engines for the future will gain traction.
What are the emerging opportunity areas revealed by the shifts in customer behavior?
Opportunity areas emerge when we are able to process diverse market research inputs through the angle of inquiry suggested by each shift. Think of it as a mechanism to generate fact-based hypotheses of emerging opportunity areas. Prioritization exercises can help leaders focus on a manageable set of actionable options.
The result of this process leads to emerging opportunity areas that the business might not have considered based on their current product set. Sticking with our example of the retail bank, here is how different the opportunity areas look once reframed around the shifts in customer behavior:
- If the nature of my work is transforming to a world where I have six sources of income instead of one, I’ll need products and services that help me manage the complexities of my income
- If data becomes the most valuable asset class, then I will actively search for products and services that help me manage and optimize the value of my identity
In our experience, this exercise is energizing for leaders of organizations in industries declared “mature”, because horizons expand, opportunities crystallize, and the future beckons.
Based on our prioritized set of emerging opportunity areas, what are the initiatives we can launch today in order to create the future — rather than wait for it?
As Jeff Bezos regularly observes, executives competing quarter-to-quarter face withering competition and a blizzard of changes that are impossible to process. By contrast, adopt a 5-to-7-year time horizon and the competition thins, options expand, and executives can play offense — rather than struggle to mount increasingly futile defensive strategies.
Contrary to popular mythology, innovation is more about minimizing risk by learning quickly and inexpensively than it is about embracing risk and seeking failure. Our work with leading growth-seeking CEOs around the world suggests a final, critical correction that most CEOs need to make in order to succeed at scale. Chief executives obsess over their revenues, customers, investments, employees, and shareholders — which are all tightly attached to the growth engines of today. Leaders reason that they should keep their eyes primarily on delivering on immediate commitments, while some sort of swat team or special forces unit can be formed and dispatched to mull and incubate the future. It fails. Always.
Entrenched incentives and familiar routines and understandable risk aversion inexorably pull these shiny sideshows back into line. We saw this play out in the airline industry, where the low-cost affiliates suffered the death of a thousand small cuts such that eventually the “low cost” carrier boasted the same, or worse, economics as the mainline carrier. What was left were embarrassing monuments of failure — planes with goofy paint jobs, and perky names, like Song and Ted — that were ultimately mothballed without mourning or fanfare.
Creating the future is undeniably the task of seniormost leaders and cannot be safely delegated or marginalized in a lab, incubator, venture unit, or accelerator. Two of the worlds’ most admired, innovative, and accomplished CEO’s, Jeff Bezos and Jack Ma, border on the dismissive in terms of current operations, instead training their eyes on creating the “impossible” future.
500-years ago, Machiavelli noted, “The innovator has for enemies all those who derived advantage from the old order of things, whilst those who expect to be benefitted by the new institutions will be but lukewarm defenders.”
The transferable insight from Bezos, Machiavelli and Ma is that current operations have robust processes, metrics and controls that line managers are more than capable of sustaining. In a world of accelerating change, however, companies need chief executives to do more than manage. They need executives to create the future, boldly.
By channeling their inner Einsteins, and answering the Five Questions, senior leaders can focus and energize the effort to create the powerful, future-focused growth engines that their companies need.