Unless American companies dramatically change the way they do business, there will be no end to the alarming trends they are experiencing.
Since the economy went global, a flood of competition pushed American companies into the most complicated business conditions in history. In less than 30 years, so many of the old rules of business have been rendered largely ineffective. The proof is ubiquitous. Customer loyalties are weakened. Market shares are threatened. Profits are eroded. Pressure from cheaper foreign labor is unprecedented. Marketing pressures have increased. And employees are no longer willing to devote a lifetime of service to any company. Businesses feel the heat, but if they don't find a viable long term solution soon, the situation will only get worse.
To date, the primary strategies adopted have been, at best, ineffective and at worst, the equivalent of pouring gasoline onto the flames. Take Colgate, for example. Though there is no data to support that Americans are brushing their teeth significantly more now than 30 years ago, the company now offers 27 kinds of toothpaste versus the two choices they offered in the 70s. And their competitors are no different. Companies from packaged goods to banking keep introducing more products and more options in an effort to stem the tide or gain an edge. But the reality is the opposite. Whereas real innovation impacts the course of an entire industry, sometimes impacting society, most of the "new features" and services offered can be easily duplicated by anyone else. In the name of "innovation," American businesses find themselves locked in a tit-for-tat "features war," a game that is both expensive and never ending.
So what do companies have to do to improve loyalty and profits in today's economy? As it turns out, no amount of new features will help. For long term success, the change needs to happen at the core. Adding features or quality, service or value is not proprietary, there will always be another who are faster, better and smarter. It's not features that inspire loyalty but who you are that matters most. Who you are is also bulletproof to competitive "innovations."
Who you are -- is not defined by the products or services you sell, but what you believe, your purpose, the very reason why you do what you do. This is something no competitor can replicate.
Companies need to develop identities based on why they do what they do and communicate their value from the inside-out. "Why" you do matters first, then "How" you do things -- these are guiding principles or values, they add credibility to your purpose. "What" you do -- your products or services and their benefits -- will serve as the ultimate proof of your "Why." Let me give you a couple of examples:
There are a handful of companies who have a clear "why" and you know them. Apple, Southwest Airlines, Harley-Davidson, Walt Disney, just to name a few. Though each sells starkly different products, their customers are actually buying "Why" they do it what they do -- the products just bring their respective purposes to life.
Walt Disney is not a theme park company or a plush toy company or a film company. Disney is a "good, clean family fun" company. That's their Why -- that's the thing that ties all the things they do together. Parents trust all the products that Disney offers not because they've tested them all or researched all of them in Consumer Reports. It is because Disney has a clear sense of Why they do what they do and consistently make products that prove it do parent's trust the things Disney makes. Parents are buying the good, clean family fun...that ideal is simply brought to life through Disney's products. It is Disney's Why that also gives the company the ability to evolve and add as many new lines of business as they have. But everything they do must reflect their core principle, they Why, otherwise they will be perceived as inauthentic and all the value they have built over the years goes to waste. Disney would probably never get into the professional wrestling business, for example. Though it may be lucrative for them it would so violate their "Why" and their identity and value would be mightily damaged. We can't even imagine it. They stay so true to their "Why," even the idea of it is inconceivable.
Apple's no different. People are not, in fact, loyal to Apple's products, they are loyal to Apple's cause, their "Why." Apple exists to challenge the status quo, to simplify our lives. People believe in "Think Different." It's not just a tagline, it's a rallying cry. It links together Apple's management, employees, culture, products, marketing and consumers. They all embody the idea of "Think Different." Apple's "Why," has nothing to do with what they make. Their products simply prove why they do what they do.
Here's a true story of two companies, for you. One battled with features, while the other swooped in with a clear "Why". Can you guess who won?
Company X, we'll call them, invented and introduced a multi-gigabyte hard-drive MP3 player. "5GB MP3 player" is what they marketed it as. They had the first mover's advantage and some success. But nearly two years later, another company introduced a similar product with almost identical specifications. "1,000 songs in your pocket," is what they told customers. Can you guess who won? It was Apple who actually arrived to the multi-gig MP3 player market 22 months late and it is Apple who now dominates. The reason was not because of the quality of their product or even the product design. The reason was because they communicated the value of their product based on their core -- their Why. Like their computers challenged the incumbency of IBM and later Microsoft, their iPod and iTunes challenged the status quo of how music was bought and sold. People weren't interested in "what" the product was - they wanted the ability to carry around all their CDs at one time. Apple won by successfully communicating from their core. Creative (the Singaporean company that invented the product), on the other hand, is run by engineers. They attempted to sell the product based on What the product was. And the results, well, I probably don't need to give you all the numbers, you know who won that battle.
The fact is, Creative applied old world thinking in a new world economy. They are just one example of the struggle companies now face if they can't adjust how they identify themselves and communicate to the world. It is essential the companies understand Why they do what they do, not in terms of product, features or even profits, but in terms of a purpose, cause or belief. Only with such clarity can companies inspire customers and truly succeed for the long term. And believe it or not, none of this is my opinion. There is a biological basis for the reason this model is so effective. I will go into this more and give more examples in future posts. But for now, I'll leave you with a question - do you know why you do what you do?