Stop focusing on your product and start focusing on your customer

The most common definition of business suggests it is the “organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs” (Pride, Hughes, & Kapoor, 2013). In a manufacturing-driven society, this definition might be valid, yet it arguably emphasizes an outward-in approach to product and service development and in doing so has potentially set a generation or more entrepreneurs off on the wrong foot. So many entrepreneurs believe that the “thing”—the product or service—they have created will “satisfy society’s needs” without giving enough thought to understanding what society needs, values, and expects. The focus on the thing poses one of the most significant long-term barriers to success for entrepreneurs.

Entrepreneurs devote too much time and energy to the perfect execution of the product or service at the outset. In fact, many entrepreneurs invest—maybe even over-invest—in the thing before they understand if there’s an actual market for the thing. Not long ago, I spoke with an entrepreneur who had an idea for a new technology product and a pool of funds to develop the product. He was searching for a developer to help get this product off the ground but had not thoroughly researched the market opportunity for what he was about to create. Moreover, he had done little more than cursory research on his target customer. His focus was on product execution, rather than customer understanding. Unfortunately, this approach is all too common with startup entrepreneurs. A good product or service—one that meets a customer’s desires—will be far better than a great product or service that misses that mark.

Steve Jobs once said, “Customer’s don’t know what they want until we have shown them” (Isaacson, 2011). To Jobs’ point, when new ideas for products and services are solicited from customers, those ideas tend to mirror competitive products in the marketplace or be derivations of products or services already available (Furnham, 2000). However, this should not suggest that knowledge of the target customer and customer input is without value. In fact, one might argue that Jobs and his team developed their products based on a clear understanding of the needs, values, and expectations of their target customer. Apple’s customers, for example, have come to expect the most innovative products, of the highest quality, that enable a short learning curve, efficient use, and support the simultaneous engagement with other products (Hyungu, 2013). Apple’s focus on delivering products to that target customer, and then taking care of that customer with committed customer service, elicits profound loyalty to the company and its products.

Customers are the only thing that matter to a business. Regardless of the product or service offered, if there are no customers, there is no business. It is surprising how many entrepreneurs start their business with an idea of a product or service and a detailed plan for execution of that offering, without a clear understanding of the customer. The customer’s needs, values, and expectations are never thoroughly researched, and the thing, as developed, misses the mark with the intended audience.

All of this is not to say that the thing—the product or service—is not essential. It is. However, a product or service is only relevant in the context of the customer’s needs, values, and expectations. A product and service placed at the center of the business, particularly in today’s business environment, may work in the near term but is not sustainable. The customer must be at the center of the enterprise for a business to have long-term success.

Perhaps a more appropriate definition of a business for our current environment might be “the organized effort of individuals to satisfy society’s needs, by producing and selling goods and services, for a profit.” Changing this definition might encourage entrepreneurs to focus first on the customer, and make product execution and delivery the second step in the business development process. Putting the prospective customer first might well make all the difference between success and failure of the next entrepreneurial venture.

What do you think? Should the customer needs, values, and expectations trump sheltered product development?

 

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References

Furnham, A. (2000). The Brainstorming Myth. Business Strategy Review, 11(4), 21-28.

Hyungu, K. (2013, September). To Be A True Industry Leader: Apple Inc. and Microsoft Corporation in Consumer. Leadership & Organizational Management Journal, 2013(3), 114-130.

Isaacson, W. (2011). Steve Jobs. New York, NY, USA: Simon & Schuster.

Pride, W., Hughes, R., & Kapoor, J. (2013). Business (12th ed.). Cengage Learning.

 

How to find and qualify new licensing opportunities

One of the most significant challenges for licen­sors is to keep the opportunity pipeline full. Regardless of the size of the licensing pro­gram, finding and qualifying prospective li­censees can be a challenge. Some licensors need more opportunities to explore, while other licensors have the opportunities but do not have a defined qualification pro­cess. Unfortunately, some licensors have both challenges. To overcome those challenges a licensor might consider the following sales and business development techniques.

Key assumptions

Let’s start with three fundamental assumptions:

  • You have a strategy for each of your licensed properties;
  • You’ve identified the product cat­egories that align with your core brand message and best support your li­censing growth goals; and
  • You have a realistic understanding of the value of your brand and licensed properties.

While having a defined strategy for each licensed property and knowing the catego­ries which each property fits best is a great starting point, you also need to have a real­istic expectation of your licensed property’s value to a prospective licensee. For example, you may have a top brand in one category, but your brand might not bring significant or even incremental value to the market leader in another category that you’re targeting; therefore, your brand probably has less value for that category leader than it would for the number two or number three player. This will be a crucial factor in targeting and qualifying licensing prospects.

With these assumptions in mind, you can begin developing or refining the process to grow your licensing program.

Finding prospective licensees

Prospective licensees fall into two camps: Those who know and see value in your brand, and those who do not. The former is likely to be already knocking at the door to pitch new ideas, but the latter creates the biggest challenge for most licen­sors.

The best way to identify possible new op­portunities is through Environmental Scan­ning—careful monitoring of the marketplace—for new licensing deals in your target product categories. You can also identify potential opportunities by not­ing specific changes at companies within those target categories, which might in­clude:

  • Changes in licensing, marketing, or other senior leaders;
  • A shift in organizational strategy, new product line development or line extensions; or
  • Expanding markets—either demo­graphic or geographic.

Excellent sources of such information for Environmental Scanning purposes include LIMA, licensing trade publications and other marketing and business publications. It is important to note that Environmental Scanning typically provides advance indica­tors of possible opportunities, not those op­portunities already clearly defined. You will have to invest time to determine if an opportunity does indeed exist, and how you might leverage your licensed properties into the mix.

