● What constitutes value in the mind of your most important clients?
● Where are opportunities to create more value found?
● What key attributes are needed to differentiate yourself and offer a valuable and profitable point-of-difference in your practice?
● How can you find and exploit those opportunities, even as the market changes and disruption continues?
Sheahan leads you through a tactical approach that will leave you with increased clarity on how to develop the tools to bring your vision into reality. Come find the inspiration.
About six years ago, I was in a meeting with the head of Solutions selling for one of the largest technology companies in the world. It's a Fortune 500 company. And I asked him how he was competing and differentiating in the marketplace. Because, in my head, I thought, Given the size and the scale of the enterprise, it must dominate in the marketplace. And he said, "You know what? Five years ago, there wasn't a single business or a single opportunity we weren't being considered for. In the last five years, the world has changed so much, and we've gone from being in every room to trying to get in every room."
I asked him to explain what he was talking about. He said, "It seems as though what our clients value has changed." And I was fascinated to be standing there with someone who, quite literally, runs one of the largest-selling organizations for one of the largest companies in the world. And he's saying that it's now struggling to get into the room, let alone finding an opportunity to differentiate itself. So I went back to my office, and I talked to my team and said, "There's something going on here with the level of change and the level of disruption people are facing. And it's impacting maybe the traditional approach to differentiation. We should go and study this problem."
We spent the next five years, all over the world, studying companies and professionals who had managed to, in spite of the change and in spite of the disruption, become what we would call the "obvious choice" in the hearts and minds of their customers. Which means essentially that when customers wake up in the morning with a problem to solve, you're the first person they call. Would anyone be interested in knowing how to be the first person they call? That's essentially what we set out to try to figure out. On the Main Platform the other day, I gave a little bit of a sense of where that research started to evolve, and I talked about this idea of not getting stuck in the middle.
The first thing we looked at in these enterprises and in these different marketplaces is what the number one mistake organizations and sales professionals make as it relates to the level of change and disruption. The number one mistake we found was that they get stuck in the middle. That is, they are neither the price leader nor a leading expert, nor have the best product or some point of difference that no one else can compete with. That was the first thing that we studied.
But the second thing that we came to understand was that those who were successful were oriented around what we call the "outcome" rather than the "input." I'll explain.
One of our clients is a defense contractor. So it is essentially in the business of spies. Its employees basically work for the CIA and the NSA, who hire them to send assets into different countries around the world to collect data, collect intelligence, and collect inside information and send it back to Langley for the US military to make decisions.
Let me give you a bit of back story. Its CEO had been to a TED conference. She had been to that conference in Monterey, California, and was so amazed by what she'd experienced, she put on her own TED conference inside her company. There were about 16 different speakers, a little bit like Main Platform or MDRT Speaks.
One day, there was a presenter in the session who looked like he was about 11 years old. He wasn't 11; he was 26. He had a double degree and a PhD from MIT in Massachusetts. He was like Doogie Howser for the next generation. Doogie Howser was an uber smart young guy on TV. This young data analytics expert was talking to 65 of the most senior intelligence professionals in the world. It's January 2010. He says to the exec team and the leadership team at this company, "I believe that social media will have a far-reaching geopolitical and national security impact within the next 10 years." And there was kind of a silence in the room, so he repeated himself. He said, "I believe, this was their disruption, social media will have a far-reaching geopolitical and national security impact. As he finishes this the second time, this gentleman in the back of the room put his hand up and said, "What do you mean? Do you mean things like Twitface and stuff like that?" The presenter said, "Do you mean Twitter and Facebook?" And the gentleman said, "Yes, that's what I mean. That stuff my grandkids play. Do you think that's going to change national security? Do you think that's going to change intelligence?" And the presenter said, "Yes, absolutely." They thought it was the most ridiculous thing they'd ever heard. They gave him a polite clap, and he disappeared off the stage, never to be invited back.
It was nine months to the day to what would be called the Arab Spring. If you go back to those days with all the uprisings in Egypt, would it be fair to say social media had a far-reaching geopolitical and national security impact? A huge impact. If you look at the global landscape today, we seem to be governing on Twitter; it seems to be the common strategy. So, clearly, he was predicting something that was spot on.
But listen to this. He presented that to the leadership team of this organization, and they thought it was a ridiculous idea, though after the presentation there was a group within the business that thought it might have some legs, that there might be an opportunity in this disruption. If they moved toward this social media and this technology, it might help them become better at gathering data and sending it to Langley. And they sent a presentation back to their senior team that basically said, "We should go and buy software companies that scrape the Internet for data that we use to form intelligence reports and then we can sell those instead of sending spies into war zones." And the leadership team of the organization said, "We're not in the software business; we're in the spy business."
