Essential No. 1: Creating Exceptional Value
When I moderate CEO panel discussions on The 7 Essentials, the CEOs invariably make practical suggestions that stun the audience. "Why didn't I think of that?" or "I am going to try that tomorrow!" are candid responses I frequently hear. There is one panel discussion that really stands out for me that proves how a company can achieve exceptional growth by focusing on delivering a highly differentiated, valuable set of benefits.
Selim A. Bassoul serves as chairman and CEO of Middleby (MIDD), a member of the select set of companies that have achieved high revenue growth through both the 2002 and the current recession. His company is the leading value-added manufacturer (No. 1 or 2 in market share in each product category) of ovens and ranges used in commercial restaurants, institutional kitchens, and food packaging. Middleby's customers include restaurants such as Panera Bread (PNRA), Dunkin' Donuts, Subway, Papa John's (PZZA), and Morton's The Steakhouse (MRT).
When Bassoul took the reins at Middleby in 1999, revenues were $132 million, which shrank to $100 million by the start of the 2001-03 recession. "We had very limited resources and capital, we were running out of cash, and we were highly reliant on three customers that generated more than 60% of our sales," Bassoul remembers. "We lacked innovation, and the products we were generating or creating were very 'me-too' kitchen products across a very broad range, including mixers, refrigerators, and ovens. Roughly 30% of the orders were not shipped on time. You could say we had a case study of a lousy company."
No Quibble Warranty
Bassoul recounts that Middleby desperately needed to find one or two market differentiators. "We needed to build the premium brand in order to be No. 1 in our category, so we focused on ovens and backed it up with a 'No Quibble Warranty.'" The company will take back any piece of equipment, for any reason, no questions asked. "The goal is to meet or exceed a customer's cooking and service expectations," says Bassoul. "While Costco (COST) and Nordstrom's (JWN) are two of the few companies that offer 'no questions asked' warranties, ours was even more compelling since returning a kitchen is a lot more costly than returning a shirt!"
Another point of differentiation: Middleby's tests each oven before it is shipped. "This creates an internal incentive for us to ensure that premium quality is built into everything we do: engineering, production, installation and service," says Bassoul. "This may sound basic but is not done by all our competitors."
Middleby's growth turnaround incorporated more than operations excellence and an industry-leading warranty. Bassoul focused on transforming Middleby's value proposition. "Our sales team focused on building relationships with new and current customers. I called on our competitors' customers, not to sell them, but to find out why they bought our competitors' products and to listen to their insights about the market."
During the turnaround timeframe in 2001, Bassoul says he heard two things about his competitors' restaurant customers that seemed directly related to his business: Restaurants were cutting back on food costs, and the trend of casual dining-out was growing every day."
What Women Chefs Want
Based on the information he got by talking with his competitors' customers, Bassoul decided to redefine the brand around more casual dining and put all of Middleby's engineering focus on the innovations required to make energy-efficient ovens. He also learned that more than half of the chefs were women. The company formed a Women's Chef Advisory Council to find out about their unmet needs.
Female chefs wanted ovens that were lower in height so they could use the top shelves, they wanted them to be self-cleaning, and more energy-efficient. "We moved from the male-centric 'make it bigger and more powerful' to redefining the benefits desired by the majority of our chefs," Bassoul says. "What we were doing was completely different than anything Middleby's competitors were doing—and that's exactly why we did it."
Combined with a new product line of ovens with features more friendly to women we focused on casual dining leaders, partnering with YUM! Brands' (YUM) Kentucky Fried Chicken to introduce grilled chicken and providing ovens to Dunkin' Donuts and Subway. All are now our Marquee Customers."
Bassoul continues to learn from customers who don't buy from Middleby: what his competition is doing, identify new niches around unmet customer needs, and why and how his company is not meeting their needs. "This may seem counterintuitive, but your competitors' customers can be more frank and honest with you than your current customers," Bassoul observes. "They are not sensitive to hurting your feelings—they tell it like it is."
Insights to Actions
Ask yourself and your management team the following questions:
• With customers redefining their needs and desired benefits for the challenging times ahead, how can your service or product become the most-desired in your industry or market category?
• Are you meeting with and listening to your best customers and those of your competitors? If not, what will get you started? If you are, what advantages have you identified that will redefine what "exceptional value" your company can provide?
• What actions could you take to create an improved or new "exceptional value" differentiator for your company?
Here are three actions you can take to transform your value proposition to create exceptional value for your customers:
1. Interview Your Competitor's Customers
Follow in Bassoul's footsteps to interview your competitor's customers to identify market trends, understand new business needs, identify your company's opportunities to serve new customers or better serve the ones you have lost. Often this can be done by the CEO or another company leader who is not charged directly with making sales. Utilizing senior leadership communicates the importance of the interview, an orientation to a broad business discussion, and one that is likely to produce action.
2. Just Ask for Time to Listen—Don't Focus on Selling
It may seem intimidating to ask a competitor's customers to meet and discuss their insights. Just ask for time to listen.
Advises Bassoul: "Prior to meeting, I simply tell them, 'I am here to make the industry better and would like to understand how to make my company better as well. Would you mind sharing your wisdom and insights' I find customers are always flattered that I take my time to meet with them in person. Just ask and take time to listen."
He says that by talking to non-customers, Middleby realized that it could go after a new market by adding electronic ignition to its ovens. "That opened up a set of new customers who turn off their ovens at night." And any company that currently isn't a customer is a potential future customer.
3. Turn Feedback Insights into Action
Whether you identify the need to form a customer advisory council, add new features, or improve level of service levels, be sure that these actions will address unmet needs. Often such actions don't require too much investment. And these customers could end up participating in an advisory council or try out a new version of your product or service.
Viewing growth opportunities through the lens of your competitor's customers can be more important than listening to current customers. Capture the 1+1=3 effect by listening to your competitor's best customers in addition to your own. Do you need proof? Middleby has grown from $100 million in 2001 to over $657 million by second quarter 2009. Bassoul's company turned in a remarkable 30% growth rate through the 2008-09 recession.
The next article will focus on Essential No. 2: Identify a High Growth Market Segment. If you want to to measure your company's performance against each of The 7 Essentials, take the free scorecard. Talk to Dave at twitter.com/davidgthomson or visit www.blueprintgrowth.com.