Are you in growth mode, or survival mode?
I have some clients who are growing, some who are hanging on – and some who are transitioning from one to the other. Although most businesses would like to be in growth mode, the point isn’t to say that one is right and the other is wrong – it’s to understand that different situations call for different approaches. And that can be an issue when transitioning from one situation to the other.
HOW GROWTH MODE AND SURVIVAL MODE DIFFER
I did a chart recently for a client of the differences that their company would see as it switched from survival mode to growth mode. There were 15 different areas that would see changes!
In survival mode, your “strategic horizon” (the timing you take into account when making decisions) is the next quarter. In growth mode, that horizon stretches out to 3 years.
And a lot of areas can be “good enough” in survival mode – but need to be tightened up when growing. Those areas include accountability, processes, and hiring. And the inverse is true, too – things that need to be tightly managed in growth mode should be loosened up in survival mode. (Why would you want less accountability or process? Because that takes time, and in survival mode, that time can be better spent talking with customers.)
THE IMPORTANCE OF FRAMING
When you’re having strategic discussions, one of the most important steps is to pick the right “frame” for the discussion. A more tangible way of saying that is, you have to know the right question to ask. This is something that you can do intuitively most of the time. But when companies are going through change, picking the right frame is much harder. And picking the wrong frame can be very costly.
Here’s a simple example. I can create a very different conversation, and a very different outcome, if I ask the question, “What should we do more of next year?” rather than, “What do we need to do differently next year?” The first question is appropriate for a company continuing in the same mode it was in the prior year – baked into the question is the idea that we already know the right “model” of how we do things, we just need to pick areas to emphasize. The second question is appropriate for a company in transition – and in that case, doing more of something you’re already doing may actually hurt you more than help you.
(And, yes, it often makes sense to ask both of those questions in your annual planning.)
As a leader of strategic discussions, you need to be aware of what frame you’re using for each discussion, and you need to build your toolkit of frames, so that you can bring the right one to bear in whatever situation you find yourself in.
Confused by all the marketing options? Here’s a quick way to cut through the clutter…
Your marketing and sales occur in a funnel, with lots of unqualified suspects at the
top, fewer qualified prospects in the middle, and even fewer scoped proposals
to potential customers at the bottom.
Most of the “chatter” about marketing is focused on the Top of the Funnel (TOF). The
problem with TOF marketing, though, is that it’s a 2% game. Super Bowl ads,
Facebook ads, click-through rates – they’ll all have about a 2% response rate.
That’s why most people say, “Marketing doesn’t work.” They’re right – but they
really mean TOF marketing.
Middle of the Funnel (MOF) marketing is much more powerful – response rates of people
who know you and are interested in what you do are usually around 15-20% –
about 10 times the rate of the top of the funnel. That’s where most people
should focus their marketing – getting more out of the relationships you have.
How? Email, webinars, speeches and workshops – things like that.
Is 20% not good enough for you? Then focus on the Bottom of the Funnel (BOF). It’s
not marketing down there, it’s sales. And most companies have hit rates of
40-80% on the proposals they write – two to four times MOF rates, and 20 to 40
times TOF rates. What kinds of things should you invest in to improve sales?
Account plans, sales training, sales process improvement – things like that.
Where to Begin?
So, here’s the simple lesson in looking at the response rates at various points
in the funnel – start at the bottom of the funnel when you are starting to
upgrade your marketing and sales, and work your way up. BOF upgrades will get
you the most bang for your buck. Once you’ve optimized your sales, then move up
the funnel and upgrade your MOF marketing to people who already know you. Only
after you’ve got a good MOF system should you then wade up into the 2% world of
TOF marketing to make more people aware of what you do.
“Value proposition” is one of those phrases, like “paradigm shift” and “synergy”, that started out as a good idea…but was then so overused that a lot of people don’t understand the importance of the original thought.
But a clear value proposition is as important as ever, especially for growing and Stage 2 companies that are past start-up.
What is a value proposition? It’s a statement that describes who your customer is and how you make them better – the value that you create for them.
To get a better idea of what a value proposition should be, let’s look at the good, the bad, and the ugly of what it can be.
In my work as a marketing strategy consultant, I get to see all kinds of value propositions. Usually, they are OK, and have some redeeming qualities. But there are some that are simply awful.
