It’s rare and thrilling to find a business book with genuinely innovative ideas. I’m sad to report (because their PR firm kindly sent me a review copy) that How Companies Win: Profiting from Demand-Driven Business Models No Matter What Business You’re In by Rick Kash and David Calhoun is not it. There are some interesting insights, which I’ll get to. But overall, the book suffers from four critical flaws.
1. It’s boring. This really shouldn’t be the case, since they credit a ghostwriter in the acknowledgements. But regardless, the book strives for a pseudo-academic tome that makes it almost painful. Witness what seems to be a thesis sentence for the book on Page 4: “The second lesson to be learned is that in an era of oversupply it is now imperative that you construct a framework in your company that encompasses and aligns everyone toward meeting not just the current but the latent and emerging demand of your highest-profit customers and consumers.” Got it.
2. Fancy Word Syndrome. One vice of consultants is that they frequently use fancy words to sound smart when they’re explaining pretty basic concepts. This often stems from either insecurity or (as I’m guessing here) a desire to create a proprietary approach they can charge a lot of money for. Check out:
- “thesis for winning” (your plan)
- “need states” (when customers want to buy your stuff)
- “demand profit pools” (the target groups you want to sell to)
- “strategic growth opportunity areas” (where you want to focus)
3. No there there. Kash and Calhoun’s concept, unfortunately, isn’t that earth-shattering. Basically, they’re saying that because the worldwide supply for goods and services is growing (thanks in part to globalization), the only move for successfully companies is to grow demand or risk falling behind. How to grow demand? Be innovative and strategic. Um, yeah.
4. Overt shilling. Let’s be honest: every consultant or executive who writes a book hopes that they’ll get business out of it. But these guys are over the top, attempting to create a fake new specialty (“demand chain management”) that Kash can consult on (and for which Nielsen, the company Calhoun runs, can sell its new Fusion service). I’m surprised they got away with a particularly unctuous and self-serving anecdote involving a meeting between Kash’s firm and the former CEO of Anheuser-Busch, at which he was so awed by an incisive question that he immediately blurted out, “You’re hired!”
All that being said, Kash and Calhoun do manage to marshal some interesting points to back up their thesis that (shocker!) it’s good to be innovative.
- First, they note that pricing power from 1991-2009 (as compared to the period from 1947-1990) declined 79% in the business-to-business market and 35% in the business-to-consumer market. That’s actually pretty amazing proof that you need to focus on differentiation.
- They cite an observation of Clayton Christensen and Michael Raynor in The Innovator’s Solution that expected returns from innovation can drive 60-80% of a firm’s market value. “The top 20 percent of companies that successfully drive innovation,” they recount, “deliver four times the total shareholder returns that the bottom 20 percent do.”
- They make a powerful case that pricing is key to success: “A 1 percent price increase has a 50 percent greater impact on operating income than does a 1 percent decrease in variable cost. More remarkably, that same 1 percent price increase has a 215 percent greater impact on operating profit than a 1 percent volume increase in sales.”
- Finally, the power of branding is enormous: “The Stern Stewart research firm has determined that if your customer believes that your product is both meaningfully relevant and highly differentiated, your margins go up 50 percent faster, your profits go up more than 200 percent faster, and your market capitalization also goes up more than 200 percent faster than it does for competitors who have not successfully created relevant, differentiated offers.”
Have you read the book? What do you think? And just how important (or not) do you think pricing is?