Where one brand failed, this brand succeeded. Find out what this firm did right to fulfill its customers’ needs! [Tuesdays: Return Driven Strategy]
Miles Everson’s Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
A Note from Miles Everson:
Return Driven Strategy (RDS) is one of the most effective frameworks I’ve encountered in my years of working with and guiding independent professionals.
Created by Professor Joel Litman and Dr. Mark L. Frigo, this pyramid-shaped framework has 11 tenets and 3 foundations that are helpful in conducting business and achieving wealth and value creation for your firm.
You may know more about RDS by reading Professor Litman and Dr. Frigo’s book, “Driven.”
In today’s article, let’s talk about two business case studies that are relevant to the framework’s Tenet Two—Fulfill Otherwise Unmet Customer Needs.
Read on to know the difference between these tech companies’ strategies in fulfilling their target market’s demands.
Miles Everson
CEO, MBO Partners
Chairman of the Advisory Board, The I Institute
Return Driven Strategy
HP…
ASUS…
These are some of the biggest computer companies in the world nowadays. They dominate the global personal computer (PC) market due to their significant computer equipment shipments in recent years.
In fact, these companies account for over 81% of the total computer shipment across the globe, and their market dominance is expected to continue into the future.
… but did you know that before the supremacy of these firms, there was another company known for manufacturing innovative, high-quality laptops and desktops in the market?
It’s none other than…
IBM!
Photo from The Software Report
IBM (International Business Machines) is a multinational technology corporation headquartered in Armonk, New York. It has operations in over 171 countries and sells computer hardware, middleware, and software.
The company also provides hosting and consulting services in areas ranging from mainframe computers to nanotechnology.
Additionally, IBM is a major research organization, holding the record for most annual US patents generated by a business for 28 consecutive years. Its inventions include the:
- Automated teller machine (ATM)
- Floppy disk
- Hard disk drive
- Magnetic stripe card
- Relational database
- SQL programming language
- UPC barcode
As of 2020, IBM is one of the world’s largest employers, with over 345,000 employees in different parts of the world.
IBM and Return Driven Strategy’s (RDS) Tenet Two
In the book, “Driven,” authors Professor Joel Litman and Dr. Mark L. Frigo explain RDS’ Tenet Two as fulfilling otherwise unmet customer needs.
According to them, this tenet is a recipe for achieving high returns on investment. They say high-performance businesses deliver offerings that customers believe are not otherwise available.
Let’s take a look at whether or not IBM achieved Tenet Two of RDS…
Before its personal computer division was sold to Lenovo, IBM’s ThinkPads had long been considered the better laptops in the market. These devices were consistent front-runners in many awards for notebook quality and customer service.
IBM’s desktops had been considered innovative products too!
Despite that, the company still lost hundreds of millions in its personal computing division.
Why?
It’s because IBM was focusing on manufacturing high-quality machines, but that’s not what the market exactly needed.
Think about this: Other tech companies were manufacturing great computers too. If you put all these products together in the market, you wouldn’t think customers’ needs would be unmet if IBM’s laptops and desktops were removed.
So, what did consumers need?
A new business model that lets them purchase personal computers more conveniently!
This was where Dell, another computer company, stood out from the competition…
Photo from LaptopMag
While IBM was suffering losses, Dell was producing earning power levels in excess of 20%. The reason for this?
Dell had been targeting a customer need that no other computer manufacturer attempted to target before: Mass customization in a direct-to-consumer model!
[Mass customization: This refers to the process of providing customized goods and services that best meet customers’ needs.
Direct-to-consumer model: Also known as business-to-consumer (B2C), this model refers to selling products directly to customers and bypassing any third-party retailers or wholesalers.]
Dell provided an approach to computer production and delivery that was truly unique at that time. It fulfilled customers’ needs for choice and flexibility in creating the machine they wanted.
Simply said, Dell provided an offering for which there was no true substitute. As a result, the company produced high returns. It created a situation where it didn’t have to price offerings relative to the costs to produce them.
… and according to Professor Litman and Dr. Frigo, avoiding cost-plus pricing and moving toward customer value-pricing is necessary for high cash flow returns.
“Great Offerings Do Not Guarantee Great Results”
Having a great product is not enough reason to say a company is performing well in the market. Great and responsible business leaders and managers know that having a great business is more than just having high-quality products—they understand the true needs of customers and whether or not other substitutes are available for fulfilling those needs.
Also, as a business owner or marketer, you have to take note that different people are motivated by different kinds of needs.
By understanding customers’ needs in terms of pain and pleasure, you’ll evaluate the value of an offering to them:
- Customers value offerings that reduce immediate perceived pains. They pay prices relative to that value.
- Customers value the potential of future pain and the perception that no other offering will prevent that future pain.
- Customers value the potential of pleasure received.
According to Professor Litman and Dr. Frigo, high-performing firms always have an offering that is different. Whether it’s a product, service, or business model, these companies have distinctly different strategies.
However, being different is not core to strategy in RDS’ Tenet Two—it’s a by-product of having done everything else right.
A firm that fulfills otherwise unmet needs is a naturally different firm. Having a goal of being different for its own sake could also lead to losses or bankruptcy.
We hope you learned a lot about RDS’ Tenet Two through IBM and Dell’s case studies!
Keep in mind that being a naturally different firm is not limited to the quality of the products or services you provide. It can also be applied to your strategies, business models, customer service—anything that could make your company stand out from the competition.
Stay tuned next week for another article on Return Driven Strategy!
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Tuesdays: Return Driven Strategy”
In the book, “Driven,” authors Professor Joel Litman and Dr. Mark L. Frigo said that the goal of every long-term successful business strategy should incorporate the combined necessity of “making the world a better place” and “getting wealthy.”
That is why they created Return Driven Strategy and Career Driven Strategy—frameworks that were built to help leaders and professionals plan and evaluate businesses so they can also help others achieve their organizational goals and career goals.
The frameworks describe the plans and actions that drive returns for anyone in an organization such as independent contractors, marketers, brand managers, communicators, and other people in any field. These actions lead to the creation of wealth and value for customers, employees, shareholders, and the society.
Every Tuesday, we’ll highlight case studies, business strategies, tips, and insights related to Return Driven Strategy and Career Driven Strategy.
In planning, building, or managing brands and businesses, these strategies, case studies, and guidelines will help you choose what specific actions to take and when to take them.
Hope you found this week’s insights interesting and helpful.
Stay tuned for next Tuesday’s “Return Driven Strategy!”
Cheers,
Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
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