At a recent gathering, business owners pondered aloud the following questions: Where should I focus? Where do I get the best return on my time and efforts?
To help them answer these questions, we did some research. According to a Strategic Planning Institute study (pimsonline.com), the number one area that impacts profitability the most is when an organization’s leader focuses on market position.
In fact, market position won by a wide margin. When company leaders focus on market position and competition, it resulted in a 65 percent impact on profitability. In contrast, focusing on operational effectiveness and strategic moves produced only a 15 and 10 percent impact on profits, respectively.
So what does this mean?
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Market Leaders
What exactly is a market-focused leader? The group identified three primary factors: clarity of vision and action, marketing investment, and situational responses.
Clarity of vision and action means setting a direction and vision for the company, and then converting that clarity into daily activities. Think about priorities. Market-focused clarity means considering the customers and the marketplace first. When faced with a decision, ask — How will this decision impact the customers? What does this decision mean in terms of the customer’s relationship with the company? Market-focused clarity begins with the customers and the marketplace, and the decision-making process proceeds from there.
One other powerful understanding is that the daily activities of a company define its market position. Why? Because company activities are what customers see and react to, and it’s a customer’s action — or inaction — that ultimately defines success. If activities reflect the vision, strategy becomes reality. Continuity from vision to daily activities produces a clear synchronization between who you want to be and who you are.
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Marketing Investment
Another insight gained is that marketing is an investment. Sergio Zyman, the former vice president of marketing for Coca-Cola said — When you understand that marketing is what you do to sell stuff, then the money that you lay out is an investment instead of an expense. Marketing activities build understanding, connections, and relationships with the marketplace as a whole, and with individual customers. This understanding and feedback should drive strategy, product development and growth plans. Without investment in marketing, it’s unrealistic to expect any long-term and sustainable synchronization between your vision and what the customer will buy.
Finally, market-focused leadership entails responding when the situation dictates. Being outwardly focused, investing in marketing, and being driven by market information yields decision points.
If a customer’s needs change, what is the appropriate response? If a new competitor enters the arena, how should they be dealt with? If new channels and connections with customers are available, should they be used? For a market-focused business, these decision points are connection points with the customers, and also potential moments of change. Think of these decision points as opportunities to challenge assumptions, reassess priorities, and decide if a change is warranted.
After the company reaches a market-focused frame of operation, the hardest part is continuing to make the daily decisions that perpetuate that vision. Distractions are going to occur, and some of them are going to be big. Trust in the vision and the daily activities established to enable that vision. Market-focused leadership is a demanding taskmaster, but the rewards and growth potential make the investment worthwhile.
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Ken Cook is managing director of Peer to Peer Advisors, an organization that facilitates business leaders helping each other. You can reach him at kcook@peertopeeradvisors.com.
