Author: Scott Novis
Demand Vs Supply
The movie Field of Dreams made the expression, “If you build it, they will come.” become world-famous. However, it later became a bit of a joke to describe many new products and companies. This article will expand on Demand vs. Supply.
The implication seemed to be that if you built the thing you dreamed about, others would want it too. It is easy to understand this thinking. After all, The Law of Supply and Demand seems to imply that supply comes first. Created in the 1890s by Alfred Marshall, the Law of Supply and Demand explains pricing in a free market. If supply exceeds demand, then prices will drop. If demand exceeds supply, then prices rise.
Shifting Perspectives on Demand vs. Supply
The Law of Supply and Demand worked very well to describe the price of commodities. The kinds of products that are widely available, like fruits and vegetables, or raw materials like lumber and iron ore. However, the law does not always explain the price of everything. As many business owners painfully discovered, if you build it, no one may come. A good friend of mine and successful entrepreneur put it better. “The Law of Supply and demand is wrong. It’s not supply and demand. It’s demand, then supply. Demand is more important than supply.” Specifically, he was saying that understanding demand is more important than supply is critical for a business owner.
The Power of Prioritizing Customer Demand
Why? Because of the word order. In his book, The Infinite Game, Simon Sinek noticed that people expose their true priorities when they speak. We do this unconsciously. Even CEOs with their meticulously curated conference calls and press releases do this. Sinek noticed that if a CEO talked about (1) profits, (2) shareholders, (3) staff, and (4) customers, in that order – her later behavior would put profits ahead of everything else. And guess who was the lowest priority? That’s right, the customers. Sinek shares multiple examples to make his case. CEO actions align with their spoken word order priorities. Regardless of what they print in pamphlets or marketing material, people talk as they think. When a business leader prioritizes supply over demand, they can shift the company’s attention away from the customer and onto the product and how it is delivered. One consequence of this shift in focus is that operations can become more important than sales or marketing. This makes the attention of the organization inward-focused instead of outward-focused.
As an entrepreneur, I want to own a profitable business. Focusing on the operations of my business ahead of the demand can become a dangerous attention trap. How so? With supply, you control most of the variables. When people focus on what they control it is easy to become lazy and complacent. Prioritizing demand, however, makes you think about how you can influence others to act. Convincing someone who doesn’t work for you (as a customer) to take action is a much harder problem to solve than telling your people what to do. Inspiring customer action, therefore, is where more value is created. My goal in my company is to make sure customer desire drives our business, not our own supply. I have watched this play out over the last 16 years in the mobile video game industry. Most independent mobile video game operators focus on the trailer. Video game trailers are cool! Imagine a living room on wheels filled with flat panel displays and loaded with every kind of video game console.
Delivering Celebrations, Not Just Renting Trailers
If you haven’t seen one you can go to gametruck.com to check them out. The concept is simple. It is easy to imagine towing a trailer to someone’s house for kids to play video games inside. And many owners focus on doing exactly that. Towing a trailer to someone’s house to host a party. As if that is what customers want; a trailer parked in front of their house. I contend that people do not want trailers. Customers want a celebration. In addition, they want a party that is easy, low stress, and most of all fun for their child. Parents are trying to create feelings of belonging, joy, and recognition for their children. The box on wheels is almost immaterial. I noticed that when we started to offer laser tag.
For a few years, we did not offer laser tag, yet people would call up and ask for it. When our sales team told them, “We do not offer laser tag.” The customers would go ahead and book a GameTruck Party with a mobile video game theater. Two thoughts crossed my mind. One, why were we not selling people things they wanted to buy from us? Second, what were they actually buying from us? I mean, we just told them we didn’t have what they were looking for, yet they continued to reserve a trailer with us. It was a clear sign the equipment was not as important as the experience they wanted their child to have.
The Impact of Understanding Customer Demand
From that time, we focused on delivering celebrations (instead of renting trailers). As a result, GameTruck owners have vastly outpaced their competitors in terms of consumer interest. The GameTruck system generates more than 10,000 inbound leads a month. These are calls and form fills from people looking to book a party for their child. Creating demand like this is not easy but has allowed us to become the price leader in every market where we operate. More revenue ensures we can hire the best staff, maintain our equipment, and follow through on our promises. Our dependability may be more valuable than any piece of equipment we use to deliver a party.
By focusing on parent demand, we can align our work to meet it. We created communication systems to increase parental confidence in the GameTruck brand. We train our Game Coaches to understand the parents’ expectations so they can manage them. Finally making sure the party guests have fun, benefits the coaches because of the higher tips they receive.
Scaling Vision and Creating Opportunities
Understanding demand first, made every aspect of our supply better. I am convinced if GameTruck had only been about renting video game equipment, we would not deliver 30,000 parties a year. Understanding our client’s demands has allowed our owners to scale their vision. More than half of GameTruck owners operate multiple units. GameTruck owners lead the industry in full-time managers, a sign of the size teams they employ. Focusing on customer demand not only made our business better but also created more opportunities for the people who run the franchises. It has become clear to me that a thorough understanding of demand is vastly more important than an understanding of supply.
