Selling a winner- Not always risk fee!
Roger La Salle 2013
Selling a winner
The supposed secret to market success touted by all leaders and marketers is to have a positive value proposition. If you can show a clear customer benefit the rest is easy we are told, but let us examine this conclusion.
A sure winner – life saving products?
At first glance one may believe that simple cheap life saving products and solutions will always be a market winner as the value proposition is clear – invest in “A” for a few dollars and save my own life. Such an investment would appear to be outstanding value for money but even here we need to be careful in jumping to a conclusion.
Unfortunately, like it or not people seem loath to invest in prevention. It seems the “it won’t happen to me” syndrome is alive and well. There are numerous examples that prove this:
The following had to be legislated to save people from themselves:
• You must fasten your seat belt when driving, despite every car being fitted with one, people still fail to do so
• You must carry life a separate jacket in a boat for every person. A life jacket can be purchased for as little as $15.00.
• To protect people from themselves, it has now been legislated that for boats under a certain size a life jacket must be worn at all times.
• Your house must have a smoke detector, this despite smoke detectors costing as little as $7.00
• Your vehicle tyres must have a suitable tread depth
• You must carry chains in snow country
• Motor bike and now all bike riders must wear a helmet
• A helmet must be approved as useful to stop people flouting the law
We see that even in the case of an unarguable potentially lifesaving value proposition the market outcome is not always predictable.
Process Innovation – unarguable value for money!
In process innovation, like the implementation of say an automation system, a clear value proposition can usually be mathematically proven. For example it is quite easy to calculate the benefit in labour saved compared with the cost of implementing the automated system. Normally such an investment is predicated on an investment return of typically 12 to 18 months and from there on it is all “upside” In this case one may have thought a “go” decision would be obvious. However this is not always the case as unforseen circumstances can often occur.
The GFC brought many unstuck!
As the GFC spread like the plague through economies, companies that had invested heavily in automation may have been in for an unfortunate surprise.
Unlike labour intensive businesses that could lay off staff in bad times, companies that had taken on serious debt to finance automation projects were hit hard by the need to continue to finance interest payments on their investments whilst their cash cow of ever growing demand evaporated. The conclusion to be drawn from this is that even in good times, investments showing a strong value proposition need to be questioned and financed with sufficient “slack” to manage any severe market downturn. A failure to abide by this principle can leave the company leader with many sleepless nights if demand shrinks.
Market risk is by far the biggest business risk but even that cannot be removed by a positive value proposition, nor can an investment on a pure mathematical basis, particularly in process improvement as the GFC proved.
The secret is to always invest in new initiatives well within your means, do not take even the most obvious markets for granted so at to ensure survival if the market fails or circumstances beyond your control eventuate. Too many people “fly” on confidence alone and ignore this axiom – much to their peril.
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Roger La Salle, is the creator of the “Matrix Thinking”™ technique and is widely sought after as an international speaker on Innovation, Opportunity and business development. He is the author of four books, Director and former CEO of the Innovation Centre of Victoria (INNOVIC) as well as a number of companies both in Australian and overseas. He has been responsible for a number of successful technology start-ups and in 2004 was a regular panellist on the ABC New Inventors TV program. In 2005 he was appointed to the “Chair of Innovation” at “The Queens University” in Belfast. Matrix Thinking is now used in more than 26 countries and licensed to one of the world’s largest consulting firms. www.matrixthinking.com
Roger La Salle
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