And, in that moment, this organization made one of the largest mistakes that we've seen a client make as it relates to differentiation. Because would it be fair to say that what the CIA and what the NSA buy is not spies or software? What they're really buying is what? Intelligence. They're buying insight. They're buying information. And what happened in its marketplace was a new way of gathering intelligence presenting itself. A new way of servicing its clients presented itself, and rather than embrace the new way of gathering data and insider intelligence, the organization instead said, "No, no, no, we're not in the software business; we're in the spy business." And define the value they bring to the market by the input rather than the outcome.
The first thing you have to do is not get so enamored and not get so committed and not get so attached to the input of what you do. Because the more the world changes, the more that new ways of creating value present themselves. My encouragement to you is to think about whether you're going to be a price player or a value player. I suspect most of you will be a value player. The way your clients determine what they value is not by what you do or the processes that you have. It's by what outcome they experience in their life.
And my question for you is, if a new way of creating value presents itself, clients will eventually adapt and evolve and become attracted to that new way. And you'll be stuck there in the middle neither differentiated nor in price advantage position because you got stuck in the input rather than the outcome. So there were two major findings. Number one was, don't get stuck in the middle; make sure you understand how you're going to compete. Then, number two, make sure you don't get wedded to and attached to the input that goes into creating value, but rather to the outcome of the value itself.
So what I thought I would do, apart from grounding you in that insight, is spend some time talking a little bit about what the research said clients said they value and the things that matter to them the most. I'm going to come back to this model here a little later. But we're going to start with what things clients ultimately said they value. In every industry we looked at, it didn't matter whether it was professional services, it didn't matter whether it was athletic apparel, and it didn't matter whether it was high fashion.
There were five attributes that emerged above the others that seemed to drive greater levels of differentiation when the market is changing significantly. Now, by the way, just before we get into these five things, if you're not focused on the outcome, these are going to be very hard to apply to your business. So the first question you have to answer is what the outcome is of what you do, and then start to look through these five lenses as to how you can better create the outcome.
I'll give you case studies for each of these. The first is what we would call "importance." I'll put it a different way. There are things your clients care about, but there are things they care about more. Are they associating your outcome, your value, what you do for them at the higher-order problem, or are they seeing you as a commodity further down the path? That's the first area.
The second area is this notion of if you are able to alleviate risk for them. Now, I know you're in the risk business, and what your clients might consider risky about buying risk or buying financial products, but can you alleviate the risk of buying what you do?
The third area is scarcity and complexity. So often in business, we run away from complexity because it's hard to scale. But the issue is, if you move away from the things that are hard to do, you end up competing in areas that are easy to do for which there are far more available substitutes. So commoditization is accelerated beyond complexity. We'll talk about that.
The fourth is friction and how hard you are to do business with. Or how easy.
And the fifth is, which we were quite surprised to find from the research, this notion of what we call "identity," such as purpose and the reinforcement of self-image.
So let's go through these in more detail. Let me ground you in where we're at. The world is changing, and so must we. We must orient and consider everything we do through the lens of the outcome that we create. And when we're creating those outcomes, we're ultimately trying to create on the value, the niche side, of where we're going. So I'm working under the assumption that you don't want to win on price. I'm working on the assumption that you want to move toward value not price, just to ground you in where we are. And there were five things that you could do better than everybody else.
The first was to solve the higher-order problem. Bill Bowerman was one of the original founders of Nike. Bill Bowerman was the track coach at Oregon, and he once took a sabbatical to the South Island of New Zealand. He was partnered up with a researcher at the University of Canterbury in Christchurch, New Zealand, named Art Lydiard. And while he was down there in the 1960s, he noticed that Canterburians, the people from Christchurch, were engaged in a very strange behavior. Before and after work, they would run around this beautiful park that was right in the center of Christchurch. And Bill Bowerman, who was a track coach and not yet the founder of Nike, said to Art Lydiard, "What are they doing?" And Art Lydiard said, "They're jogging." And the founder of Nike said, "I've never heard of jogging. What is it?" Lydiard said, "It's running for fun and recreation." Bowerman thought this was a crazy idea, but he started engaging in this behavior in the 1960s while he was on his sabbatical in New Zealand. He found out that he lost an inch off his beltline and thought that he'd discovered a panacea.
He came back to America, and he partnered up with a heart surgeon and wrote a book called Jogging on the health and heart benefits of running for fun and recreation. True story. He sold a million copies of the book with this emergence of the amateur athlete and the notion of running to fight our sedentary lifestyles. The problem was, at that time in the United States, there were no players and no product manufacturers that were selling sneakers that were suitable for the amateur athlete to run on the street. They were only suitable for running on Tartan and on professional tracks.
So he launched a company called Blue Ribbon Sports and started selling sneakers to everyday people like you and me. Because, at the time, the highest-order problem, the most difficult problem on the ladder for the amateur athlete to solve, was getting access to sneakers and apparel.
