Most managements, if they ask the question "What is our business" at all, ask it when the company is in trouble. Of course, then it must be asked. To wait until a company is in trouble is irresponsible management. The question should be asked at the inception of a business - and particularly for a company that has ambitions to grow. Such a business better start with a clear entrepreneurial concept.
The most important time to as "What is our business" is when the company has been successful. Success always obsoletes the very behavior that achieved it. It always creates new realities. It always creates, above all, its own and different problems.
Showing posts with label Mission. Show all posts
Showing posts with label Mission. Show all posts
Friday, May 4, 2007
Arriving at "What is our business?"
Any attempt at defining the business has to begin with the customer. The first question to ask is "Who is the customer?". A business may have several customers.
Next, it is important to ask "Where is the customer?"
The third is the most important question "What is value to the customer?" Yet, it is the question that is least often asked. One reason is because managers are quite sure they know the answer. Value is what they, in their business, define as quality. But this is almost always the wrong definition.
The teenage girl's value in a shoe lies in its 'high-fashion'. Durability is not value at all and price is at best a secondary consideration. Manufacturers tend to consider this as irrational behavior. But the first rule is that there are no irrational customers. Customers behave rationally in the context of their own realities.
The customer never buys a product. By definition, the customer buys the satisfaction of a want. He buys value. Yet, the manufacturer, by default, cannot produce a value. He can only make and sell a product. What the manufacturer considers as quality may, hence, be irrelevant and nothing but a wasteful and useless expense.
What the company's different customers consider value is so complicated that it can only be answered by the customers themselves. Management should not even try to guess at the answers - it should always go to the customers in a systematic quest for them.
So the attempt to ask "What is our business?" can be translated into first asking "Who is our customer", "Where is he", and "What does he consider as value"
Next, it is important to ask "Where is the customer?"
The third is the most important question "What is value to the customer?" Yet, it is the question that is least often asked. One reason is because managers are quite sure they know the answer. Value is what they, in their business, define as quality. But this is almost always the wrong definition.
The teenage girl's value in a shoe lies in its 'high-fashion'. Durability is not value at all and price is at best a secondary consideration. Manufacturers tend to consider this as irrational behavior. But the first rule is that there are no irrational customers. Customers behave rationally in the context of their own realities.
The customer never buys a product. By definition, the customer buys the satisfaction of a want. He buys value. Yet, the manufacturer, by default, cannot produce a value. He can only make and sell a product. What the manufacturer considers as quality may, hence, be irrelevant and nothing but a wasteful and useless expense.
What the company's different customers consider value is so complicated that it can only be answered by the customers themselves. Management should not even try to guess at the answers - it should always go to the customers in a systematic quest for them.
So the attempt to ask "What is our business?" can be translated into first asking "Who is our customer", "Where is he", and "What does he consider as value"
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