Customers care about their problems, not our products. Get this right. And win.

More than 40 years ago a young Xerox manager assigned to train copier salesmen just got fed up. Razzle-dazzle-sell-sell-sell schemes were exhausting his spirit. "Sales" had become a euphemism for manipulating customers into solving the firm's own production, revenue and earnings challenges. Serving customers, the original, satisfying source of passion and meaning and integrity, seemed lost. Unable to find any acceptable alternatives among the plethora of available sales training schticks, Richard Hodapp embarked on what became a lifelong journey of discovery.

He interviewed hundreds of owners, visionaries, government leaders, military officers, sales geniuses, and other wizards in a deep and wide exploration of the patterns and processes that define how leaders make decisions, and also how their most valued collaborators support them in the pursuit of their goals. Richard collected, refined and synthesized all this into a conference agenda, a training syllabus and visual aids and checklists he named “Decision Mapping”®, which has since been lnstalled by dozens of companies around the world.[1]

We were among them. The toughest challenge confronting our firm in the mid-1980s was fixing our win rate. Losing is very stressful. It breeds fear, selfishness and defensiveness and it severely damages the hearing. We had to find a way to drive discipline into the sales team and to learn to listen again. One key step our new leader took was to bring in Richard Hodapp and make Decision Mapping® our shared language for conversations about how to win. It more than doubled our win rate.

This approach:

• Uncovered the logic and structure of customers’ decisions, providing insight into customer behavior that otherwise often seemed chaotic, enabling the sales team to design creative ways to serve fundamental customer interests and needs profitably
• Provided a systematic way to document, communicate and continuously improve capture strategies
• Integrated senior management into the business development enterprise in a way that helped us focus on the sale at every level and in every functional discipline, harness the power of multi-functional teams, and establish clear strategic responsibility, accountability and authority for winning

This is not selling. This is serving.

Case Study: Customer Decision Focus In Action

More than a decade after this approach became our capture strategy standard, the US Army's newest attack helicopter, the AH-64D Longbow Apache was ready for export. It faced stiff, government-backed French/German competition from the brand new Eurocopter Tiger that was just beginning to roll off its European production line. The first international opportunity was with the British Army, and the stakes were high: the winner would be positioned to run the table around the world in multiple competitions that were just beginning to take shape.

Conventional wisdom gave Apache little chance on Tiger's home European turf. But we learned that the British government was far more interested in making a "British" decision than they were in making a "European" decision. We also learned that their military leadership placed extreme value on operating systems that preserved their relevance in coalition operations, which we knew would be greatly enhanced by acquiring systems that operated easily along side U.S. forces. How, we asked, could we offer a powerful U.S.-common solution that was actually British?

At 3:31PM on July 13, 1995 The Secretary of State for Defence Mr. Michael Portillo rose in Parliament:

"I can announce that... we have decided to buy 67 Westland Apache helicopters with Rolls- Royce engines. They will operate, as required, in support of the Army's two armoured divisions, 24 Airmobile Brigade and the Royal Marines... There will be significant work for Shorts of Belfast on the Apache's Hellfire anti-armour missile."

His last sentence tells the story:

"We are ordering a helicopter built by Westland, powered by Rolls-Royce, and equipped with missiles supplied by Shorts."

Our name never came up. Because of what the map taught us we had made the leading British helicopter company the prime contractor of our team, integrated engines built by the leading British aerospace propulsion company, and added armaments provided by the leading British provider of missiles. And we had equipped the British Army to make tremendous contributions to coalition operations around the world by guaranteeing full interoperability with U.S. forces.

Signs That An Organization Needs Help Navigating Complex Decisions 

There are many signals that an organization might benefit from a transforming focus on customer decisions. Here are a few of my favorites:

• Top managers tend to ask:  Who is the buyer? Who is the "economic" buyer? Who is the decision maker? Who writes the check?  A much more sophisticated definition of "customer" is definitely needed.
• Powerful People talk about managing "The Three 'P's", usually "Product," Politics," and "Price." Sometimes "Promotion." "What is the price to win?" they ask, mindlessly inviting commoditization. This firm will gain from a much deeper understanding of the interaction among product characteristics (including price) and the other complex elements of a customer's decision making process, including critical success factors that may not begin with the letter "P."
• When a sales campaign is faltering, insiders blame the customer and sometimes even call him "stupid." A transforming concentration on customer decisions treats this sickness by exposing the ignorance and arrogance that underlies it.
• Size 44 Extra Long - Executive Hair - Low Handicap salesmen dominate the capture conversation. "It's all about relationships," is a common chant. "I know the guy," or "I know a guy who knows the guy." Subsequent failures are then explained as, "The customer loved us but we lost on [pick one] price/technical/terms/the lawyers/we don't know why." A much more serious construct evaluates not so much whose companionship is enjoyed by whom, but rather the extent to which a customer relies on the advice and counsel and judgement of your business team in making his own decisions.