Are you struggling to find access to sneakers today? So is that a higher-order problem? No, it's a highly competitive, increasingly commoditized, price-sensitive market. So Nike got really smart, once it evolved from Blue Ribbon Sports, and said, "Well, we can't just sell products that are functionally affective. There must be a higher-order outcome they're looking for." And it turned out to be: "I don't just want a good product that I can run in; I want to look pretty and sexy and strong when I run in them, right? And I want to feel good while I'm wearing this stuff." So Nike sponsored Bo Jackson and Michael Jordan, and, all of a sudden, it became more about the image and less about the product. But that was a more difficult, more complex higher-order challenge.
Now everyone is in the game. You've got Under Armour. You've got Adidas. You've got Reebok. Everyone does the professional athlete sponsorship thing. Now it's actually cooler to be a yoga person than it is to be a runner. In California, everyone is walking around with a yoga mat. They probably haven't done yoga in 10 years, but they carry it anyway because it makes them look like they're New Age and sophisticated.
Is getting access to a functional product that looks good, that's associated with some sort of professional athlete, that difficult to do anymore? No, you've got everyone. All the brands. Lululemon, the athleisure brand. So that's becoming a highly competitive, price-sensitive, and commoditized industry. Now Nike has a choice: It has to either compete on price or evolve its business to solve the higher-order problem.
What's the highest-order problem? What is the most difficult challenge amateur athletes have today? What's their number one challenge? Injury? Well, the typical amateur would have to be doing a lot of athletics to get injured. That could be one. Definitely staying healthy could be one. What else could be one of the biggest challenges? Time and motivation? How many of you set your alarm? How many of you, before you came to Orlando, made the commitment, given the beautiful sunshine that Florida is known for, that you're going to exercise every morning while you're here onsite? How many times in the last three days have you lived up to your commitment of exercising every day? What usually happens is, our alarm goes off at 6:00 a.m. We hit snooze. Our alarm goes off again. We hit snooze. We slip into mathematician mode and we begin to calculate the absolute last possible minute we can get out of bed and not miss the opening session of MDRT Speaks, right? Are you familiar with this pattern of behavior?
The most sophisticated challenge, the higher-order problem that the amateur athlete faces, is not product, it's not looking good, and it's not even time, even though we say it is: It's motivation and discipline. Would that be fair? So Nike is doing what it always has done, and it's moving up the order, up the ladder, up the hierarchy, and it's going after the higher-order problem of motivation, and it's launched a platform that many of you may have heard of called NikePlus.
Here is what NikePlus is for those of you who are uninitiated. It is basically a sensor Internet of Things, the IoT sensor technology in your sneakers, in your apparel, or in your device that tracks your movements and how many steps you take. If you're playing basketball, it tracks how many vertical feet and how much air time you had in any given game. If you're in athletics, and you're outdoors and running, you can track how high you are and how low you go. Basically, it collects all this information and all this data and puts it on your phone, and then it matches that to your social media environment.
It turns out you would do more to avoid embarrassment in front of your friends than you would ever do for yourself. And so, when your alarm goes off at 6:00 a.m., and the night before you've committed to everyone on Facebook that you're going to run a 5K this morning, you feel that social pressure. Does that follow? You feel the need to do that.
Now, here's what would happen. If you posted on Facebook, "I'm going to run a 5K tomorrow morning," you could have just taken a photo out the window and said, "Look, I'm running in Orlando," except you've got IoT sensors in your sneakers that say you are a liar. All you've done is walk to breakfast and to the main hall, right? So they bring accountability and social pressure together to drive behavior change.
Now let me give you some basic data on what's going on. Nike now has over 20 million users, by the way. Every single day, you can log on to Nike+ Run or Nike+ Training, where there are videos of athletes showing you how to do exercises and the best runs to do in Orlando. All other NikePlus users will get on the platform, and you might meet a group of people and do a run together. Users have set more than 65 million goals—run a marathon; hit a certain time; lift a certain weight—that they've achieved. More than 1.2 billion miles, which is getting up to near 2 billion kilometers, have been run just by those people who have the IoT sensors in their equipment.
If you run 2 billion miles, will you need a lot of shoes? And so what Nike is doing is establishing itself as the obvious choice in the lives of amateur athletes by helping them solve their number one challenge, which is motivation and discipline. It isn't even charging for the service, by the way, because it knows when it gets that sticky deep relationship and creates that level of value, it's going to have no problem selling sneakers and apparel. In other words, it's elevated itself to the higher-order problem and, in doing so, become the obvious choice. It is what we call "having an elevated impact." I'm going to come back to that a little later on.
Just to give you a sense of how much Nike continues to dominate the market, it's a $50 billion company that grosses double digits and, in some sports, in fact in all sports, has more than a 50 percent larger market share at aggregate over its nearest competition. And, in some sports, like basketball, it has a 93 percent market share. In a world where the average time on the Fortune 500 list is actually only about 15 years now, it's been able to continue to stay number one because it evolved to solve the more important challenge.
