This is Pop Quiz, answer these two questions—choose any of your important customers to think about the answers:
How does your customer make money?How do your customers think?
These are two fundamental questions–they are what dominates your customers’ thinking. To engage our customers in business relevant conversations, we have to be able to answer and talk about these two questions.
Some of you may be thinking, “Dave, this is easy, they sell stuff and get revenues from those sales……”
But that doesn’t answer the question of, “How do customers make money?” There are hundreds of things the customers must consider in order to make money. Things like, “What products/services do we offer, to what customers in what markets? Why would they buy this, how much are they willing to pay? Who are the competitors? What is the addressable market? What do we have to do to compete, effectively?” And there are dozens more…..
Then there are the questions about the products and services that generate revenue: “What does it take to develop these offerings? What type of people do we need to hire, what tools/investments do we need to put in place to to enable them to develop these? What are the risks, how long does it take to develop these? When can we launch them and start developing revenue? How should we price these? What support infrastructure is needed to support product development?” And there are more…
What about the questions about making and delivering these products, “What manufacturing capability do we need, or What service delivery capability? Do we make versus buy, what do we outsource? What investments do we have to make? Do we need plant/equipment, inventory/logistics/supply chain? What skills, competencies, resources do we need for service delivery? How do we manage quality of delivery? , What skills and capabilities do we need to hire, what do they need for support? What risks do we face?”
Then there are similar questions across sales, marketing, finance, operations, HR and so forth.
All these combine to help answer the questions about “How does your customer make money?” These are what your customers think about. Perhaps they focus on the questions most relevant to their function. But they are consumed with understanding the answers to all these questions.
But then there are a lot more questions your customers think about. For example, “Which areas do we invest in, what if we shifted focus from function to another function? What should we prioritize? How do we fund these? Do we generate sufficient cashflow to support these? What are the tradeoffs? How will our customers respond? What is the long term demand, are the markets changing what do we need to do to respond to these? What is our competition doing? What should we be changing? How do we improve? What opportunities are we missing? What threats do we face?
And then the answers and decisions made in one area, ripple through and impact other areas. Those other functions have to change their strategies and adapt to the decisions made in other parts of the organization. Imagine, for example, supply chain problems that impact the ability to make and ship products. This means we have to reassess all our manufacturing investments, but then sales/marketing/customer services have to adjust their strategies and what they do.
This is the work that is done in each organization to “make money.” And things are constantly changing, requiring our customers to adapt/adjust/shift priorities, investments, strategies to continue to make money.
And for us to help our customers, to help them recognize the need to change, address challenges, solve problems, address new opportunities, we need to get into these questions with them, helping them understand them, develop answers to them and demonstrate how what we are proposing helps them make money.
And if we can’t help customers think about these, develop answers to how they address them, we aren’t creating the value that’s most important and impactful to them. They may go someplace else for this help–perhaps a competitor. They may try to do the heavy lifting, figuring it out for themselves. And we know the majority of these efforts end in no decision made. And some few may figure out they need something we sell, and they may eventually come to us.
If we want to help our customers. If we want to incite them to change, if we want to help them successfully address their issues leveraging our offerings, we have to understand how they think, what drives them and how we can help them develop answers to these questions.
But we can’t do this unless we can answer those two basic questions:
How do they make money?What do they think about?
What do we do about this? How do we learn? It’s about developing business and financial acumen. It’s about understanding the basics about “business.”
Here’s a suggestion to managers, sit down with your people and answer the questions, “How does our company make money, what do people in our company think about?” The answers aren’t we sell software, we deliver these services,, we build these products….. Everyone in your company is looking at the same issues outlined above. Talk to the development teams ask them what they think about, talk to delivery and manufacturing, talk to finance, operations, HR. Once we start learning how we make money and how people in our companies think, we’ve made a giant step in thinking about our customers and how they make money.
Once we understand this, we can start helping our customers answer these questions for themselves!