Saturday, January 26, 2008

Listen to Your Customers to Find the Blue Oceans

By Louis Columbus

CRM Buyer 01/18/08

As W. Chan Kim and Renee Mauborgne, the authors of the book Blue Ocean Strategy: How to Create Uncontested Market Space and make Competition Irrelevant, show in their research, the ability of manufacturers to reassess the unmet needs of their customers and create entirely new products and solutions that match customers' changing preferences is critical.

Competing for customers has never been more challenging, intensely focused, or costly for manufacturers globally. Instead of relying on plunging prices or continually adding in product line extensions to marginally increase a given product's market size and potential sales, manufacturers must get back to what made many of them successful to begin with, and that is concentrating on knowing the unmet needs of customers and responding to them with innovative products and solutions better than any competitor globally.
Aggressively getting Voice of the Customer (VoC) initiatives and programs off the ground quickly to drive both ongoing quality programs and getting their product development cycles fine-tuned to customers' unmet needs delivers long term competitive advantages. Any lasting competitive strength needs to be built on processes that deliver exceptional value to customers with products that meet their unmet needs and exceed their expectations.

Searching for Blue Oceans and Global Customers: Let the Race Begin
While the catalysts that launched many manufacturers were innovative products and services that in many cases created entire markets, the predominant mindset today seems to be following cost reduction as a strategy to the exclusion of creating new markets. As W. Chan Kim and Renee Mauborgne, the authors of the book Blue Ocean Strategy: How to Create Uncontested Market Space and make Competition Irrelevant, show in their research, the ability of manufacturers to reassess the unmet needs of their customers and create entirely new products and solutions that match customers' changing preferences is critical.
When companies follow this approach to redefining markets for their products and services, they create entirely new market segments, which the authors have called "blue oceans." A market that is considered a blue ocean is one where demand is created, not fought over, and illustrates opportunity for growth and profitability versus margin- and price-cutting to gain market share. Conversely, red oceans are those markets marked by high levels of price-cutting and margin-taking in the hopes of driving demand up quickly to compensate for declining sales. Price isn't the problem in red oceans; relevance is. Finding blue oceans starts, however, with an aggressive VoC plan and continues with a shift in the culture of manufacturers to act on the customer intelligence gained.
There are excellent lessons learned from Blue Ocean Strategy that apply to manufacturers. Here are several of them:
Incumbent manufacturers most often create blue oceans from their core businesses. Chrysler's redefining the family vehicle market with the development of the minivan, IBM's (NYSE: IBM) humble beginnings as the company CTR for tabulation machines, IBM's creation of the server market with the launch of the System/360, Compaq's defining the blue ocean of low-end, fully configured servers with the launch of its ProSignia line, Proctor & Gamble's redefining of floor cleaning products with the Swiffer are all examples of how blue oceans have been defined by incumbent manufacturers.
In entertainment, AMC's definition of the blue ocean strategies of first the cinema multiplex and later, the megaplex, in addition to the redefining of circus entertainment by Cirque du Soleil, which is thoroughly discussed in the book and article by Kim and Mauborgne, also illustrate how manufacturers can create blue oceans for themselves based on their core strengths.
Blue oceans can't be bought purely through technology innovation. Consider the fact that the majority of blue oceans that manufacturers are benefiting from today are based on existing technology, and it's clear that just spending heavily on R&D to create entirely new markets doesn't work. Instead, there needs to be deliberate customer listening strategies including aggressive VoC programs to fully understand the needs of customers and re-align existing product and process strengths to meet them.
The technology behind the Apple (Nasdaq: AAPL) iPod series of personal MP3 players was well known; it was the development of the iTunes store as well as strong demand for personal music that could be quickly saved to a personal MP3 player and used anytime, anywhere that revolutionized this specific market. For manufacturers the message is clear; the blue oceans are out there and it takes a concentrated effort to find them through VoC programs and staying close to how customers want to solve their unmet needs.
Defining blue oceans as traditional industries and markets don't work; yet capturing and acting strategically on customers' changing unmet needs do. Kim and Mauborgne contend that blue oceans defy existing approaches to defining them and as a result require entirely new product strategies, marketing messages, and approaches to meeting unmet customers' needs. Manufacturers who strip away the traditional approaches to business development and new venture creation have a better chance of uncovering the higher growth and uncontested blue oceans that may exist in their customer bases. Customers' approaches to buying, using, and recommending your products change dramatically over time; finding out about how these changes occur is critical to finding blue ocean markets.
Blue ocean strategies transform value/cost trade-offs and force manufacturers to align activities in the pursuit of differentiation and low cost at the same time. For incumbent manufacturers, this is the aspect of cost reduction that makes the greatest potential impact on competing in new markets. The ability to trim cost isn't then used, turning a red ocean even more red with losses. It's about creating such a high level of differentiation in products and delivering such high value that low cost becomes one more competitive differentiator. It isn't the single greatest differentiator, yet a contributing factor in underscoring exceptional value to customers in the fulfillment of their unmet needs.
For manufacturers, the implications of pursuing blue oceans are clear. First, the world is now the playing field -- not any state, province or region they are located in. Globalization has leveled the playing field and is bringing competitors to manufacturers' doorsteps, yet also providing opportunities to capture customers globally with greater efficiency than ever before as well.