Now, Nike is a much bigger company than the practices you run or the book value of your advice business or the product portfolio that you sell. But the principle is exactly the same. You could be a one-person shop, and the questions you want to ask yourself are: "What's the higher-order challenge?" "What is the higher-order outcome?" and "What is the higher-order problem that my client is ultimately trying to solve?"
For those in the United States, let me give an example. The typical US citizen is grossly underprepared for retirement. Would that be a fair statement? And so, while we might sell those people a risk product or we might sell them a financial product, the real issue they're going to have is not whether to have access to product; it's whether they can develop the discipline of saving consistently in an intelligent way and understanding that it's an accumulation of income and all the things that go with that, and the role a risk product plays in supporting that. That's the higher-order problem. And the question is, When your clients get out of bed in the morning, do they think of the person that sells? Oh, that's just the guy who sells me my life insurance. or That's just the lady who sold me my 401(k). Or do they think of you as their financial partner, the person who's setting them up for a sound future? And the question is, how do you anchor against that challenge? Just as a simple example.
Let me give you one more example, and then I'll give you a question to ponder.
Importance was number one. Scarcity was the second driver, but specifically it was from complexity that we got interested. If I had said to you seven years ago, "What does Adobe sell?" what would be the most common answer to that question? PDFs. How much did you pay for your last PDF reader or piece of software on the computer? It's free. It's shipped with the equipment. You want to talk about a commoditized marketplace, how about free?
So Adobe surely does more than that. What else does it do? Photoshop. Premiere. So it helps you make beautiful imagery. It helps you adjust the colors on your photos. It helps you make videos that you can put up on your website. And, for a long time, that was the highest-order problem. For a long time, the most difficult thing marketers had was the explosion of the Internet and all these different media. Could they make their brand look good and their content look good in all those different media?
Have you used Instagram lately? How much did that cost you to download? And you have all those filters and all that editing software on your smartphone. So even that space became highly commoditized. Adobe had the choice to do what Nike did and move up to the higher-order problem or to keep competing with PDFs, document management, and making beautiful images. And what it decided was, it would move up the value chain and sold the highest-order problem a market has.
You're all in the marketing business whether you realize it or not. And the number one challenge we have as marketers is that half of our marketing works. We just don't know which half, and there's a lack of understanding in transparency. We know something is driving demand, but we don't know what it is. And Adobe decided it was going to lean into that. I'll tell you why. Because most of the big brands in the world were using Adobe's Photoshop and Premiere products for their websites and their e-commerce platforms. And what it worked out is that about 80 percent of all transactions of the world's largest retailers were going across Adobe's platform. And so it had all the data and all the analytics of what customers did, how clients behaved, what site they visited before they came to the Adobe site or their client site, and it worked out that the data that it was collecting might be even more valuable than the software it sold. And it was going to try to see if there was a way of understanding consumer behavior based on tracking their activity on the Internet so it could not just tell a marketer how to make a beautiful image, but also tell the marketer how to show the right image to the right buyers at the right time to make them transact.
Now, does that sound like a simple challenge to solve? No, it's massively complex—huge amounts of data, massive computational power. But that's exactly what Adobe was looking for. Because if it's really, really complex, what does that mean? Not many people have figured out how to solve it yet. And so, this is the tension we find—whether we want to do the things that are easiest to scale. But the things that are easiest to scale are the things to which there are the most available solutions. So easy to scale is directly related to commoditization and the more you can be pushing the edge of what's possible and absorbing that complexity for your clients. Because, trust me, that problem keeps marketers up every night, and the more you help them absorb some of that complexity and solve that problem for them, the less likely you are to have genuine competition for that work.
Now, listen to this: Adobe bought out a company called Omniture. It developed some capability, and now about 40 percent of its revenue comes from this analytics engine. So, basically, what happens is this: Say you're searching on the Internet and you're looking at Orlando to come here for MDRT, and then, after that, you get off that website and move on to a clothing apparel website. And let's say you were coming from the Southern Hemisphere, and it was cold. But it's really hot in Orlando, and you went to visit Amazon or an e-commerce site such as Alibaba or some other e-commerce platform. What Adobe would do is track the fact that you had been looking at Orlando in June two clicks before, and, even though you're in the Southern Hemisphere, instead of showing you winter clothes, it would have shown you summer clothes, based on where your behavior had been before. And it drives about 40 percent of its revenue from that space right now.
Listen to this—it doesn't make very much money from it yet. But if you're buying all your sophisticated solutions from Adobe, are you going to put out to RFP and shop the functional product that ladders up? No, it's almost a no-brainer that if you're going to be using its analytics, then you'd better use the document management systems. You'd better use its content creation systems. You'd better use its video editing systems. And now Adobe is making more money selling its old products at higher margins than it used to make because it's positioned against the more complex challenge.
