Coming back from a week in India, I was left with a few lasting impressions, which could be summed up in one word: ubiquity. Of people. Of noise. The organised chaos that is Delhi traffic. And energy – something that seems to have reached a frenetic level quite shocking to a laid-back Capetonian. This energy translated into some excited and stimulating debate in the classroom, which is where I found myself with 50 other Naspers employees at 8am sharp on the first Monday of 2010. For three days, we discussed mostly Internet and technology cases under the guidance of two HBS strategy professors, Bharat Anand and Felix Oberholzer-Gee.
Many interesting concepts and theories were discussed, but what stayed with me was that no matter what service or product you are providing or building, the focus should always be on the user. In fact, a consumer-oriented approach is the only way to build a long term competitive advantage (barring of course government-supported monopolies like Telkom, which is finally facing real competitive forces). This is why companies like Amazon, who are obsessive in their mission to please consumers and make every business decision based on whether the intended results are ‘good’ for these users, are streaking ahead of the competition.
Having a user-focused strategy, as opposed to a product/service-focused one, has several benefits:
- More time. Focusing on technologies and trends, which change quickly and are difficult to predict, causes companies to constantly chase the next big thing, and can cause stagnation when a standard is slow to emerge and market players stay on the sidelines before investing (as could be seen with the Bluray vs. HD-DVD battle). Focusing on user behaviour, which changes relatively slowly and is easier to predict, allows forward-thinking companies to focus their energies on satisfying user needs. For instance, in the case of the next-gen DVD saga, companies lost track about how user behaviour was shifting to wanting video anytime and anywhere (online, mobile and TV – the so-called ‘three screens’) while deciding which physical format to back.
- Network effects. Product-focused companies design a product with the aim to sell it – which is where it ends. As long as the user can be convinced to part with cash to purchase said product, the product cycle is completed. A better approach can be to build a product/service that harnesses network effects, i.e. the more users you acquire, the more benefit they derive from using your product or service. The classic example of direct network effects is an online auction service – the more buyers you have, the more sellers are attracted to the platform, which in turn attract more buyers as the number of items increase. Such networks are incredibly hard to break, which is why eBay in the US remains entrenched. As a bonus, indirect network effects in the form of complements can make your product even more valuable. Apple’s iPod, with its thousands of add-ons, and the iPhone, with its hundreds of thousands of applications, are much more desirable and valuable in the eyes of consumers because of these complements.
- Differentiation. When companies focus on product/service quality and number of features, there is a constant battle to be superior, have more, look better. This is both costly and difficult to maintain, especially when this is how your brand is defined (Sony again comes to mind). As Ranjay Gulati puts it, “In a marketplace like today, customers have more choices and more information, and services start to look like each other, in what we call a sea of sameness. If you don’t have an ability to transcend beyond the features and functionality of my product versus yours, then you have a problem.” User-focused companies don’t concentrate and obsess about rivals, but rather think about users and their needs. Instead of competing on a product-by-product, segment and geographical basis, they design their products and services around user habits and requirements. In the end, it’s your users you want to be happy, not your engineers or developers.
Gulati goes further to say that there are three keys to transcending the ‘sea of sameness’ and become customer-centric:
- Ask the right questions (i.e. “What problems are customers dealing with?” and “What are the issues happening in the life of my customers?”)
- Make the creative leap – by asking the right questions to figure out the innovations that will best serve your customers.
- Get your organization aligned around what customers want, rather than around product and geography.
So ask yourself: is your awesome new service with its long list of kick-ass features, or the shiny product that will change consumer electronics forever, actually satisfying some basic need? Will it delight your users, make their lives better or easier?
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