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The Two Most Important Questions

June 27th, 2009 by Greg Head | 1 Comment

Think about it: Who is your customer? What does this customer value?

These are two of Peter Drucker’s “Five Most Important Questions” for your organization. I often find myself returning to Drucker’s questions in strategic discussions about a business or business idea.

Having clear answers to Drucker’s five questions doesn’t guarantee your success, but you can’t run a successful organization without answering them:

What is our mission as an enterprise?
Who exactly is our customer?
What does this customer value?
What is our plan?
What are our results?

I have not found a better way to describe the core management responsibilities of leaders and entrepreneurs.

Three of the elements — your mission, your plan and your results — are required to lead and manage any organization. But your mission, plan and results depend on who your customers are and what unique value you bring to them. As Drucker says, the customer is the most important thing in a business: without customers, you have no business.

“Who are your customers?” and “What unique value to you bring them?” are the two most important questions for leaders and entrepreneurs to answer.

Drucker wisely differentiates between primary and secondary customers. Yes, there are many groups your business serves, but your primary customers are those “whose lives are changed by your product.” Everyone else your organization serves is a secondary customer. Your top priority should be delivering value to your primary customers.

For example, a school serves students, teachers, communities, school districts, and others — but only students’ lives are changed by the product of the school. A business serves investors, employees, partners, suppliers and others, but their customers pay them because they expect their lives to be positively changed in some way by the business’ product.

So when you see a struggling organization, of any size, it’s likely the problem can be traced back to Drucker’s two questions about the customer. Sometimes the company has lost focus and tried to serve too many customers, serving no one well enough. A startup organization with big dreams of creating a large market may need to focus on one target segment in the short term to survive.

Which of Drucker’s five questions presents the biggest challenge for your business? When you know the answer, you have defined your top priority as its leader.

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The Marketing Trap

June 11th, 2009 by Greg Head | 4 Comments

Successful startup entrepreneurs almost always have impressive skills in two areas: product creation and sales. They find problems in the marketplace and create products or services that satisfy those needs with teams that can deliver the solution with meager resources. Then the entrepreneurs use their savvy sales skills to find initial customers and sell their new solutions to make money to grow the company.

This is great, but guerrilla sales efforts can only take the company so far. At some point, these companies have to create awareness and demand beyond the prospects their small sales teams can reach through networking and cold calls.

Startup entrepreneurs have to do great marketing to continue to grow.

Surprisingly, this is a much-misunderstood concept with most startup entrepreneurs. To many of them, marketing means, “I need to spend time and money for something that doesn’t drive immediate revenue.” To others, it’s “just create a website and a nice presentation for our salespeople.”

This is the Marketing Trap. From my experience, misunderstanding the strategic marketing challenge is the biggest reason entrepreneurs are prevented from reaching their big startup dreams. “Hockey stick” growth, market leadership and a successful payoff for investors almost never happen through sales efforts alone.

The Secret — You Need to Create Your Category

If you have 1) a valuable product or service that is generating sales, and 2) a unique benefit that makes you different from competitors, then you are really creating a new category (or sub-category) in the market. An established category is a type of product or service that people know and understand.

For example, a sub-category of mobile phones is “smartphones” — you know, the phones that do email, calendars, contacts, and web browsing. Five or ten years ago, this category didn’t even exist in the minds of the market. The early pioneers had to create compelling new smartphone products and explain this new type of phone concept to the market. Now we just say, “I want a smartphone,” while years ago this category didn’t exist and people didn’t know they wanted one.

Everything fits within a category in minds of your target customers. Big, successful markets are filled with categories that are clear and compelling. If you’re really, really good, your product name is the category, like BlackBerry (in the early smartphone days) or iPod.

To achieve your growth goals, you need to be known as the leader of that important category. But who will establish that category in the market? If you don’t do the things that will establish the importance of this new type of solution and position yourself as a leader, someone else do it for you and take the prize. Remember, market leaders always get disproportionate market share, recognition and profits.

If you are a leader and you want to grow your new category, you have to sell your products and your category.

Your Strategic Challenge

Stop thinking that marketing is something you “do later when we have time and money.” You don’t need big money to get started. Really. But establishing a category and a defensible leadership position takes years, so you have to start now.

Start thinking, “How do we start now to establish our category of product/service in the market and position ourselves as the leader?” This is more a challenge of your mindset than your budget. It’s your biggest business challenge in the long run and only the CEO can really drive this effort. It’s that important.

If you aren’t thinking this way about your strategic business challenge, then you should not be telling your investors and employees how huge your company is going to be. You can have a nice business, but you won’t have a big, valuable success story that will change the world.

What are you waiting for?