The worst has to be a statement like, “We offer our value proposition to our customers.” In other words, the value proposition is… “our value proposition.” You can see why that would be a problem – it doesn’t describe who the customer is or how they improve. Often, if asked to tell more about the value proposition, these people will say, “We offer good service at a low cost.” That makes me cringe, too, but that’s a subject for another column…
Another ugly value proposition is doing everything for everybody. I recently asked the CEO of a marketing firm who his target market was, and was shocked when he shrugged his shoulders and said, “We work with pretty much anybody.” (Note: if your marketing firm does not have a clear value proposition itself, they can still help, but don’t ask them to develop yours.)
Look at this video – the value proposition seems to be…”we’re the most popular.” I’m sure there was more thinking behind it, but compare this one to the one I show farther below, and you’ll see that it doesn’t say much.
Which brings us to bad value propositions. With these, the company has usually successfully described the customer and the value – but what they describe…is a problem. Here are some examples of value propositions that are a strategic problem for a growing company:
– Basing the value on something only the owner can provide
– Basing the value on being good and cheap (note: please pick one if you haven’t already!)
– Basing the value on flexibility and quality
All of these value propositions work when a company is small and in start-up mode, but they are unsustainable in the long run. It’s almost impossible to grow a company when it is:
– Reliant on the owner to deliver the value (Steve Jobs being the exception that proves the rule)
– Dependent on finding labor that is good and cheap (there is not a lot of good, cheap labor available, folks!)
– Expected to provide high quality AND offer a lot of flexibility
So, what does a good value proposition look like? One of my favorite examples is demonstrated in an ad campaign that came out in 2010.
Listen to what they say they can do for their customers. And look at how they portray their customers – despite their broad appeal, it’s clear they are selling to people who are active. I think this is a great example of an ad being so “on strategy” that the value proposition is perfectly clear.
Here’s what I think a good value proposition looks like:
– It is focused on a specific market that is the appropriate size for the company’s resources
– It is focused on quality, cost, or speed – or if it’s a niche offering, then 2 of those 3
– It clarifies what the company doesn’t do
– It’s been developed by the team, so that everyone understands it and is committed to it
A good value proposition is just one of the pieces of a marketing strategy. If you’d like to learn about the other pieces, feel free to register for our upcoming teleseminar on marketing, at stage2secrets.com.
Hammering a screw …
Baking a cake in your dishwasher…
Pedaling your car…
One of the most common ways that small business owners get stuck is to have the wrong mindset for a problem. This happens a lot when companies emerge from start-up and move into Stage 2 of their development.
What does it take to be successful as a start-up? A high-quality product or service, quick reflexes, responsiveness, experimentation, frugality.
But those same qualities work against you when your business moves to Stage 2. With the right mindset, you stay in control of new opportunities and problems; without the right mindset, you struggle and waste time with solutions that don’t work.
There are many ways that business is different in Stage 2. Let’s look at a few…
Focus on ROI, not cost. In Stage 1, it’s important to manage your costs so that you can get to a point of profitability. In Stage 2, it’s important to focus on your investment returnsand the best and fastest way that you can get results. Often times in Stage 2, the best answer – the one that will get you the best results – is not the cheapest. But many Stage 2 leaders can’t break the frugal mindset, and are stuck in a cycle of underinvestment that never gets them where they need to go.
Focus on markets, not customers. Success in Stage 1 is a built on one-to-one sales, and that intimate contact is important to win early adopters. In Stage 2, though, making sales customer-by-customer is not scalable. What’s needed is the ability to sell to a market. The change from sales-driven to marketing-driven is a big one, and if a Stage 2 leader thinks she can just do “more of the same,” she’ll never be able to scale the business beyond her ability to add good sales people. (And we all know how hard that is.)
Spend more time on strategy and communication. Stage 1 businesses are not simple – but Stage 2 businesses are much more complicated. In fact, as a business grows, the complexity grows exponentially – but many Stage 2 leaders are thinking that it’s only growing linearly. Because the business is more complicated, it needs more time invested in strategy (which is how you coordinate and direct all the different parts) and communication (which is how you align all the different parts). Many Stage 2 leaders think that the decisions they have to make are simpler than they actually are, and are stuck in a reactive mode because they don’t spend enough time thinking about their situation to develop (more complicated) action plans.
What can you do if you’re stuck because of your mindset?
- Honestly assess whether you’ve been as successful in Stage 2 as you were in Stage 1
- Find someone with experience in your situation, who can help you understand the right mindset
- Ask your team what frustrates them – they usually have a good sense of how well you are managing, communicating, and planning
- Get trained on management and strategy, which are going to be key to your success in Stage 2
Here are the themes from a recent strategy and planning session I held for my Stage 2 small business clients.