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Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits
In the book The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits, author Adrian J. Slywotzky (1998) provides insight and information relevant to making a business work both in the present day and in the future. Traditionally, it was believed that market share was (and should be) nearly the only focus of a business, if that business was to be successful. In Slywotzky's (1998) book, however, there is more to the issue than just how much of the market the company has captured. Now, it is believed that the main focus should not be on the extent of the market share held by a particular company, but on the way that company treats, reacts to, and responds to its customers (Christensen, 1997). "Customer-centric" is the term being used, and it means a large and significant shift in priorities for a number of companies, mostly because these companies have not spent time in the past focused on giving customers top priority (Slywotzky, 1998). Instead, the bottom line (and the market share that creates it) has been the sole focus of a majority of companies.
Slywotzky (1998) is clearly showing that he feels this focus is misguided, and that there is a better way for companies to handle their business. In other words, if the company focuses on the way customers are being treated, and it does everything it can to keep its customers happy, those customers will continue to come back again and again. They will also tell other customers about the value of doing business with that company, and the issue of market share will take care of itself. Instead of a company that spends time focused on how to increase market share, the company that focuses on the proper treatment of its customers will naturally see its market share rise over time. That will create a large benefit for the company and also for the customers, so everyone will win (Elcock, 1996; Slywotzky, 1998).
What has been learned in class fits very well with this book, for the most part. Market share matters, but it is not everything. Even companies with good market share may not be seeing the profits they would really like (Nag, Hambrick, & Chen, 2007). Other companies are lacking in both profit and market share, and that generally occurs because they do not have their customers' best interests in mind. Companies that are greedy and that are clearly out for profit only will generally not please their customers on a long-term basis (Christensen, 1997; Nag, Hambrick, & Chen, 2007). Customers can be very savvy, and they see through things more than some companies would expect. Because they see that the company is just out for market share and profits, they stop doing business with that company because they do not feel appreciated or valued as customers. A company that shows it truly values its customers will be much more likely to keep those customers coming back, because people want and need to be valued by the companies with which they do business. It is much more likely to get a good response.
Companies in the past spent little time with their customers (Slywotzky, 1998). There are still companies today that are focused on market share, as well. Many of them do not appear interested in meeting their customers' needs. They will just move along to other customers. That is unfortunate, but it is not something that can be avoided until the company realizes its mistake. For large companies that can take some time. The effects of customers leaving the company and not doing business with it anymore will often not be immediate, because there will be new customers coming in. The market share may stay the same or even appear to be growing, but how are the profits? If these kinds of companies will start looking at their bottom lines, they will begin to see that they are actually losing money even as they are seeing new customers coming in.
The reason behind this is that the new customers they are seeing do not stay. They try the business, see how they are treated, and move on. While it may look like new customers are always coming into the business, the fact that they do not remain because they are dissatisfied can be reflected in the level of profits made by the company. Over time, that can cause a business to fail. Of course, this also depends somewhat on the size of the business. When a company is very large it takes longer for it to struggle. Small and medium-sized companies that are not treating their customers correctly are going to find themselves struggling much more quickly, because they simply have fewer resources and a smaller "buffer zone" between doing well and failing. Any size business should be focused on its customers, however, if it wants to become and remain successful (Nag, Hambrick, & Chen, 2007; Slywotzky, 1998).
Naturally, there are pros and cons to any book and this is also true of Slywotzky's (1998) work. He focuses very clearly and directly on what he believes to be accurate when it comes to how customers should be treated, how important they should be to a business, and what that business should be doing in the way of priorities. However, there is always the concern that this customer-centric business model could be taken too far. That is one of the cons of the argument. Will customers continually come to expect more and more from businesses with which they interact? At what point does a business determine that enough is enough, and that customers cannot be catered to at a level any higher than what they currently have? Will that business then fail because it is not doing enough for its customers? It is a slippery slope, and balance is something that must be carefully considered when it comes to how customer-centric a business becomes.
Naturally, it is good to be mindful of customers and their needs and wants. Businesses that fail to do this lose their customers quickly, because those customers realize they can go down the road to another business and be treated better. However, when businesses lose themselves attempting to always please every customer who comes through the door, that can be just as detrimental to the success of the business overall. Yes, the customers will be happy for the time being. But it is impossible to please everyone all the time. When a business becomes determined to please every customer, other business issues are neglected and can fall through the cracks. Eventually, that leads to a lack of being able to keep customers happy, even though that was the company's main goal. In short, a business has to eventually give up some of that desire to please the customer, and has to find balance so that customers can be satisfied but the business can also be satisfied.
In order to be successful in a future career in the business world, that balance needs to be something which remains in the forefront of a person's mind. In entry-level positions in business, a person must do what he or she is told. Eventually, that person will move up to the point where he or she has some discretion over the decision making. That allows the person to consider carefully how he or she feels about the way customers are treated and how that is potentially affecting the bottom line of the company. It is important to remember that it should no longer be about market share. It should be about a customer-centric attitude that keeps people coming back again and again. That is what pleases both customers and the business, and that is what increases profits. Market share will grow as a natural extension of that (Slywotzky, 1998). When companies focus solely on market share, they are really neglecting both their profit margin and their customers. Changing things around, and "neglecting" their market share is actually a better choice for a long-term business strategy.
More profitability will be seen with this strategy than with one that is focused on the market share held by the business (Slywotzky, 1998). Being customer-centric takes work and time, however, and an adjustment period is necessary in order to ensure that everyone in the business is on the same page with how customers are to be treated and the policies that are put into place regarding those customers. Overall, customers are truly the lifeblood of the business. Without the customers there would be no business. If a company cannot attract customers properly, and keep them once it has them, how is it supposed to be successful? It is actually quite surprising that companies ever moved away from a customer-centric model, or that they did not use one to begin with. The value of that type of model was apparently not seen by the majority…[continue]
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