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Understand 80 vs 8: Do You REALLY have a Competitive Advantage?

McKinsey & Company’s February 2018 magazine included an important article, Strategy to Beat the Odds, with interesting implications.

Most CEOs know the fundamentals of business strategy, including Michael Porter’s “5 Forces” model and the concept of Competitive Advantage which arises from a set of conditions that makes your company superior to rivals and facilitates greater profits.  The article notes a study which found that “80 percent of executives believe their product stands out against the competition – but only 8 percent of customers agree”.

WOW! Peter Drucker said that “the purpose of a business is to create a (profitable) customer”; therefore, it’s their opinion –not that of the executives – that really counts!

Why the discrepancy?  The reason that the article focuses on is what they call “the social side” of strategy. First, when people make decisions, there are inherent biases, such as overconfidence and cognitive biases, (e.g., anchoring, loss aversion, confirmation bias and attribution error), as Daniel Kahneman described in Thinking, Fast and Slow. While they help us filter information in our daily lives, they can distort the outcomes when we make big, consequential decisions infrequently and under high uncertainty – as we do with strategy. Also, affecting the process is the “agency” challenge: presenters who want to get a “yes” to their proposal may exclude contrary information; knowing that proposals are compromised often, executives may overstate requests; and people’s decisions are often influenced by other factors including their own egos and career aspirations.

Another reason stems from Drucker’s perspective: who are your customers? Do you really know who they are and what they want? For instance, what’s really important to potentially-loyal customers who:

  • Use the product infrequently because they are not enamored with it
  • Choose not to use it for reasons the company may not know
  • Never even considered it.

We all know the limits of what rivals can do selling similar customers, similar products for which none have a real Competitive Advantage: (e.g., McDonald’s, Burger King and Wendy’s who fight over “dollar” meals.) Kim and Mauborge propose executives get out of the “bloody” red ocean and service new customers with a “Blue Ocean Strategy” (e.g., Shake Shack). Using value innovation, companies like Cirque do Soleil, NetJets, Curves, Salesforce and Lyft) companies can deliver REAL competitive advantages to targeted new customers.

What does all this mean for you?  Check whether your current customers really perceive your service/product as having a Competitive Advantage. If not can you fix it? If not, does it make sense to:

  • Identify the needs of potentially profitable new customers
  • Build new profitable service/product models that can offer a (sustainable) Competitive Advantage.

 

 

It’s the Relationships that Count

 

As part of the coaching and mentoring I do for young people entering the workforce (see MentoringInternships.com), I often have to broaden their perspective: success takes more than competence with technical skills; it requires building effective relationships. (See blog last month on a study conducted at Google.)

When I heard that Warren Buffett credits 12 lessons from “How to Win Friends and Influence People” for transforming his life, I began re-reading Dale Carnegie’s book and recommending it.

I thought I’d share the lessons (as noted by Richard Feloni in Business Insider), since we can all learn from them

  • Avoid criticism, condemning or complaining
  • Praise others’ achievements
  • Be empathic
  • Know the value of charm
  • Encourage people to talk about themselves
  • Know when to use suggestions instead of direct orders
  • Acknowledge your own mistakes
  • Respect others’ dignity
  • Don’t try “winning” an argument
  • Be Friendly, no matter how angry the other person may be
  • Reach common ground as soon as possible
  • Get others to think your conclusion is their own

Which ones stand out for you? Why?  Share with us!

Is Your Company Creating Careers?

For decades, we’ve been making an effort to help young people make better career decisions through our mentoring internship program. We’ve had 600+ interns from the US and internationally. Several years ago, we launched the Mentoring Internships program to help larger companies adopt our approach.

Over the last months, we’ve noticed a number of other programs focused on helping you people and we though we’d share a few.

With increased longevity – people living to 100+ – more people also ending up needing geriatric services. This is a professional marketplace not on the radar of most young people. Accordingly, a Geriatric Career Development program was developed to give teems a pathway to a career, and provide the host with a supply of workers in an industry with exploding demand.

The New Jewish Home, an elder-care non-profit in NYC launched the program to train teens to work in a nursing home, while providing mentoring school tutoring, college prep and life-skills training. (See details.) The program accepts NYC public schools beginning in the sophomore year as long as there is genuine interest to work in the field and to graduate high school. Over the years, almost every student in the program has graduated from high school and 94% are enrolled in college or employed. Two students have gone on to medical school and two others are pursuing Ph.D. degrees in pharmacology.

