Welcome to the Innovative Leadership Newsletter brought to you by the Innovative Leadership Institute, where we bring you thought leaders and innovative ideas on leadership topics each week.
This week’s article is written by Sarah Ahern, an Owner and Partner at PATH, a 40-year-old woman-owned market research and business management firm. It is a companion piece to her interview on Innovating Leadership: Co-Creating Our Future titled Paving the PATH to Customer-Centric Success, which aired on June 6, 2023.
|Intro from “FauxMo:”
Short clip from the interview:
|Link to the entire interview:|
Do you want to know the secret to growing a business successfully? In our 40 years in business, PATH has had the great fortune to partner with many exceptional companies to help them grow thriving businesses. Growing a business is no small lift – in today’s culture, our attitude towards achieving growth almost feels flippant – a “how-hard-can-it-be” type vibe. We can attest, from our own experiences and our clients’ experiences, that it is tough, grueling work. Creating a people-focused company that stands the test of time is especially hard.
Clients and partners come to us with the same question – how do I supercharge my growth? Companies that do it well bring people to the center of every single decision. We believe that so fiercely that we named our company after it: PATH stands for “People Are The How.”
How do you grow an exceptional business? To do it well requires three ways of thinking about people…
- Have a competitive advantage mindset
- Are clear about what game they’re playing in the market
- Use data to know who their best customers are and what they want
We want to make a key distinction: you can be a solidly good company and not prioritize people above everything else. We’re talking about the difference between good and exceptional companies. We take inspiration from many great thinkers before us – Jim Collins, Daniel Pink, Brene Brown, Joseph Pine, James Gilmore, and more. The experts and the data are clear – a people focus is your competitive differentiator.
Let’s talk a little bit about each.
#1 Exceptional companies have a competitive advantage mindset
When we ask you, “what is your business’s competitive advantage?” what comes to mind? If you’re like us and our clients, you started to build a list. Strengths, weaknesses, opportunities, what the competition is doing. ChatGPT did the same thing, listing technology, sustainability, talent, etc. All of which are true! After doing this year after year, a key factor became clear – the list always changes.
So, how do we decide? As the market constantly shifts around us, how do we stay focused on what will drive the most competitive advantage? We know we can’t do it all. We have to choose. That’s the core truth: competitive advantage isn’t a thing on a list; it’s a mindset. Jack Welch’s quote sums it up nicely, “There are only two sources of competitive advantage…the ability to learn more and turn it into action faster than the competition.” A competitive advantage mindset forces us to recognize that change is constant and our ability to manage it better than the market is the only long-term differentiator.
#2 Exceptional companies are clear about the game they’re playing in the market
We’ve all bought something that we could have found cheaper or easier somewhere else. Why do we do that? How could we make such a seemingly illogical decision? My brother did his undergrad in economics and tells this story: in his Econ 101 class, the assumption is that we act in our rational self-interest – one part of Adam Smith’s “invisible hand of the market.” Economists also recognized that some decision-making couldn’t be accounted for rationally – the “animal spirits.” Then, behavioral economics entered the conversation, dedicated to understanding why people make decisions. It showed that logic and rational thought are only part of what drives our decision-making – emotions are a powerful driver of behavior.
I can’t tell you how many surveys we’ve implemented where customers say, “I work with them because I trust them to be there when I need them. They’re not the cheapest, but I don’t care.” Emotions drive behaviors, and experiences drive emotions.
That’s where the market decision comes in. Exceptional companies understand that success in the market is emotionally driven. There are too many choices in this world for consumers to weigh them logically. People have to simplify, and emotions take an outsized role in the decision. The companies that don’t simplify and try to be all things to all people lose in the long run – Sears, Toys R’ Us, and most recently, Bed Bath and Beyond.
Exceptional companies cut through the noise. And the success is clear – Apple, Disney, Tesla, Warby Parker. Starbucks is another great example. When we’re doing speaking engagements we always use this question, “You can go to the gas station and get 16 oz of coffee for $0.99 or go to Starbucks and pay $5. How many of you went to the gas station?” Very few hands go up. People know they can count on the exact Starbucks experience they want anywhere in the world.
#3 Exceptional companies use data to know who their best customers are and what they want
How do we find the right customer? How do we build a loyal customer base? We hear this question all the time – “I know who my customers are, but who should I grow with?” Exceptional companies don’t guess – they use data to understand and prioritize their best-fit customers.
I read a great story about Amazon that drives this point home. We’ve all heard about how customer-focused Jeff Bezos has been from the beginning. If you go back and listen, it’s not just any customers; it’s specifically his consumers. Though Amazon serves four different customers (sellers, enterprises, content providers, and consumers), the whole business model is designed to serve the consumer, even to the detriment of the other customers. Sellers, in fact, have sued Amazon in the past for more resources.
This data-driven focus on the consumer has led to industry-defining innovations like Prime, One-Click Ordering, immediate returns, and more. Bezos and Amazon used data to understand what customers wanted and ruthlessly delivered that to them with huge success.
We had a client who saved $5 million in additional investments after cutting an innovation that had been in development for years. They did so because customers said they didn’t want it. It isn’t always easy, but it’s the difference between good and exceptional.
“Data is the oil of the 21st century, and the ability to process data and extract insights from it is the new superpower.” – Jeff Bezos.
In conclusion, exceptional companies grow by putting people first. Customer tastes will change, disruptors will enter the market, competition for talent will continue to heat up, and world-shifting events will happen. In short, things are going to change and as good as your business model may be today, it cannot—and will not—survive forever.
Our competitive advantage relies on our ability to learn more about our customers and turn it into action faster than the changing market tides. Through this, we are able to decisively grow; intentionally and in partnership with the people our business serves.
ABOUT THE GUEST:
Sarah Ahern, MA is an Owner and Partner at PATH, a 40-year-old woman-owned market research and business management firm. She has developed and launched companies, programs, products, and services for almost two decades as a 4-time entrepreneur and consultant.
Sarah has built change management and market growth strategies for Fortune 100 and 500 companies across North America. To spice it up, she rounds out her understanding of human behavior with a Masters in Health Education, a culinary degree, and experience designing and implementing nutrition-focused population health programs for Whole Foods Market, LinkedIn, Tesla, SpaceX and more.
Sarah is a passionate thought leader, consultant, educator, and community steward. She was recognized as a 2022 recipient of the Columbus 40 Under 40 award and is a renowned facilitator and mentor in the social enterprise community.
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