One More Case... and Not Exactly

Near end of President George W. Bush's first term the US Department of Homeland Security ("DHS") resolved finally to do something useful about securing the northern and southern borders of the U.S. The project became known as "SBInet." Estimated worth: $8B.

Fortunately our firm knew nearly nothing about this customer.  We had spent our history serving the US Department of Defense, NASA and international defense ministries and military forces, but not DHS. Although the our company's customer decision focus had atrophied by the time SBInet appeared, we were acutely aware of our ignorance in this case and so we managed to carve out the time needed to apply this discipline.

What we learned was decisive:

• This project, which given its size would normally be overseen by a mid-level government executive, enjoyed -- or suffered -- significant visibility all the way to the White House. 
• The priorities and issues on the two borders were fundamentally different, which meant that a product-based solution proposed for one would not fit the other. 
• The program concept was not only about what hardware investments the government should make, but also and even more about which bidding team would contribute most to modernizing DHS overall and help the Department prove its ability to conduct large, complex acquisitions.

These discoveries thoroughly reshaped our strategy. Where our more knowledgeable competitors offered comprehensive portfolios of products built in their own factories, we offered an analytically-based security concept that offered to integrate the best systems available anywhere using a business relationship that gave the Department complete transparency and control through which they could effectively manage the phased release of the best technologies. Our proposal offered not a single rivet of our own hardware.

We beat the other guys by a mile, going away.

The story ends on a sour note that reinforces in a sort of backhanded way, the importance of maintaining concentration on customer decisions. As program implementation unfolded our attention to the customer's strategy waned. Results proved again how vital sustaining a deep understanding of a customer's business and his decisions is, not only for winning but also for protecting the win.  It is so easy to get tunnel vision, become bogged down in day-to-day details, and lose sight of customer dynamics that spell the difference between a long-term success, and project termination. Unfortunately SBInet ended in the latter.

Deployment

Instilling a passion for serving complex customer decisions often stimulates cultural change that can be uncomfortable for a sales and marketing organization. But when fully implemented it becomes profoundly rewarding. 

A strategy conference is normally launched through an initial three-to-five day meeting in which one or more real teams create capture strategies for real opportunities that matter to the firm.

• Team size is restricted; seven to ten participants is ideal.
• One of two qualifications should be met for participation: customer insight or product knowledge. The former is more important. 
• Sessions are demanding and personal commitment is essential. Nobody comes late, and nobody leaves early. Executives who are not in a position to delegate daily responsibilities should not be invited.
• Scheduling a final presentation to top management at the conclusion of the session is critical.

Teams often experience acute internal tension at first as they are forced to recognize gaps in their understanding. Conference participants reach out in real time during the conference to customers – many of whom have been identified for the first time in the conference – in order to gather data, explore issues and vet alternatives. Very quickly energy and excitement build as insights and previously unimagined winning options develop.

Investing in Strategic Customer Engagement

Through our history we had readily understood the importance of investing in our internal “content” (products, capabilities, technology, expertise) and in internal processes (Six-Sigma, Total Quality Management, Lean Enterprise) in order to have something attractive to sell. But we were forced to admit that products and services do not, in fact, sell themselves, and all forms of customer manipulation are a dead end.

Investing in listening in a way that would enable the sales team to go beyond product pitches and to creatively engage in customers' decisions was a a tough choice, but we made it. As a result we gained a powerful vocabulary for ethical strategy dialogue and the skills needed to build a guide for customer engagement with the right people, in the right way, at the right time. If there had been enough sales and marketing wizards to go around we probably wouldn't have needed it. But there weren't. And so, we did. And we won nearly everything we chased for more than a decade.

