By Sandip Devkar General Manager – HR (Training & Development) Fleetguard Filters Pvt Ltd, Pune
The real challenge for the Management is alignment of thinking pattern to ensure achievement of short term and long term goals of the Organization. It is generally observed that there is a certain degree of conflict in the thinking approach.
Many a times, teams are expected & required to undertake cross functional tasks, which need to be accomplished either independently or with the due integration, dependability to make sure the smooth work flow of the next tasks. In the process, the resolution of conflicts by Management at a very early stage, is the key to make sure the optimum outcome & performance of each team.
Let’s have a look at a very common example that is generally observed in any Organization. The goal of any organization is to make money now & for the future. Taking this goal to the Marketing team which works at the forefront & deals with customers and importantly is primarily responsible for bringing in the required & budgeted top line for the Organization. Obviously, Marketing team comprising of various team members end up with the conflict for the achievement of targeted top line. Following is the conflict diagram.
How to read this conflict diagram :
Team A – In order to make money now and in future we must increase sales and in order to increase sales we must reduce prices.
Team B – In order to make money now and in future we must protect our margins and in order to protect our margins we must not reduce prices.
The right side box suggests solution to think Win-Win for both the teams.
Let us see how these two teams are thinking and what their fundamental assumptions are behind their respective approaches.
It is quite often evident that the traditional way of thinking is to increase sales revenue by reducing the selling price. Always you find that marketing people are happy to reduce prices and sell more to the customer. If you go and ask them why our sale is not happening, the typical marketing answer is “Sir, our prices are higher than the competitors. Here the fundamental assumption of Team A is that only if we reduce prices customer will buy more. Even they do not take pain to understand why we are placing our product at higher price and what competitors are delivering comparably at lower prices. The simple analysis to understand our product and competitor’s product, and its pricing is also not carried out many times in detail by our teams. They must understand that reducing prices to compete with any of the competitors is just a matter of one day decision and this kind of strategies are copied just in no time by competitors. This also results in to another serious undesirable effect in the market and that is a big price war. Lot of compromises happen on quality and functionality to follow this strategy of reducing prices from both ends and finally customers suffer on his expectations and eventually product dies.
On the other hand if forward thinking team members like Team B thinks that the protecting margin is very much important to sustain our profitability, their fundamental assumption is exactly opposite to the Team A. This is a conflict many times, as there is always a management pressure of increasing revenue with a time line on both the teams. This pressure many times take an easy way out of reducing prices and marketing teams manage to create pressure continuously on the organization to reduce prices. However, in a long term this proves to be disastrous.
Management needs to work out solution around protecting margin and adding values on product offerings like service, quality and functionality-features to the customers so that the customer sees more useful values and product gets different standing in the market like “Innovative product, Excellent Service, Absolute availability “. This enhances confidence of a customer in our products and the customer base starts widening. Thus, more sales volumes are generated.
This thinking approach creates decisive competitive edge – DCE, which is usually found difficult for any competition to copy. The rise of our brand takes place in the market due to this unique DCE and customer is now ready to pay premium for our products.
Hence building decisive edge to create our brand in the market is strongly recommended than indulging into price war, which is a superficial work many organizations follow. It is necessary for organizations to stay away from this trap of price war and build teams and infrastructure to go for designing a DCE – Decisive Competitive Edge for the product and the organization. The management must continue to believe in convincing the front-end team to sell products without compromising the margin and make sure that DCE created by the organization create that fundamental assumption in the minds of marketing people that the customers are always glued to DCE and is ready to pay premiums.
Hence, I believe and strongly recommend avoiding price wars. Instead, we develop capability to create DCE for the organization on which we make more sales as well as protect our margins…of course to make money now and in future.