Businesses spend a ton of time working to optimize their supplier relationships and streamlining channels of delivery. And rightfully so. An efficient supply chain is critical to cost management and operational efficiency. However when operational efficiency is a commodity or markets are flush with supply, the opportunities for growth lie on the demand side of the equation. Which begs the question: is there such thing as a “demand chain” that needs optimizing as well? And if so, how does a business go about optimizing it and what can it expect in return?
UT Research Confirms Value
In late 2011, Chief Outsiders, LLC partnered with the McCombs School of Business at The University of Texas to explore various growth drivers for mid-market companies. A study of CEOs from 27 industries provided data to the UT research team, including Professor Leigh McAlister, and Assistant Professors Jade DeKinder and Ty Henderson, whose analysis yielded several noteworthy discoveries.
First, the team discovered that businesses cluster into two general categories: operationally-driven and market-driven. Two-thirds of companies are in the first category as evidenced by the CEO’s operational background and the make-up of his executive team. Their path to growth is often through M&A activity. The second group, market-driven companies, is made of leaders from marketing (or IT) backgrounds. Their leadership teams are tasked with more market-facing roles, and they grow by taking market share. The key insight from this research was the discovery that when operationally oriented companies adopted market-oriented company disciplines, they experienced growth ahead of their industry peers. By and large, operationally oriented companies are not naturally proficient in market-driven disciplines. Yet when they develop these proficiencies, they are rewarded with growth. This is good news: most businesses have an opportunity to develop their growth potential by optimizing what we’ll call their “demand chain.”
Maintain a Market-Based Perspective: Even companies that rigorously solicit customer opinions on their products, services and support can be misled into believing they have a market-based perspective of their business. It’s most common for companies to rely upon their sales and customer service organizations for these critical insights. However, a full market perspective extends far beyond customer satisfaction. A rigorous and continual approach to understanding market dynamics including competitive activity, ecosystem relationships, global shifts and technology impact are key factors in maintaining a market-based perspective. While most companies maintain an opinion of how they relate to their markets, few are proficient in maintaining a perspective of how the market views the relevance and distinctiveness of their business.
Continually Position for Distinctive Relevance: Capitalizing on the knowledge and insight gained from a truly market-based perspective, a business must continually evolve its relevance and uniqueness to the marketplace. This is not a messaging exercise, but drives the very purpose of the company – why it exists, to serve which customers, with what products and services – and the business plans that will align the company around these objectives. It provides clarity to the entire organization on how to create compelling value propositions that are market-relevant and competitively distinctive. It is the core business strategy for ensuring effectiveness in the marketplace, and efficiency in how a company executes its plans.
Execute with Precision: Go-to-market “execution” is what most business people refer to when they say “marketing.” When leads are not being generated, prospects are not converting into customers, businesses generally believe they have a marketing problem and set out to find a new mix of tactics. Ninety percent of the time, however, the foundational issues are upstream, or further up the demand chain. When companies are well informed with a market-based perspective and have aligned their purpose, offerings and plans with this knowledge, tactical program execution is both effective and efficient. Developing a discipline for executing with greater precision requires an alignment of marketing program tactics with business priorities, plus establishing the processes for measurement and accountability. Companies that aren’t already taking advantage of the broad range of affordable technologies (sales force automation, customer relationship management, marketing automation and analytics) are simply missing the most obvious opportunities to operationalize their marketing execution.
How does one get started in optimizing their demand chain? First, make sure someone besides the CEO is charged with “looking out the window.” Make it a priority to regularly capture an understanding of the marketplace. Extend the company’s operational excellence to include making the business fully aligned and distinctively positioned to serve current and future markets. Then, revisit the precision and accountability of marketing program execution. In short, apply the same excellence that’s made other parts of the business operationally efficient to the demand chain and the business will improve its potential for growth.
Pete Hayes is a principal of Chief Outsiders, LLC, a national firm based in Houston focused on helping mid-market companies grow. Hayes and founding partner Art Saxby are preparing their first book for publication, “The Growth Gear: 3-Disciplines for Demand Chain Optimization.” www.chiefoutsiders.com