Know thyself in business
Ferrari had always vowed to never make a sport utility vehicle.
And they maintained this stance many years after it became clear that the SUV was not a passing fad. Roughly half of the cars sold in the US are SUVs, according to a September 2019 New York Times article, and the percentages keep growing. Consumers want more of them in every price segment.
The competition in the ultra-luxury market had given in long ago.
Lamborghini has made them for many years. It was not caving to pressure though since it did so before there was a trend. Porsche has made the Cayenne since 2002. Bentley debuted one in 2016. And even Rolls Royce unveiled one in 2018 that starts at $332,500.
Ferrari will make its first SUV for the 2022 model year. Why did they make the decision to hold out so long to consumer desires and what lessons could be taken from that decision?
I don’t believe it was pure stubbornness (though maybe that played a part).
Ferrari is a company that knows who they are.
When you know who you are, you also know who you’re not.
Our businesses may not be iconic luxury brands. But quality businesses of all sizes need to be focused on building a brand.
A brand is how you are perceived, the promises you make, and what you stand for.
The brand is social capital that creates and builds wealth for the entrepreneur. How do you build an enduring brand? There isn’t just one way.
The key to finding the answer for your business is the lens through which you are making decisions. What I mean is that you’re always considering the point of view of what a prospective buyer of your company would have.
How would that prospective buyer value your various business channels?
Not all revenue is created equal. Highly differentiated products and services are valuable to a buyer. Commoditized products and services are not. In many cases, the commoditized revenue has no value at all to the buyer even if the revenue is good.
This can be a tough pill to swallow.
As business owners, we cling to any revenue-generating activity. It feels foolish not to. How are the bills going to get paid? But we unknowingly pay a terrible price for trying to be all things to all people.
One hallmark of commoditization is running negative cash flow. If you’re getting paid for your work long after it’s already been done, you’re probably in a commoditized business line. You’re not in charge and it feels like you’re always chasing your tail.
It’s so easy for this to happen.
I have experienced this in my own business. Starting out as a financial advisor, I felt that I needed to help any and every client who could fog a mirror. I felt that I couldn’t say no to anyone. Often, I’d take on assignments that meant putting in way more time than I could ever expect to get compensated for from a revenue perspective.
It was a terrible place to be.
I felt pulled in every direction and under-appreciated. I was unappreciated in many cases by the people I was pouring so much time into serving.
But if I’m really honest with myself, the truth is that I was probably getting the amount of appreciation I actually deserved.
Trying to serve all needs means that none of them get done exceptionally well.
It’s the same for any business.
It doesn’t matter if the business is products or services.
Things didn’t change for me until I took a step back and really analyzed what I was doing.
I asked three questions of myself and my team:
What three things do we already do well?
What three things should we start doing?
What three things should we stop doing?
You will be amazed if you really stay in these questions until the answers become clear and the best way forward presents itself. Invite honest feedback from your team on these same questions. They see things from a different vantage point than you do.
It’s okay to get granular.
Heck, it’s even preferable to take the granularity nearly to the point of ridiculousness. This is particularly true on the topic of who you are there to serve. It’s an iterative process. I continue to get more granular as time goes on.
One tool I love to help get clarity around these topics is the Business Model Canvas. There are free templates and inexpensive commercial offerings of this tool you can use. Google this and you’ll see examples.
The beauty of the tool is that you can get your entire business model on one page. It’s far too easy to go down rabbit holes of detail when doing business planning but this keeps it simple. It asks and answers all of the key questions and, importantly, keeps it clear.
Who are the customers you are there to serve?
Where will the revenue come from?
What are the value propositions?
What is the cost structure?
Who are the key partners?
If it can’t be articulated on a one-page Business Model Canvas, you will probably find that you’re doing some things you shouldn’t be.
Now you know.
You can stop doing those things.
You can learn to say “no!”
Which I understand takes courage.
And probably needs to be the topic of a future article.
But it is all worth it. You know more about who you are. And you’re not going to start building SUVs just because they are popular. You don’t know how to build SUVs. It’s not who you are and it’s not your brand. Unless you can get $350,000 each before options which is what the Ferrari Purosangue is rumored to start at when it debuts in late 2021.
Then you make the smart business decision like Ferrari and cave in. Sometimes exceptions prove the rule.