What is the limiting factor to growth? Capital? Talent? Determination?
A related question: Chinese manufacturers are better and cheaper at building most things. What do we need US companies for?
Chinese companies are far away from the end customer in every sense — distance, language, culture. Therefore they lack access to customer knowledge, down to the smallest details. It’s not enough to know that customers want tumblers or dresses or iPads. You need to know their preference for a certain shade of color, a certain flavor profile, a certain cost tradeoff between display and processor specs.
Once the problems are known, there is no shortage in ability to solve them. Skill is abundant. The specs are immediately outsourced to China.
US companies add value in the supply chain because they are closer to the customer and therefore understand what customers want better than Chinese companies.
This structure is most visible when it is disrupted. There is a trend in Chinese manufacturers going direct to the consumer, via a digital interface with data-driven feedback loops, and skipping the US middle man. The biggest success is SHEIN. I know of another company a friend is starting that is applying this model to agricultural products.
But it doesn’t take global trade to demonstrate that customer understanding is the limiting factor to growth.
In my own company, we had ample capital, talent, and determination. We hired from top schools and companies. We raised from top investors. But we still saw unhappy customers and lukewarm growth. We were not getting anywhere.
In fact, the one thing we lacked was customer understanding. I had spent 90% of my time internally — managing employees, talking to investors, looking at code and design. No one knew anything about the customer (except sales, the team talking to customers the most). It was blind leading the blind.
Once we started to spend 90% of our time with customers, everything started to make sense. We developed confidence about which features to build. We shipped less bugs. We started winning major accounts. We would know what a customer wanted even before they knew themselves.
A great way to not spend time with customers is to work from home instead of being in person with the customer.
The takeaways:
- Become one with the customer
- Fully understand their reality, objectives, problems
- Once the problems are known, solving them is easy