Competitive Differentiation: Why its Important?

Buying is an exercise in decision-making. Some buying decisions are made impulsively and almost unconsciously; others are made after long and careful consideration. But all decisions, that is, all logical decisions; are ultimately the end result of a mental selection process by which the buyer converges on a “best” option…

Buyers can perform that selection process in two ways: They can make the selection at random, by throwing dice, drawing straws, or just guessing. Or they can make the selection by differentiating; by acting on a perceived distinction between the available options.

Of these two ways of deciding, differentiation is by far the more “natural” because the more rational process to sort and select one product or service from another. Nobody (well almost nobody) makes a decision, especially a potentially costly buying decision, by random choice unless there is no distinguishable difference between the options.

Think back to the last major purchase you made yourself; your car, an insurance policy, your house. Think about how you came to buy the product or service and the decision-making process that you went through. If you’re like most informed buyers, you did some comparison shopping and researched the options seeking out the distinctive feature or capabilities so that you would make a wise decision. This is typical of intelligent buying.

Now as a sales person you should recognize that this is the exact same process that customers will use to make their buying decisions. In a competitive situation it’s critical that you assist the customer to understand the distinctions between the available options in order to make a decision: This is “differentiation”.  In an article by Dena Waggoner and revised by R. Anthony Inman, they outlined the following:

PRODUCT DIFFERENTIATION: Product differentiation is achieved by offering a valued variation of the physical product. The ability to differentiate a product varies greatly along a continuum depending on the specific product. There are some products that do not lend themselves to much differentiation, on the other hand, many (most) can be highly differentiated. In Principles of Marketing (1999), authors Gary Armstrong and Philip Kotler note that differentiation can occur by manipulating many characteristics, including features, performance, style, design, consistency, durability, reliability, or reparability.

SERVICE DIFFERENTIATION: Companies can also differentiate the services that accompany the physical product. Two companies can offer a similar physical product, but the company that offers additional services can charge a premium for the product. A company may offer products that are very similar to those offered by many other companies; but these products are usually accompanied with an informational, instructional training session provided by the consultant. This additional service allows the company to charge more for their product than if they sold the product through more traditional channels.

PEOPLE DIFFERENTIATION: Hiring and training better people than the competitor can become an immeasurable competitive advantage for a company. A company’s employees are often overlooked, but should be given careful consideration. This human resource-based advantage is difficult for a competitor to imitate because the source of the advantage may not be very apparent to an outsider.

As a Money magazine article reported, Herb Kelleher, CEO of Southwest Airlines, explains that the culture, attitudes, beliefs, and actions of his employees constitute his strongest competitive advantage: “The intangibles are more important than the tangibles because you can always imitate the tangibles; you can buy the airplane, you can rent the ticket counter space. But the hardest thing for someone to emulate is the spirit of your people.”

People differentiation is important when customers deal directly with employees. Employees are the frontline defense against waning customer satisfaction. Other companies can differentiate itself by having a recognizable person at the top of the company. A recognizable CEO can make a company stand out. Some CEOs are such charismatic public figures that to the customer, the CEO is the company. If the CEO is considered reputable and is well-liked, it speaks very well for the company, and customers pay attention. National media coverage of CEOs has increased tremendously, jumping 21 percent between 1992 and 1997 (Gaines-Ross).

IMAGE DIFFERENTIATION: Armstrong and Kotler pointed out in Principles of Marketing that when competing products or services are similar, buyers may perceive a difference based on company or brand image. Thus companies should work to establish images that differentiate them from competitors. A favorable brand image takes a significant amount of time to build. Unfortunately, one negative impression can kill the image practically overnight.

QUALITY DIFFERENTIATION: Quality is the idea that something is reliable in the sense that it does the job it is designed to do. When considering competitive advantage, one cannot just view quality as it relates to the product. The quality of the material going into the product and the quality of production operations should also be scrutinized. Materials quality is very important. The manufacturer that can get the best material at a given price will widen the gap between perceived quality and cost. Greater quality materials decrease the number of returns, reworks, and repairs necessary. Quality labor also reduces the costs associated with these three expenses.

INNOVATION DIFFERENTIATION: When people think of innovation, they usually have a narrow view that encompasses only product innovation. Product innovation is very important to remain competitive, but just as important is process innovation. Process innovation is anything new or novel about the way a company operates. Process innovations are important because they often reduce costs, and it may take competitors a significant amount of time to discover and imitate them.

Some process innovations can completely revolutionize the way a product is produced. When the assembly line was first gaining popularity in the early twentieth century, it was an innovation that significantly reduced costs. The first companies to use this innovation had a competitive advantage over the companies that were slow or reluctant to change.

SUSTAINABLE COMPETITIVE ADVANTAGE: The achievement of competitive advantage is not always permanent or even long lasting. Once a firm establishes itself in an area of advantage, other firms will follow suit in an effort to capitalize on their similarities. A firm is said to have a “sustainable” competitive advantage when its competitors are unable to duplicate the benefits of the firm’s strategy. In order for a firm to attain a “sustainable” competitive advantage, its generic strategy must be grounded in an attribute that meets four criteria. It must be:

  • Valuable—it is of value to customers.
  • Rare—it is not commonplace or easily obtained.
  • Inimitable—it cannot be easily imitated or copied by competitors.
  • Non-substitutable—customers cannot or will not substitute another product or attribute for the one providing the firm with competitive advantage.

SELECTING A COMPETITIVE ADVANTAGE: A company may be lucky enough to identify several potential competitive advantages, and it must be able to determine which are worth pursuing. Not all differentiation is important. Some differences are too subtle, too easily mimicked by competitors, and many are too expensive. A company must be sure the customer wants, understands, and appreciates the difference offered.  A competitive advantage can make or break a firm, so it is crucial that all managers are familiar with competitive advantages and how to create, maintain, and benefit from them.