Recently, there was been discussion at the federal level on spurring the creation of apprenticeship programs to give people an opportunity to learn trades. Not everyone wants to go to a 2-4 year college to work in an office, fast-food establishment or some other company where the liberal arts training has little applicability to what they will do. For centuries, Europeans have been offering high school students the option of hands-on learning in trades like construction, plumbing and electrical, with the prospect of joining the firms. Maybe the time has come to adopt more apprenticeships.

Bloomberg Business featured one company whose pitch is “Want a $1Million paycheck? Skip college and go work in a lumberyard”. 84 Lumber Co, one of the nation’s largest building-supply chains spent millions on this message. It pays manager trainers about $40K a year; those in charge of top-grossing stores can earn $200K a year, and some earn more than $1Million, including bonuses.   With skilled and high-paying blue-collar jobs going unfilled, their program offers a solution to meet the need. While society today encourages millions of young people to take out loans to pay for college degrees, studies report that about half of the students then fill jobs in which they’re not really using the skills the acquired (e.g., learning Roman history may not be  helpful for a fast-food burger server.)

What are you doing to help young people explore their career options to make the best possible decisions?

Share with us your experiences!

There’s No Such Thing as a Stupid Question

As a straddle the worlds of teaching students, working with CEOs and their teams, and studying the psychology of aging, I am amazed at how more-or-less the same issues appear in all of them. The power of questions is one example.

Discovery requires being curious and asking questions.  We begin our lives as children unfettered when it comes to asking questions: Why is the sky blue?  etc. As we get older, schools and other socializing institutions ty to reduce the number of questions we ask. One seventh grade teacher had students put on their desk a note saying “Is this a stupid question?” as a way of limiting questions in class (He was a science teacher!)  As I teach university students in the US and China, I increasingly see a few students who ask almost all the questions and the rest shying away from doing so.

In companies, I experience newer (and younger) workers often refraining from asking questions. Asked why, some respond that they don’t want to “look stupid”, even though they concede that without the critical information they may make a (stupid) mistake. As I work with people 60+ through Age Brilliantly, including the “elderly” (over 85) the pattern of not raising questions continues for many.

Yet, in all cases, asking appropriate questions can save people time and energy, and have positive effects. Indeed, Meika Loe, who researched the “oldest old” (over 85) in Aging Our Way, notes a key lesson she learned: asking for help enables autonomy and control – as long as it’s on the (asker’s) terms.”

We need to change the culture our hour homes, schools, workplaces, etc. to encourage people to ask appropriate questions more often because they empower people to make better decisions, do better work, and feel more confident about themselves.  In my office we have a note saying “there is no such thing as a stupid question!”  We celebrate breakthroughs that come from a good question asked to encourage more of them. But it’s not enough.

What are you doing to create cultures to encourage people to ask more and better questions?  Share your experiences and ideas.

What Really Matters to Your Audience

What’s more powerful as a motivation for changing: recognizing the consequences of our actions on ourselves or the consequences our actions may have on others? Adam Grant, in Originals: How Nonconformists Move the World, suggests the latter may be more important.

As you probably know from prior research (e.g., The Checklist Manifesto), hospitals have discovered that they can substantially decrease the incidence of patient’s negative health consequences with one simple action: getting doctors and nurses to wash their hands In a study he and David Hoffman conducted, they wanted to know which of two signs (displayed near soap and gel dispensers), would encourage the health care providers to wash more often:

  • “Hand hygiene presents you from catching diseases”
  • “Hand hygiene prevents patients from catching diseases.

The first focused on consequences for the provider; the second for the people that the provider serves.

The first sign had no effect. The second increased medical professionals washing 10% and led to 45% more use of soap and gel.  Why?  Understand the logic of the consequences. In the first, the doctor/nurse thinks about their situation:  “I spend a lot of time in the hospital, I don’t always wash and rarely get sick, so they doesn’t affect me.” In other words, we know ourselves, tend to overestimate our invulnerability.  In the second case, the question is what should a person like me do in a situation like this?’ The cost-benefit equation isn’t only about one’s probability of getting sick, but what’s right and wrong: do I have a professional and moral obligation to care for patients, especially those I can’t monitor as often as myself.

What’s the implication for you?  When you’re presenting a message to the audience – whether in an ad or a presentation – you need to think not just about the immediate message but what else your audience cares about how the message may trigger additional considerations. We saw this phenomenon recently in an ad that Pepsi produced starring Kylie Jenner that upset many people and led them to pull it immediately (see).  It’s critical that you go through a two-step process: figure out what you want to say – and be prepared to deliver an authentic message, and then consider the “mental setting” of your audience (be audience-driven) before designing the actual pitch.

Have you gone through similar experiences? Are you concerned about one in the future?  Share with us so we can help you deal with your audience’s sensitives.

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