So those were the first two attributes. Can you solve the higher-order problem? And are you willing to embrace the complexity that you might have to absorb in order to do that effectively? Here's my question for you: What are the complex problems for which there are very few solutions that you are credible enough to solve for your clients? I didn't ask you where you will make a lot of money from specifically. I'm talking about positioning you as the obvious choice. You might make margin on more traditional product, but we're talking about positioning you in their mind as, "This is my go-to person." So my question again is, What complex problems for which there are very few solutions could you help your clients solve?
The more the world changes, the more we will have to adapt to the way we go to market, tell our story, and find opportunities to differentiate. Number one: We did a five-year piece of research all over the world, and spent more than $1 million on this study, trying to understand how to differentiate in times of significant change, and we found a couple of big realizations. Number one, the biggest mistake people make is they get stuck in the middle. They're not price competitive or have a breadth of services or are differentiated in any significant way. What we're focused on right now is how and where you differentiate.
The second thing we came to understand is that value in the minds of clients is not linked to what you sell them, but the outcome it creates for them. And so you need to orient around the outcome. You're not in the software business or the spy business or the intelligence business. In your case, you're not in the product business; you're in the financial wellness, you're in the safety, you're in the protection business, depending on where you sit in financial services. So you've got to orient around the outcome.
And then, within that area where you're creating outcome, there are specific attributes that seem to be emerging among the companies that were successful at becoming the obvious choice: They were focused on differentiation, and they were focused on creating more value.
One of them was moving up the value chain and solving the higher-order problem. Nike was getting into the behavior change business even though what it ultimately sells are shoes and apparel.
The second attribute was complexity, and the best way to describe complexity is this: Where there is complexity, there is scarcity, and where there is scarcity, there is differentiation and ultimately margin. Because there aren't as many available substitutes. So the second area is not to run away from that complexity because it's difficult. Because if it's difficult for you, could you imagine how scary it is for your clients? And your ability to bring order, to bring solutions to that highly complex challenge for which not many people are able to solve, is a very rapid part at breaking commoditization and finding differentiation.
And then the question I asked you was to consider what they might be for you. Are there any comments or questions so far?
Audience Question: I could make a list of 100 complex issues, but how do I know which one to go after?
That's a good segue, not for what's coming next, but for what's coming after what's coming next. And it's ultimately one of the ones that are at the edge of your clients' disruption rather than yours. I'll explain that.
Most often, when you ask people that question, they think about where they're struggling the most—getting access to market; understanding digital marketing solutions; social media; dealing with government compliance and the cost of that in their business; the emergence of robot advisors; and more passive environments. That's usually what they say. However, none of your clients are getting up in the morning worried about robot advisors. None of your clients are getting up in the morning even thinking about active versus passive or this risk product versus that risk product. They are getting up in the morning, by the way, thinking about income and the sorts of things you can solve. And so the high-level answer to your question is what's at the edge of your clients' world and their disruption. What are they facing? Is it a live transition? Is it a specific instance? And so the answer is, don't make a list of yours, make a list of theirs. And then look for the overlap between what they need and where your capabilities are and what the emerging possibility from technology is.
Can I give you a model? Remember, I skipped past a model here earlier and said I'd come back to it. This is the answer to your question. You have clients who have very specific needs. You have disruption, which is making those needs feel more important than they've ever felt before. So what are they scared of? What's keeping them up at night? And then you have your capability—what you're actually able to solve for. And the intersection of those three circles is where the real magic happens. So the needs are usually fairly well established. You probably know those already. Your capability—you've probably got a sense of roughly where it is. What disruption does is, it creates new needs and new capabilities. So what does technology now enable you to do that didn't enable you to do before? What has changed now in the lives of your clients that wasn't keeping them up before? And so the intersection of those three is the area. That's how you narrow your list.
So do your list of 100, and then run it through the filter where you have deep capability, where disruption is making it more important and even more able to be solved. And where is the highest need, the highest-order need for the client? I'd go after that area.
The point to take out of that is, it's not about our complexity and our challenge. Think about how often you walk around going, "I've got to deal with this and IFRS responsibilities and Dodd-Frank and DOL." I'm using US examples, right? And, always, us, us, us, us. Even the concept of a fiduciary suitability, the fiduciary standard, even though you might not all be dealing with that challenge. It's about getting out of what's good for you and getting into what's good for them. And consider the language of a service mentality. Let's stand in the shoes of our clients. Feel what their world's like, and you'll get much closer answers to what their complexity is. And that's where the ultimate area is.
