Creating Demand: The Secrets of Truly Magnetic Offers

Adrian Slywotzky

How do some companies generate runaway growth and extraordinary customer loyalty, even in a sluggish economy?

Adrian Slywotzky, an Oliver Wyman senior partner and bestselling author, examines the unpredictable dynamics of demand creation in his latest book, Demand: Creating What People Love Before They Know They Want It.

With engaging stories, Slywotzky pulls back the curtain on how demand creators wind up creating the killer offer: things customers can’t resist and competitors can’t copy. How do some companies seem to know what we want – even before we do? we all want video-on-demand now. But could we have even imagined it 10 years ago? Netflix founder Reed Hastings anticipated the future shift to on-demand streaming – even in 1998, when fewer than 7% of U.S. homes had broadband: “that’s why we named the company Netflix, and not DVDsBymail.com.” Demand “creators” always look to solve the next customer hassle – before we even recognize the hassle itself.

What makes us rave about some things, but rant about others, even when the underlying products are functionally the same? Magnetic products not only offer superior functionality, but also forge an emotional attachment that is hard to sever. they embed themselves so seamlessly into our lives that they become part of who we are. take the grocery chain Wegmans. More than just an incredibly functional supermarket – with an average of 60,000 items in stock – Wegmans has an emotional appeal that led 7,000 people (in 2010 alone!) to beg for a store in their area.

Here is an excerpt from an interview of Slywotzky. To learn more about his firm, Oliver Wyman, and its services and resources, please click here.

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How do some companies seem to know what we want – even before we do?

We all want video-on-demand now. But could we have even imagined it 10 years ago? Netflix founder Reed Hastings anticipated the future shift to on-demand streaming – even in 1998, when fewer than 7% of U.S. homes had broadband: “that’s why we named the company Netflix, and not DVDsBymail.com.” 1 Demand “creators” always look to solve the next customer hassle – before we even recognize the hassle itself.

What makes us rave about some tHings, but rant about others, even when the underlying products are functionally the same?

Magnetic products not only offer superior functionality, but also forge an emotional attachment that is hard to sever. they embed themselves so seamlessly into our lives that they become part of who we are. take the grocery chain wegmans. more than just an incredibly functional supermarket – with an average of 60,000 items in stock – Wegmans has an emotional appeal that led 7,000 people (in 2010 alone!) to beg for a store in their area.

Can you actually create demand – or are you just getting lucky?

Smart companies recognize that we often can’t articulate what we really want, and that “creating” demand is often just a matter of recognizing untapped demand. Demand creators identify hassles that bedevil all of us – and instead of simply accepting them, they ask, “Do they have to be this way?” Reed Hastings founded Netflix after a personal frustration with a $40 late fee. By making the leap from the way things are to the way they should be, he unleashed demand… to the tune of $2 billion.

Why do most attempts to create demand fail?

Identifying hassles that could be solved is a start – but it’s not enough. Demand creators recognize that even great products have a very low chance of success, and they do everything they can to increase it. Toyota knew the Prius’ odds of success were less than 5%. yet instead of dropping the project, Toyota actively asked, “how can we change those odds?” the company even went so far as to create a new division for the project – and then successfully launched the Prius two months ahead of an already “impossible” schedule.

Does what happens behind the scenes actually matter for demand creators?

It’s easy to think that only the product itself matters, but what happens behind the scenes can shape both the end product and your experience using it. Take the market for e-readers. the Amazon Kindle provided instant, wireless access to the world’s biggest bookstore. the Sony reader – released 10 months before the Kindle – offered wired access to only 20,000 titles. the backstory makes all the difference: there really is no point to an e-reader that doesn’t have the books you want to read, when you want to read them!

So many great products never get purchased, while others fly off the shelves. What triggers us to buy something?

Most of us need a trigger to get from want to buy. For Zipcar, it’s density – and just a short walk to the car. For Nespresso, it’s taste and trial in a fancy boutique. For Netflix, it’s waiting one day for a movie to arrive instead of six. Smart companies recognize that each product has its own trigger – and that discovering these triggers is the key to creating demand.

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To read the complete interview, please click here.

Adrian Slywotzky, a senior partner at Oliver Wyman, has consulted to Fortune 500 companies from a broad cross-section of industries, working extensively at the CEO and senior executive level for major corporations on issues related to new business development and creating new areas of value growth. He has written several books on strategy and growth, including Value Migration, The Profit Zone, and The Upside.

