Sunday, September 18, 2011

BIG’s Blog: Do We Know or Just Think We Know?

We “think” we know exactly what our donors want from us, don’t we? Many times we are right; but, are we setting ourselves up for long term failure with this “knowing” attitude?

This “knowing” attitude is way more common than you might think and it crosses all kinds of different organizations, it's not new and doesn’t just affect nonprofits. It also affects very successful people.

A very famous quote that is attributed to Henry Ford laid out his thinking very clearly. The quote is: “If I had asked people what they wanted, they would have said faster horses.”

It turns out that Henry Ford never actually uttered this famous and polarizing phrase.

In a recent article, Patrick Vlaskovits uses just this example to illustrate how trapped we can get in out thinking and begin to go down roads that while successful initially, often lead us to failure later on.

Vlaskovits states that if Ford didn’t actually verbalize his thoughts on what his customers wanted, the famous quote seems to capture what he probably thought about how his customers would think. And in the end, not really knowing what his customers thought had a negative impact on Ford Motor Company.

Henry Ford’s genius lay not in inventing the assembly line, interchangeable parts, or the automobile (he didn’t invent any of them). Instead, his initial advantage came from the creation of a virtuous circle that underpinned his vision for the first durable mass-market automobile. He adapted the moving assembly line process for the manufacture of automobiles, which allowed him to manufacture, market and sell the Model T at a significantly lower price than his competition, enabling the creation of a new and rapidly growing market.

But in doing so, Henry ford froze the design of the Model T. Freezing the design of the Model T catalyzed the speed of the virtuous circle, allowing him to better refine the moving assembly line process, which in turn allowed him to cut costs further, and drive the growth of Ford Motor Company from 10,000 cars manufactured in 1908 to 472,350 cars in 1915 to 933,720 cars in 1920.

As long as the Model T’s design remained ahead of the competition, as long as it competed on price, and as long as the market’s needs remained static, this was a successful and disruptive innovative strategy, since Ford had no compelling reason to innovate in any other sphere other than cost and price-reduction.

But, everything changed with the onset of the innovations introduced by General Motors in the 1920s, which took the direct opposite of Henry ford’s tack of “Any color … so long as it is black” and is best summed up by Alfred Sloan’s consumer-research driven “A Car for Every Purse and Purpose,” which aimed to produce cars for distinct market segments aided by: Installment selling, Used car trade-ins, Closed car models and Annual model changes.

In light of these, Ford persevered stubbornly with his cycle (now no longer disruptive or virtuous) and as such, Ford’s response to these new innovations can only be described as tepid at best. The Ford Motor Company did introduce a closed-body Model T, and did so without significantly altering its open-body design, which observers at the time felt amounted to a reluctant afterthought.

In 1921, the Ford Motor Company sold about 2/3 of all the cars built in the U.S. By 1926, this share had fallen to approximately 1/3. And in 1927, when Ford belatedly responded (at tremendous financial cost and internal strife) to changes in the market’s tastes and competitive innovation by shutting down production temporarily to re-tool his factories and bring the Model A to the market, that percentage fell to about 15%.

It was clear what people wanted, and it wasn’t faster horses. It was better cars, with better financing options. I attribute Ford’s failure to respond in a timely and effective manner to competitive innovation in the marketplace to an attitude summed up in a quote he never uttered.

As some of you are reading this – you are getting it. The real lessons are to constantly listen and engage with your donors but also to test your vision of what you are doing in fund raising against the reality that exists outside the doors of your office. Ask questions like: Why is our donor base so old? Was it as old 20 years ago? We have a lot of grandparents on our donor file, how many 30-something soccer moms do we have? How many single 20-somethings do we have? How do soccer moms and 20-somethings see our mission? Is our media reaching 20 and 30-year olds or are we just recycling grandparent lists? Where will our growth come from?

Don’t be blinded by your success today. Yesterday’s innovation and success won’t last forever. Keep engaging donors and keep innovating.


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