So importance is one. Scarcity is two. The third is safety. Now, listen to this. I know the vast majority of you at MDRT are in the business of selling risk solutions, and even if you sell a broader portfolio, risk is still part of that. I am not talking about the product. Let's assume I'm going to buy risk product from somebody. What are the risks of buying a risk product from somebody versus buying it from a different player? So could I go online, direct to the consumer? Do I go to a fully registered RIA? Do I go to the first person I meet in the mall when I get off the train and ask, "What is the risk in the choice that I'm making? And how could you assume some of that risk? How could you make it feel safer to buy from you?"
I want to give you an example of a much smaller company just to show you that these insights don't just apply to big organizations. It's a freight and logistics company in Canada. I was at this conference a few years ago. I was right in the middle of my research, and it was a closed conference. The only people allowed in the room were the CEOs of the largest consumer brands in Canada, such as Nestle, Danone, Pepsi, and Coca-Cola. No customers or suppliers were meant to be allowed in the room at all. Except I was sitting next to this guy who was in freight and trucking—he's a trucking company. I'm like, "How did you get in the room? Their biggest customers aren't even allowed in, and you're allowed in. What happened?"
He said, "Well, I'm considered a thought leader in the industry." This guy had become the obvious choice for trucking in the consumer products category in Canada. I was like, "How on Earth did you do that?" Because my understanding is, trucking is a bit of a commodity. I don't know if you know this, but here's how the trucking business works.
Coca-Cola wants to move a box from Montreal to New York City. It puts that out to a broker, who bids it out to all the different trucking companies, who then negotiate on price to race against each other. "If you can do that for $800, I'll do it for $745." "If you'll do it for $745, I'll do it for $680." And they basically drive down the price. But what happens is, there are a lot of underhanded deals going on: hockey tickets here, a little bit of a greasing the skids over there. That would never happen in your industry, but it does happen in the trucking industry. And so it's purely a price-based play.
But it turns out that doing that actually doesn't get you the cheapest overall price. There are massive amounts of inefficiency, and actually the real opportunity is when you consolidate all your trucking into one place and you look for more efficient routes that say maybe you shouldn't be going from Montreal to New York. Maybe you should be taking everything from Montreal into Toronto and everything from Toronto to New York, or something like that, as an example.
And so what happened was, when these consumer products companies were bidding the work out, they were always trying to get the better deal. Their fear, the risk they were feeling, was that they were getting ripped off and they weren't getting the best deal. So Jeffrey Moore, the CEO of Lakeside, said, "I want to solve for this problem, and I'm going to go to these clients, and I'm going to give them greater visibility into what's happening. I'm not just going to show them a price. I'm going to show them what it would have looked like if they had made decision B or decision C instead of decision A." And Lakeside basically collected data from the way things had been getting shipped from its clients all around North America and began geo mapping routes of where people could go and what it would look like. And it showed its clients that they were at risk of spending 5 to 10 percent more every single year by going down this traditional RFP price-based play and that actually, if they were to consolidate their business in one place, it could find massive efficiencies and it could show them the data and everything. Tell me a CEO who wouldn't be interested in extracting 10 percent of cost out of his or her business. That is a conversation people want to have.
And so it's begun creating software solutions that would aggregate and manage these processes. It would take the risk of being ripped off and the risk of being poorly managed and looked after off the client and onto Lakeside. So it isn't just a brokering service; it's a full-service, outsourced freight company. So Coca-Cola, Danone, and Nestle could focus on making beautiful sodas and yogurts and chocolates. Let us take care of the rest. It took that off their hands.
Listen to this: When Lakeside first started down this journey, its average transaction per client was $800, because that was a single lane, Montreal to New York. When it started presenting this data and going after the full business, the transaction went from an average of $800 to three $10 million agreements. Now, don't get me wrong—that's a lot of $800 transactions, but in one agreement. But it only has to make the sale once. And then it gets all the $800 transactions. Could you imagine how much better its margins are not having to sell for every single piece of work? By the way, it also takes 5 to 10 percent of cost out and guarantees it to the client.
So you're CFO of a consumer products company and someone says, "If I give you all my work, you're going to save me 5 to 10 percent guaranteed, and I don't pay you if I don't get the savings." This is a risk-free transaction. And that's ultimately what it started to do. It grew the business sevenfold in three years, all because it wasn't interested in keeping the risk on the clients' balance sheets, but putting it on its own. And it was prepared to back and guarantee the solution it was able to create in the market. So it did exactly what we're talking about. It went after the higher-order problem, which is that these companies needed to focus on innovation, not freight and logistics. It absorbed the complexity of consolidating freight logistics and extracting cost, and it mitigated risk by guaranteeing that it only got paid if it could make the savings. That is a no-brainer solution. It's no wonder it became the obvious choice. It became so successful at this model that its people were invited to industry forums to share their expertise, which is like getting invited to sell to people for free. It was just an unbelievable example. And it was a small trucking company that did this.
