The two drivers of business success

There’s a lot of noise out there. For business owners, this can be pretty unnerving. But it is also a real test of leadership mettle. Can you keep your head while everyone around you loses theirs? It may be harder than it looks – but there are some lessons to be learnt from the past.

Take Ford, for example. In the last market downturn (from 2001 to 2004), Ford was under siege. Already losing market share, the prospect of recession and the panic after 9/11 spurred management into action. Together with their fierce rival, GM, they launched the “America’s Rolling” campaign to persuade consumers to buy US vehicles. Huge cash incentives were allocated to dealerships to shift inventory.

New-economy managers were thrown out and veteran executives brought back to salvage the historic company. Henry Ford’s great-grandson Bill even took the helm, appearing in company ads, pontificating on global warming, posing with the President, positioning every Ford purchase as a patriotic statement.

All very heartwarming – and utterly ineffective. The company continued to lose money and market share. Devoting huge amounts of time and resources to external events it could in no way influence, the company lost ground on every front. It didn’t do anything meaningful in terms of designing great new products or developing better relationships with customers.

As a counterpoint, take Apple Computer. Like all technology stocks in 2001, it was badly hit. Market share, revenue and stock price all slid. CEO Steve Jobs announced that the company would innovate its way out of the slump. Quarter after quarter, poor results provoked mockery from analysts and competitors. But Apple kept rolling out new products – to little or no fanfare.

So when the economy started to pick up again, there was Apple, chock-a-block with shiny new products inside shiny new retail stores. Most famously, the iPod, which had debuted with scarcely a ripple in 2001, suddenly took off in 2005.

What’s interesting about these stories is that both Ford and Apple were run by smart men who were passionate stewards of major brands. But Ford got distracted by all the surrounding noise. It seems as though strategy was driven by headlines and market analysts. It was in reactive mode, frantically busy but tragically unfocused.

By contrast, Apple was focused almost to the point of being blinkered. It concentrated on two things and two things only: getting new products and getting new customers. It made those products better, smarter, cheaper. It built new ways to find customers, and then it never let them go. It said it would innovate its way out of the slump and that’s exactly what it did.

Products. And customers. When you think about it, it’s simple. In a business, what else is there?

There’s noise. Every week, I meet business leaders who fret about things they can neither change nor influence. The worst ones devote endless amounts of time to speculation, trying to predict the future.

Talking about global events may make managers feel in control, but it merely highlights the fact that they aren’t. There are two drivers of business success and if you can’t focus on those in hard times, you won’t win in good ones. Products. And customers. Ignore the noise and focus on those.

For more articles by Margaret Heffernan, click here.

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