A few days ago I talked about using four simple concepts to make better decisions (Incentives, Measure What Matters, Be Wary of Conventional Wisdom, Correlation is not Causation).  Andy Grove, of Intel fame, said your industry and your business  must embrace change to survive and thrive.

It can be hard to look past the way business is currently conducted, or to look at the external factors (Measure What Matters).  Often, the change is generated outside the regular players in the industry, and often from new players.  Profits then slide so existing firms cut costs to be able to survive, eg., in a market where the product has become a commodity, like insurance or banking.

But to compete, it is not only a matter of increasing scale and efficiency.  Buggy whips manufacturers were efficient but went out of business because the industry had changed.  (Also, look at what is happening to video shops, newspapers, books, landline phones, outsourcing of clerical work, the music industry, etc.).

Real change comes from thinking about the business model.  And changes come from understanding what is really valuable to the customer and determining how to provide a more effective solution.

What is of value to the customer?  That is often hard to answer and sometimes even the customer struggles to answer.  Henry Ford said "if I asked people what they wanted they would have said a faster horse".  Steve Jobs of Apple said many times it's not only what Apple does that distinguishes them but why they do it, which is challenging the status quo of the industry and appealing to the individual not a mass market.  Microsoft set out to put a computer in every home, now it sells software.  So what does it do next?

Where might the solutions be?  Try:

1. Understand what is happening in the customer's lives and where the product benefits them.

2. An effective solution will win over an efficient solution any day.

3. Don't focus on competitors, focus on the customer.