Companies stall because they don't listen to customers

The Stall Points Initiative is an effort by the Corporate Executive Board, a business research group, to pinpoint why companies suddenly stop growing, then stagnate or decline for years thereafter. If you think that's a rare trend, think again: according to CEB, 87% of the companies they studied (all at one time members of the Fortune 100 or similarly sized non-US companies) had stalled once or more.

Matthew Olson, Seth Verry and Derek van Bever of the CEB describe their work in the March issue of the Harvard Business Review ("When Growth Stalls" - free link). The authors contend that most of the reasons for stalls are within the company's control (factors such as regulatory actions, macroeconomic issues, political shifts are responsible for only 13% of the stalls).

CEOs are advised to watch for "red flags" to see if their companies are headed for a stall. Here's the list:

• Core assumptions about the marketplace and company capabilities to exploit it are undocumented
• Market definition boundaries are out of date
• Definition of core market is out of date
• Infrequent testing of customers' valuation of product attributes
• Ineffective translation of customer insights into products
• Core customers no longer are willing to pay a premium for the product

Five out of the six reasons directly point to an inability to listen carefully to the market and compose a realistic picture of the strengths and weaknesses of the company's products.

So why do stalls happen? Companies point inward and lose contact with customers. Their internal focus leads them to overestimate their strengths and show overconfidence in their offerings.

Companies need to constantly question their value propositions to customers (this strategy approach can help) and guard against falling in love with their products. A little humility, a lot of listening, and never being satisfied.

strategy, growth, Harvard Business Review