What is your right to win in business?

MANILA, Philippines - Eight out of 10 new businesses fail within the first five years. This is a sobering fact and raises the inevitable question, why?

Another fact: Only 14 percent of successful family businesses pass beyond the third generation. Eighty-six percent of them go out of business by the time the grandchildren are done working on the business they inherited. This is another sobering fact, and again makes us ask: why?

The answer is the same regardless. They didn’t have a “right to win.”

Too often business people get caught up in tactics, small issues, and nuances. They start a business because they have a “great idea.” Or they spend all their time on important matters like financing or line of credit. Or they focus on trading to make a quick buck when they see an opportunity. But in doing so, they neglect to strategically think and reflect upon the most important business question of all. The one that comes head-and-shoulders above all other questions, which is: “What is your right to win versus the competition?”

Said another way: “Why should a consumer pick your product over someone else’s?”

The great companies in the world today, the Apple Computers, the Coca-Colas, the Procter & Gambles, the BATs, all share one thing in common. They are customer-centric. They put the customer at the heart of everything they do. Their right to win is simple: they are committed to innovate, to give the consumer the best product experience.

P&G’s mission is “To improve the lives of the world’s consumers.” And this implicitly says what their right to win is — they will give the best products to consumers, and consumers will reward great products with continued loyalty. And as long as P&G is prepared to hire the best people, and to benchmark where they stand versus competition, and improve continually to stay ahead, well, there is no reason this company won’t sit at the top of the consumer goods world for another 175 years.

Apple is conceptually the same. They are committed to “changing the world” and bringing new innovation that suddenly a consumer cannot live without. And look at what they did. I never knew I needed an iPad… until they introduced it. Now it is truly a need! What is their right to win? They are committed to innovating, and giving consumers solutions that improve their life.

The companies that win, and win sustainably for decades and decades, have a right to win rooted in the consumer or customer. They start with the consumer. And their right to win is based on satisfying the consumer better than anyone else.

Not all companies, however, are consumer-centric. Some have put zero thought into the fundamental question of, “What is my right to win?” They have an idea and they just “go.” They never test it, they never benchmark versus competition, and they don’t evaluate how sustainable it is. They just “go.” And more often than not, they fail.

Some companies do find a certain level of success without being consumer-centric. They may not be leaders in their industry, nor are they globally competitive, nor is the company sustainable long-term, but for the time being, they can turn a profit and find success.

While there are far too many different business models to talk about here, let’s take a look at a few of the other quasi-successful “right to win” business models that can be found in the marketplace.

The “cheating” model. What this means, simply, is winning through dishonesty. This can be a counterfeiting operation that steals the brand image of other companies and then dupes consumers into thinking it’s real. Or it can be a company that sells at artificially low prices through dumping or tax evasion. These strategies may work for a while, but they aren’t sustainable and eventually a free market will weed them out. There is no sustainability whatsoever.

The “make a cheap copy” model. This is a quite prevalent model in the world today. Apple creates an iPhone or iPad. And within a short period of time, companies pop up with clever copies that may or may not circumvent the patents, and sell at a lower price. And of course they can afford to. They don’t have the investment costs of an Apple. They just take someone else’s idea and make it cheaper behind lower costs. This is again a model that can work for a while, but the issue is these companies can never get ahead, nor even keep up. As the innovation keeps changing, they struggle to stay on pace. You don’t see “copycat” companies ever listed among the worlds most sustainable.

The “connections” model. This is another word for crony capitalism. The only reason a company wins is by knowing someone. Getting special privileges that would not exist in a true open market. Preserving a monopolistic position through calling in favors and influencing legislation to keep competition out. Take Indonesia. How many wealthy businesses today were built on being “A friend of Suharto”? Or even in the Philippines, how many fortunes were made not via sustainable business strategy, but simply being a “friend of political leader X”? These are companies that are highly successful as long as they keep the right friends in the right places. But reform and market liberalization will come, and many such companies find competing in a true open market a humbling experience. I witnessed this firsthand in Eastern Europe when I was posted to Poland just after the fall of communism. State-run companies, all with state-mandated monopolies, suddenly had to compete in the free market. And every single one of them went bankrupt. Their model was based on favors, corruption, keeping competition out. They never knew how to win in a truly open market. So when that day comes — and it inevitably does — they collapse.

There are indeed many ways to turn a profit. But many means are purely tactics, and not having a good answer to “What is my right to win?” eventually leads to failure. The sole sustainable business model is grounded in being centered on the consumer or customer.  These are the companies built to last, and built to remain solid investment choices. Places where one goes to work to really learn how to grow a business.

Want to win? Make “The consumer is boss” or “The customer is king” your corporate mantras. Design everything to win with customers. And the profits will come. For decades and even centuries to come.

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Catalyst 360 is offering a seminar on “Customer Centricity” on April 30. Interested companies can contact Pam at pmiranda.catalyst360@gmail.com. or p.miranda@catalyst360.com.ph.