I love Michael Raynor’s Three Rules for running a great business:
- Better before cheaper: Don’t compete on price, compete on value.
- Revenue before cost: Don’t drive profits by cutting cost, instead find ways to earn higher prices or higher volume.
- There are no other rules: View all your other choices through the lens of the first two rules.
For some strange reason, the first two rules have always been intuitive for me and we’ve taken this approach from the beginning in our practices even though I tend to struggle in many other aspects of running a business – especially the operational side! Anyway, Sara Sharfstein introduced me to the Three Rules when she sent me a link to Dr. Raynor’s Ted Talk on YouTube a few months ago and then she invited me to see him in person this weekend. It was awesome to listen to and speak with Dr. Raynor. There are few things more gratifying than to see someone present hard data that backs up one’s core beliefs. I was also able to get clarification from Dr. Raynor on one issue that’s been giving me pause since learning the Three Rules.
I asked, “Is it possible to move down market and still deliver better before cheaper because of the relative nature of ‘better’? In our model we are interested in increasing access to care by serving the underserved and/or those who don’t currently utilize dental services at all and doing so entails ignoring the high end and serving the majority.”
He replied (and I’m paraphrasing here), “Absolutely. Think about Dollar Store. Realistically, they are barely in the same category and have almost no overlapping customer base when compared to high end retailers so it’s not relevant to compare the quality of one to the other. Dollar Store doesn’t have to be better than a high end retailer to deliver “better” to their target demographic. You can deliver relatively better services to those who are used to poor products/services and those who didn’t buy any of the product or service in question before you arrive on the market. Just because you are less expensive and/or not as comprehensive in your product or service when compared to the high end players doesn’t mean that you’re not delivering ‘better over cheaper’ to your target demographic”.
And again, it was great to receive reinforcement of our company’s core beliefs from someone as knowledgeable as Dr. Raynor. It makes me feel we are on the right track! Better doesn’t mean best. Better means better than what our customers and our target demographic are used to or currently have access to. How do we know if we are providing better? The market will tell us if we are doing this effectively or not.
One final thing Dr Raynor said was, “Just because you apply the Three Rules in your business doesn’t mean it will succeed. Nothing works all the time.” This obvious but important reminder is vital to keep in mind. There is no guarantee that any of us will be successful today or in the future so we must be vigilant, open minded, hard working and have just a touch of insecurity and fear when it comes to our business. Things are changing all the time and the speed of change is increasing. Owing and growing a business certainly is challenging and even risky but it sure is fun!