Fuel for Global Growth: Capturing Voice of Customer Insights
Manufacturers must find the intersection of their core strengths through the use of aggressive VoC programs find the blue oceans their organizations can compete strongly in. There are a series of qualitative approaches manufacturers rely on to gain insights from their customers, and while these are all valuable as part of a broader VoC program, the culture of any manufacturer must also change to capitalize on the lessons learned.
No one can afford the luxury of being arrogant and ethnocentric in such a rapidly and highly competitive, changing world; if anything, VoC programs must force manufacturers out of their comfort zones before market forces do and force change that is planned versus by accident. Here are the key approaches manufacturers are taking to gain qualitative feedback in their VoC programs:
Advisory councils: One of the most effective approaches to gaining insights from customers, there has been wide variation in results achieved using councils to gain insights into new markets and unmet needs of customers. The cardinal sin so many manufacturers commit here, however, is either thinking they already know what their customers' future plans are, or worse, viewing this as a negative experience just because customers will complain about problems they may have had for years. There is no room for such arrogance in such a rapidly changing global economy. Fail to listen to your customers' complaints and someone else will; and will gain their business in the process.
If there was ever a time to throw off the "we know already" mentality that tends to pervade old-school manufacturers, this is the time because it is time to fight for your customers like never before. Besides that, they have insights into where entirely new blue ocean markets are.
The best-run advisory councils first recruit from the standpoint of exclusivity and the need to gain insights into the direction customers are going. They are hardly sales events; they are more often events where C-level executives gather to share peer-level insights into what is working and what isn't when it comes to solving major strategic challenges. Symantec's (Nasdaq: SYMC) use of advisory councils at the CEO level with its customers has netted remarkably strong results as its customers have shared their long-term security strategies and plans, challenges, and sought advice from the senior security experts at the software company. The result: over two years, the platform product strategy direction of Symantec was perfectly aligned with their customers' needs.
Blogs: If there is one lesson taken away from this article, get out to Google (Nasdaq: GOOG) , get an RSS reader set up and start tracking bloggers who are in your industry. There is an exponential growth of content being generated by bloggers and many of them are hinting at the next blue oceans in key markets. In addition many manufacturers have set up blogs and even defined blogging policies for their employees. Using blogs as a means of connecting with customers needs to be down with transparency, honesty and directness. No sugar-coating problems, not dodging customer complaints, but ownership and sincerity are critical in the blogosphere. Start tracking what bloggers are saying about your company, the industry, and what is going on in related areas as well, as this is a great way to stay on the pulse of what one form of exponentially growing voices of customers is saying.
Focus groups: This is a commonly used qualitative strategy for completing research, yet it can also be used as a VoC program as well; and needs to be considered as part of any new product development effort. The use of focus groups has been criticized, yet it is one more avenue by which manufacturers are attempting to find the blue oceans accessible to them.
Mining unstructured content from sales and post-sales feedback including customer complaints: Well-intentioned at the time they are nearly always ignored when the results come back from customers, sales feedback forms and post-sale customer satisfaction bounce-back cards often up in stack after stack of moving boxes in the marketing director's closet. Because the data is unstructured and difficult to interpret, it gets ignored for years. There is good news for manufacturing company's marketing directors feeling too guilty to throw these boxes out yet seeing a Herculean task of coding them. Companies including Attensity, Cymfony, Island Data and others have software that can interpret unstructured data and create linguistic models based on the results. This is incredibly powerful for finding blue oceans. Consider getting to know how these tools work to gain greater insight into how to find blue oceans globally.
Win/loss analysis needs to grow up: The days of simply relying on sound bites of why business was won or lost have got to end for any manufacturer who wants to compete more effectively on a global basis. If you're a manufacturer and you're not doing a thorough analysis of why you didn't win the major deals, then it's time now to start paying more attention to this area of a VoC program. Kill sound bites and don't allow them to be part of how sales efforts get evaluated; finding out the specific reasons why a given deal was lost is critical if a manufacturer is going to compete globally with greater strength.
Too many companies get lulled to sleep with sound bites while their competitors have found entirely new markets -- their blue oceans have arrived -- and sound bites hide that from a competing manufacturer. Don't be asleep on this area of where weaknesses are slowly eroding competitive strength. Likewise, finding out why a customer chose your products and solutions nearly always points to greater clarification of the unique value proposition manufacturers rely on for positioning and identity.
Listen to Your Customers
Finding blue oceans is the path to profitability and growth for manufacturers, regardless where they are located. For American manufacturers, their core strengths began by uniquely attacking customers' unmet needs and aligning their product strategies accordingly. It's time for this nation's manufacturer to wake up and realize that it doesn't need to just be about cost reductions and product line extensions -- in the vernacular of Kim and Mauborgne -- red ocean strategies.
Instead, embracing the challenge of finding blue oceans through concerted VoC programs needs to be a strategic priority -- and further than that -- a passion to change and become a stronger global competitor in the process.


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