Witty Laws & Principles that Govern our Lives…

We live in a society that is govern by natural laws and principles that dictates every aspect of our working and leisure life. A few of the more interesting ones are outlined as follows:

  • Parkinson’s Law (not to be confused with the Parkinson Illness)
  • Parkinson’s Law of Triviality
  • Murphy’s Laws
  • Peter’s Principles
  • Dilbert’s Principles
  • Moore’s Law

Parkinson’s Law

First articulated by Cyril Northcote Partinson as the first sentence of a humorous essay published in The Economist in 1955. It was later reprinted together with other essays in the book Parkinson’s Law: The Pursuit of Progress (London, John Murray, 1958). Parkinson derived the adage from his extensive experience in the British Civil Service.  “Work expands so as to fill the time available for its completion”

Much of the essay is dedicated to a summary of purportedly scientific observations supporting his law, such as the increase in the number of employees at the Colonial Office while Great Britain’s overseas empire declined (indeed, he shows that the Colonial Office had its greatest number of staff at the point when it was folded into the Foreign Office because of a lack of colonies to administer). He explains this growth by two forces: (1) “An official wants to multiply subordinates, not rivals” and (2) “Officials make work for each other.” He notes in particular that total of those employed inside a bureaucracy rose by 5-7% per year “irrespective of any variation in the amount of work (if any) to be done.”

Parkinson’s Law could be generalized further still as: “The demand upon a resource tends to expand to match the supply of the resource.” An extension is often added to this, stating that:  “The reverse is not true.” This generalization has become very similar to the economic ‘law of demand’; that the “lower the price of a service or commodity, the greater the quantity demanded.” Several other laws have been attributed to Parkinson, these include:

  • Parkinson’s First Law: Work expands to fill the time available.
  • Parkinson’s Second Law: Expenditures rise to meet income.
  • Parkinson’s Third Law: Expansion means complexity; and complexity decay.
  • Parkinson’s Fourth Law: The number of people in any working group tends to increase regardless of the amount of work to be done.
  • Parkinson’s Fifth Law: If there is a way to delay an important decision the good bureaucracy, public or private, will find it.
  • Parkinson’s Law of Meetings: The time spent in a meeting on an item is inversely proportional to its value (up to a limit).
  • Parkinson’s Law of 1000: An enterprise employing more than 1000 people becomes a self-perpetuating empire, creating so much internal work that it no longer needs any contact with the outside world.
  • Mrs. Parkinson’s Law: Heat produced by pressure expands to fill the mind available, from which it can pass only to a cooler mind.

A bestselling author, T. Harv Eker of “Secrets of the Millionaire Mind”, shares some of his view about Parkinson’s Law: Poor and most middle-class people believe that the only way to get rich is to earn a lot of money. They believe that only because they’ve never been there. They don’t understand Parkinson’s Law, which states, “Expenses will always rise in direct proportion to income.”

“Here’s what’s normal in our society. You have a car, you make more money, and you get a better car. You have a house, you make more money, and you get a bigger house. You have clothes, you make more money, and you get nicer clothes. You have holidays, you make more money, and you spend more on holidays.

Of course there are a few exceptions to this rule… very few! In general, as income goes up, expenses almost invariably go up too. That’s why income alone will never create wealth.” “Therefore, if your intention is to be a millionaire or more, you must focus on building your net worth, which is based on much more than just your income.”

Dr. Paul Hein, in his article “Parkinson’s: The Law, Not the Disease”, has an interesting prospective. He says, “no doubt it is the dream of scientists to discover one law or one logical explanation, verified by experimentation, and not, as yet, disproved, to explain everything observed in the physical universe. Einstein’s theory of relativity may have been a giant step in that direction; I am not enough of a scientist to know, or, truth be told, to care. Dr. Hein goes on to say: “But in 1958, Professor Cyril N. Parkinson explained most of the phenomena we observe in society with his law: Work expands to fill the time available. What a simple, yet profound, insight!”

The verification of Parkinson’s Law is most easily found in government. The professor pointed out that bureaucrats, usually complaining of overwork, want assistants, but not competitors. Thus a busy bureaucrat will not hire someone to share the work, but rather, a couple of assistants to help him, and compete with each other, not him. Parkinson also observed that bureaucrats make work for one another.

Thus, assistant A will ask assistant B to check his research on a given subject. B will comply, asking A for a list of sources which he could use in his verification. A might reply with a list, asking B if he had any further suggestions, etc. A and B would, in short order, become so busy that each of them hired a couple of assistants, thus bringing to seven the number of people doing the work formerly done by one. And they would all be busy!”

“A few years earlier, in 1953, newly-elected President Dwight Eisenhower established the cabinet position of Health, Education and Welfare. He named ‘Oveta Culp Hobby’ the first Secretary of HEW. What in the world did she do, asked Dr. Hein? I used to wonder about it. She couldn’t, after all, just continue the work of her predecessor, because there was no predecessor. She couldn’t just continue with the work already being done, because there was no work already being done.

The agency was brand new, and so was she. Professor Parkinson helped me understand. My hunch is that the first thing she did was organize a staff of underlings. Then she scheduled meetings, lots of them. She analyzed the results of these meetings, and had more meetings to discuss the analyses. She assigned her assistants the job of developing a list of priorities of possible tasks to be undertaken by HEW. Why, in no time, she was as busy as could be! In fact, her agency eventually split in two: Health and Human Services, and Education. And they’re all working like beavers! No doubt, if they stop to think about it, they marvel that the nation, at one time, made do without them.”

“The good professor directed us to something very basic about human nature: we all attach great significance to our work, and tend to expand it as far as possible; and, as a sort of corollary, we make use of what opportunities arise. Recall the move made around the motto: “if you build it they will come?” It’s the same idea.”