 

Adrian J. Slywotsky, Part Two: An interview by Bob Morris

Adrian Slywotzky

Adrian J. Slywotzky is a consultant and author of several books on economic theory and management. He graduated from Harvard College and holds a JD from Harvard Law School and an MBA from Harvard Business School. He has worked as a consultant since 1979 and is currently a partner at Oliver Wyman. His published books include Value Migration: How to Think Several Moves Ahead of the Competition (1995), The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow’s Profits with David J. Morrison and Bob Andelman (1998), Profit Patterns: 30 Ways to Anticipate and Profit from Strategic Forces Reshaping Your Business with Morrison and Ted Moser (1999), How Digital Is Your Business? with Morrison (2000), Profit Patterns: A Field Guide with Morrison (2002), The Art of Profitability (2004), How to Grow When Markets Don’t with Richard Wise (2005), The Upside: From Risk Taking to Risk Shaping—How to Turn Your Greatest Threat into Your Biggest Growth Opportunity with Karl Weber (2007), and most recently, Demand: Creating What People Love Before They Know They Want It, also with Karl Weber (2011):

Note: You may wish to read the first part of the interview first. In it, Slywotzky responds to general questions and then several about his earlier works. If so, please click here.

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Morris: Although I highly regard the three books previously discussed as well as your other works, I want to say now that I think Demand is the most interesting and – yes – the most entertaining book you have written…thus far. Was it as enjoyable to write as people will find it to be when they read it?

Slywotzky:  The fun you had in reading Demand absolutely mirrors the fun we had in researching and writing it.  In particular, getting to meet so many of the “demand creators,” ranging from brilliant CEOs to front-line employees with a passion for solving customer problems, was a real treat.  They’re among the most creative, caring, and interesting people I’ve ever met, and I came away with a deep sense of admiration for them and what they contribute to our world.

Morris: To what extent (if any) does the book in final form differ from the one you originally envisioned?

Slywotzky:  There was a complete draft of Demand almost two years ago, but it was much more of a traditional business book than the version you’ve read; it contained graphs, tables, and even a bit of technical jargon.  It could have been published in that form, but realizing that the theme was of broad interest and importance in today’s demand-challenged economy, we decided to revise it thoroughly, with a much greater emphasis on stories and personalities.  I hope the positive reactions from you and other early readers mean that Demand will reach a wider audience—and maybe even help to change the way organizations around the world do business.

Morris: Were there any head-snapping revelations while writing it?

Slywotzky:  Yes, in almost every story that we researched!  Here’s just one example.  We were stunned to learn that Netflix actually struggled to enroll enough customers to achieve liftoff, until they realized that having distribution centers scattered all over the country was key. They found that when DVDs could be delivered by the Postal Service overnight the service became far more magnetic and desirable. People couldn’t stop talking about it. The discovery came as a surprise even to Netflix executives, and to this day very few people are aware of the crucial role that the US Post Office played in making Netflix a huge success.

Morris: As I read the first few chapters, I was reminded of a common expression, “I’ll know it when I see it.” It seems to me that those who create demand envision the “it” before anyone else does, perhaps after recognizing an unmet need and then determining how best to respond to it. Is that an accurate assessment?

Slywotzky:  Very much so.  That’s one of the real gifts demand creators have—the ability to recognize the gap between what we settle for and what we really want or need, and then to imagine the perfect product or service that will fill it. By drawing the hassle map of the customer, it becomes much easier to see the sources of tomorrow’s demand. It’s a bit like x-ray vision for entrepreneurs.

Morris: Your use the term “product” to include both an item and a provision of service, both of which are indeed produced for a consumer. Whatever form the product may take, here’s my question: How best to create demand for commodities that are essentially interchangeable and sold for essentially the same price?

Slywotzky:  There are many answers, depending on specific circumstances.  Sometimes the key to escaping the commoditization trap is by providing ancillary products or services that enhance the value of your offering.  We call this “big box thinking,” with the big box of supporting products or services providing differentiation to the “little box” represented by the basic core product.  In other cases, the key is to offer the commoditized product in a place, a time, or a specific form that competitors can’t match and that customers find uniquely valuable.

Morris: Please explain what you mean by “the mystery of demand.” Will your book eliminate that mystery?

Slywotzky: You touched on the mystery with your question about commoditized products.  We live in a world where seemingly identical goods often produce vastly different streams of demand—where the iPod, for example, dramatically outsells every other MP3 player despite the fact that their functions are almost the same.  There are numerous cases of two seemingly similar products where one produces 5x more demand than the other. We wondered why demand appears so unpredictable in cases like this—and why otherwise well-run companies so often fail to elicit demand for new products they create.  Demand suggests the answers we discovered through several years of research.

Morris: What business lessons can be learned from the process by which Zipcar eventually achieved sustainable success?

