“How Companies Win” by Rick Kash & David Calhoun
Let me start by telling you how I received this book. I actually was surfing Twitter when I saw Gary Vaynerchuck tweet that he was looking for people who review business books. Instantly I tweeted back saying that this is indeed the purpose of my blog! A few days later I received an email from Anthony Liang, Project Manager over at Vaynermedia. He asked if I were interested in reviewing a copy of How Companies Win by Rick Kash & David Calhoun. I agreed, and he was kind enough to send me a complimentary copy in the mail.
When I first received the book in the mail, I have to admit that it didn’t send chills of excitement down my spine. At this point, I’ve read tons of business books and just by the cover alone appeared to be extremely dry. Remember that old saying though…never judge a book by… Before I began reading, I hopped over to Mixergy, which had just featured an interview author Rick Kash. I figured, what better way to get introduced to the book than to hear it from the author himself? After listening to the interview, I threw off my preconceived notions and eagerly dove in.
The thesis of the book is as follows:
“In the years to come, the real power of the supply chain will have less to do with the micromanagement of details regarding cost and performance, or with one’s comparative advantage relative to competitor’s supply chains. Instead, the true measure of power for one’s supply chain will now lie in its ability to more precisely target and serve the right demand at the right time at the right place in the right package in the right environment.”
Rick Kash David Calhoun
In essence, How Companies Win describes how we are moving from a supply-driven economy into a demand-driven economy. According to Kash & Calhoun, companies can succeed by switching to a demand-driven business model. So what does this mean exactly? I remember from my Economics class that it was all about “supply and demand” and the inverse effects each had on one another. However, since the economy has taken such a hit, supply is vast, while demand is scarce. Companies can no longer afford to simply look at their supply chain and make business decisions. They have to determine what the consumer demand is, and target appropriately. Kash & Calhoun use the example of dog food to explain this concept. To examine the why they re-segmented dog owners by looking not just at demographics, but at a customer-type they referred to as “The Loving Indulger.” These owners treat their dog like a child and are completely price indifferent. Understanding this behavior, dog food makers realized that people wanted a healthier, better quality kind of dog food. 20 years ago, the general population began to shift their eating habits toward organic, better quality food. Why not apply the same mindset to dogs?
To transform your company into a demand-driven model, you must understand the why of the customer. The first step in this process is to understand the three flavors of demand, as detailed in the book: current, latent, and emerging.
Current Demand
Current Demand is what everyone is doing today; it’s the way everyone competes. For example: “With a vast market already established by Netscape, Microsoft was faced with the challenge of responding to current demand. It did so by developing its own similar Web browser, Internet Explorer, and then drove that product into the marketplace by (controversially) embedding it in its already-dominant Windows OS.”
Latent Demand
Latent Demand is the demand that customers have but have not yet expressed. For example, look at everything that Steve Jobs has done with the Apple iPod. Before Apple released the iPod people had no idea that they really wanted “1,000 songs in their pocket,” as Jobs said. Apple in a way released the iPod, unveiling this need to have digital music wherever you are.
Emerging Demand
Emerging Demand is the demand that is just beginning to grow that businesses want to pay attention to. Kash & Calhoun use Twitter as an example: “What explains Twitter’s success? It was simple and free, for one thing. But more important, it tapped into a vast reservoir of demand that was just emerging: ‘smart phone’ users who had spent the previous decade becoming acculturated to the daily use of e-mails, instant messages and Facebook chat. Twitter, rather than being a revolutionary idea, was in fact a small comfortable next step.”
After you understand the main shifts in demand, Kash & Calhoun talk about what they call, demand profit pools, which are “groups of customers who make similar decisions based on the common needs they want satisfied.” If, like me, you’ve already been through Marketing 101, then you are no doubt familiar with the concept of STP: segment, target, position. Demand profit pools are a new way to look at the segmenting portion of the STP model. In order to create the most successful demand profit pools, you need to consider the following:
- Identify the most valuable demand profit pools
- Align your brands, products, messages, and resources to capture an increasing share of the highest-profit demand profit pools
- Develop products or services for customers in these pools
- Define a pricing strategy to match expectations of these customers
My favorite chapter of the book was The 5th P. If I took away one thing from the book, it would be this chapter. Again, thinking back to Marketing 101, you will recall that the four P’s of marketing are: product, promotion, place, and price. How Companies Win introduces the 5th P, precision. Now that we are living in a world immersed in Internet technology we have grown fond of having things custom made for us. If I’m shopping on Amazon, for example, it’s nice to see the suggestions being offered according to what I’ve searched for and purchased in the past. I can also now have Pandora create custom-made radio stations based on the type of music I like. More and more, we see the need for precision and accurate data arising. How well do you know me? You know what I search on Google, who my friends are on Facebook, and if you’re reading this article what books I’ve read! In order to be successful, companies need to start looking at their customer data, and realizing that there isn’t a one-size fits all product out there for everyone. This places an incredible emphasis on how your company gathers data, and if and how you choose to broadcast that data back to the customer. Once again, it requires shifting your focus to the customer demand. What do they want? What are they looking for? Once you are able to answer those questions as a company…then you’re sure to win.
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