When was the last time you paid for a “long distance call?”
I know, I can’t remember either.
Back when I was growing up, however, it was a big deal.
My grandparents lived in Florida, and anytime they called, if my siblings and I were given the chance to say hello, my parents hovered nearby to make sure we didn’t stay on too long.
That made sense, of course. Phone call charges were a function of distance, thanks to AT&T’s profit model which correlated price with the amount of copper wire involved.
Today, of course, nobody thinks about distance when making a call. Thanks to cellular phones and broadband internet, calls are now effectively free.
In the late 1980s, though, when I was working with executives in AT&T’s long-distance business, getting them to grasp the concept that eventually distance would not matter — and that competitors with business models that reflected this change could become viable substitutes — was no easy sell.
Back then, AT&T was fully invested in a 100+ year “distance pricing” model, in addition to having a strong and long held belief in the importance of call quality as a competitive differentiator (remember the ads that bragged, “You can hear a pin drop”?). Having spent many decades and a lot of R&D dollars to improve its network, it’s no wonder they felt confident that a lower quality alternative would not be a threat.
You know the rest. As the world changed, customer priorities did too, making consumers open to alternatives that did not previously exist. AT&T, like many companies, got tripped up in planning for its future.
So how do you keep that from happening to you? The key is to listen closely to those in and around your business, especially customers, and with as little bias as possible.
Tips for Better Listening
In my work as a strategy consultant, nearly every project begins with a “listening stage” — structured discussions with key members of the leadership team, board members, industry authorities and, of course, customers or prospects. The process is not that complicated, and our discussion guides are usually quite simple. But there are a few elements in this step that are critical…
1. Look outside.
Internal viewpoints are important, of course. But it’s just a start and developing a strategy based on your insider perspective only can be very risky.
Critical insights come from speaking with people outside the organization, such as current or former customers/clients/users; partners, if you have any; others who study or analyze the sector in which you operate; etc.
2. Conduct one-on-one conversations.
Unlike in a group setting, where there are always stronger voices and more influential speakers, one-on-one conversations allow us to hear individual thoughts. This construct gives people the space to offer points of view that may run counter to the prevailing wisdom.
Candid views are critical, so it’s important to gain trust at the outset. This means assuring participants that discussions will remain anonymous and are “not for attribution.” Interview notes should be kept private and extreme care taken to summarize themes in ways that don’t point to specific individuals (it’s fine to use an anonymous quote or two to illustrate a point).
Often, these conversations are best done by someone outside the organization, so that participants feel free to speak their minds fully.
3. Don’t lead the witness.
The “right questions” to ask vary with the situation, but some of the core ones remain consistent. When speaking with Board members or the leadership team, they include: What is your vision for the organization? What’s working well / not working well now? What are your main concerns? What would make this organization better?
Note that these are all fairly open-ended — you want to be careful not to steer conversations into a preconceived direction. Rather, the idea is to let the participants take you where they want to go.
For a startup with a new product or service idea, it is critical that you don’t begin by showing your concept and seeking reactions (i.e., leading the witness). Instead, start the conversation by encouraging participants to talk about the problems they currently experience. This way, you increase the likelihood of developing solutions that match actual customer needs.
In the AT&T example, they never considered that people might want to be reachable when they were not at home near the phone. In the case of Travelocity, their original assumption was that the mobile version would only be used for urgent or last-minute plans, not realizing at first that the iPhone generation (in particular) prefers to do most everything on the phone!
The point is, to uncover a complete picture, let participants talk freely, before you talk to them about your solutions.
Reflections
Back in the 1980s, a young Harvard economist named Michael Porter came up with the “Five Forces” framework, a concept that described the attractiveness of a given industry and the likelihood that companies within it would be profitable.
Among the five forces, one of the hardest to recognize is the “threat of substitutes” — the idea that an innovation or company that is not currently a direct competitor might win out. This can be particularly problematic for executives who have been in an industry (if not a given company) for a long time, and who see the world as it has been or is, rather than how it might become.
Engaging in deep, thoughtful conversation with customers and other players, while listening as intently as possible, can help your organization avoid similar missteps.