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[1] The intellectual property for Decision Mapping® is owned and licensed by The Decision Mapping Council LLC, founded by Chairman Richard Hodapp.   Mr. Hodapp developed Decision Mapping® and has been deploying and enhancing the process for more than 40 years.  Mr. Krause has been leading Decision Mapping® conferences for more than 25 years and is authorized as a Decision Mapping Council LLC Associate to support clients in the installation and use of Decision Mapping®. After learning the process teams continue to use Decision Mapping® under individual licenses, or under an organizational agreement which provides for unlimited use throughout the licensed organization. 

How to identify adjacent markets that make sense and make money In them...

What Else Can We Do?

When growth falters and investors get cranky companies start to ask this dangerous question. It is dangerous because, especially in high technology companies, the smart guys think the answer is easy: We'll just tweak the doumaflatchit, add more flux capacitance to the romulous and get Scotty to throw in some more dilithium crystals. Customers will line up like trained pigs again.

This is the field of dreams: Build it and they will come. I would term this, gently, inside-out thinking. Whatever it's called it usually fails and wastes resources and demoralizes everybody in the process[1].

By 2004 the firm where I worked had convincingly demonstrated this principle.  A corporate "Innovation Initiative” had established a $200M revolving investment fund and solicited technology ideas mainly from the engineering community. After four years the scheme had started no successful businesses, but had inflicted significant financial losses on the company and also serious career damage among the participants.

Although the company launched two more similarly doomed efforts over the next decade[2] a guerrilla movement searching for a better way sprang up.  One of the rogues, a brilliant ex-fighter pilot who was determined to escape the old Sisyphean fixation, undertook a global search for companies that had demonstrated proficiency converting innovation to cash and found IBM and Shell Oil and several others. Among them he noticed a curious pattern: their annual reports, newsletters and organization charts contained a common language about growth. He traced this vocabulary back to the work of Mercer Management Consultants, a small operation located deep inside the Marsh & McLennan empire, and to a technique called "Value Driven Business Design."[3] This proved to be the secret sauce he had been seeking. 

Business design applies The 21 Rules powerfully to the problem of creating new businesses. In a nutshell, “VDBD” as Mercer called it takes a market-driven approach to business model innovation to create an integrated, internally consistent design whose elements are mutually reinforcing. And it works: one of our teams used VDBD to launch an intelligence-surveillance-reconnaissance services business that generated $200M in revenue during the first year.

Business design helps you create new businesses just as you might design and develop new products and services, with a disciplined, repeatable process that uses deep market insights to build businesses that are purpose-built to serve them. The steps are simple, intuitive and intensive:

• Define market domains where you believe you might be a allowed to make money
• Prioritize segments and select customers
• Dig into customer value chains to find points where you could make money if you had the right offerings
• Build offerings (hardware, software, prices, business terms, etc.) that you are convinced customers would buy if you offered them
• Identify the capabilities required to produce these offerings
• Examine your company to see which of these capabilities you have and control, have and don’t control adequately, or need to acquire
• Examine the environment for potential partners (and competitors, which are also potential partners)
• Create a plan to assemble the capabilities you already have in the most appropriate way, and to acquire (by internal development, contracting, merger/acquisition) the capabilities you don’t have
• Design an organization that can manage all the capabilities, assemble and deliver solutions and capture business.
• Lay out a plan to take all this to market

A disciplined way to design and develop new businesses just as you design and develop new products and services.

Lessons[4]

There are lessons to be learned from successful attempts at business design and also from failures.  Here are a few:

• Picking adjacent markets that make sense is a critical precursor, without which the application of business design is a waste.  IBM invests significant resources in figuring out which adjacencies make sense.  When we benchmarked them we learned that their strategy team continuously generated fresh information about adjacent markets and reviewed the results with the top half-dozen members of the corporate leadership team for one-half day each month.  In these sessions the IBM chairman and his top thinkers looked for instances where value was either pooling in markets IBM did not serve and should, or was moving away from markets IBM did serve.  Once they selected an adjacent space top managers created a "Strategic Business Opportunity" (“SBO”) team to design a new venture in the space.  Their process had generated about 25 SBOs, many of which remained active, and four or five of which were generating $1B in new annual revenues.

• Funds not dumped into dumb ideas are as good as earnings. There is no substitute for subjecting new venture ideas to ruthless market-based scrutiny. Design teams should be rewarded for terminating bad projects.  Killing dumb ideas is very productive.

