By Wes Ball. Wes is a strategic innovation consultant and author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success (Westlyn Publishing, 2008) and writes for Leadership turn every Tuesday. See all his posts here. Wes can be reached at www.theballgroup.com.It doesn’t make any difference what your political views are, everyone recognizes that Sarah Palin’s nomination as candidate for VP for the Republican Party changed everything… not only at the Republican convention, but also at the DNC. There was obvious fear in both the eyes of Democratic spokespersons and the words of their primary candidate.
Why would something so simple have such a major effect? I believe it is an example of the power of the Alpha model at work. Let me explain…
We saw that John McCain was the underdog, despite the apparent closeness of the polls. Almost everyone assumed that this one was in the bag for Obama. He is smooth, well-spoken, and inspirational, even when you’re not quite sure what he is saying. His original message was one of joining together for a great purpose that made many persons who are not tattooed with a cute gray elephant on their foreheads aspire to be part of the movement to a brighter tomorrow. Obama had not even had to tell anyone how that brighter tomorrow might occur to gain that following.
John McCain, on the other hand, had never been able to quite generate the support his poll numbers seemed to indicate he had, because his stiff jawed approach and constant reminders that he was the candidate with experience rang un-inspiringly hollow. Going into this convention, the Republicans were trying hard to put on a good face, but it was obviously hard to do.
Then, magic happened. It wasn’t that she was another “Maverick.” It wasn’t that she was a “real” woman, who can shoot her moose dinner, cook it up, and still make it to work at the governor’s mansion the next morning in time to bust the tail of some nasty oil executives. It was something quite simple, and it happened when we saw her speak: she was inspirational. She was real. She, like Obama, could make people feel that they could be part of something great. She made people aspire to be part of this “maverick” movement, and that even if you are a lifelong small-town resident, you can be part of this great country — you don’t have to be an ivy-league elitist.
The best part was that she was able to tell the “my experience is better than yours” story more inspirationally than John McCain, not because she has more experience, but because she was so inspirational and aspirational. It meant something coming from her, where it just did not mean that much coming from McCain, because not that many really cared.
This is the Alpha model at work. The Alpha innovation rule is: Ego-satisfaction over-rules functional satisfaction. You can have the performance advantage and still lose to someone who is more inspirational and aspirational than you. Make people feel that they will feel good about themselves (self-satisfaction) and that others will feel good about them (personal significance), and the only factor performance has in the equation is to act as “proof” that you are telling the truth.
This campaign has suddenly become one where issues will be important. They weren’t before. Before it was who makes us feel that we want to be part of a movement. Now it’s going to come down to who can prove that their claim of that benefit is real, based upon how they are going to achieve their goals.
A couple of months ago, Obama would have won without anyone really knowing how he was going to do anything. Now he will be forced to explain it, because there is another inspirational “gun” in town who is stealing the scene.
If candidate McCain can join in the inspirational, aspirational game plan, this could now have become an unbeatable ticket. If not, it will still be a very close race with the small set of independent voters measuring who they really believe will give them the Alpha leadership they desire.
Does Sarah Palin provide you with ‘ego-satisfaction’? (Miki)
By Wes Ball. Wes is a strategic innovation consultant and author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success (Westlyn Publishing, 2008) and writes for Leadership turn every Tuesday. See all his posts here. Wes can be reached at www.theballgroup.com.
Psychologists will tell you that only about 15% of the population thrives with change. But they will also tell you that almost no one really likes it. Change causes pain – personally and organizationally. And pain causes uncertainty, which makes everyone uncomfortable. So we all try to avoid change, if at all possible.
Who wouldn’t like to think that what works today might work ten years from now? The trouble is: change is happening all the time. In fact, change is occurring so quickly today that, if you get some useful information, you better react to it right now, because it may no longer have value a week, a day, or an hour from now. The days of believing that waiting to make a decision is a viable option are long gone.
The key to success in today’s business environment is not to avoid change, but rather to be the master of it—that is, to own it.
But change for change’s sake doesn’t go very far. Fads die almost as quickly as they are birthed. Change that continually drives customer expectations, especially change that drives them higher in the areas that customers want their expectations to be fulfilled at higher levels (i.e., ego-satisfaction), will create following behavior among competitors. And following behavior puts the leader being followed in control.