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Enhancing Traditional Process Documents
I recently took part in a panel on business execution. Everyone agreed that documenting their processes would improve their operations. However, telling people to document their processes ignores two nontrivial challenges. The first is understanding why it is hard to document a process. The second is how to get your people to use the process! By understanding these challenges and implementing effective strategies, you can maximize the benefits of traditional process documents and drive superior business performance.
The Power of Supplementing Traditional Process Documents
While traditional process documents are valuable, it is crucial to recognize their limitations and explore complementary approaches that enhance their effectiveness. Documenting a business process sounds like it should be easy right? As Simon Sinek noted, the part of our brains that makes decisions is not the part responsible for language. When we become proficient at a skill, our actions are reduced to muscle memory. Studies show when someone asks us to explain our actions, our brain can unconsciously make up stories. Baseball legend Ted Williams believed he could watch a baseball hit the barrel of his bat, but he couldn’t. It is a physical impossibility. It happens too fast. Describing what we do is more challenging than most people realize.
How can you address it? Try to capture only what matters most, like the 20% of steps that deliver 80% of the results. Too much detail can reduce clarity.
How do get people to follow best practices?
Often, staff ignores process documents. Why? A couple of reasons. One is pressure. People find it hard to learn under pressure. Another is expectations. Performance suffers when learning a new skill. We avoid that which makes us look bad.
I find it helpful to remember that my true goal as a business owner is better business execution. I want to help my people consistently deliver what our brand promises our customers. The most effective way to do that, I have found is to supplement processes with stories and tools. Stories create meaning and shape our feelings.
Feelings fuel behaviors.
When we capture our processes, we also capture the stories of the problems solved. A great process should make the user a hero who solves a problem, not a monkey who flips a switch.
A tool complements the story because it shapes the user’s actions by constraining them. This is where proven process documents are essential. I try to never automate a process I don’t understand! Having a fun tool that minimizes errors and maximizes results has a massive positive impact on performance.
Conclusion
The next time you set about creating a standard process, think about the story and automation. Can you make the person running the process the hero of a story? Is it clear the problem they are solving? Do they have great tools to help them achieve that outcome? In my experience, when my people have a key role in solving a problem, and they have a great tool to do it, their performance soars.
If you’re interested in exploring more strategies for effective business execution, check out this insightful article on improving operational efficiency in business for additional tips and techniques or check out our article on “Business Opportunity on Wheels at GameTruck“.
Remember, by addressing the challenges of documenting processes and getting your team to follow best practices, you can enhance your business operations and drive better results.
Transform Culture Through Respect
Learn how a simple act of respect not only resolved a stressful situation but also transformed the culture within a company, fostering understanding, recognition, and a desire to help.
The Unexpected Call: A Mistake and an Upset Franchise Owner
I was in my company’s call center and someone had made a mistake. I could tell because a franchise owner, who had called to speak to an agent, sounded upset. Mistakes with event bookings can be very stressful to owners, and it was all crashing down on a call center worker who was brand new to the company. I remember thinking “please, just don’t make her cry.”
What actually happened on that call blew my mind. Far from breaking down, the agent remained poised and calm. She respected the owner’s feelings, took the issue seriously, thanked the owner for bringing the issue to her attention, and took the steps she needed to address it.
Challenging Beliefs: Rethinking the Scarcity of Respect
For context, I was raised to believe that you had to earn respect, as if respect is a scarce resource. Respect was talked about like money, like a few people had a lot of it, but that most of us didn’t have enough, and that we were going to struggle to earn enough for the rest of our lives. In that call center, I learned from my agent that respect doesn’t follow the laws of scarcity. Neither of the people on that call had to “earn” each other’s respect, the way I had learned they should. One respected the other, and they got respect back. Respect is an infinitely renewable resource. It’s something that we can generate from within ourselves and that we can give away freely.
Amplifying Respect: Modeling Behavior and Changing Conversations
The late George S. Thompson spoke of respect as one of the most powerful tools available in his profession as a police officer. He was an imposing 6’2”, had a PhD in English, and a black belt in judo, but he valued his ability to be respectful above any of these advantages. In his book, Verbal Judo, he explains that even though he had the physical ability, the moral authority, and the legal right to force people to do what he asked them to do, every time he used those abilities, it was the worst decision he could make. Thompson believed that it was always more effective to treat people with respect, exactly what my call center agent had done.
I am not overstating that her attitude and that of the team that followed her completely transformed the way that not only our franchise owners talked to our booking center, but how everyone at our company started talking to each other. Our culture shifted. Even our franchise owners, like the caller I overheard, began talking to one another differently. When we model for others by giving the respect that we would like to receive, that respect comes back to us amplified. Respect is something that we can demonstrate in a wide variety of situations. Everyone craves to be recognized, to be understood, and, ultimately, when people are recognized and understood, they’re open to being helped.
Acting with Respect: Cultivating a Calmer and Better World
At the end of the day, that’s all that call from the franchise owner was, a cry for help. Very often, people are upset and angry because they’re afraid that no one cares enough to help them. One of the most important things you can do, then, if you do care, is to act out of respect. I believe that the more respect we put into the world, the more respect there will be for all of us, the calmer people will behave, and the better the world will be. It certainly has been that way at my company.
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