What Business Are We Really In?

If the railroad barons in the United States had sat down 50 years ago and defined the business they were really in, the nature of their companies would be completely different. Their real business, of course, was not the railroad itself but transportation.

When air transportation arrived, they should have had the foresight to get involved in it, and not be left behind. They would have prevented their dramatic decline in sales.

Believe it or not, business, and even governments, often see their role differently than their customers see it. We have all seen government five-year plans that have been scrapped at the end of the first or second year. We have seen businesses with annual budgets set in January which rapidly change in March and change again in June because sales and expenditures don't meet their plan.

This level of uncertainty and change is often caused by inadequate analysis of customer needs. Do we really understand why our customers are dealing with us? Have we identified why we are unique and what special benefits we offer over our competition?

Don't Use Yesterday as Tomorrow's Guideline

Many managers assume they know what their business really is because they took over a successful product line. There appears to be growth and an improving market share and yet those products with an improving or commanding lead in competitiveness, are often the very ones that are about to become obsolete because of product lifecycles. The airplane was created long before it was realized that the railroads were a declining business.

Discovering what business we are really in can be answered only after hard thinking and studying. The right answer is usually anything but obvious.

Find New Applications

It’s interesting to look at the business of Church and Dwight Company. They produce ‘Pure Baking Soda’ under the brand name of Arm and Hammer. The answer to their question, “What business are we in?” is indeed anything but obvious.

Their product is the most common and ordinary of products, pure bicarbonate of soda. However, the management team used an enlightened approach to broaden the business areas in which pure bicarbonate of soda competes. Not once, not twice, but at least five times!

In addition to their product acting as a leavening agent for the food industry when mixed with cream of tartar, it's also used medically for heartburn and the prevention of plaque on the teeth. Still farther afield is its use as a cleaning agent, a mild abrasive for the refrigerator, and yet again as a substance for absorbing food odors.

Go For Diversity of Users

There you have five very diverse applications for the same product! One is human consumption, two applications are medical, two are cleaning related. Yet for all five its properties are identical. Can you diversify your application area? You may be surprised and your discovery can lead to new profits from new markets.

Sykes Consultants had a client with a similar opportunity. But the opportunity, like Arm and Hammer's, had to be discovered.

The company was faced with a product in the textile industry that was sadly and rapidly declining. It was being over-taken by man-made materials and cheaper imports. However, the fine natural qualities of the original product still attracted a loyal following, particularly users who had to comply with stringent fire regulations.
This application wasn't obvious to those who didn't look. A potentially huge new market has opened up for this company, utilizing their existing manufacturing technology and their channels of distribution.

Increase Sales on Merit, Not Chance

This is a classic example of never accepting the obvious, never writing off the most basic of products. Ask yourself what consumers want that they haven't got. It is the ability to ask this question and to answer it correctly that usually makes the difference between a true growth company and one that depends on the rise of the economy for its development. Take the lead when looking for new applications for your product. Increase sales on your own merit, not on chance.

Test the Waters Carefully

How far afield should we go with applications? How quickly should we move?
Research shows that excellent companies stick to what they are best at, and only a move one manageable step at a time.

These companies keep to the business they know best and when entering new fields, they do it carefully. The best companies do not jump in too quickly. They test the waters carefully I first and if they don't have success, they withdraw quickly.
When we are challenging the nature of the business we are in, we should be careful that we are not too radical in moving into totally uncharted waters.

When we're looking for areas of improvement, we have to keep our eye on the customer. Find out what directions there needs are going. Remember the railroads. Remember the customers wanted transportation, but not necessarily train transportation. Focus on the fact that, with ingenuity, you can find new application areas for your products and services.

.

ACTION SHEET 

Ideas for Development:

1. Analyze what your customers gain from your product or service.
   This leads to perspective on opportunities and future product line investments.

2. Brainstorm new application areas for your current product.

3. Create diversity in your user base.

4. Ask yourself what consumers want what they haven’t got.

5. Test the new application area carefully before entering fully.

6. List other points here:

7.

Of the above ideas, which one is likely to yield the best results?

What percentage of sales (or performance) increase could realistically be expected?

How long would it take: to develop the idea? to get results?

Who would have to be involved?

What date should we start?

What is the first step I should take?