When a prospect is identified, it is impor­tant to create an ongoing marketing and sales program to keep connected. Like any type of marketing program, a prospective licensee needs regular communication to keep your brand top-of-mind for the time when the opportunity does present itself, and the licensor’s sales and business devel­opment team steps forward to qualify and close the opportunity.

Qualifying new opportunities

Regardless of the source, once you have identified what you believe to be an excellent prospective licensee, it is important to have objective criteria in place to help you evalu­ate fit with your brand. The majority of pro­spective licensees will look good on the surface and will be reputable, but a deeper dive will give you a clearer picture of how well the company, its products, and its busi­ness practices align with the values and ex­pectations of your business.

The first step in collecting the informa­tion you need to qualify further a prospec­tive licensee is via a licensing application. The qualification process should include a review of objective matters such as:

  • The applicant’s financial solvency, possible legal issues (including prod­uct recalls, infringements, social- and/or labor-related matters);
  • Experience in developing and launching similar products in the marketplace;
  • Experience working with other licen­sors, and;
  • Reputation in their distribution chan­nels for meeting demand.

A licensor may need advice from finance or legal experts for some areas of review.

 

Key Point – Ask: Does the market need this product? 

The market need or opportunity for the proposed licensed products is critical in the licensor’s decision process. A licensor should also evaluate the prospec­tive licensee’s understanding of the market­place, the market needs for the product, the strength of the product development and launch plan, and the company’s commit­ment to market the licensed product. Then consider whether the licensor’s brand truly brings value to the product in the marketplace. If all align, it might be a good opportunity to further consider.

 

These review steps are somewhat sub­jective, yet an experienced licensor will quickly spot those proposals that are likely to fall short of expected performance if a deal is completed.

A prospective licensee who scores well in all of these review categories is clearly a catch. Those who do not may still be a good match for a licensor; it depends on the tol­erance level for imperfect feedback in one or more of the review categories.

Some licensors develop a rubric or score­card for evaluating prospective licensees and their tolerance for variances in the review categories is built into the scoring process. This approach also helps to make the review process a little more objective. The most significant challenge in finding and qual­ifying new licensing opportunities has more to do with the lack of structured, formalized systems for achieving these goals.

Keep in mind the best opportunities for a licensor are not those that are readily ap­parent.  Licensors will have more significant success in growing licens­ing opportunities by looking not at “what is,” but at “what can be.” A defined process for identifying and qualifying opportunities will help you find and leverage “what can be” much more quickly.

 

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A version of this post was originally published in the Licensing Industry Merchandiser’s Association (LIMA) Bottom Line newsletter.

Fear and panic in entrepreneurship

I’ve been reading meditations from Mark Nepo’s The Book of Awakening every morning for several years. A few weeks ago, the reading from September 27 in the book struck a chord with me relative to the challenges of fear and panic in entrepreneurship. Here is that meditation and my takeaways:

 

Leaning In

Few situations can be bettered by going berserk.” – Melody Beattie

It was the philosopher Michael Zimmerman who told the story of being a boy in school when someone passed him a pair of Chinese handcuffs, a seemingly innocent thimble-like casing with an opening at each end. It was passed to him without a word, and, of course, through curiosity, he slipped his left forefinger in one end and then his right in another.

Mysteriously, what made them handcuffs was that the more you tried to pull your fingers out, the tighter they held you.  Feeling caught, he panicked and pulled harder. The small cuffs tightened. But suddenly, it occurred to him to try the opposite, and as he leaned his fingers into the problem, the small casing slackened, and he could gently and slowly work his fingers free.

So many times in life our pulling in panic only handcuffs us more tightly. In this small moment, the philosopher as a boy reveals to us the paradox that underscores all courage: that leaning into what is gripping us will allow us to work our way free.

 

I can personally identify with this story.

I have learned the hard way that panic begets panic. I know this to be true through all my life and business trials. I also know that the majority of the times I have panicked, especially as an entrepreneur, it has involved matters of money. But, it’s often not really about the money itself. It’s more about what the money represents—a lifestyle, security, safety, and the like, and losing those things strikes a chord of fear in us. Panic always comes from fear, doesn’t it?

As the handcuff story above tells us, the more fearful we become, the more we entrench into the past problem-solving approaches, and the tighter the gripping fear has on us. The story also tells us we cannot solve our problems using our first instincts—those stemming from our past experiences. Moreover, the story illustrates the way out is not to rely on what has worked in the past, but to look for new ways. We must lean into the problem, rather than retreat from it.

I can attest to this, too. The past gives us tools and experience for moving forward. But every situation is different because the internal and external forces that influence the situation are different, or of a different mix of forces. So, the context of each situation creates something new, even if on the surface it looks as though it may be the same. A mentor once helped me understand this by telling me, “If all you have is a hammer, everything looks like a nail.” I know it’s easiest to grab the hammer. It’s on top of our toolbox because we use it often. We have more tools in our toolbox, though. Our past experiences help us to choose the right tool for the job at hand. Yes, it’s easy to grab the hammer. But, it’s not always the right tool.

All of this is not to suggest that we act frivolously in our business decisions. Instead, when faced with challenging times as an entrepreneur, we must find the courage to lean into to the future, rather than retreat into the past. We must find comfort in the gifts of wisdom, talent, and the experiences to make the best decisions for moving forward on your journey. My hope for you is that you might make strategic decisions about your business that are born from dreams, rooted in practicality, and polished by optimism.

And, try not to get caught in those handcuffs.

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Advertising Disclosure: David Harkins may be compensated by your clicking on affiliate links in this post.

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