Bogus business ideas -- popular ideas that raise havoc

By John R. Graham

If it sounds new, exciting, and intriguing, we want to believe it. We also assume it's true. While there may be exceptions to every rule, there aren't many in this case. Several examples tell the story.

We've all heard the term "customers for life." Even though the idea flies in the face of the reality, there are those who cling to it uncritically, believing that in some miraculous way they can hang on to customers forever. But ask any salesperson if this is possible and you'll hear the truth. To operate on the premise that they are forever is delusional.

"Customers for life" lasted as long as it did because we wanted to believe that the impossible was possible.

Then, of course, there was Quality Management, or QM as it was known. This was touted as the panacea for catching up with the Japanese and getting ahead of everyone else. Companies large and small clawed their way onto this bandwagon.

At one engineering firm, work almost stopped as the employees spent a year, mostly in meetings. When management figured out that little work was getting done, QM disappeared quickly and silently. It all happened because we wanted to believe that QM was the solution.

And who can forget the highly paid guru who advocated creating chaos in the workplace. By his standards, a company like Enron is destined for unlimited success, while Wal-Mart is headed for the scrap heap.

Creating chaos caught on because it was new, different and exciting.

Then we wanted to believe that dotcom would change businesses overnight. Countless companies and investors went for broke on the word of hoards of 23-year-olds. The trip from going for broke to going broke was dramatic and short.

We are always ready to go for the simple solution, the instant answer, or the magic potion. Each one sounds exciting, but most are also bogus. All appear profound, but they are also in error. Here are four popular business ideas that get companies in trouble:

Bogus business idea #1 -- Valuing value added

This one continues to enjoy undeserved popularity. What has allowed it to survive for so long? The answer may lie in the fact that it is meaningless.

Most of what companies view as value added is either what they are doing already or is worth so little it is devoid of value. Why is value added always what a company -- not the customer -- wants to believe is valuable?

Value should play a key role in doing business, of course. That's what customers expect. But the focus should be on what customers value, not what we think is important. That is inherent value, not something that's added.

"Brands that have a simple promise and have delivered on that promise for a long time top the fall 2001 Equitrend best brands study," reports Research Alert, Feb. 1, 2002. Once again, Craftsman Tools is at the top of the heap. Its lifetime, no questions asked guarantee resonates with tool buyers. That's built-in value, not value added.

Bogus business idea #2 -- Over-emphasizing profits

There's nothing wrong with the word profit. It's what business is all about. Not surprisingly, most business owners and managers put "making a profit" as the #1 reason for being in business. While the response may be 100 percent predictable, it is also way off base.

In fact, it may be a good idea to stay away from those who are obsessed with profit. They tend to behave irrationally, often undermining strategies that make for higher sales, customer satisfaction and increased margins. Their distorted thinking leads them to believe that cutting is the formula for growth.

What makes more sense is establishing conditions that produce profits, such as creating and cultivating customers so that they conclude that doing business with you is in their best interest. Those who are convinced that they have made the right buying decision become enthusiastic and loyal customers -- who buy because they believe and don't switch because of price. And customers who buy produce what every business needs -- profits.

But it all starts with the right focus, not on profits but investing in creating customers.

Bogus business idea #3 -- Constantly pushing sales

It sounds almost subversive to suggest that getting more sales can be a treacherous business objective. To take it a step farther, pushing for sales generally leads to price-cutting and tarnishing the brand. It can certainly produce short-term gain -- along with the long-term erosion of market credibility.

Panasonic has long been a niche player in the personal computer business. Instead of trying to buy market share with lower prices, the company has taken a far more strategic approach. The company is expanding its line of "ruggedized" Toughbook laptops that meet the demanding needs of users operating in adverse conditions. Panasonic owns this particular market with pricey laptops that set the standard for durability.

When Louis V. Gertsner Jr. took over the CEO job at IBM in the early 1990s, the company was languishing. Quickly, Gertsner assessed the situation and concluded that the task was building IBM from the customer back -- not the other way around. The IBM focus moved from selling products to making customers, a strategy that has taken the company to the pinnacle.

Bogus business idea #4 -- Viewing what you sell as a commodity

When you speak with insurance agents about what they sell, you just may hear something like this: "We sell what no one wants to buy. They only buy insurance because they have to have it." What an attitude! What a sad way to look at the products you sell. No wonder we avoid insurance agents whenever we can.

If we let what we sell become a commodity, we devalue it to the point that only the lowest price makes sense.

"A brand program should be designed to differentiate your cow from all other cattle on the range. Even if all the cattle on the range look alike," says business writer Al Ries. Think about what Morton's has done with something as simple as salt or Arm & Hammer with baking soda.

If you see what you're selling as a commodity, whether it's insurance, software or chemicals, be sure you have the lowest price because that's the only way to make the sale.

In business, ideas don't seem to count for much. A go-out-and-get-it-done attitude gets the votes. Yet, it should be obvious that ideas affect not only the way we think but the way we perform as well. Bad ideas -- no matter how popular they may be -- still produce bad results.

John R. Graham is president of Graham Communications, a marketing services and sales consulting firm in Quincy, Mass. (617-328-0069 or j_graham@grahamcomm.com)