The Simple Question That Can Make You Rich

Strategic clarity allows you to make much better decisions about your business.

I have a question for you. It appears to be very simple, but if you really work hard at answering it for your business you will be much more successful; it can even make you rich. The question is this: what business are you in? That’s easy, right? Well, be careful, many business owners don’t do very well at answering this question and that is a pity because a good answer can create a lot of business value and personal wealth. It’s one of the first things I ask a new client but rarely do I get an answer that we don’t change as we work together. How you answer this question is central to your understanding of your business’ strategy.

You don’t have to read too many marketing books to be told that people buy benefits not products. It should therefore be a small step to ask yourself exactly what benefits your clients are buying from you as that will help you answer my question. Have you done that recently? I decided to write about this today because I was reading about LinkedIn’s recent results which, like Twitter’s, have been a little disappointing. Now, LinkedIn seemed to me, on the face of it, to be in the networking business or so its various strap lines would suggest: “manage your professional identity”; “build and engage with your professional network”; and “access knowledge, insights and opportunities”. However, most of its revenues come from selling its members’ career details to recruitment companies. The benefit that the people who pay LinkedIn the most cash get for their money is up-to-date and highly targeted personal data. To my mind you might more accurately describe LinkedIn as being in the “recruitment database business”, to which you might add Sales databases too as selling more sales leads is also part of its immediate revenue development plans.

The distinction that I am making here may seem trivial but it isn’t. Selling personal data is the core revenue generating business for LinkedIn, so the more that it aligns its strategy behind this the more successful it will be. Alignment is core to business success and to have alignment you need strategic clarity and thinking this way gives you that, rather than the muddled thinking that I often find. LinkedIn has created a networking utility which benefits its users who, mostly, don’t pay for it in cash; they pay by providing up-to-date data. There is always an important difference between what I like to think of as Primary business activity (that generates sales) and Secondary activity (that, in this case at least, effectively creates the Primary product). There are many types of business that operate like this; look no further than publishers, who sell qualified leads and advertising on the back of their often free content.

Thinking clearly like this is most important when you have big decisions to make. As an example, if you don’t know if you are in the networking business or the recruitment data business, or even if you are just a bit confused about it, you may have a completely different reaction to a possible acquisition opportunity or you may not understand the full value of a potential offer for your business. In fact, it is just this lack of strategic clarity that leads to the silly choices that some businesses, both large and small, have made when faced with this sort of choice: banks spring to mind as being the most extreme example of many.

It isn’t clear to me when LinkedIn realised that this was where the money was but clearly recognising it allows a far more aligned and focused development strategy for the business going forward. It also provides a great example of why my question is so important. If you are clear about the benefits you are selling, and to whom you are selling them, you will have a much better chance of building a bigger, stronger and more valuable business.

Mark

 

 

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