Parkinson’s Law of Triviality

Parkinson’s Law of Triviality is the idea that organisation give disproportionate time to insignificant items. An example often used is the discussion of a multi-million dollar power plant. No one really understands the implications so it gets waved through the committee with little discussion.

However, when it comes to the issue of whether to provide a bike-shed for workers, there could be an animated discussion about – whether to build it, how to build, what color, etc. The reason is people can relate to bike-sheds – everyone can have an opinion on this issue. The billion dollar issue never gets discussed – instead the $2,000 bike shed can take many hours of discussion.

 Peter’s Principle

The Peter Principle is the principle that “in a hierarchy every employee tends to rise to their level of incompetence”. It was formulated by Dr. Laurence J. Peter and Raymond Hull in their 1969 book The Peter Principle, a humorous treatise which also introduced the ‘salutary science of hierarchiology’, inadvertently founded by Peter.

It holds that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent (their “level of incompetence”), and there they remain, being unable to earn further promotions. This principle can be modeled and has theoretical validity. Peter’s Corollary states that “in time, every post tends to be occupied by an employee who is incompetent to carry out their duties” and adds that “work is accomplished by those employees who have not yet reached their level of incompetence”.

Murphy’s Law

An adage that is typically stated as: “Anything that can go wrong, will go wrong”. According to the book ‘A History of Murphy’s Law’  by author Nick T. Spark, differing recollections years later by various participants make it impossible to pinpoint who first coined the saying Murphy’s Law. The law’s name supposedly stems from an attempt to use new measurement devices developed by the eponymous Edward Murphy. The phrase was coined in adverse reaction to something Murphy said when his devices failed to perform and was eventually cast into its present form prior to a press conference some months later.

From its initial public announcement, Murphy’s Law quickly spread to various technical cultures. Before long, variants had passed into the popular imagination, changing as they went. Author Arthur Bloch has compiled a number of books full of corollaries  to Murphy’s law and variations thereof. These include the original Murphy’s Law and other reasons why things go wrong  and Murphy’s Law Book Two, which are very general, and the more specific volumes Murphy’s Law: Doctors: Malpractice Makes Perfect and Murphy’s Law: Lawyers: Wronging the Rights in the Legal Profession!.

Dilbert’s Principle

The Dilbert Principle seems to be an extension to the Peter Principle. According to the Peter Principle, the subject has been competent at some job in his past. The Dilbert Principle attempts to explain how a person who has never been competent at anything at any point in time can still be promoted into management. Of course, both the Peter Principle and the Dilbert Principle may be operating in the same organization at the same time. A few Dilbert favorite quotes:

  • 63% of all statistics are made up… including this one.
  • Accept that some days you are the pigeon and some days the statue.
  • An optimist is simply a pessimist with no job experience.
  • And bring me a hard copy of the Internet so I can do some serious surfing.
  • Change is good. You go first.
  • Creativity is allowing yourself to make mistakes. Art is knowing which ones to keep.
  • Engineers like to solve problems. If there are no problems handily available, they will create their own problems.
  • I get mail; therefore I am.
  • I respectfully decline the invitation to join your hallucination.
  • If at first you don’t succeed, try again. Then quit. No use being a fool about it.

Moore’s Law

The law is named after Intel co-founder Gordon E. Moore, who described the trend in his 1965 paper and the term “Moore’s law” was coined around 1970 by the Caltech professor and entrepreneur Carver Mead. Moore’s law describes a long-term trend in the history of computing hardware and the number of transistors that can be placed inexpensively on an integrated circuit has doubled approximately every two years. The trend has continued for more than half a century and is not expected to stop until 2015 or later.

Predictions of similar increases in computer power had existed years prior. Alan Turing in a 1950 paper had predicted that by the turn of the millennium, computers would have a billion words of memory. Moore may have heard Douglas Engelbart, a co-inventor of today’s mechanical computer mouse, discuss the projected downscaling of integrated circuit size in a 1960 lecture. A New York Times article published August 31, 2009, credits Engelbart as having made the prediction in 1959.

Moore slightly altered the formulation of the law over time, in retrospect bolstering the perceived accuracy of his law. Most notably, in 1975, Moore altered his projection to a doubling every two years. Despite popular misconception, he is adamant that he did not predict a doubling “every 18 months”. However, David House, an Intel colleague, had factored in the increasing performance of transistors to conclude that integrated circuits would double in performance every 18 months.

Greed: Greed is good, Greed is right, Greed works: Machiavellian…

“Greed, for lack of a better word, is good. Greed is right. Greed works.” remarks of corporate raider Gordon Gekko in the film Wall Street, played by Michael Douglas.

“There have always been examples of isolated business enterprises engaging in unethical or illegal activities, but the spectacular and concentrated nature of recent events have refocused our attention on what’s wrong with corporate America. Is it Gekko-like greed or the transformation of government watchdogs into lapdogs? Is it a society that operates on the borders of the law without crossing the line?

Is it a general laxity in moral values in our society? Heady questions indeed. An interesting parallel to the previously unchecked behavior of these leaders is the stream of books published in the last third of the 20th century, and reaching a crescendo in the last decade, arguing that the writings of Niccolo Machiavelli, a 16th century Renaissance thinker, could provide the key to effective corporate governance.”

“Given Machiavelli’s reputation this development is perplexing, if not troubling. The application of Machiavelli to management and business raises questions and problems that are generic to the migration and transformation of ideas created in one specific historical and social context to other fields and time periods. What are the presuppositions of such a transformation? What is problematic about applying these presuppositions to the modern business world?

In addition, attempting to transfer such a complex and ambiguous thinker, as Machiavelli raises more specific concerns. How relevant are the precepts on leadership and power formulated for princes in Renaissance Italy as lawmakers to the functioning of 21st century corporate executives?” To what extent are Machiavelli’s precepts applicable to the modern corporate world? These are issues discussed in article “Machiavelli & Modern Business” by Peter J. Galie and Christopher Bopst.