How do successful change-leading companies make that happen? Here are the specific steps a company must go through to make it happen and become the change leader:
Top management must be convinced that change is desirable. This is by far the hardest and most critical step. Few top managers would say they don’t want positive change, but few have the heart to really follow-through on what it takes to make change happen successfully. They all too often want to solve a short-term issue and then go right back to business as usual. Without this top-down desire to change, nothing useful happens. And any positive change driven from the bottom up is quickly undermined.
Uncover customer desires and aspirations – that is expectations they wish they could have fulfilled but don’t really believe can be. The company that uncovers and addresses these wishes has the key to long-term loyalty and greater profitability than most companies ever dream of gaining. Just ask Apple, or Harley-Davidson, or John Deere, or any of the other Alpha companies out there.
Use what you discovered to drive new and higher expectations. You won’t be able to fulfill every dream or aspiration a customer has (that’s why there are always new opportunities to raise the bar. But, when you drive new and higher expectations from dreams and aspirations, you not only make your company the one to beat, but also the one to follow. Customers, competitors, distributors, retailers, and referral agents will all look to you for insight as to what is important and what they should be doing. You begin to own change in your category.
Define the future by defining the path of future changes in expectations. Intel has already defined the next five generations of processor performance. It’s for everyone else to follow their lead. As you define that future in broader terms than just product performance, you generate the path of a true leader. Once you have most people following your lead (even if they are not all buying from you), you have control over continually driving expectations for the entire category higher.
It starts with a desire to create change. It is sustained by defining the path change will take for the category that makes you the leader and makes your company, its products, its communications and its people the proof that customers can get what they have dreamed of getting.
By Wes Ball. Wes is a strategic innovation consultant and author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success (Westlyn Publishing, 2008) and writes for Leadership turn every Tuesday. See all his posts here. Wes can be reached at www.theballgroup.com.
I was reading Miki’s postings on Saturday about “disruptive innovation” as described in IBM’s Enterprise of the Future, so I downloaded my free copy. I walked away with a nagging concern that these 1000+ CEOs are still chasing their tails, because they seem to be looking for the answers to long-term growth in places that require the highest investment and the highest risk. Instead, there are much greater sustainable profit and growth opportunities sitting right in front of most of them.
The point of looking for “disruptive” innovation is that it is believed such innovation will drive a long-term, sustainable competitive edge for the innovator. The trouble is that such innovation models typically require technology development or other innovation into untried areas that more often than not fail to deliver either long-term or sustainable growth. It is often too easy to “one-up” such innovations, so the investment often never quite pays off as hoped. Not everyone can deliver an iPhone or a Blackberry. Too often the technology “breakthrough” only offers a short window of opportunity until someone else improves upon it.
This drive to find ”new” places or ways to sell is usually driven more by frustration at the failure of marketing and sales to provide sustainable growth opportunities than it is by a real lack of opportunity in existing markets and business models. The fact is that customer satisfaction and fulfillment is very low in most product and service categories, which leaves a readily addressable opportunity for growth to the organization that can understand what to look for.
When we do research in most product and service categories, I am almost always surprised at how low customer expectations are compared to how high their dreams and aspirations are. That gap represents a significant opportunity that can often be addressed without large investment.
What it takes is a willingness to open up the focus of innovation to go beyond product improvement, process refinement, or other functional innovation (including technology breakthroughs). The real focus to create really disruptive innovation should be upon those dreams and aspirations, not functional improvement.
Innovation that focuses upon these dreams and aspirations (the Alpha model shown in my book refers to these as “self-satisfaction” and “personal significance”) can drive growth that catches competitors flat-footed and often unbelieving that success could come so simply. We’ve had many examples where an organization used this kind of innovation, created dramatic growth, and their competitors doggedly proclaimed that “there must have been something else that happened to create that growth.” In many cases, competitors never figure out what the real ego-satisfaction innovation was that drove success, so they waste time and money unsuccessfully trying to “compete” by copying other things they see happening that they think must be the true cause for the success.
Apple’s iPhone just experienced this. The success of the iPhone put several competitors on a panicked innovation track to try to at least get “in the game.” None have succeeded, because all of their efforts have been on the product improvement and functional innovation side, while the real success of the iPhone is far more on the ego-satisfaction side of the equation.
I own one of the original iPhones. Functionally, it’s pretty darn good, but so was the Blackberry to which I compared it. In some ways the Blackberry was better; in others the iPhone was better. But on the ego-satisfaction side, there was no comparison. Like the iPod or the MacBook Air or just about any of the other Apple products available right now, all you have to do is touch an Apple product and you feel that you’ve been transported to a planet where companies suddenly know how to make customers “happy.”
