Like all areas of management, strategy-building has changed a lot since the economic crisis. Today’s companies don’t just talk about strategy, they make a lot of effort and create strong professional teams to devise quality business approaches.
We can also say that an increasing number of companies rely on the knowledge of specialists for these strategic tasks, and more and more of them use cutting-edge strategic technologies and solutions based on decision-making processes.
In my career, I have participated in a large number of strategy workshops and meetings; as a result, my strategic thinking has also changed and developed a lot over the past 15 years. There are, however, basic axioms that don’t change. One such axiom, for example, is that the process of defining strategy, at least of the solutions that lead to business success, is an almost constant process that is built from the same key elements. A crucial part of this process is the market assessment. A strategy always describes how the company should go forward, i.e. which directions it should take on the market in the future. In the market assessment phase, experts work with a vast amount of data, and as a result they often ‘can’t see the forest for the trees’, but obviously they deal with it, as this is what they do. Market assessment usually involves the analysis of solvency, age groups, and locations, just to name the most general aspects. These traditional approaches work just well in a relatively calm economy. But where are the good old times, where is the calm economic environment of the past? Of course, not everything was caused (or solved) by the crisis, but it has surely increased competition in every sector of the economy to a level that makes traditional tools of market assessment insufficient for defining perfect orientations for the future. As a result, an increasing number of companies are trying brand new approaches, including one of the most important — business psychology. Business psychology doesn’t deal with psychological factors in general, but rather with the particular techniques that rely on the decision-making process that is rooted in the personality type of the individual, which is the most important for businesspeople and consumers. ‘Across the pond’, these solutions have been used for decades, but in Europe, it has not been customary to get this deep into the thinking of the target group. Competition, however, calls for the most effective solutions. While 10 years ago the completely new and unfamiliar ideas that scratched the surface of this topic was met with surprise in Hungary, 5 years ago there were a few brave ones that gave it a try; now, in 2018, we can see that – to a varying extent – enterprises of all sizes incorporate decision-making processes that are based on the system of business psychology into final market assessments.
Figure: solvency and demand
Age, income level, personality – what is it that counts?
We have the question, and the answer can be found by choosing from the various technologies. What is the most important criterion when building a strategy? What should a market assessment focus on? If it needs to focus on growth, which can mean an increase in revenues or specific profit growth, the most important criterion is obviously the personality of the target customers. When you focus on the wallet of your target group and it is about planning purchase decisions, it is obviously the decision-making process of the target group you cannot do without. Let’s see a simple example. There are two families of 4 with the same income level, where the head of the household is 45 – according to traditional assessments, we have two identical potential clients. Yet one of them is a ruler and the other is a supporter as far as their primary personality is concerned. The ruler likes expensive and trendy things, premium stuff, where premium quality represents status and image. As opposed to this, the supporter likes convenient and comfortable things, doesn’t want to stand out from the crowd, doesn’t want to have a flashy lifestyle and mostly chooses mass products. When it comes to buying a car, for example, the ruler likes to choose a BMW or a Mercedes and would be unhappy to drive a Toyota, whereas the supporter wouldn’t switch from a safe Japanese car to a brand that is overpriced just because of its trademark (or at least the supporter thinks so). Naturally, it is not for us to decide who is right, and we won’t try to do so. In our strategy, however, we must take into account that these two people will not spend the same amount of money, despite their identical income level, family environment, and age. The ruler will spend approx. 80-90% of their income on purchases, while the supporter will try to keep this at 20-30%. As you can see, the two groups are ‘not in the same league’ when target groups are identified, either. And if this is not considered by the strategist, the results may prove really surprising.
