It’s All About Outcomes

In 1960, Prof. Theodore Levitt gave marketeers a huge dose of reality when he made this famous statement: “People don’t want to buy a quarter-inch drill, they want a quarter-inch hole.”

He was talking about customers wanting the outcome they could obtain by using the tool and not the tool itself. However, the outcome he selected, the quarter-inch hole, is not very valuable either. What can you do with a handful of the holes? 

To demonstrate my point, I will talk us through a process that starts with an author and her drill, and end with a valuable outcome.

One day, a book and article author decided her home office organization was sapping her productivity and limiting how much money, she could make. She decided to do something about it. Since she was mechanically inclined, she designed what she needed, purchased some lumber and quarter-inch screws, and started working.

 She put the drill bit into the drill drilled lots of quarter-inch holes and then replaced the bit with a screwdriver attachment and started to join the pieces of wood. In a short time, she constructed a bookcase. She moved it into its permanent location and started loading all her reference material onto the shelves in an orderly arrangement.

When she was finished, she looked around her office, smiled, and noticed two things: 

1. The new neatness made her fell more relaxed and in control. She believed that this alone would increase her output by 5% annually.
2. She realized that saving the time she wasted looking for reference material she knew she had would boost productivity by another 5%.

The end result of the project, of which drilling some holes was the smallest part, would increase her output and compensation by 10% per year. That was the outcome Prof. Levitt should have been talking about!

The same logic works for the products and services you and your organization sell. For example, in my past life, I was the Vice President of Customer Service for an analytical instrument company. Our products were used both by scientist “doing science” (as they say) and production and QC people creating and inspecting products.

In the latter case, where the plant processes natural materials like cement and limestone, they ran their process to the point where the delivery trucks were loaded and then brought one or more samples from the load to the lab. Our instrument measured the material properties and printed out the results for the final inspector. If the number was within specification, the shipment was allowed to proceed. If the number were out of spec, a whole team would decide how to bring the shipment into conformance and how to prevent more out-of-spec product from being produced. 

The desired output from using our product was authorization to ship product and invoice their customer. They never cared about the computer, operating system, algorithms, or other techy stuff. They cared about the accuracy and reproducibility of the measurement, ease of training a new operator, product reliability, and time for service to bring an inoperable unit back into production. They cared totally about the output because their bonus depended on shipping good product.

As you design your services or the products you sell, keep in mind that they have to work together to ensure that the outputs your customer will purchase are actually what your company will deliver. And, if you have to sell additional services as the equipment ages or the technology improves, then the new outcomes received must increase in proportion to the incremental cost.

Not focusing on customer outcomes is the shortest route to unprofitability and the usual consequences. 

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