Who can describe what happens or why? It’s so emotional that it’s beyond description. But it is real enough that people are buying them like crazy despite the “economic downturn” we find ourselves in. Address a person’s ego-satisfaction needs well and every competitive product pales by comparison.
We did that with so many products throughout our Alpha Factor Project that it’s hard to recall them all. The funny part about each one was, however, that competitors seldom figured out what was really going on. That was truly disruptive. Often we would wait, expecting competitors to catch on, only to see them blindly fall into the product improvement trap trying to copy what we had done without addressing the core ego-satisfaction needs that had actually created the success.
The point is: if you absolutely have to change business models or find new markets, because you’re selling in a way or to a market that is a dead-end, then by all means change. But if you’re just frustrated with your lack of success at getting enough out of your current model and markets, then make sure you aren’t focusing upon product improvement and functional innovation, when the real need is on the ego-satisfaction side.
Do your products/services address ego-satisfaction?
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
I sat through a meeting a couple of months ago wanting to scream in agony, but knowing that I could not really blame the participants for what I was hearing. This meeting simply pointed out the misery of most businesses when they think about how they might strategically create growth.
The context of the meeting was this: I had been hired to help them find new ways to grow, because they were continually finding themselves losing to “stronger” competitors, especially one key competitor. What I knew was that their competitors were not strong at all, but rather they were just as confused as this team. The only difference was a history of one of those competitors being the lead dog (not the controlling Alpha, but at least the name that everyone knew).
The men and women around this conference room table were desperately trying to figure out what they could do to become “the Alpha.” It wasn’t happening, because every time I pointed out the path that had been clearly defined by some research I had done for them (and they had witnessed to the point of actually hearing people say they would change their behaviors if they were offered these solutions), they immediately dropped back into their “following” mindset and believed that they could not get there. They believed that the bar that the “lead” competitor had set was too high for them to hurdle.
The final straw came when we started talking about pricing strategy based upon the research findings. All through the discussion, they kept referring to this one competitor’s price as being the one they had to “compete” against. They saw that as needing to be below it. This was despite the fact that they claimed their product was superior in every way to this competitor’s product.
I gave them an alternative that was clearly supported by the research: Someone could easily take a price position 5% to 10% ABOVE this competitor and make themselves the new leader that everyone would look toward. I could count the heartbeats. The fear in their eyes clouded the entire room. They said their product was better. They said they wanted to take a leading role. But when it really came down to pushing the button, they just could not believe that they could do it.
That company is still sitting there with a “superior” product, unable to take the step to prove it to customers with a price that proves its worth. They have come no closer to becoming an Alpha than they were two years ago.
Sadly, this is all too common. We set our own limitations. It’s what makes an Alpha capable of controlling an entire category with just a few well-thought-out strategic moves. People and companies convince themselves that they must follow someone’s lead, even though their own demise is driven in that following.
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
A friend just sent me a copy of an article about the presidential campaign from back in late May. At first I wondered if she just thought I was so far out of touch that I needed to do some catching up. She pointed out instead that my Alpha Factor model was playing out right before our eyes in this campaign. I agree.
Here’s part of what he said:“A new study by D. Scott DeRue of the U-M’s Ross School of Business and colleague Jennifer Nahrgang of Michigan State University shows that the number of years of political experience doesn’t matter much when it comes to getting nominated.”
According to DeRue, “It is clearly not experience, so there is something else about Obama… Obama’s personality and charisma have captured the hearts of the American people.”
Guess what? That’s exactly what I found in my research regarding how people make decisions. Rationality is not dead. It never existed.
We all grow up believing that people make rational decisions based upon clear lists of performance or other “factual” criteria. It’s just not true.
People are emotional beings and that’s where their decisions are made. Make people feel good about themselves (I refer to that as “Self-satisfaction”) or help them believe that other people will feel better about them (I call that “Personal Significance”), and you are tuned into the “buying channel.” That’s where all buying decisions really occur.
When researchers ask people why they made a buying decision, they always give a litany of rational reasons’
it works better;
it costs less;
it fits better;
it has more features;
blah, blah, blah.
None of those proved out to be real reasons, according to my research. They were just the way people believe they need to explain their decisions to other people.