• The killer application hit rate is extremely low. High technology companies frequently invite their geeks to rummage around in the technology portfolio to identify “neat” technologies that they are convinced will offer the world the next iPad, and then they invest big money to make this dream come true. The risk of value destruction is high: “…of 750 large companies in the decade before 2008… Apple was the only incumbent in this period to grow by creating new markets repeatedly through disruptive innovation.”[5] And it turns out that there is only one iPad. There are many Newtons. Even Apple crashes a lot before it makes a killer app fly.

• Business design is about shaping the company, not shaping the customer. Product teams are sorely tempted by a selfish mentality that seeks to manipulate customers into buying the products we already build. They are Lionel Bart’s flower girl in “Oliver!”

“Who will buy my sweet red roses?

Two blooms for a penny.”

This is the most sickening common attribute among much that passes as “sales” training. The closest analog in the defense and security business is a military notion called “shaping the battlefield,” which means eliminating the enemy's capability to fight in a coherent manner before committing forces to decisive operations.

Framing the customer as the enemy is inexcusable for marketing people. Business design thinking demands that the analysis must begin with market and customer needs and must concentrate on value propositions that will serve those needs, and then drives the enterprise to reshape itself in order to serve those needs profitably.

• The immune system will kill you. New ventures usually offer inferior marginal returns at first and they may threaten to cannibalize existing business lines, so leaders of these existing businesses naturally attack. But long range business plans are notoriously optimistic and vulnerable to somebody. Disruptive solutions targeting over-served customers inevitably appear and the old enterprise captures neither the planned returns nor the earnings that might have been available from its own now-terminated offspring. Disk drive and steel companies learned the hard way. This is why it is important to locate design teams close enough to the existing businesses to scavenge from their infrastructure, but far enough away to avoid infanticide.

• Beware premature transition. As much as the existing businesses abhor new ventures, as soon as the new ones start generating profits the established businesses reverse field and struggle to suck them in. If this happens, the new venture can be disrupted and lose critical mass, fragment and fail.

Practical Steps

• Identify adjacent markets that “make sense.” Expect the strategy team to generate the adjacent space information top leaders need to identify value migration trends, and populate the team with innovators who are willing to think without constraints. Engage top management regularly to explore fresh data and find new insights. Anchor any outside consultants in this internal process.

• Create a team of business design experts. Train a core group of business designers to internalize, operate and improve the process. Allocate a protected budget for the design work, and as business designs are accepted allocate protected budget for the new ventures. Adjust the incentive system to encourage the incubation of new business ventures, elevate to the top the decision about when and how to transition the new business to a new or existing operating unit and time the transition very carefully.

• Maintain a constant high level of senior management focus on the design, launch, early operation and transition processes. Launching a new venture is hard. New ventures rarely succeed. Investing as heavily in the design a of new business, however, as a firm would invest in the design of a new product, improves the odds.

Business Design is Worth It

Most companies are probably already doing the things they are good at. Doing something new is hard. Fortunately, business design transforms how the firm thinks about new business in a way that is systematic and effective, and not mysterious:

• It helps a company serve its customers, because it is fundamentally rooted in market and customer needs, including unarticulated and even unrecognized ones. 
• It resists bias because is data intensive. It doesn’t care what you think; it cares what you know. 
• It feels natural because it harnesses a technology company’s natural understanding of design, turning the firm's own familiar tools and experts toward modifying, complementing or replacing the existing business model to make new revenues and earnings happen.

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[1] “Failure” is defined here as investing large resources in “neat” technologies and sure-fire ideas, supported by field-of-dreams strategy, while generating few if any financial returns.

[2] The advanced technology group pursued “White Space,” a similar collection of initiatives seeking killer applications that added no new businesses of any significance to the income statement.  Years later “I2E” for, possibly, “Innovation-to-Enterprise,” or maybe “Invention, Innovation, and Entrepreneurship,” adopted the same approach and yielded identical results.

[3] Mercer and it’s Value Driven Business Design practice have since been folded into a larger Marsh & McLennan consultancy called Oliver Wyman (www.oliverwyman.com/‎) and their work continues out of London.

[4] Many of the ideas here derive from Clayton Christiansen’s work published in The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Boston, MA: Harvard Business School Press, 1997.
[5] Solving Your Biggest Innovation Challenge by Marla Capozzi and Ari Kellen  |   HBR November 21, 2012