Slywotzky:  It’s a great story with a host of possible lessons for various kinds of readers.  Maybe the most dramatic is that seemingly tiny functional differences can have a huge impact on demand.  Zipcar’s online car rental system was beautifully designed and highly efficient, but customers shied away from becoming members until the average walking distance to the nearest car was whittled from 10 minutes to 5 minutes.  Imagine that—Zipcar can save members hundreds or even thousands of dollars per year as compared with the expense of owning their own vehicle, but that extra five minutes of walking time made all the difference!

Morris: How does Wegmans differentiate itself from its competition?

Slywotzky: We were shocked by the kinds of comments Wegmans customers offered about the grocery chain—“love” is the only word you can use to describe their feelings (in fact, 90 percent of Wegmans’ customers say they “love” the store).  And there are lots of specifics one can point to in defining the difference, like the huge selection of specialized foods, the ultra-fast checkout lines, and so on.  But the key difference in the way Wegmans treats its people.  They reward employees well, train them extravagantly, recognize and reward their creativity, and empower them to solve customer problems.  The result is a store staffed with hundreds of demand creators.  Quite amazing.

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To read the complete interview, please click here.

Adrian J. Slywotzky cordially invites you to check out the resources at the book’s website by clicking here.

Head’s Up! A great business book will soon be published.

On October 4, 2011, Demand: Creating What People Love Before They Know They Want It, will be published by Crown Business. Written by Adrian Slywotzky with Karl Weber. In my opinion, it is one of the most valuable and will, over time, become one of the most I influential business books ever written.

It takes full advantage of the breakthrough revelations generated by dozens of major research projects that seek answers to questions such as these questions:

• During the decision-making process (e.g. making a purchase), what role does reason play?
• What role do the emotions play?
•  By what process can it be determined what people want even if they don’t know it?
• Which companies have most effectively created demand for what they offer? How?
• Precisely how and why is demand “a modern alchemy”?
• What is the “Achilles heel” of creating or increasing demand? Why?
• What is Netflix’s “two-hundred-year-old secret”?
• How to “get smarter faster” about what consumers do and do not want?

Slywotzky and Weber provide a brilliant analysis of what the research reveals, citing dozens of real-world examples of what the demand principles offer and how to develop mastery of them.

To read my first interview of Slywotzky, please click here.

To read Curt Finch’s excellent interview of him, featured in the June (2011) issue of Inc., please click here.

Adrian Slywotzky is a Partner of Oliver Wyman, a leading global management consulting firm. Since 1979, he has consulted to Fortune 500 companies from a broad cross-section of industries, working extensively at the CEO and senior executive level for major corporations on issues related to new business development and creating new areas of value growth. Adrian has written several books on strategy and growth, including Value Migration, The Profit Zone, and The Upside. BusinessWeek named The Profit Zone one of its Top 10 Business Books of 1998. The Upside was on the Financial Times list of Best Business Books of 2007. Adrian has been a keynote speaker at a number of senior executive conferences, including the Microsoft CEO Summit, the Forbes, Fortune, and BusinessWeek CEO Conferences, and CFO Magazine and Conference Board conferences. The Times of London has named Adrian one of the top 50 business thinkers, and Industry Week has named him one of the six most influential management thinkers. He holds degrees from Harvard College, Harvard Law School, and Harvard Business School.

Karl Weber is a writer specializing in business, politics, and social issues. He has collaborated with Adrian Slywotzky on four previous books, including The Upside and How Digital Is Your Business? Karl has also collaborated with Nobel Peace Prize laureate Muhammad Yunus, founder of Grameen Bank and author of Creating a World Without Poverty, and he edited the best-selling movie companion books Food Inc. and Waiting for Superman. He lives with his wife Mary-Jo Weber in Irvington, N.Y.

Adrian J. Slywotzky, Part 1: An interview by Bob Morris

Adrian J. Slywotzky

Adrian J. Slywotzky is a consultant and author of several books on economic theory and management. He graduated from Harvard College and holds a JD from Harvard Law School and an MBA from Harvard Business School. He has worked as a consultant since 1979 and is currently a partner at Oliver Wyman. His published books include Value Migration: How to Think Several Moves Ahead of the Competition (1995), The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow’s Profits with David J. Morrison and Bob Andelman (1998), Profit Patterns: 30 Ways to Anticipate and Profit from Strategic Forces Reshaping Your Business with Morrison and Ted Moser (1999), How Digital Is Your Business with Morrison (2000), Profit Patterns: A Field Guide with David J. Morrison (2002), The Art of Profitability (2004), How to Grow When Markets Don’t with Richard Wise (2005), The Upside: From Risk Taking to Risk Shaping—How to Turn Your Greatest Threat into Your Biggest Growth Opportunity with Karl Weber (2007), and most recently, Demand: Creating What People Love Before They Know They Want It (October, 2011)

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Morris: Before discussing any of your books, a few general questions. First, other than a family member, who has had the greatest impact on your personal development?

