Monthly Archives: May 2008

• BIG AH-HA #1: You don’t have to be the biggest to dominate

  Monday, May 5th, 2008 by Wes Ball

  Alpha thinking: YOU DON’T HAVE TO BE THE BIGGEST TO DOMINATE DECISIONS IN YOUR CATEGORY.

  Non-Alpha thinking: “Size (market share, number of employees, number of locations) equals domination.”

  In The Alpha Factor, I talk a lot about the fallacy of viewing the biggest as being the dominant, influenctial leader of a product or service category.  I use Ben & Jerry’s ice cream as one of the prime, highly-visible examples of the fact that smaller brands often are the real “Alpha’s” in a category, driving expectations and gaining a disproportionate share of the profits available in the category.

  It’s not hard to look at the business press to see examples of this.  What’s harder to understand is how a small marketer can gain that kind of influence over much larger competitors.

  Most of the answer to this is in attitude.  The smaller company that believes it is being overshadowed by a larger competitor creates a self-fulfilling prophesy.  Through its lack of self-confidence, it automatically looks for opportunities to maintain its “following” behavior.  It quickly falls into either a “me, too” product development mode or it combines that with a heavy dependence upon price promotion.  It doesn’t take long for everyone in the category (retailers, distributors, competitors, customers, the company’s own sales staff, and internal staff) to become convinced that the product or brand is just a follower with little hope of becoming much more.  It is discounted in everyone’s mind even before the company discounts the product on retail shelves.

  Step #1 to changing that is to catch a vision for what is possible.  The research model I use with companies quickly defines a range of possible new visions for the category, based upon the unstated, unmet needs of customers already buying products in that category.  This research sees what people wish they could buy, how they wish they could buy it, and personal needs they wish were being met based upon the decision pyramid described in detail in The Alpha Factor.  Many of those needs are unstated, because people are either embarassed to admit the core emotional and personal needs they wish could be met or because they don’t believe this category could offer an answer to any of those things.

  The result I have discovered of finding and then addressing these unstated, unmet needs is amazing.  Brands double or triple their share in short periods of time usually without discounting or even new product development.  Customers become more loyal.  And they even begin to “evangelize” about the product to others.  As long as the company recognizes the source of this new growth and customer loyalty, they can maintain this momentum for long periods.  The moment they lose sight of what actually caused the change, they begin to consciously or unconsciously undermine the things that created that growth and the product or brand begins to slide again.

  Is it possible to catch the vision for what is possible without using my research model?  Certainly.  You just have to create a way of getting past the obvious answers that customers invariably give researchers and salespeople to discover what’s behind the decisions being made and what more they would really like to be offered.  Using the decision pyramid helps a lot.  It keeps you focused upon the emotional, personal factors that really matter. 

  Just remember that customers are the only ones with the answers you need.  Your salespeople don’t know; they are being lied to by their customers who want them to believe price is everything.  Your retailers and distributors don’t know, because they want to believe that price is everything.  Your competitors don’t know, or they would already be addressing them.  Only customers know.  It’s just that they don’t always know that they know or believe that, if they reveal those answers, anyone would be able to answer them.

   

  Posted in Applying "The Alpha Factor", Business | Comments (0)

• GE’s stock drop indicative of much bigger problems for American business

  Monday, May 5th, 2008 by Wes Ball

  GE’s stock price meltdown two weeks ago is not the result of a weak company or even a weak economy, but rather of something much more threatening to every publicly-held company:  the stock market.   We have finally reached the point where the stock market has become the enemy, creating such disproportionaltely high stakes for even understandable minor falters that it puts CEOs at too much risk to be able to make really good long-term decisions.

  Short-term management has been the bane of the past decade, creating more harm to the future of American business than any short-term benefits that were generated.  Short-term management is defined by a focus upon driving continuing short-term profit results often without regard to the threat such decisions represent to the long-term growth potential of the company.   As discussed in The Alpha Factor, even short-term profit can be generated without undermining the long-term growth of a company, IF the tactics used to drive that reported profit had strategic value and were not going to weaken the company’s overall ability to generate strong future growth.

  Unfortunately, the most debilitating version of short-term, cost-side management has been driven by the extraordinary demands of the stock market.  GE’s predicament and Jeffery Immelt’s bruises over not meeting a short-term predicted profit goal demonstrate just how dangerous the emotional, “I-don’t-care-how-they-do-it-as-long-as-they-do-it” mentality of stock analysts has become.  Here is a company that is strong, vibrant, and probably better poised than most to create a strong future, yet it was spanked by both the former CEO and the stock market because of a simple, unpredicted change.

  Could it and should it have been predicted?  Possibly.  But the bigger point is the punishment administered for failure.  How can any CEO of a publicly-held company be expected to make strategic decisions in the face of such potential punishment for things that may be beyond control and have little or no long-term effect on the strength of the company?

  Combine this with the excessive incomes being showered upon CEOs even of losing companies for hitting target stock price goals, which typically only provide profit to stock holders who have little or no long-term interest in the company, and you have a formula for disaster.

  The entire “gambling” aspect of the stock market has become one of the most potent enemies of long-term success for American business.  My hope is and has been that the model for generating both long-term and short-term sustainable profit growth presented in The Alpha Factor will help provide a more rational and more valuable way of analyzing corporate stock value.

  I pray for the day that may occur.

  Posted in Business | Comments (2)