Do You Have a Challenge Making Important Decisions?
Several friends and business associates recently told me, “Sales of my new product or service are not meeting my forecast, and I am nervous.” I quickly discovered they a failure to talk with customers and prospects.
At the same time, I talked with two people from different companies who were jointly starting up a new business. When I asked them about validating their basic assumptions about who will buy from them and how much they are willing to pay, I received the famous “glassy eye stare.” Again, a failure to talk with customers and prospects
These people invested much time, effort, and money because they believed their B.S.
They did not recognize that their high-level decision-making was flawed. They did not talk with customers and prospects even though the decisions were related to these people.
3 Real Life Examples
1. A new business situation where people failed to talk with customers and prospects at the very start of their journey
Ruth Winett, a good friend and experienced market researcher, recently posted an article on her website titled Listening to Customers: Three Short Case Studies. In one of her case studies, she writes, “A distributor of textiles used for retail displays wondered if hotels would use one of its fabrics to decorate hotel rooms. We interviewed a few hotel managers and interior designers who said they would not consider the fabric for such use: It did not meet fire regulations!”
2. Communicate Changes
A few years ago, I had an interesting project. I was working with a manufacturer of lighting control equipment who decided that some products would benefit from having settable buttons engraved with the chosen setting. The engraving looked very professional and clean, which made the installation special. However, about six months after starting to offer the engraving, the head of the service did an audit and discovered that the engraving option had received virtually no orders. I was asked to find out why.
Although I told my client I would talk with about 12 recent customers, I only needed eight interviews. I already had enough data to answer my client’s “why no orders” question. Only one of the eight randomly chosen customers I interviewed knew about the service! Few of the service and salespeople knew about it or just forgot to mention it or decided they didn’t want to be associated with the offer.
In all cases, the same individual pushed the buttons once or twice a week. The labeling service was not needed because it added no additional value.
3. Confirm Your Perceptions to Ensure They Match Customer Reality
On March 5, 2021, the Harvard Business Review posted the article “Data Is Great — But It’s Not a Replacement for Talking to Customers” by Dr. Graham Kenny. Dr. Kenny made several critical points based on the results produced by a prominent Australian wealth management business team, which decided to ditch surveys and instead turn to structured interviews. What the executives found out “really shocked them.”
“The first [realization] was that their data was based on nonsense,” the article notes. “This came about because the questions they’d been asking were built on managers’ perceptions of what clients needed to answer. They weren’t constructed on what clients wanted to express. This resulted in data that didn’t reflect clients’ real requirements. The list of priorities obtained via client interviews compared to management’s assumed client priorities coincided a mere 50% of the time.”
“What [the leadership team] also discovered, to their surprise, was how few interviews it took to gain genuine insight,” the article continues. The business leaders later noted “‘we needed around 18 to 20 clients to uncover most of the substantive feedback. We thought we’d need many more.’ What [they had] encountered here is saturation; a research term referring to the point when you can stop conducting interviews because you fail to hear anything new.”
Data Points to Keep In Mind
According to U.S. Bureau of Labor Statistics data, approximately 20% of small businesses fail within the first year. By the end of the second year, 30% of companies will have failed. By the end of the fifth year, about half will have failed. And by the end of the decade, only 30% of businesses will remain — a 70% failure rate!
LendingTree reports that the #1 reason small businesses fail is “lack of demand for the product or service.” Almost half — 42% — of startup businesses fail because people don’t need or want what they’re selling, according to research firm C.B. Insights. This means that assessing the potential market is essential to ensure success.
Timothy Carter, the author of the LendingTree article, clarified the Bureau of Labor Statistics data by saying, “I also want to acknowledge that whenever failure statistics are misrepresented, they’re usually inflated. In other words, people have a tendency to exaggerate the failure rate of small businesses. Why? It might be a conservative way to taper expectations, or it might play into the desire to discourage would-be entrepreneurs. Either way, we need to be cautious of people who confidently assert a trivial “truth” about business ownership.”
In his new book “Rethinking Competitive Advantage,” Ram Charan uses consumer to stand for any customer. He writes, “However sophisticated the data and methodology, analysis of the customer journey can only supplement, not fully replace, unfiltered observation of the customer.” He goes on to say that “every leader and employee should look for opportunities to directly observe consumers and reflect on why their experience is the way it is. Why are people behaving that way or doing things the way they do? What is unsatisfactory to them? What might a consumer wish would happen differently? What is missing? Simple questions like these can generate powerful insights.”
Recently the Harvard Business Review (HBR) published an article entitled “11 Myths About Decision- Making” written by Cheryl Strauss Einhorn. In the article, the author notes, “Known as confirmation bias, this decision-making flaw has been behind notorious failures from the Bay of Pigs to the subprime loan market implosion to the NASA Challenger explosion to the Deepwater Horizon environmental catastrophe. In each case, disconfirming data was available and should have raised concerns, but groupthink set in, and no one wanted to raise the red flag. To better understand and define the limitations of what you think you know, look for contrary examples and evaluate rival explanations. These techniques can prevent “frame blindness” to keep you from seeing what you want to see rather than what may be present.”
People buy your products or services because they believe your offer will provide their desired business outcomes (sometimes called “Jobs to be Done”) at a lower cost or for other essential reasons than what they could get from different sellers. In other words, your offer provides the most significant value they can get from any other source they know about.
How to Minimize the Likelihood of Making Wrong Strategic Decisions
- Recognize that the only way not to make a wrong decision is to avoid making any decisions. Nobody ever gets everything right or wrong. We all make mistakes. So, do your best and take responsibility for the inevitable bad choices. When you make significant decisions, recognize the people who helped you! That’s what great leaders do.
- Take time to make big decisions. Don’t procrastinate on small decisions; for strategic choices, collect data, opinions, insights, ideas, alternatives, pro/con analyses, and any other advice you can get from as many people as you can let into the situation.
- Make a preliminary decision. Write it down and ensure that the thinking that made you decide was clear.
- Test the decision on a set of the people who will be most impacted by it. To make a big decision that affects customers, you must talk with a group of typical customers.
- When you are convinced the decision will achieve your desired results, document the “why” and “how” to share with everyone affected.
- After implementing the decision, get feedback and make any necessary modifications. This is not the time to be inflexible — you must do everything possible to achieve your desired outcomes.
- Follow the same approach when making big decisions affecting employees, industry partners, shareholders, and the communities in which you have a strong presence.
Before Moving Forward, Talk with Customers and Prospects and Ask the Right Questions
When trying to improve or substantiate a significant decision, it is best practice to interview rather than survey customers and potential customers to understand the desired business outcomes they are trying to achieve. This can only be accomplished by asking open-ended questions and following up with enough why questions to get down to the basic answers.
All you need is a list of the right people to talk with, the right interviewer, and a few days of interviewing, and you can feel confident that your decision will likely yield the success you are looking for.
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About Middlesex Consulting
At Middlesex Consulting, we partner with the field service teams of B2B capital equipment companies challenged to grow their top and bottom lines. We use value creation, service marketing, and customer experience techniques to identify and create service offers that achieve customers’ desired business outcomes. To discuss how we can grow your business, write to Sam here.
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