Safety is another. The fourth attribute is friction and ease of doing business. Mercedes-Benz is on a massive resurgence right now. It's a really high-performing brand, doing fantastically around the world. It wasn't 10 years ago, but I would say it's back in its position of the obvious choice. Mercedes did a piece of research a few years ago and found out that its customers were rich—groundbreaking research, I know—and that the problem with its wealthy customers is it wasn't servicing their vehicles on a regular basis because they were too busy. Now, Mercedes-Benz dealers make more money when you service your vehicle than when you buy it. This is a problem for Mercedes-Benz. It was trying to figure out why people wouldn't service a vehicle. It did some research with those wealthy customers and found out that they were often so busy traveling from city to city, going to and from the airport, that it was logistically too hard to service their car, so they just didn't do it at all. And most of the cars were leased, so they were going to give the problems back to Mercedes anyway. And they didn't really care.
So the Mercedes-Benz people asked themselves the question: "How could we make it easier to service your car?" And they began piloting a couple of different models. By the way, two of them were in Australia, for my colleagues from back home, one at Sydney Airport and one at Melbourne Airport. It started piloting a concept called the Mercedes-Benz Express, which was an opportunity, as you go to the airport, to drop your car off at a service location there. You'd get dropped off at your terminal, and you'd fly off to do your business, maybe Beijing to Shanghai or Hong Kong or Singapore. You're off doing your business, and while you're traveling interstate or internationally, it's servicing your car. You come back, say, Tuesday afternoon, and your car is serviced. The workers have done the dry-cleaning on your backseat, and there are two mint chocolates on the front seat, which they stole from Lexus to send you off on your merry way. What do you think happened to service rates for those customers? Why? Because they removed all the friction from the process. Something really interesting happened, though. Some of these locations around the world became some of the highest-velocity sales environments in all of the Mercedes-Benz network. It wasn't set up to sell; it was set up to service.
But what happens is, you fly on a Monday. You drop your car for service. Let's say you have a C-Class. You come back on a Tuesday. One of two things happened. You either closed the deal, and you feel like a master of the universe, or you didn't close the deal, and you feel sorry for yourself. Either way, you've got the perfect excuse to justify buying a new car: "I'm a hero. I deserve that. I work really hard." And you come back and your beautiful C-Class is parked next to an even more beautiful E-Class. And you're flying again on Thursday, so you say to the Mercedes guy who serviced your car, "Do you mind if I take just a cheeky test drive? I'll be back in a day and a half. Do you mind if I take it out, just see what the new E-Class is like?" Once you've driven a new E-Class home—you've had the hot rock massagers; it's driving itself; you're not even touching the steering wheel; all your neighbors are like, "Dude, nice ride"—there's no way you're going back to your C-Class after you've had that experience. You arrive back on Thursday. You tell them to do the paperwork while you're away. You come back Friday, you sign the paperwork, and out you go.
And they started turning over selling cars like crazy. Why? Because they also removed the friction from the buying experience as well. It wasn't just easier service, but you now didn't have to go through the decisions to decide whether you needed a new car; it was there right in front of you in that moment.
So the question I have for you is, Where is there friction in doing business with you that you could remove? Now, back to the other point. When you think about friction, and you think about what's hard to do business with you, it's not from your frame of reference; it's from their frame of reference. It's from your customers' lanes.
I'll give you an example. PricewaterhouseCoopers did a study where it tracked the emotional journey its clients went on when it appointed a new financial auditor. And then it tracked the emotional journey its partners and staff went on when selling PwC as a new financial auditor. They would go through the sales process where the clients had a bit of trepidation about not being sure who they would go with. PwC was really nervous about going for the pitch, but excited. Then the clients started to get more and more clear and feeling better and better. PwC got more and more nervous as it got down to the final moment. And then the decision got made: "We appoint PwC as our auditor."
What do you think happened to the emotions of the PwC staff? How do you think they were feeling when they won the deal? Were they positive or negative? Super positive. Happy. Proud. Excited. What do you think happened to the clients? Freaking out. They just bet their career on a new financial auditor. So they're nervous. PwC is excited. But guess what they used to do at that point in the buying cycle? They would go out for a celebration with the clients. They'd close the deal and say, "Let's celebrate." They'd go out to drink expensive champagne, get drunk with the clients, who are freaking out about the decision they've just made. And the first thing the new auditor does is go out and party and get drunk. How do you think that felt for the clients in that part of the journey? And so PwC reversed that whole experience now so that the first thing they do when they sign a new deal is to go deep into the work and create massive results really quickly. So the clients say, "So glad I picked PwC to do this work."
You can see how the journey looks different depending on which side you're on. So what's friction for you, or what you might find easy, might be hard for them, or vice versa? Don't think about it through your journey; think about it through their journey.