In an article ‘Machiavelli & the art of management” by Shyamal Majumdar, he says that “It’s easy to dismiss the Machiavellian approach to running organizations in today’s kinder, gentler world of new age, team-based management.  But some management experts like James O’ Toole, Senior Fellow of the Aspen Institute, finds some merit in the timeless rules and stratagems penned by Niccolo Machiavelli, who entered public life in 1494 as a clerk and became a secretary of Florence four years later. Make no mistake. O’Toole is not an unabashed admirer of the man who believed that leaders can accomplish their goals only by being tough, manipulative, dictatorial, or paternalistic as the situation requires.”

Indeed, O’Toole feels most of Machiavelli’s principles are outdated in the present context. Take this example of the manipulative and paternalistic style of management. When Henry Ford set up his first plant, he was generous in providing– free schools, hospitals, subsidized food for his workers; something unheard of at that time. The “labor welfare” measures were then termed revolutionary and progressive, but Ford’s approach was essentially Machiavellian (manipulative) in nature. His purpose was that his workers should have more disposable income so that they could turn out to be potential and captive buyers of the cars he produced.

This met with some success. But to Ford’s and the industry’s utter surprise, the Ford workers one day went on strike as they found their owner was trying to be too much of a “paternalistic” manager by trying to control their lives through dictates such as one which said no worker’s children could study in any other school but the one he had set up. It is wrong to assume – as Machiavelli had done – that it’s a jungle of greed and treachery out there in world of business.

But the fact is, however devious his principles may sound to the moral brigade, a careful reading of his ideas in his memorable work The Prince shows he was essentially trying to develop the concept of an ideal prince (CEO in the present context) who would make use of many of the techniques of the enlightened rulers during his time to forge a humane and stable government.

Many may not know that Machiavelli was motivated in his philosophy by the same goals as Confucius – both had a deep underlying concern for the good of the people through stability in government. And their ideas have applications in modern organizations even more than 500 years later.

Why did Machiavelli recommend that a prince must be ready to be cruel and devious? He himself gives the answer: in the long run, this is often kinder than to expose citizens (staffers in an organization) to the turmoil let loose by a weak ruler.

Read it in Machiavelli’s own words: “A man who wishes to make a profession of goodness in everything must necessarily come to grief among so many who are not good. Therefore it is necessary for a ruler, who wishes to maintain himself, to learn how not to be good, and to use this knowledge and not use it, according to the necessity of the case”. The operative word here, as O’Toole points out, is “according to the necessity of the case”, which in other words means, “it all depends”. Your management style cannot be straitjacketed and has to change as the situation demands.

Even the worst of Machiavelli’s critics should find nothing wrong with these arguments. After all, expediency is the name of the game in effective management. His colleagues often derided one of the great business leaders – GE’s Jack Welch – as a modern-day Machiavelli. Listen to the Machiavellian ring in Welch’s own words in 1982: “Managements that hang on to weakness for whatever reason – tradition, sentiment, goodness or their own weakness – won’t be around in 1990”.

But while adopting this seemingly “cruel” style of management advocated by Machiavelli, Welch didn’t forget the thinker’s advocacy of a “human” face. Welch believed the victims of layoffs deserved compassionate treatment – not only generous financial settlements, but humane consideration of their feelings. He personally answered letters of complaint from laid-off employees, and directly intervened in cases of injustice that came to his attention. Executives who mismanaged the downsizing felt his wrath.

The past and present Machiavellis were only practicing a dictum that has now become an all-too-familiar phrase: Business reforms with a human face.

Change Sales Behavior: It Fails, Most of the Time…

Research conducted by both the Sales Benchmark Index and Gallup indicates that individuals fall into three distinct groups when it comes to their attitudes toward sales change:

• 20 percent of people are early adopters. These are the people who immediately embrace change.

• 60 percent of people are “fence-sitters,” as Greg Alexander, CEO of Sales Benchmark Index, puts it. These individuals resist change in a passive way, neither supporting the change initiative, nor directly acting against it.

• 20 percent remaining are entrenched in their own methods and will not accept the change. The reason that such a low percentage of salespeople are willing adopters of change, Alexander says, is that frontline management and executives have not provided a clear link between what the change means for the organization and what it means for the individual. In other words, salespeople wonder: What’s in it for me? And, will the change really stick this time?

In 1996, John Kotter published “Leading Change”. Considered by many to be the seminal work in the field of change management, Kotter’s research revealed that only 30 percent of change programs succeed. Since the book’s release, literally thousands of books and journal articles have been published on the topic, and courses dedicated to managing change are now part of many major MBA programs.

Yet according to article “The irrational side of change management” by Carolyn Aiken and Scott Keller published as a McKinsey Report in April 2009; a McKinsey survey in 2008 of 3,199 executives around the world found, as Kotter did, that only one transformation in three succeeds. Other studies over the past ten years reveal remarkably similar results. It seems that, despite prolific output, the field of change management hasn’t led to more successful change programs.

“It also hasn’t helped that most academics and practitioners now agree on the building blocks for influencing employee attitudes and management behavior. McKinsey’s Emily Lawson and Colin Price provided a holistic perspective in “The psychology of change management,” which suggests that four basic conditions are necessary before employees will change their behavior: a) a compelling story, because employees must see the point of the change and agree with it; b) role modeling, because they must also see the CEO and colleagues they admire behaving in the new way; c) reinforcing mechanisms, because systems, processes, and incentives must be in line with the new behavior; and d) capability building, because employees must have the skills required to make the desired changes.”

