Innovation

Competition

Like most things in life, competition is not all good and not all bad but competition can be unhealthy and destructive if it is the end game.

Peter Thiel, founder of PayPal and other ventures including Founders Fund, gave an interview last year about his investment philosophy in startups.  As part of his explanation he talked about his issues with competition – not because he believes in monopolies – but rather to encourage more entrepreneurs to focus on solving problems that have no solution or competition.

He had three main reasons for encouraging entrepreneurs to solve problems that have no solution or competition.

1. Competition erodes pricing power and incremental improvements often result in razor thin margins. When the margins become too thin, people fight over “stupid things”.

2. Competition makes people work hard but it also makes them compete against one another.  Many people “get hooked” on competing and often miss the open door to new and better opportunities.

3. Competition on a global scale is good for those that can rise above it.  However, “God” might even find it hard to watch given how hard it is for those that have to compete against billions of people who make a fraction of their pay.

One of the examples used to support his argument was Apple versus the 600+ apps in the App Store.  Apple has tremendous pricing power because the company provides a unique product and exceptional experience whereas the apps all fall into one of a few categories.  Few apps if any are significantly better than the next to warrant premium pricing yet what seemed to puzzle Peter was the number of entrepreneurs still building new apps rather than looking for the open door.

So why aren’t more people looking for the open door?
As Peter acknowledged, the creativity that fuels innovation takes more than putting on black clothing and calling yourself a creative.  It takes time to see opportunities and for those competing for their next job, a new assignment or a big raise, time to observe, think, tinker and conceptualize is probably limited.

Is there more to the story?
There is a little less venture in the venture capital today compared to when PayPal was founded.  Back in the late 90s, ideas got funded.  PayPal burned $10M a month to take over the world. Today, people and evidence get funded.  Many of the startups with big bets on meaningful innovation today are founded by people who were successful in the 90s.  They have a track record and their own money to invest.  Whereas most entrepreneurs starting out today are following the lean launch pad philosophy of developing customers early and building a minimum viable product (MVP) to test the market as a way of hedging their risk.  It may also explain why so many talented people are focused on apps rather than meaningful innovation.

Are there lessons to be learned from failure?
Peter came up a little short on the lessons to be learned from failure but it something that I can speak to from my own experience.  I founded my company back in 2000 and launched our e-learning initiative for the healthcare market just before the dot com crash.  I had recovered and was building again when the financial market crashed in 2008 which basically ended the initiative when our consulting revenue also dried up.  It was heartbreaking and like many entrepreneurs, I blamed myself for not finding a way forward.  Years later a friend said to me “Everything you did made sense.  You were just underfunded.”  Why we were underfunded had a lot to do with the industry.

What does the industry have to do with it?
Many of the most highly regulated industries such as the airline, automotive and healthcare are some of the most competitive industries.  For the most part, they all have razor thin margins making them some of the hardest industries to change.  Without funding from the government to reduce the risk for entrepreneurs and the venture community and incentives for providers, few would undertake the innovation challenge especially if they have already tried and failed.  What remains to be seen from the changes underway in the healthcare industry now is whether the margins of the companies serving the market will be improved and sufficient to support further innovation going forward.

In summary, competing has become a state of mind for most people.  So ask yourself…Are you competing for something worthy of your time and effort?

About the Author:
Shannon Smith is a management consultant with over fifteen years of experience helping companies achieve greater success by helping leaders shape strategy, implement systems and processes and enhance capabilities.

Customer Satisfaction

Listen to your customer and make everything else easy.

To help shape our goals and resolutions for the year, a friend and I have been posing questions to each other such as “What is your purpose?, “What do you want to experience in life?”.  This week he asked me “How do you define good customer service?”  This coming from someone who exemplifies customer service.

Something must have happened during the week because before I could even respond, he started to share his thoughts and ideas.  He started with having people well trained to do their jobs, listening to the customer, empathizing with the customer if there is a problem and when possible, solving the problem for the customer.  He continued talking and eventually focused in on the importance of listening and connecting with the customer.

We didn’t have time to finish the conversation and left off with another question…Is it possible for a company to achieve 100% customer satisfaction?  If it is possible, how do you do it?  

Four of the key principles for achieving 100% customer satisfaction as well as management principles and processes used by leading companies who are getting it right more than their competitors are summarized below.

Get it right or make it right with the customer:
Pleasing every customer is a challenge for most.  Entrepreneurs and innovators have learned or are learning that you have to “get out of the building” and talk with customers about their problems, get their input on how to solve the problem and understand how they value the solution.  Talking with the customer before developing a product or service helps companies get it right the first time.

Making it right for the customer does not necessarily mean owning their problems or mistakes.   Apple is probably one of the best examples of shared responsibility.  They own their problems but not the problems created by their customers.  If you’re wondering how they do that and leave the customer feeling satisfied, just sit in one of their stores for an hour and listen to the interactions with customers who have dropped their iPhones in water.

Make it simple and provide a great experience.
Designing a product or service that is simple is not easy.  Technology companies are adopting Agile processes that make it easier to speed the iteration cycle and enable product enhancements that are meaningful to the customer.  However, speed and responsiveness to the customer helps but does not always translate to a beautiful product that provides for a great experience.  It requires talent and time to get the design right.

Live your values.
Few companies have guiding philosophies that are memorable to both customers and employees but there are a few standouts.  Southwest returns love to the skies for their customers, Apple thinks differently and disrupts industries with amazing products and Google does no evil by respecting people’s data.  Without even seeing the actual values, you can kind of imagine what they might be for each of these companies and the type of behavior that would be expected of all employees.

Value the customer’s time and chances are they will pay up for the product or service.
Apple is probably one of the best examples because they sell more computers than all the other competitors combined even though they are not the cheapest.  They simply make owning their products easy by making them easy to set up, easy to learn and easy to get support when needed.  Most of us cannot afford to be without our computers or devices for long.  Everyone including the people in the store must get it because their products and service are designed to keep us computing, searching, connecting, listening and sharing or in other words, enjoying their product 24/7.

In summary, achieving 100% satisfaction requires listening to the problems, ideas and solutions valued by customers and then making everything else easy for customers and employees so that they know what to expect and what is expected of them.  It is no easy task but looking at Apple, the results are worth it.

Are you wondering how this ties back to my friend, our questions and why I have concluded he exemplifies customer service?  When I asked him about his purpose in life, he told me that his purpose is simply to make people happy.  He is not a push over.  He cares about people, listens to them, empathizes with them and when needed or if he can, does little things that make a big difference for his customers – and his friends.  In short, his actions in business and his personal life are aligned with his purpose.

 

About the Author: Shannon Smith is a management consultant, strategist and innovator with over fifteen years of experience helping companies achieve greater success.