I'll give you one more example. We have a client in the paint business. It does refinishing paint and coatings for collisions. It was losing market share. It was no longer the obvious choice and couldn't figure out why. It had been the obvious choice for decades. Its market share started to drop, and these cheaper competitors started taking over, and it couldn't figure out why. And when we started getting involved with it to see if we could solve this problem, we asked its people why they thought they were better than everybody else. They said, "We make the world's best paint." And we said, "Define the world's best paint." And they said, "It lasts for 25 years. If you put this on a car that's been in an accident, it's going to last for 25 years." This company sells a lot of product in America. Take a guess on how long the average American owns a car. Five years. How many customers are running around looking for 25-year paint? And it's the insurance companies buying the paint anyway through the collision repair shop, and they only care about two things: How fast does it dry, and how quickly can it be matched? Because if it dries fast and matches easily, it's cheap to get the person in and out of the collision repair environment, and so it drives the overall cost down.
So the client stopped making paint that lasted 25 years and started making paint that was easy to match and easy to apply and fast to dry. And now it's back in its leadership position and is returning to the obvious choice.
It got out of its head—out of its journey and into its clients' journey—and looked to make it easy for its clients to do their job, which was repair cars quickly. It's all about their world, not yours.
So the question I have for you is, where is there friction in your clients' experience of doing business with you?
Now, by the way, some friction is OK if the outcome of the friction is that they understand how smart you are and how brilliant you are and the quality of what you do. But what if it's just annoying and unnecessary and you're outsourcing that to your clients? Then, no matter how well you do important, complex, and risk mitigation, they're eventually going to back out of that interaction.
A final example of the five drivers is purpose. Remember, we had importance, complexity and scarcity, safety, friction being easy, and then we had purpose and meaning.
I went to the grocery store the other day, and I was looking at fresh fruit. There was a bunch of bananas there with a QR code on it. I took out my phone, took a photo of the QR code, and it took me to a website that showed me the name of the farmer who grew my bananas. It told me about his children and gave me a price point about how much he was paid for those bananas. Benchmarked that price against what's considered fair trade around the world. And, then, it told me how long those bananas had been in the supply chain. Because, apparently, you can't buy a banana anymore without having a story to tell yourself about why that was a good banana with a positive social impact.
And, if I can't buy bananas without a story and a sense of purpose and meaning, don't think for a second that in the most emotionally charged area of my life, my finances, I'm not making that purchase without a sense of connection, shared identity, purpose, and story. Now, my story might be the smartest person in the business and strategic partner. My story might be a great local member of my community, who supports his community, and our kids have been doing soccer together forever.
It might be this person doesn't just care about me, but cares about the industry: Look at them; they're at MDRT. They're contributing. They're thought leaders. I don't know what the story is, but this concept of a narrative and a story in all of our research kept coming up over and over again. We were fighting this. Because we're like, this doesn't make sense; it's not objective, and this is about competition and winning. And it wasn't for people. It was about competition and winning and purpose and meaning.
So I thought I'd give you the example of Warby Parker, the billion-dollar eyewear company that was started at the Wharton School by four MBA students who were sick of paying $700 for a new pair of frames. Warby Parker decided it would sell them for $95, and every time you bought a pair of frames, it would gift a pair into the developing world. So kids who couldn't go to school because they couldn't see, could go to school because they could see.
Now, if you had a choice of buying a pair of glasses that saved someone's eyesight and education versus not, which one would you most likely choose? It's cool and fashionable and everything else. And the beautiful thing about Warby Parker is, the glasses are also one-seventh of the price. So not only was it differentiated, but it was also cheaper and cost-effective.
And so the question I want you to think about is, where do you believe the most important challenges with the least viable solutions are that have emotional significance for your clients? That's the primary question. But the ultimate answer to the question is, it's not at your edge of disruption—it's at your client's edge of disruption.
So here's the deal. The rate of change you're experiencing now is about to accelerate and probably quite significantly. You need to accept that change and move toward it rather than away from it. The most important thing you have to make a decision on is how you intend to win: Volume, differentiation services. Once you've decided, you then get in line behind what the attributes are, what the things are that are going to create the highest value. In order to do that, you need to orient around the outcome, not around the input. And once you're oriented around the outcome, ask yourself the questions: "What's the higher-order problem, higher-order outcome, that I can solve for?" "What's the complexity that I can lean into and create solutions where there aren't many that already exist?" "How do I mitigate risk?" "How do I remove friction?" and "How do I build a powerful story and meaning in doing business with me?" If you can do those five things, oriented around the outcome while responding aggressively to change, you will become the go-to obvious choice in the hearts and minds of the people whom you want to sell to.
Peter Sheahan, the founder and CEO of Karrikins Group, is the author of seven international titles and has delivered more than 2,500 presentations to people in 20 different countries. He has been named one of the 25 most influential speakers in the world by the National Speakers Association.