Flowing through the body
Naturally, you can’t take these thoughts out of context and you can’t view them separately. You need to apply the technique during the entire strategic process, even though by defining the target personality you effectively point out the proper path for your company. At the beginning, we must determine the personality types of our current customers. It may be surprising, but the customers and partners of successful companies are quite homogeneous as far as personality traits are concerned, which means their decision-making processes are also similar, i.e. the factors that made them choose your company, products, services or, in case of small enterprises, the company owner personally, are also similar. At first, clients are usually shocked to hear that the company’s identity and its decision-makers determine and define the personality type of both the company’s partners and customers. Later, however, as they are presented with rational arguments and evidence, they realise that this claim is true and the relationship is almost trivial: the approach a company takes if the owner has an expert personality can only be an expert approach, (unless it has been consciously changed using technologies based on business psychology), and this approach will be reflected in the products, services, and communication of the company, and will be represented by the decision-makers. If its effectiveness is proven in practice, if it brings about real business success, there will be even more truth to this claim. Why would an executive want to feel uncomfortable at their own company? Basically everyone believes in decision-making points that they personally identify with, i.e. clearly the company attracts partners whose personality suits the personality of the leader, which will make the leader feel good. The personality orientation, i.e. the decision-making process of the current clients of a company, is not that difficult to identify: the personality of the top decision-maker(s) needs to be assessed, the visible traits, i.e. the identity, brand, and communication of the company need to be examined, and based on these, it can be determined perfectly who and why they have chosen the given company, its products, and its services. The strategist needs to consider this information when working out a plan, where the key issue is what target group is to be defined that is different, but not too different from the current personality orientation. When this is done, the decision-making process of the new target group can be identified immediately, and the product and service features that are the most important for the potential clients can be defined, and new orientations can be set accordingly. Finally, this strategic direction needs to be taken to the level of organisation development, as a ruler-type strategic direction is best implemented by a ruler-type leader, and there is no point in having anyone other than a supporter-type leader implement a supporter strategy. Why would we have tiresome strategic discussions that go on for hours if the only reason for them is the leader’s lack of understanding of the thinking and decision-making process of the target group? Or, what is even worse, but happens very frequently, is that the leader understands it full well, just rejects it because he or she absolutely can’t identify with it.
Don’t make unnecessary mistakes
Having managed hundreds of business development projects and having created hundreds of strategies, I can say for sure that successful business strategies are those where the technique is consistently applied, from the first step to the last: where there is no compromise in the major issues and no partial solutions are accepted just because they don’t want to dramatically change established methods. Of course, the process and the success rate is different for decision-makers with different personality types. When it comes to the re-orientation of the strategy, rulers are clearly the best, as they understand the whole process, they see the ‘big picture’. Moreover, customers with the most disposable income in Hungary over the last 10 years come from this personality type. The individual reacts very quickly, this type of person can come up with a new ‘strategy’ within a day, but, unfortunately, the strategy is never worked out in such detail that it could be really effective, so it fails. Experts are unrivalled in building the strategic process; what they usually lack is an original idea. But both individuals and experts can easily find a suitable partner, and as they pair up, they make use of use their beneficial characteristics, while less useful characteristics can be bypassed. It is leaders and business owners from the supporter generation who are facing the greatest challenge. For these people – especially for the 40+ year-old supporters – strategy is something elusive. As it is not a material asset, or property, or anything that you can physically perceive or touch, they almost always end up thinking that creating a strategy means wasting your money; and most of the time they repeat this often enough for people who work on the implementation of the strategy to lose their faith and the supporter turns out ‘to be right’.
The recurring basic elements of the strategy-building process that is based on the decision-making process are:
- defining the personality of current partners/clients
- defining the decision-making process of current partners/clients (identifying main decision-making points and points of influence)
- personality-based definition of the new target group (defining personality orientation)
- defining the decision-making process of the new target group (identifying main decision-making points and points of influence)
- defining product and service strategy based on the information gathered
- defining the organisation that can successfully implement the strategy (defining personality types, positions, and profiles)
- evaluation of the new strategy vs. current identity/brand elements, defining necessary changes
- developing a communication plan to fit the new strategy