The Grid_Watkinson summary

Right, let’s begin sketching the Grid. The best place to start is by setting our ultimate goals. These can be described in all sorts of ways, but when you really get down to it, all businesses share three identical goals.

First off, each and every business must be desirable. Put differently, if you want your company to prosper, you need people to be interested in your product. 

Imagine a ship at sea. The currents pull it one way; the winds blow it another. To maintain its course, it must take these factors into account and adjust its sails accordingly. This, then, is the mark of a well-run ship: the captain and crew know the currents and listen to the wind.

Businesses are a bit like ships in that they are also buffeted by forces beyond their control, which they must learn to navigate. The three most important factors they must consider are their customers, their organization, and the market. These are all highly unpredictable.

In this blink, we’ll be shifting gears and looking more closely at what makes a company desirable. This will add three more elements to our grid – wants and needs, rivalry, and offerings. 

Let’s start with wants and needs. In general, these are determined by customers’ values and beliefs. These aren’t written in stone, however. In fact, the beliefs and values guiding customers are constantly changing. 

It’s time to look at profitability. Like desirability, this can be broken into three factors, each of which we’ll be adding to the Grid. 

Let’s start with price. Simply put, raising the price of a given product is one of the most effective ways of boosting your revenue. Take it from McKinsey. In a 2010 study, the management consultancy firm found that a 1 percent price hike increased profits by 11 percent if demand remained constant. 

Now that we’ve covered desirability and profitability, we’ll need to look at the factors that determine a company’s longevity. This will allow us to add another three elements to our grid – customer base, imitability, and adaptability. 

Let’s start with the customer base. It’s an ironclad rule of business that a company cannot survive if consumers don’t know it exists. Longevity, in other words, depends on awareness. 

We’ve now defined the three goals, three factors, and nine elements that apply to all companies. But remember what we said at the start – these can’t be treated in isolation. Every element is relevant and can affect changes in every other element. 

Let’s say a company has a brilliant idea for a new product, but it fails to take account of the expertise of rival companies. The danger here is that the first company develops a product that a competitor then easily copies and even improves. This happens when companies focus on the desirability of products from the perspective of consumers but forget about rivals. 

The author was recently engaged by a company in the service sector that had run into financial difficulties. When he looked at the firm’s data, he found some puzzling patterns. Customer satisfaction was high, for example, but repeat purchases were low. The firm also had a lot of potential customers, but very few of them committed to a purchase. So what was going on here?

Well, here are a couple of things the author learned from this example. Let’s start with one of the most obvious lessons: sometimes, you simply need a fresh pair of eyes to identify improvements.