In their research and by working with companies attempting change, Aiken & Keller have identified insights into how human nature gets in the way of successfully applying the four conditions (noted above) required for behavioral change. As they describe these insights, they’ll show how various companies have, either by conscious awareness or simple luck, overcome or leveraged counterintuitive sides of human behavior in making change happen.

Creating a compelling story: Change-management thinking extols the virtues of creating a compelling change story, communicating it to employees, and following it up with ongoing communications and involvement. This is good advice, but in practice there are three pitfalls to achieving the desired impact.

1. What motivates you doesn’t motivate most of your employees. We see two types of change stories consistently told in organizations. The first is the “good to great” story: something along the lines of, “Our historical advantage has been eroded by intense competition and changing customer needs; if we change, we can regain our leadership position.” The second is the turnaround story: “We’re performing below industry standard and must change dramatically to survive. We can become a top-quartile performer in our industry by exploiting our current assets and earning the right to grow.”

These stories both seem intuitively rational, yet they too often fail to have the impact that changes leaders’ desire. Research by a number of leading thinkers in the social sciences, such as Danah Zohar, has shown that when managers and employees are asked what motivates them the most in their work they are equally split among five forms of impact—impact on society (for instance, building the community and stewarding resources), impact on the customer (for example, providing superior service), impact on the company and its shareholders, impact on the working team (for example, creating a caring environment), and impact on “me” personally (my development, paycheck, and bonus).

This finding has profound implications for leaders. What the leader cares about (and typically bases at least 80 percent of his or her message to others on) does not tap into roughly 80 percent of the workforce’s primary motivators for putting extra energy into the change program. Change leaders need to be able to tell a change story that covers all five things that motivate employees. In doing so, they can unleash tremendous amounts of energy that would otherwise remain latent in the organization.

2. You’re better off letting them write their own story. Well-intentioned leaders invest significant time in communicating their change story. Road shows, town halls, and Web sites are but a few of the many approaches typically used. Certainly the story (told in five ways) needs to get out there, but the insight we are offering is that much of the energy invested in communicating it would be better spent listening, not telling.

3. It takes a story with both + and – to create real energy. The “deficit based” approach—which identifies the problem, analyzes what’s wrong and how to fix it, plans, and then takes action—has become the model predominantly taught in business schools and is presumably the default change model in most organizations. Research has shown, however, that a story focused on what’s wrong invokes blame and creates fatigue and resistance, doing little to engage people’s passion and experience.

 “The fact is that human begins consistently think they are better than they are – a phenomenon referred to in psychology as a self-serving bias.”

This has led to the rise of the “constructionist based” approach to change, where the change process is based on discovery (discovering the best of what is), dreaming (imagining what might be), designing (talking about what should be), and destiny (creating what will be). The problem with this approach is that an overemphasis on the positive can lead to watered-down aspirations and impact. The reason is that, as humans, we are more willing to take risks to avoid losing what we’ve got than we are to gain something more. Some anxiety is useful when it comes to spurring behavioral change.

Role modeling: Conventional change management suggests leaders should take actions that role model the desired change and mobilize a group of influence leaders to drive change deep into the organization. Unfortunately, this does not necessarily deliver the desired impact.

4. Leaders believe mistakenly that they already “are the change.” Most senior executives understand and generally buy into Gandhi’s famous aphorism;  “Be the change you want to see in the world.”

They commit themselves to personally role modeling the desired behaviors. And then, in practice, nothing significant changes. The reason for this is that most executives don’t count themselves among the ones who need to change. How many executives when asked privately will say no to the question, “Are you customer focused?” and yes to the question “Are you a bureaucrat?” Of course, none.

Consider that 94 percent of men rank themselves in the top half according to male athletic ability. Whereas conventional change-management approaches surmise that top team role modeling is a matter of will or skill, the truth is that the real bottleneck to role modeling is “knowing” what to change at a personal level.

5. “Influence leaders” aren’t a panacea for making change happen. Almost all change-management literature places importance on identifying and mobilizing those in the organization who either by role or personality (or both) has disproportionate influence over how others think and behave. We believe this is sound and timeless advice. However, we have observed that the role of influence leaders has gradually shifted—from being perceived as a helpful element of a broader set of interventions, to a panacea for making change happen.

Reinforcing mechanisms: Conventional change management emphasizes the importance of reinforcing and embedding desired changes in structures, processes, systems, target setting, and incentives. We agree. To be effective, however, these mechanisms must take into account that people don’t always behave rationally.

6. Money is the most expensive way to motivate people. Companies that try to link the objectives of change programs to the compensation of staff find that it rarely enhances their motivation for change to the extent desired. The reason for this is as practical as it is psychological in nature. The reality is that in the vast majority of companies, it is exceedingly difficult to incorporate a meaningful link to the change program within compensation systems that are based on a vast array of metrics. Moreover, many studies have found that for human beings satisfaction equals perception minus expectation (an equation often accompanied by the commentary, “reality has nothing to do with it”).

7. The process and the outcome have got to be fair. Employees will go against their own self-interest if the situation violates other notions they have about fairness and justice. In making any changes to company structures, processes, systems, and incentives, change managers should pay what might strike them as an unreasonable amount of attention to employees’ sense of the fairness of the change process and its intended outcome. Particular care should be taken where changes affect how employees interact with one another (such as head count reductions and talent-management processes) and with customers (sales stimulation programs, call center redesigns, and pricing).

Motivating Salespeople and Sales Organizations to Embrace Change: Building on the aforementioned discussion: Some sales practitioners say; “millions of dollars are wasted every year on sales training programs that are designed to change salespeople’s behavior and they don’t generate any extra sales. Corporate giants and small start ups spend massive budgets on bringing in outside training companies and get no return on their investment.”

“I have never seen a salesman, or woman, sell more for any length of time, after attending a sales training program. You can’t instill a lasting change of any significance by sending someone on a short course to learn sales skills.” 

