Tell Me What You Do, Not What You Make

By Kurt M. Schroeder, Sr. Manager, Practice Leader, Go-to-Market Solutions, Virchow Krause Consulting If you want to sustain and potentially grow your business in tough economic times then you need to clearly understand what you DO, not what you make. Once you understand your capabilities, you can then seek out new markets for those capabilities.

Over the past several months I have had numerous conversations with manufacturing executives who are concerned about the sustainability of the markets they serve.  In one recent conversation, the executive looked at me and with a look of bewilderment stated, “I don’t think our primary market is coming back. Will this be the end of our company as well?”  

So before we get too close to the ledge, let’s step back and understand what is happening and what you should be doing to sustain and even grow your business in the tough economy. 

The good news is that the approach we are going to discuss works regardless of economic conditions. But let’s be clear, this is not a silver bullet. Like a lot of things in business, it requires hard work, objective-rational thinking, and willingness to change.

One of the first questions I ask as I work with companies to improve their businesses is, “Tell me what you do.” I usually get responses that orbit around what the company makes and sells today. Once I listen to the long, proud list of their products and how those products are differentiated in the market I will ask the question again, “Tell me what you do, not what you make.”

As an example, four months ago I met with a company whose market has all but gone away. They were suffering from a 60 percent decline in sales. This company made high quality wood floors. When I asked a small group of their people to tell me what they did, they provided a very good, detailed 45-minute description of the various wood flooring products they made. I heard about the numerous species of trees that they processed to make the flooring.

After listening to the description of their products, I asked them to tell me what they do, not what they make. After some thought, they described a process which begins with the harvesting of lumber from their own forests as well as other subcontracted forests that they manage. They went on to describe the rest of the process. As I listened to the description of their total capabilities, the actual milling of the wood floors was just a small part of the total process. Their capabilities reached far beyond the end product of wood flooring. Indeed, their core capability was not wood floors; their core capability was raw lumber and forestry logistics.

Many companies today are so attached to their products they struggle to define other valuable capabilities that other markets may need. If you want to sustain and potentially grow your business in tough economic times then you need to clearly understand what you DO, not what you make. Once you understand what your capabilities are, you can then go into the broader market and find what markets have need for those capabilities. 

Here are some examples of where companies have thought carefully about their capabilities and have effectively applied those capabilities into other markets:

Sustainability graph

So what are the steps you need to take to bring your capabilities to other markets?  This is where the objective thinking and hard work comes in. Here’s a high level outline of the steps that successful companies are taking in discovering what they do and looking for new markets for their capabilities.

1.) Be honest with yourselves as to what capabilities you really have. 
Think about the characteristics of your current products and begin to describe other products that have those same characteristics that can be made with your capabilities. Don’t be too restrictive, if your current capabilities allow you to complete 85 percent of a product and it would require an additional equipment purchase for the remaining 15 percent, put that on your list. Now that your list of capabilities and other products is made we can find out what markets might be interested.

2.) Analyze which markets these new products or capabilities could be used in.
Here is where the hard work begins. Build a reputable fact base. If you get this wrong, you will be wasting time and money when you begin your marketing activities. If you don’t have the research and analysis resources in house, look to your local university’s MBA marketing programs. Most MBA programs are looking for “real world” projects for their students to get involved with. This is a perfect opportunity to get the fact base you need to target markets while providing a valuable experience for the students.

3.) A voice of market analysis should be completed. 
An analysis will help to understand the competitive landscape, the buyer’s value, buyer’s channel preferences, and key trends and pressures that you can align your value proposition to. The output of the voice of market and the market research should provide a sense of where the “white space” is for your capabilities.
 
4.) Build your sales and marketing assumption base.
When going into new markets, many organizations fail to understand the level of effort required to be successful. Begin with “reverse engineering” the sales funnel. How much revenue will you need to make in years 1, 2 and 3? What assumptions are you making about the buying process? How many contacts and impressions will you need to make to generate an inquiry? How many inquiries will you need to have to produce a qualified lead?  How many leads will you need to generate a proposal or quote? How many quotes will you need to generate a single sale? The answers to these questions will allow you to allocate the right amount of sales and marketing resources for the new market launch. Remember, in the case of launching into new markets, “Hope is not a strategy.”

5.) Pre-determine your metrics that you will use to monitor market entry success.
Are you meeting your sales and marketing assumptions? Are you seeing the inquiry activity that you planned for? Be prepared to tune up your go-to-market tactics to adjust to the environment.

I have described these five steps in broad terms. However, to be successful these five steps require a deep level of objectivity, heavy lifting in market research and analysis,  and a practical understanding of the level of effort and investment from sales and marketing.

So, why aren’t more companies able to sustain and grow by taking their capabilities into new markets?
1. They are too attached to their current product set to see what other opportunities are available
2. They are not able or willing to do the hard work required to find the “white space” and capitalize on it
3. They are paralyzed by a sales and marketing organization that has sold into their current markets so long, that they have lost their broader sales effectiveness
4. They have waited too long and any additional costs for market launch would be prohibitive.

In hard economic times, when current markets are shrinking faster than the mall parking lot snow piles in spring, companies need to know what they do, not what they make, and how to bring those capabilities to market. 

Kurt Schroeder is a Senior Manager and Practice Leader in the Go-to-Market Solutions practice group at Virchow Krause Consulting.  He can be reached at 612-876-4816 or kschroeder@virchowkrause.com.

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