One of my favorite segments from Paul Akers’ 2 Second Lean book.
Perhaps one of the most controversial concepts I push is that we are not here to make money. Profit and money are a by-product of an effective Lean culture. We are here first and foremost to improve the quality of the customer’s life. Internally, we are here to grow our people. If we do both of these at a high level, we will be profitable. However, profit is not the reason to do Lean nor is it the reason a company exists. If I told you the number of times I have encountered businesses that have gone south, with good products and capable people, you would be shocked. Ultimately the problem stems from the leadership focusing on profit and themselves, forgetting why the business exists in the first place. Take your mind off the numbers, focus on your customer, your people and serving others, and you will be surprised how everything else will work out. [emphasis added]
This resonates with me because I have valued this same thought since day one of Lean Technologies. And often I feel like I’m from another planet when I try to communicate this. Over the last twelve years I have heard numerous comments like the following:
- What is your exit strategy? I got this question early and often within the first couple years of my business. Why would I exit? I’m just getting started! It seems like people have found it hard to believe there wasn’t a deliberate end goal. My goal in starting the business was to alleviate my own personal frustration with manufacturing software, and to help others encountering the same pain. To quote Paul again, fix what bugs you! I didn’t get started just to quit.
- Your pricing structure is completely wrong. This comment was targeted at the price being too high (or too low; see below) for Thrive. The idea being communicated was that anyone with a $1,000 spending limit at a manufacturing company should be able to jump online and buy Thrive. Again, the approach here seemed to be to fleece customers. Get people to buy, but who cares if they ever get any value out of your software. This again did not align with my values. I wanted people engaged in improving their organizations, not suckers with a ProCard. Interestingly, I often get the flip-side argument which is that the software is priced too low.
- You should be charging for every user. This certainly works and makes sense in a lot of industries. However, typically those scenarios involve very specific applications (think email, Pandora, Dropbox). The reason this bugged me in a manufacturing environment is that people’s engagement with the software varies greatly. You have “power users” who are in an application every day and you may not mind paying the full license fee for. But then you have the “long tail” of users who are only in the application from time-to-time and now you need to shell out a bunch of money. Ultimately, I didn’t want to stick companies in “user management” mode, which just means they are trying to find ways to trick the system and use generic accounts or spend lots of time trying to manage user licenses. The data is their data…you own the software and data, just start using it!
- You maintenance contracts are setup wrong. This is another one I wanted to fix from personal experience. I didn’t like (and still don’t like) expensive software contracts that I felt added no value. I also didn’t like not receiving the next major upgrade of a product and having to pay for it. Ultimately, from a lean standpoint, it is easier for both the customer and the software company if everyone is on the same product. So don’t tick off customers by making them pay for your next big thing! A great notable example of this is Microsoft’s recent change to Windows 10. They want people on Windows 10. They don’t want a whole bunch of people on 8 or 7. They already experienced a significant portion of their user base clinging to Windows XP for years. Similarly, we want every customer on our latest Thrive iteration. This year we’ve been focusing on getting everyone from Thrive 2 to Thrive 3…and it’s just part of the maintenance agreement!
My biggest issue with most of these questions and comments is that they are not customer focused. They are business and profit focused. And the moment those internal goals become the focus you start losing sight of the customer. You begin focusing on wringing out one more user out of each client instead of thinking about how you can help them.
I have seen plenty of large organizations where the customer is some distant afterthought. The company is so focused on hitting a certain profit margin, or internal budget goal, or some other number that has no connection to the pain of or value delivered to the end customer. They have lost sight of why they are in business in the first place.
Maybe I’m just a bit altruistic, but as Paul says, if we focus on improving our customers’ lives and developing internal people, we will make money.