“Salespeople get distracted with the day to day problems, and the new sales method  gets forgotten, and salespeople go back to the same old ways of selling with the same old marginal results.”

However, there are some methodologies and programs that embody the basic principles of change and have demonstrated a higher rate of success for affecting change in sales behavior, e.g.; winning sales organizations embrace sales change with methods that are based on “principles”, “process”, “discipline”… The practices of these programs are based on a very simple philosophy, as quoted by the Chinese philosopher Confucius;    “What I hear, I forget; what I see, I remember; what I do, I understand.”

Basic Elements for Changing Salespeople and Sales Organizations are as follows:

Create a powerful coalition: The promoters of change must involve all levels of management: CEO, executive team, sales leadership and frontline sales manager, and they must all drive change on a day-to-day basis. The sales leadership must involve frontline managers in the change initiative by demonstrating to them that they are solving a problem or embrace an opportunity.

Keep the process simple: Use this rule of thumb: “Whenever you can’t describe your vision in five minutes or less, you’re in for trouble. That means your process is too complex. If the sales force can’t grasp how the change will help them retain and acquire more customers, they’re unlikely to participate in the initiative.”

Explain why a change is needed: Why would anyone change a process that seems to work? People won’t accept change unless they believe the change will truly make a difference. It’s important to explain to the sales force why the change is attainable and quantify for them what the benefit will be if they embrace the change.

Create short-term wins:  “Sales leaders must work to get short-term wins with the new initiative and then promote the victories. That allows momentum to build and highlight success; it raises the confidence level for the change, and those responsible for implementation realize it’s attainable.”

Focus on adoption, reinforcement and culture: Change initiative must be institionalized in a company’s culture and the process continually reinforced, and performance numbers consistently delivered, over a period of time.  Greg Alexander at Sales Benchmark Index says that “sales leaders make a conscious attempt to show salespeople how specific behaviors and attitudes have improved performance. By making the change something that affects individuals, it becomes something that salespeople will do in their own self-interest. That’s how a change initiative stops being something that people resist; and starts being the way things are done.”

According to Alexander, “Sales leaders can take another step to make sure everyone is on board by positively reinforcing the early adopter sales people; those 20 percent who adopt the process early, and by removing those who have demonstrated they won’t change. Sales leaders need to work within the process to keep the early adopter salespeople in early-adoption mode, and prevent them from falling into the 60 percent who passively resist change. Rewarding early adopters defends against a future change-weary attitude. Passive resistance is often borne of failing to see the results of too many change initiatives.”

Alexander continues and says, “Show the ‘fence-sitters’ that they should emulate the behavior of the early adopters by highlighting and rewarding them when they have a success as a result of the new process. “And, if you ask the bottom 20 percent; people who won’t change, to leave, the middle 60 percent will realize there’s equal consequence for not getting behind the initiative.”

When sales leadership displays commitment and demonstrates to the sales team that change will positively affect them as individuals, it will make a difference. A successful change initiative avoids common pitfalls; particularly tolerating complacency and permitting obstacles, measures progress, creates accountability for individual salespeople as well as frontline management, and encourages executive sponsorship.”

Changing Sales Behavior is a Realistic Expectation: Real-life successes suggestions that combination of methodologies and Alexander’s philosophies can have a significant impact effectiveness in changing sales behavior.

Talent Mismatch: Wrong People; Right Job; Right Place; Right Time…

Manpower Inc. (NYSE: MAN) ** surveyed over 35,000 employers across 36 countries and territories (including the U.S.A.) during the first quarter of 2010 to determine the impact of talent shortages on today’s labor markets…

The results of the fifth annual Talent Shortage Survey revealed that 31 percent of employers worldwide are having difficulty filling positions due to the lack of suitable talent available in their markets, which is an increase of one percentage point over last year’s survey. Second on the list of tough-to-fill jobs: sales representatives.

Although the current global economic situation has increased the number of overall job seekers in labor markets worldwide, there is still a notable talent shortage in many countries and industry sectors. So the immediate problem is not the number of potential candidates. Rather, it is a talent mismatch: There are not enough sufficiently skilled people in the right places at the right times.

Simultaneously, employers are seeking ever more specific skill sets and combinations of skills – not just technical capabilities alone, but perhaps in combination with critical thinking skills or other qualities that will help drive the company forward. As a result, the “right” person for a particular job is becoming much harder to find. And the problem shows no signs of easing.

The top 10 jobs that employers are having difficulty filling across the 36 countries and territories surveyed are (ranked in order):

  1. Skilled Trades*
  2. Sales Representatives
  3. Technicians (primarily production/operations, engineering, or maintenance)
  4. Engineers
  5. Accounting & Finance staff
  6. Production operators
  7. Secretaries, PAs, Administrative Assistance, Office Support Staff.
  8. Management/Executives
  9. Drivers
  10. Labors

The top 10 skills categories that appeared in the 2009 worldwide survey results also appear on this year’s list. However, some of the individual rankings have changed. As the results show, lack of available talent is not confined to highly skilled knowledge work. Once again, Skilled Trades tops the global list of difficult jobs to fill.

Rounding out the top four are Sales Representatives, Technicians and Engineers. Accounting & Finance Staff climbs one spot to the fifth position, while Production Operators (sixth) and the Secretaries, PAs, Administrative Assistants & Office Support Staff category (seventh) each climb two positions. The Laborers category drops three positions to tenth.

Note that employers often identified other in-demand skills in the survey. If a particular job role does not appear on the list, it should not be assumed that the skill is not also in demand. It simply means that the surveyed employers have identified more pressing needs in other skills categories.

