Any goals for 2010 yet? What about reinventing your business?

Let me share 25 ways on how you can get started. This is the first post in a 3 part series on how to reinvent your business. The series is build around the who-what-how framework. Your business is defined by who you consider being your customers, what you offer them and how you do create and deliver the value proposition. Before we start, I urge you to buy a good notebook (Moleskine seems to be a favorite all over the world at the moment). Keep it with you at all times. Print the strategies outlined here and stick them into your notebook. Write down everything that comes to your mind…let’s get started…

Before going into the details, let’s start with a more general approach.

#1 Challenge industry assumptions

This is probably the single hardest barrier to overcome when you’d like to reinvent your business: your industry’s implicit and explicit assumptions. Industry assumptions usually define “the way business is done”, what you see as the competitive factors of the industry, what has to be offered, to whom, in what way etc. Suppliers are usually defined, just as who can collaborate with whom, whether collaboration is allowed at all, etc. What are your industry’s assumptions? What are the rules, the dos and don’ts? Be they explicit or implicit. How would you know? Well, each time you hear somebody say, “…but we can’t do that”, it’s probably due to one of these assumptions. For the next two weeks, try to write all the assumptions you can think of down. And then start to question whether this is really the way it has to be and how you could escape the trap.

Next we’ll look at who you consider being your customers and how you can reinvent customer segments.

#2 Target non-customers

When thinking about increasing revenue or developing new products I found that most companies focus on existing customers. After all marketing has always thought us that it’s better (i.e. cheaper and easier) to keep a customer than to acquire a new one. But at some point you need new customers. Luring customers away from your competitors is likely to result in a counter attack. So why not search for non-customers? People that are currently not buying your product (I use product here in the broadest sense including services, solutions, experiences and whatever your value proposition might be.) might have several reasons for not doing so: it might be too expensive, not accessible, to difficult to operate, or they might simply not be satisfied with the current performance. In Blue Ocean Strategy, Kim and Mauborgne outline 3 tiers of non-customers: (1) Soon-to-be non-customers, who minimally use the current offering, but are constantly searching for something “better” and will switch without hesitation as soon as a better offering comes along. The second tier are the(2)  refusing non-customers. These customers are willing to buy, but not at the current terms. They either find the current offering unacceptable (for whatever reason), beyond their means, or too complicated. The third tier are the (3) unexplored non-customers. They are the farthest away from the current market and are typically being ignored as potential customers by the entire industry, either because they have always been assumed belonging to another industry or are not being considered worth the effort. Think about Nintendo’s success with focusing on non-customer in the games console industry: pretty much everybody besides heavy gamers.

#3 Target less profitable customers

The argument picks up with the third tier of non-customers. Businesses usually look at the existing products and try to find markets that offer the highest margins. But as for example micro credit banking has shown, it might be worthwhile looking at customer segments that, traditionally, have not been found worth the effort and try to invent a product that suits there needs at at a cost they can effort. Less profitable customers usually constitute a very very large customer base. Think about the long tail.

#4 Target the least satisfied customers

Strategy #4 specifically targetsthe first and second tier of non-customers. Those who are simply not satisfied with the current offering and either use it, because there’s no alternative, or refuse to use it at all. Which of your customers are unsatisfied? What could you do to help them and offer them a better value? It helps to look at the buyer experience consisting typically of the following steps: (1) Awareness of your product (2) Evaluation of alternatives (3) Purchase (4) Delivery (5) Use (6) Supplements (7) Maintenance (8) Disposal and possible barriers along each of these steps: convenience, simplicity, risk, cost (time, effort and monetary), fun and image, and increasingly environmental friendliness, etc. Which barriers do your costumers encounter? What are they satisfied with? What not? You might again think of the Wii, which reduce the complexity of using a game console and made it a lot more fun for less sophisticated users.

#5 Target the chain of buyers

Instead of focusing on the buyer of your product, who is often best known, you might want to consider looking at the chain of buyers. Again the buyer experience phases outlined above might help you to identify individuals or groups of people having to deal with each of these steps separately. What is it that they are looking for at each of these steps? The result might be a total solution and experience for each of them. The McCafé can serve as an example. Often kids want to go to McDonald’s and drag their parents along (at least that’s how me and my brother used to do it). I can imagine that since McDonald’s offers the McCafé even grand-parents are happy to enter McDonald’s and have a piece of cake along a good cup of coffee.

#6 Segment according to commonalities

Businesses typically segment their customers along differences such as gender, age, status, class, income, etc. For some businesses it might be worth looking at what customers and non-customers have in common. Again if you observe customers at McDonald’s you’re likely to see a lot of differences (students, male and female, kids, parents, lawyers, shop floor workers,….) which essentially don’t really matter.  What do you customer have in common? Are there other segments that might have the same needs, although they don’t appear on your radar (yet)?

#7 Segment according to circumstances

Whereas strategy #6 looks at the customers as such and usually uses criteria for which data is readily available, you can also try to describe what need the customers are trying to fulfill and why they are buying your product. Looking at McDonald’s the need might primarily be to satisfy your hunger. Another reason might be to spend time with friends, get the kids to shut up, escape from the cold, not having to cook, kill time, whatever. Identifying these circumstances can again help in two ways: either bring ideas for new or enhanced offerings or you can target additional customers that have the same need, but have traditionally been neglected because the industry focused on a particular type of customer.

#8 Desegment the customer base

It seems to me the trend has gone towards finer segmentation in recent years. Mass-customization has been the result. Think about the car industry in Europe: customers have so many choices to individually configure their car that the result is more than a million different possible configurations of a single model. Focusing on commonalities and circumstance might help to find bigger segments and simpler products and product lines as a result. Bigger segments might also be worth the effort, even if profitability is low. Instead of desegmenting using commonalities or circumstance you might find other ways to do so.

In any case, let me know how it worked…As always: comments are highly welcome.

The next post will outline 9 strategies to reinvent your value proposition.

Continue reading part 2.