How ‘listening’ to their customers made these companies so big
In his book Scaling Your Startup, Peter Cohan has laid tremendous importance to developing a product that relieves intense customer pain. For this, he mentions to collaborate with the customers early on in the business.
Today, we will look at 3 case studies — one very old in time and the other 2 very recent that emphasises the importance of listening to customers. How if the real pain of a customer is addressed can quickly make a company successful.
Case Study 1: Sumo vehicle by Tata Motors
Tata Motors launched their first nine-seater utility vehicle called Tata Sumo in 1994. The vehicle was an instant hit on Indian roads. It became the fastest-selling product of its time and achieved the milestone of 100,000 units sold in just three years. In the nineties, it reached a peak sale of 55,000 units a year.
How did this happen?
Sir Sumant Moolgaonkar (as he is fondly called in Maharashtra, India), former MD of Tata Motors was a zealous man. Legend has it that he used to sometimes have his lunch at roadside dhabas, specifically those ones where truck drivers would be resting. He would then discuss the shortcomings of Tata Trucks with his new buddies and go back to his office with all the relevant feedback. The Tata team would then try to incorporate the feedback in their design. Tata Sumo was a vehicle carved out of those feedbacks. However Moolgaonkar could not live enough to see the launch and success of Tata Sumo.
Interesting trivia - the name Sumo is derived from first 2 letters of his firstname and lastname, and it is the only example in corporate history where an employer named a product/service after its employee.
Sumo tasted success because it cared to listen to the pain points of the end customers and solved them.
Later on fierce competition from Toyota Qualys and Mahindra Bolero caused sluggish sales of Sumo until Tatas decided to stop its production.
Case Study 2: Zoom Video Communications Inc.
Zoom was founded in 2011 by Eric Yuan. Before Zoom, Eric worked at Webex which got acquired by Cisco Systems in 2007 for a whopping $3.2 bn. While Eric continued to work in Cisco and rose to the ranks of a VP, he regularly caught up with customers to collect their feedback and pain-points. At that time, Cisco Webex was virtually the only big player but was extremely slow, connectivity was unstable, installation was frustrating, etc. Eric knew about all these deficiencies and proposed changes to the higher management which were not taken seriously. Consequently, Eric decided to quit Cisco and start his own company — Zoom. After having listened to his customers for many years, he improved on those issues and created very modern, in-browser video conferencing solution, Zoom with a video-first approach. By 2014, Zoom had over 10 mn users. It listed on NASDAQ stock exchange in 1st quarter of 2017 at $36 and had a market valuation of $16 bn by the end of that day. In pre-Covid days, the stock hovered around $68. Now with unimaginable demand for conferencing solutions in Covid crisis, Zoom shares are trading at $250. It is valued at over $47 bn and is more than the 7 largest airlines in the world.
Eric knew about all the deficiencies in Webex and proposed changes to the higher management which were not taken seriously
Zoom was a run away success because Eric chose to listen to his customers’ major problems while using a conferencing solution and dared to provide a better alternative.
It’s worth noting that Zoom also had its share of controversies where serious security issues were reported. However those points are beyond relevance of this article.
Case Study 3: Square Capital
When Jack Dorsey founded company Square started giving abysmal financial results soon after their IPO [late 2015], the company was struggling for fresh ideas. Some of this pain was contributed by cut-throat competition posed by several players in the fin-tech space. Its during this time that Square spoke to their small and medium enterprises for their most important pain-point. And the answer they got was — Getting easy loan for business. Yes you read that right. In spite of fully-integrating the payments channel — from hardware to software that runs on hardware to developing mobile apps to shipping free square pieces the company faced the challenge of getting easy loans for their customers. Square listened to this and setup Square Capital, a company/product that tied up with several banks and facilitated loans disbursal. And they ditched the ancient credit score way to find the credit worthiness. Instead they came up with their own AI-driven algorithm to decide credit worthiness. They also introduced a flexible repayment option - meaning — if the merchant is making a lot of business in a given month, the monthly installment for that month increases and if the merchant closed the shop for a few days, the monthly installment for that month decreases. How does the bank/Square Capital know this? Through the number and value of transactions in a month. These 2 changes were a massive hit for Square.
If the merchant is making a lot of business in a given month, the monthly installment for that month increases and if the merchant closed the shop for a few days, the monthly installment for that month decreases
The stock price went from $9 in Jan 2016 to $99 in Sep 2018. That’s a 1000% appreciation. As of 23 June 2020, it was trading at $104.75
Changing the business direction based on feedback from customers is crucial for the existence of any company.
Just as listening to real customers is important, it’s equally important to act on their feedback. And this is possible only if executive leadership can foresee and make necessary adjustments in the organization.