 (Total number of respondents: 35,650; Employers indicating difficulty filling positions: 31% Employers indicating no difficulty filling positions: 69%; Margin of error: +/- 0.5%)

*In this survey, Skilled Trades refers to a broad range of job titles that require workers to possess specialized skills, traditionally learned over a period of time as an apprentice. Examples of skilled trade jobs are: electricians, bricklayers, carpenters, cabinetmakers, masons, plumbers, welders, etc. Where possible, these jobs are listed in order of highest demand for each country.

**Manpower, Inc. describes the employment trends in more detail in a 20-page report “2010 Talent Shortage Survey” dated May 2010. Visit “Research Center” at ManPower for the full Report.

Talent Management

Talent management: Finding, developing and keeping talent is a top concern for business executives. This encompasses the acquisition, assessment, development and retention of effective and productive workforce, and especially salespeople. Companies are not only having trouble finding more strategic and qualified (i.e., specific experience and expertise) salespeople, but they’re also having trouble keeping them.

Talent management is a process that emerged in the 1990s and continues to be adopted, as more companies come to realize that their employees’ talents and skills drive their business success. Companies that have put into practice talent management have done so to solve an employee retention problem. But companies are beginning to realize that the issues involved in employee retention can be very complicated and may even  include the shifting culture of the workplace.

The issue with many companies today is that their organizations put tremendous effort into attracting employees to their company, but spend little time into retaining and developing talent. A talent management system must be worked into the business strategy and implemented in daily processes throughout the company as a whole.  It cannot be left solely to the human resources department to attract and retain employees, but rather must be practiced at all levels of the organization.

This is particularly true with salespeople where the employers no longer want the nearest warm bodies to represent their companies. They’re becoming more strategic about hiring salespeople. They want people who know the company, know the industry and know the people they’re selling to, people who have proven track records. As a result companies more frequently are using “assessment tools” that helps to pinpoint what differentiates salespeople; who are very good at what they do from those that are challenged by the same position.

The process of attracting and retaining profitable employees is of strategic importance, as competition increases between firms. In 1997, a McKinsey study coined term: “war for talent”. The knowledge age has moved the basis of economic value into information assets, and now the competitive battlefront is for the best people because they are the true creators of value…

Negotiation: Strategy for Mutual Gain…

What’s your response to that time-tested negotiating classic-move? “We are all ready to sign this Master Agreement, right now; and we want to thank you for having invested four months with us to develop the terms. Now, the only thing I need you to do for me is to discount the final contract figure by 10% and it’s a done deal.”

If there’s one thing everybody knows about sales, it’s that serious negotiation starts when buyer and seller sit down together to close a deal; Right? Think aga…  In any successful negotiation, the real work begins long before either party comes to the table.

“When people hear the word ‘negotiation,’ they think ‘Oh, that happens at the end of the sales process,’” says ‘Grande Lum’, a nationally known authority on negotiation and author of “The Negotiation Fieldbook: Simple Strategies to Help You Negotiate Everything.”  In fact, he and other experts say, the best salespeople start thinking about negotiation much earlier–sometimes even before they’ve made the first contact.

Specifically, top performers prepare for those at-the-table talks by learning as much as possible about the other party’s needs and concerns. “You have to look for their underlying interests,” says Lum, “You need to understand what their personal motivators are, what they’re really after.”

Negotiation is not a destination that you reach at the end of a sale, nor is negotiation about one party winning and the other losing. Negotiation is part of each step of the sales process, not a one-time event. It begins prior to the first sales call and ends with customer recognition of the value your product or service brought to his business. Interests, options and deal-breakers..

Too often, salespeople don’t dig enough to find the customer’s real interests. They need to find out whether the client’s focus is around price, or around the terms and conditions or around something else.

In general the goal is to satisfy customers and provide them with services they consider valuable. When you negotiate from the very beginning of sales process, you uncover the buying organization’s interests and can therefore generate more creative options. You learn the criteria on which their interests are based, and you discover deal-breakers. You explore how both parties can win. Perhaps even more importantly, you discover if both parties can win; after all, it’s far better to lose quickly and exit the situation, thereby wasting fewer resources, than to lose slowly. Achieving the end goal

Additionally, since the end goal is repeating customers, there’s no advantage in creating a situation where you win and your client loses. If your negotiation leaves a bad taste in your customer’s mouth, it’s less likely that they’ll come back to you for more products or services. Conversely, by negotiating in a way that allows both parties to win, you set up an environment that is conducive to a long-term relationship. Incorporating negotiation into the early stages of a working sales process leads to deals–and client relationships–that are more mutually beneficial.

“Perhaps the most famous negotiation parable involves an argument over an orange. The most obvious approach was to simply cut it in half, each person getting a fair share. But, when the negotiators began talking to each other, exchanging information about their interests, a better solution to the problem became obvious.

The person wanting the orange for juice for breakfast took that part and the person wanting the rind for making marmalade took that part. Both sides ended up with more. Neither agreement is particularly creative. The parable of the orange becomes a story about creativity when both parties decide to cooperate in planting an orange tree or even an orchard.”

Getting to YES: The best-selling 1981 non-fiction book “Getting to YES: Negotiating Agreement Without Giving In” by ‘Roger Fisher’ and ‘William L. Ury’; focus on psychology of negotiation, i.e.; “principled negotiations”, finding acceptable compromise by determining which needs are fixed and which flexible for negotiators… “Getting to Yes” describes their method principled negotiations to reach an agreement whose success is judged by three criteria: 

  • It should produce a wise agreement if agreement is possible.
  • It should be efficient.
  • It should improve or at least not damage the relationship between the parties.

The authors argue that their method can be used in virtually any negotiation. Issues are decided upon by their merits and the goal is a win-win situation for both sides. Below is a summary of some of the key concepts from the book. The four steps of a principled negotiation are:

  • Separate the people from the problem
  • Focus on interests, not positions
  • Invent options for mutual gain
  • Insist on using objective criteria

In principled negotiations, negotiators are encouraged to take the view that all the participants are problem solvers rather than adversaries. The authors recommend that the goal should be to reach an outcome “efficiently and amicably.”