The real reasons for their buying decisions were far more controversial and emotional.
it makes me feel better about myself;
it makes me believe that other people will notice me more;
it makes me believe other people will think better of me;
it makes me feel that I am more the person I wish I were;
it makes me believe that more people will love me.
It’s all emotional fulfillment that drives decisions.
Companies could learn a lot from the current presidential campaign.
John McCain may have all the experience that Obama lacks (a rational factor), but he has proven himself incapable of making people feel good about themselves or of making them believe that anyone will think better of them for voting for him. Hence, Obama has strong support among a broad cross-section of the population in both political parties. McCain doesn’t.
This has nothing at all to do with my personal political preferences. I personally wish the Republicans had a “real” candidate – someone who could inspire people and make them desire to be part of his campaign. They don’t.
What does this say about leadership?
If you think you can run a company on purely rational factors, you’ve lost before you start.
If you think you can steer a corporation without making people feel good about themselves and about being part of what you’re doing, then you will certainly fail.
Every Alpha company I have tracked that has lost its way got lost on this issue.
Although every CEO knows that he has to manage the rational side of the business, he better also understand that the emotional side is where the key to his real success lies.
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
Sam Walton made no bones about it. He was not going to lose control of Wal-Mart to the stock market. Even after they started selling stock over the counter, top management at Wal-Mart was able to maintain control over the strategic direction of the company right up to Sam’s death in 1992.
Sam was a leader. He had a clear vision that he would not compromise. He took risks, built a support team to “manage” the company, empowered and nurtured employees, shared profits, and built a company that is still the envy of most retailers. It also became the Alpha in discount retailing due to that leadership.
Compare that with the life of most CEOs today: shareholders and stock analysts really run their companies, because stock price is the measurement of their success. Their bonuses are based upon it, and their future employment is based upon it.
CEOs who have to answer to the whims of the stock market cannot be leaders, because they have already defined themselves as followers.
Is it possible for a CEO of a publicly-owned company to maintain leadership?
Certainly, but it takes an extremely charismatic, visionary, focused individual who is willing and capable of bucking stock analyst and shareholder pressure for short-term profit results and instead keep the company focused upon long-term success.
All of the Alpha companies I researched for my book, The Alpha Factor, had such leadership in their early formative years. What killed most of those companies later on was the compromise of allowing stockholders and stock analysts (or other outsiders) to drive the strategic management of the company.
How would you protect your company from this if you had to generate significant financing?
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
If you’re alive, you’ve probably been watching the drama being played out at Starbucks. Hundreds of stores are slated to close across the country, and customers ranging from local neighbors to business owners to the mayors of cities are calling to lobby for their local store.
Starbucks management claim that they “over expanded,” and that has caught up with them as they experience the same economic downturn that is haunting everyone else. That is certainly the case, but there is something even more significant being displayed here: the power of an Alpha company.
Alpha companies are the leaders of customer expectations in a product or service category. They define what it means to be “good.” Everyone else has to either emulate or overcome them to establish themselves as acceptable. They accomplish that by driving emotional needs fulfillment ever higher to “self-satisfaction” and “significance.”
One of the benefits of making yourself this kind of company is that you have a lot more margin for error when you really blow it.
Not since Coca-Cola nearly immolated itself with “New Coke” in the 1980s has there been such a customer response as we are seeing for Starbucks. Customers saved Coca-Cola from disaster. They are trying to help Starbucks in the same way. What a testimony for leadership over management.
Cost-side management has really been the cause of the problem. What was forgotten was that cost-side management could never have created this kind of customer response. Only revenue-side management (which is the focus of leadership vs. management) could do this.
Luckily, Starbucks has been given a gift by its customers. I hope that it recognizes the true cause of its decline is a cost-side focus and uses this time to re-focus upon the customer experience that defined new experiential expectations for a coffee shop.
How will you react when your local Starbucks closes?
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
It is seldom the “big” decisions that kill a company, except in the final stages, when big decisions are needed to “save” it. It is the day-to-day sacrificing of “Alpha Assets” that drive a company to ruin. Alpha Assets are the real strategic assets a company has, based upon the Alpha Factor model defined in my book.
What happens is that leaders start to believe the lies they hear from customers, retailers, and salespeople that they have to compete on price. They make decisions based upon short-term internal needs before addressing strategic needs of customers. They make budget and other decisions based upon satisfying shareholders and stock analysts, whose interest in the company is extremely short-term.
