The Impact One on One with Prof Niraj Dawar was held on Thursday evening at the ITC Grand Maratha, Mumbai. Prof Niraj Dawar, Ivey Business School (Canada and Hong Kong) is a renowned marketing strategy expert who has also been on the faculty of leading business schools in Europe and Asia. He works with senior leadership in global companies and his publications have appeared in leading academic journals.
Speaking at the special event, Dawar began with a little insight on the history of the world’s business practices, wherein he explained how the business of the world has been run on the industrial model for over 250 years now. He narrated how the mid-18th century entrepreneur Richard Arkwright saw around him a lot of innovations in the textile industry and his idea to stick together a number of machines and run them as one turned out to be the ‘factory’. But since his focus shifted to moving more volumes to his factory to reduce his per unit cost of production, it essentially became the defining feature of business over the next 250 years – the ‘product-centric approach’.
Borrowing various examples from his earlier article published in the Harvard Business Review, titled ‘When Marketing is Strategy’ and his book ‘Tilt’, Dawar tried to lay emphasis on the ‘tilting’ or moving away from ‘product-centric’ functioning to ‘customer-centric’ functioning for better results. What he pointed out very clearly is the fact that while the companies do acknowledge that only customers drive their brands – and why they’d rather buy from them as opposed to their competitors – they still focus only on the product at hand and not what or how the customers buy.
According to him, there are three shifts that are redefining businesses today. The primary focus of costs has shifted out of the factory to downstream activities such as customer acquisition, customer satisfaction, and customer retention. Citing an example, he explained how a customer is ready to pay a 700 per cent price premium for a can of Coke delivered to him from a tailor-made machine in whatever the circumstances he wants it. It is chilled, it is single serve and it is at the point of thirst, thus moving the concentration away from upstream activities and making one realise that the downstream activities are driving the organisation value, and yet, the organisation continues to focus only on upstream activities.
Dawar mentioned that the App Store today does more business than what Apple did entirely in the year 2004. This is because they realised that the concept of downloading music for free and having portable music players was a relatively untapped market. What worked in Apple’s favour here was the fact that they simplified the process for the customers and gave them precisely what they wanted. He noted, “Today, every app that a customer buys on the App store is a stich that binds the customer to Apple, forever.” The very reason for creating the App Store was to give the App developers and App software users a common Apple platform to interact freely. When Blackberry (RIM) was asked as to how it lost out to Apple despite being the pioneer in bringing the Filofax and Mailbox to a mobile-phone, or Nokia, as to how it lost such a huge market share, they had only one answer – “We were too slow with our app stores”.
He continued, “Imagining a world without Coca Cola is unthinkable, for it has been around nearly 120 years now. But if it were to vanish overnight, its revival the following morning would depend solely on what its customers thought about it. Many companies lose out on their customers because they focus on all the upstream activities, forgetting that the downstream activities have to be looked after equally well to offset them. The sources of customer value — what the customer is willing to pay a premium for — have also shifted downstream, toward the services and information that surround the product.”
Given our core competencies, what can we make? A practical answer to this came from a pharmaceutical company producing a molecule for the ADHD medicines for children. To ensure that the value to the customer was maximised, this company, to check the effect of the drug, decided to create video-games with lines of code telling the kids to calm down – and the effects were phenomenal. This goes to show that even if a particular task isn’t exactly our forte, we can still accomplish it with external help, but simply ignoring it would help no one.
He also said that competitive advantage no longer resides in the four walls of the organisations – at one point it did reside in factories, and thus had four walls around it. But today, it lies in the market place. Dawar raised an extremely important point with his statement – “Sell parts better, as opposed to selling better parts’. It redefines innovation. For so many decades, Gillette has been the only reason for people to believe their adage – ‘four blades are better than three’. Had this been introduced by absolutely any other competitor, it wouldn’t have registered anywhere in the customer’s mind, because it wasn’t Gillette – its credibility and, in fact, any organisation’s credibility is what matters the most.
Every organisation is stuck in the same rut of focusing heavily on only the product innovations – with as many sub-divisions made only for the product – product managers, product measures, product market shares; profitability is measured by product; incentives are based on the products having moved – Product tends to be central despite all talk of the customer-centricity. Success is measured by product units sold, and profit is measured by product sales. Marketing and sales people count on product pipelines and product innovation to extricate them from competitive battles. In all this product-fixation, the customer is lost. The core of an organisation is the product, never the customer.
However, today the centre of gravity of an organisation is shifting. While we’re still in the upstream currently, we are slowly beginning to move downstream in our journey. Prof Niraj Dawar hopes to see the organisations loosen the inertial force and make the downstream trend a reality soon.