Slywotzky: Three people really changed the path I travelled: my high school sophomore English teacher, who taught me how to write; my piano teacher, who taught me how to listen (to people, as well as to music); and my partner, David Morrison, who taught me management, leadership, and a values-centered approach to business.

Morris: A 12th century French monk, Bernard Chartres, once observed, “We are like dwarfs standing on the shoulders of giants.” On whose shoulders do you stand?

Slywotzky: There are lots of giant shoulders I’m in debt to. Just a few of them include: Drucker and Deming, Michael Porter and Taiichi Ohno. Drucker because of his prophetic and clear thinking on management. Deming because he taught me to keep asking “Why?” Porter because he created the foundation of pragmatic industry analysis. And Ohno because he showed how radically you can redesign a business even if you’re starting from what looks like a hopeless situation. And, of course, the Beatles and Picasso, who never stopped challenging and reinventing themselves.

Morris: Was there a turning point in your life (if not an epiphany) that set your career on the course you continue to follow? Please explain.

Slywotzky: The big turning point was my dad saying he won’t pay for any more schooling, and that I had to get a job. Having to get a job can do wonders for your professional development. In 1993/94, when I absolutely didn’t have the time, I was induced/challenged to write a book.  It turned out to be Value Migration. It showed me that: a) it could be done; b) you learned so much more by forcing yourself to do it; and c) it actually helped to challenge people to think differently about their businesses.

Morris: Of all the non-business thinkers, from whom have you learned the most valuable business lessons?

Slywotzky: For me, many of the most valuable lessons came from long ago: Henry V (Shakespeare’s creation) on leadership. Henry V could teach anyone how to lead, despite impossible circumstances, by creating a real relationship with the people you lead. Sun Tzu on strategy (not sure there’s ever been anything better since). Sun Tzu showed how to find and take advantage of the key pressure points in any situation. And I think if you read Homer’s Iliad, you will find in it the essence of every business, military, political, and family battle you’ll ever encounter, especially the endless interplay between what we can control and what we can’t (cleverly disguised as the “actions of the gods”). The other two non-business thinkers who were critical were Thomas Kuhn (The Structure of Scientific Revolutions) and Michel Foucault (The Order of Things). Both of them teach how incredibly difficult it is to see the transition soon enough to make a difference.

Finally, the comics, Yogi Berra, Steven Wright, Dave Barry. If you understand comedy, you’ll have a really good chance at understanding what makes people tick.

Morris: To what extent (if any) has your formal education in law proven to be beneficial to your consulting relationships with various clients?

Slywotzky: The law taught me (at great psychological cost) two priceless lessons:  Always keep asking the next question, no matter how tired you are. And always be looking for the impact of politics in every situation (yes, including all the judicial ones).

Morris: You have collaborated on writing books with several different people. Was that intentional and/or a coincidental?

Slywotzky: The collaboration was 100 percent intentional. I loved the give and take, and the constant debate. The constant challenge of a different point of view can be both massively annoying and completely priceless.

Morris: In your opinion, what are the essentials of effective collaboration?

Slywotzky: For collaboration to work all you need are a few simple ingredients: respect, trust, flexibility, patience, and a lot of good lunches and dinners.

Morris: Most change initiatives fail or at least fall far short of original expectations. In Leading Change, James O’Toole suggests that cultural resistance is often the reason, the result of what he apt characterizes as “the ideology of comfort and the tyranny of custom.” What do you think?

Slywotzky: Ah – “The ideology of comfort” and “the tyranny of custom” – beautifully put. In Value Migration, I call it “institutional memory,” the things we love to do because we’re good at them. But, when an external transition occurs, we need to learn new things, to get way out of our comfort zone. We often need to do the opposite of what we used to do (e.g., get much lower cost, much faster, or more solutions oriented).

Sometimes it takes a degree of internal shock therapy to make the switch. Sometimes, it means doing both the old and new well. As Yogi Berra once advised: “When you come to a fork in the road, take it.” He could have added: “Especially during the really big transitions.”

Morris: In your opinion, are business opportunities today better, worse, or about the same as they were (let’s say) five years ago? Please explain.

Slywotzky: Today’s economic conditions are much worse, and yet the opportunities greater, precisely because business conditions are worse. Customers today (consumers and business) need a lot more help. They face a lot more problems. And it’s those problems that define tomorrow’s opportunities. Henk Kwakman of Nespresso once said: “Discover a problem, discover a business.” If that’s the case – today is a time filled with tremendous new opportunities.

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To read the complete interview, please click here.