Leadership has changed over the decades in substance but not in form. To be clear, leaders still have to identify and communicate a less uncertain view of the world, which the community will perceive as well, and together they can make into a reality. However, in business, the key to realizing that vision was a tangible assets everyone could see, touch and/or feel. More recently, those assets became intangible and while one part of the community could still relate to them the other perceived only the benefits. These businesses are noteworthy for their productive capacity; that is, the making of products and services used by clients. Exercising leadership in production-side businesses requires clearly identifying the asset underpinning the business and maximizing the return on it. Today, many economies are consumption-based – also known as customer-centric – making leadership a bit more challenging.
Consumption based businesses are no longer established on the basis of assets owned and/or controlled by an organization but by their ability to capture a specific market segment of like minded clients.
the evolution of e-commerce might be a good way to illustrate this point. The first e-commerce companies provided clients with a stand alone software product they ran on their own servers. This gave existing and new companies the opportunity to develop sales through a new distribution channel, online, as opposed to the tradition “brick and mortar” store on the high street. The second generation came in the form of software as a service, allowing anyone to start an e-commerce business without any of the costs associated with maintaining and developing a stand alone site. Here, once again, the e-commerce platform targets an intermediary by providing them with an efficient tool. These businesses are all on the productive side of the fence.
However, the benefits of the e-commerce solution were short lived. The process of driving traffic to the site and converting visitors into paying customers is significantly more expensive than the store. Many of you have surely heard the term “cost of acquiring a client” when pitching your online business to investors; well, this is what investors are referring to.
Consequently, on the consumption side of the fence any number of new economic actors entered the marketplace to help manage the processes and costs associated with capturing prospective clients and turning them into repeat buyers. But these tools too are only tools and should not be confused with actual leadership. They are simply bought in resources available to all competitors.
So how does the leader of an e-commerce site contribute to the success of the business? The most successful e-commerce leaders are those who approach their business not on the basis of the old product-driven mindset but of a consumption-driven one targeting a distinct segment of the market on the basis of shared identifiers and values. A shared culture, if you like.
Let’s take the example of Zappos, a very successful online shop company. The company doesn’t make shoes, it only distributes them. The technology underlying the business can be acquired by anyone. Similarly, the tools for attracting customers will be bought by many competitors. There is no real ability to differentiate in market without any proprietary assets. So how to resolve this challenge and stand out in the marketplace as a place where consumers want to shop? Initially, the company put the emphasis on customer service. This worked well for a time but like with any market competition rolled in making the distinction between Zappos and the competitors difficult to distinguish.
In a brave move, company leadership, Tony Hsieh, saw that what brought together employees, customers, vendors, partners,…, all stakeholders, was a shared set of values. A quick view of the company’s “about us” website page illustrates this point quite well:
As we grow as a company, it has become more and more important to explicitly define the core values from which we develop our culture, our brand, and our business strategies. These are the ten core values that we live by:
- Deliver WOW Through Service
- Embrace and Drive Change
- Create Fun and A Little Weirdness
- Be Adventurous, Creative, and Open-Minded
- Pursue Growth and Learning
- Build Open and Honest Relationships With Communication
- Build a Positive Team and Family Spirit
- Do More With Less
- Be Passionate and Determined
- Be Humble
The stakeholders attracted by and who contribute to Zappos’s “culture” of openness were welcome and work together to make their community a comfortable place for like minded people. From a leadership perspective, the uncertainty of living in a non-like-minded community is reduced.
The company went one step further with its mantra of openness by implementing an organizational structure based on ideas of holacracy; an organization without hierarchy. After 2 years of implementation, in 2015, the company pushed out anyone who didn’t subscribe to this new organization. Although such a move might be perceived as intolerant – thus contrary to the company’s values – it is not because culture is the foundation on which this business is built. Not adhering to the company culture in a consumption-based company is like impairing or stealing the property on which a production-based company is built. The important thing to note here is the significance – if not, importance – of maintaining a like-minded community through whatever means possible.
The consistency of values communicated to the community and echoed by the same allows company leadership to be effective and drive results in a purely consumption-based business. In effect, any other economic actor seeking an entrance into this market will have a much easier time of it if they go through the gate keeper known as Zappos making the company very valuable.
- Are you the leader of a company on the production side or consumption side of the economic fence? Or, is it in between?
- If you are on the consumption side, are you really able to access a specific market segment? Which one?
- How authentic are you, as a leader? Are you perceived as such by your community of stakeholders?
- If your business’s key component is culture, how good a leadership job are you doing at keeping the connection with your community going?
If you wish to explore these questions and issues like these, please contact me directly.