The Blueprint

Enduring Success: Exploit versus Explore

Harvard Business Review has an excellent article in its July-August 2007 magazine called "The Four Principles of Enduring Success".  It is somewhat of a "Good to Great" look at companies that have achieved long term success and what was the root cause of their success.  The four principles were.

1. Exploit before you explore
2. Diversify your business portfolio
3. Remember your mistakes
4. Be conservative about change

With the first principle the author, Christian Stadler, concludes that companies that find new ways to exploit or expand their existing business have more success over the long term than companies that re-invent themselves and explore totally different markets.  It is not that you shouldn't explore more markets, but more of the company's attention should be put into exploiting than exploring.  I found this to be quite interesting and when looking in the rear view mirror I have to agree.  What does this mean for AEC commercial reprographics?  It is an interesting question?  Many people argue that printing volumes are declining and it is time to look at other markets.  I would question whether you have actually been in the printing market for the last ten years?  I don't believe so.  I believe you have been in the information or content logistics market, but called it printing.  If you accept that you are in the construction content logistics market and find ways to exploit this market there is long term enduring success ahead of you.  If you believe you are in the printing business your business will decline with print volumes.  If you try to abandon ship and jump into a different market you face some of the risks and perils companies described in the HBR article.

Isn't All Profit Good?

In the book "The Ultimate Question" Fred Reichheld distills customer loyalty into an extremely simple yet compelling metric called NPS or Net Promoter Score. He describes how most companies rely solely on traditional financial metrics like revenue and profit, but explains that these are short term measurements of success and are not highly correlated with long term sustainable success.  He describes the difference between "good profit" and "bad profit". Good profits are when you make money turning customers into enthusiasts and bad profits are derived from schemes such as locking in customers, tricking them through deceptive promotions, or hard selling techniques. Good profits create value for customers and bad profits extract value from customers.  Companies can hit short term goals with bad profits and sometimes more effectively than with good profits, but customers who had bad profits extracted from them will count the days until they can find an alternative vendor.

Measuring Service

I mentioned in a previous post that most reprographers see customer service as their main differentiator.  Two fierce competitors in the same market will both claim their advantage over the other is better customer service.

How do you measure the effectiveness of your customer service?  Verne Harnish, CEO of Gazelles, Inc. recommends a method developed by Fred Reichheld, author of the best selling book "The Ultimate Question".  The metric is called the Net Promoter Score or NPS.

Using a metric like this will help you determine how good your service is and what steps need to be taken to improve it.