 

Selfridge vs Kelleher: Are Customers Right or Wrong?

The phrase:    “The customer is always right”

is attributed to Gordon Selfridge in 1908. However, Selfridge didn’t make up that phrase out of whole cloth.  Hotelier ‘César Ritz’ advertised in 1908 and used the phrase;  “Le client n’a jamais tort” (“The customer is never wrong”)

Selfridge translated ‘Cesar Ritz’s’ phrase/slogan and gave it a positive twist. John Wanamaker took note, and was soon using that phrase in promoting his Philadephia -based department store chain.

Harry Gordon Selfridge, Sr. (January 11, 1864 – May 8, 1947) was an American-born retail magnate, who founded the British department store ‘Selfridges’. In 1879, Selfridge began his carreer by joining the retail firm of Field, Leiter and Company (which became Marshall Field and Company and finally Macy’s.) in Chicago.

Over the following 25 years, Selfridge worked his way up the commercial ladder. He was appointed a junior partner, married Rosalie Buckingham (of the prominent Chicago Buckinghams) and amassed a considerable personal fortune. While at Marshall Field, he was the first to promote Christmas sales with the phrase:  “Only   ‘X’  Shopping Days Until Christmas”,

a catchphrase that quickly was picked up by retailers in other markets… However, not everyone agrees with Selfridge on this point.  Herb Kelleher (co-founder and former CEO of Southwest Airlines) in the excellent book “Nuts!” about Southwest Airlines, says: “The customer is always right” is wrong. “How about when the customer isn’t right for your business?”           

Herb Kelleher makes it clear that his employees come first — even if it means dismissing customers. But aren’t customers always right? “No, they are not,” Kelleher snaps. “And I think that’s one of the biggest betrayals of employees a boss can possibly commit. The customer is sometimes wrong. We don’t carry those sorts of customers.  “We write to them and say, ‘Fly somebody else. Don’t abuse our people.’”

“The fact is that some customers are just plain wrong, that business is better off without them, and that managers siding with unreasonable customers over employees is a very bad idea, that results in worse customer service. So put your people first. And watch them put the customers first.”

Likewise, Gordon Bethune is a brash Texan who is best known for turning Continental Airlines around “From Worst to First,” a story told in his book of the same title from 1998. He wanted to make sure that both customers and employees liked the way Continental treated them, so he made it very clear that the maxim “the customer is always rightdidn’t hold sway at Continental.

In conflicts between employees and unruly customers he would consistently side with his people. Here’s how he puts it: “When we run into customers that we can’t reel back in, our loyalty is with our employees. They have to put up with this stuff every day. Just because you buy a ticket does not give you the right to abuse our employees . . .”

“We run more than 3 million people through our books every month. One or two of those people are going to be unreasonable, demanding jerks. When it’s a choice between supporting your employees, who work with you every day and make your product what it is, or some irate jerk who demands a free ticket to Paris because you ran out of peanuts, whose side are you going to be on?  “Of course there are plenty of examples of bad employees giving lousy customer service. But trying to solve this by declaring the customer “always right” is counter-productive.”

Most businesses think that “the more customers the better”. But some customers are quite simply bad for business. Rosenbluth International, a corporate travel agency, took it even further. CEO Hal Rosenbluth wrote an excellent book about their approach called “Put the Customer Second – Put your People First and Watch’em Kick Butt.”

Rosenbluth argues “that when you put the employees first, they put the customers first. Put employees first; and they will be happy at work. Employees who are happy at work give better customer service.” “On the other hand, when the company and management consistently side with customers instead of with employees, it sends a clear message that: Employees are not valued.”

Whether Right or Wrong: Customers are the lifeblood of any business. You can offer promotions and slash prices to bring in as many new customers as you want, but unless you identify the ‘right(best) customers’ your business won’t be profitable or even survive for long.

Developing the ‘Ideal Customer’ Profile:  The “perfect” customer just doesn’t exist. The Ideal Customer is a standard that you identify to help you measure your prospects (potential customers) to see if they fit… Why? So you can focus on the good ones, get rid of the truly bad ones, and anticipate problems with those who fall in the middle. So, you’ll take a hard look at your most profitable customer in order to produce the hypothetical perfect customer you’d like to have. This will become the definition of your Ideal Customer.

Step 1: List best and worst. It’s up to you. Start with those companies with whom you’ve done business: Just customers, not prospects. Limit yourself to those accounts where you’ve already done some business. List the best and list the worst. The best will include those that have given you the maximum number of wins and the least trouble. Then list those accounts that are the worst – possibly because even though you’ve closed the deal, either you or the customer feels that you’ve lost. Remember, you set the criteria.

Step 2: Next, list the characteristics of both the best and the worst. Best characteristics may be:

• Willing to pay for “value added”

• Committed to high quality

• Good proximity to my support center

• Size of end user group

• And worst characteristics could be:

• Inflexible on price

• Slow to make buying decisions

• Secretive and unwilling to cooperate

• Outside my industry expertise

Step 3: Now combine the two lists. List the positive characteristics, and then add the opposite of your negative characteristics. For example, “slow to make buying decisions” becomes “has a process for making buying decisions quickly”. You’ve now created a profile of your Ideal Customer. You’re ready to evaluate the account to which you’re trying to sell, against your definition of the best. Measure that account against each of your Ideal Profile characteristics.

The Ideal Customer Profile you’ve just created enables you to sort through the virtually limitless field of potential sale opportunities, to create a personal territory that is actually manageable. Time is money, and creating the Ideal Customer Profile enables you to concentrate on business you can win, and which will create a Win-Win relationship that continues to build your business for the future.

Subtle Shifts in Business, Leadership, Management, Organization, Strategy, Innovation– Bring Big Results…

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