When I see the kinds of problems that most corporate leaders face on a day-to-day basis, more than 90% of them are ones that either would not exist or would be much less threatening, if the company had not made many small compromises and small “mistakes” over a long time. They have given away the competitive influence they might have had by “playing by the rules.”
In the research for my book, The Alpha Factor, I was continually surprised to find that many Alpha companies struggle with this. The difference is that Alpha’s compromise less and stay focused more upon their core Alpha Assets when making decisions.
What kind of pressure have you seen that tempts you to just solve the problem today without regard to how it might harm your long-term potential?
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
To grow a company and make that growth sustainable, top leadership must be focused upon strategic decisions, not short-term tactical ones. That means decisions that further the long-term objective of creating more growth potential for the company, not just satisfying short-term demands—whether those are internal or external.
Too many top executives are among the greatest offenders in this, largely due to the extraordinary pressure created by the stock market. In fact, I believe the stock market and its “gambling mentality” is the greatest threat to American business today—even more of a threat than the U.S. government has tried to make itself.
Unfortunately, I hear CEOs so concerned about their stock performance that this concern starts filtering down to the ranks of staff. This creates a frightening problem. Lower-level staff, where most of the real strategic initiatives can originate, start thinking as the CEO does and slowly stop thinking strategically about initiatives that will sustain growth.
Since the top of the company has become so focused upon tactical response to stock market performance, the company has actually been turned upside-down with mid- and lower-level staff becoming the real source for strategic growth. Can a company actually survive being driven from the bottom up, especially if mid-level staff start thinking about stock price as a real goal for their initiatives? This creates a terrible problem of both how to train these staff to become more effective in a strategic role, how to nurture strategic thinking from lower levels, and how in that environment to still maintain a proper management hierarchy.
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
Corporate ADD (see last Tuesday’s posting) may be one of the chief causes of the lack of “leadership training” in corporate America today, other than a simple lack of know-how. Who has time to nurture a subordinate or to model “strategic leadership” in an environment that is all tactical all the time? And, as noted in last Tuesday’s posting, this only gets worse as you go up the corporate ladder.
The danger is that lower-level employees are the only ones with any perceived freedom to experiment or to make truly strategic proposals… at least until they realize that there’s no one upstairs who is listening. That’s when the young ranks of “best and brightest” start looking for another place of employment.
Not all Alpha companies, as I describe them in my book, The Alpha Factor, avoid this problem, but I was lucky enough to work for two where young employees were encouraged to experiment. At one of them, I made a bold comment about how staff at my level were being under-utilized, and the VP of my division challenged me to prove what I could do. That opened up an opportunity for me to initiate a limited, but strategic initiative that created my first big personal success at growing sales.
Be aware, however, that just because a company is the Alpha of its category doesn’t make it the greatest place to work. Some of the Alphas I discuss in the book have extremely threatening cultures, but they seem to work because they are designed to nurture a specific type of employee that can thrive under that management style.
What are your thoughts on how to nurture future strong strategic leaders?
Entrepreneurs face difficulties that are hard for most people to imagine, let alone understand. You can find anonymous help and connections that do understand at 7 cups of tea.
Crises never end.
$10 really does make a difference and you’ll never miss it,
It doesn’t make any difference what your political views are, everyone recognizes that Sarah Palin’s nomination as candidate for VP for the Republican Party changed everything… not only at the Republican convention, but also at the DNC. There was obvious fear in both the eyes of Democratic spokespersons and the words of their primary candidate.
But change for change’s sake doesn’t go very far. Fads die almost as quickly as they are birthed. Change that continually drives customer expectations, especially change that drives them higher in the areas that customers want their expectations to be fulfilled at higher levels (i.e., ego-satisfaction), will create following behavior among competitors. And following behavior puts the leader being followed in control.
If you’re alive, you’ve probably been watching the drama being played out at Starbucks. Hundreds of stores are slated to close across the country, and customers ranging from local neighbors to business owners to the mayors of cities are calling to lobby for their local store.
It is seldom the “big” decisions that kill a company, except in the final stages, when big decisions are needed to “save” it. It is the day-to-day sacrificing of “Alpha Assets” that drive a company to ruin. Alpha Assets are the real strategic assets a company has, based upon the Alpha Factor model defined in my book.
Too many top executives are among the greatest offenders in this, largely due to the extraordinary pressure created by the stock market. In fact, I believe the stock market and its “gambling mentality” is the greatest threat to American business today—even more of a threat than the U.S. government has tried to make itself.
