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Value Creation: The New Core Competency for Growth Minded Companies
It is critical to make value creation everyone's job.
Posted Mar 1, 2006
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Are you sure that you're providing the value your customers bought into? In my experience 50-plus percent of all companies feel that they aren't getting true value from their suppliers. That number almost certainly includes some of your customers. If your customers can't perceive the value you provide, it simply doesn't exist. This is the value gap and it's one of the biggest roadblocks to sustained growth and maximized profitability. The value gap can often be traced back to cross-functional dysfunction, a term that basically means that individuals or departments are not working together. Consider these examples: Are new products created that have little connection with your customer's real problems? Are salespeople rushing to "present" solutions instead of discovering relevant information on the customer's real requirements? With confusion and disorder, customers default to what they do understand--price--and the downward spiral to commoditization begins. When various departments or individuals are operating with cross purposes, a company's value strategy is likely diluted by the time it reaches the customer. The customer perceives, rightly or wrongly, that either the value being offered simply isn't there, it isn't unique compared to alternative solutions, or there are doubts that the value being promised will be delivered-all of which leads to hedging, forcing price comparisons, and driving profits down. Sellers ultimately watch their margins erode as price becomes the driving force of the decision. To close the value gap, companies must create prime solutions, that is, solutions that:
  • deliver optimal results, capable of leveraging value to the highest level of the customer's business,
  • ensure that customers have identified and purchased the best solutions to their problems, and
  • provide implementation and value creation strategies that enable customers to achieve the ROI that they anticipated. To achieve this goal, a company must end cross-functional dysfunction. It must replace cost-cutting with value creation as a core competency. In other words, creating and selling value must become everyone's responsibility.
    So how can you build a culture in which value creation becomes the mantra and your customers see you as an incomparable source of value? Here are some guidelines: Begin with a tangible and compelling customer problem. All too often, we can develop products and services based on faulty assumptions about value. Then by the time we discover the disconnects, time, money, and market position have been lost. Not only must we look through the eyes of our customer and develop products and services that address her financial well-being, but we must constantly validate our assumptions about value. We must ensure we can convert what we believe is value into value that our customers can fully achieve and measure. Commit to Diagnostic Marketing*. You must define your solution, designing it to solve a problem that your customer is currently facing, or will likely experience. You then create your market message based on a thorough diagnosis and understanding of that problem and its solution. Your messages however, must be written in the negative present, a place customers don't want to be. Additionally, marketing must prepare the tools and support materials that will guide salespeople through the same diagnostic process that is used in developing the solution and marketing message. They must assist salespeople in identifying the indicators and consequences of the customers' problems that their solutions address. Learn the art of diagnostic conversations. Traditionally, a salesperson's goal has been to close the sale, get the signed order, hit the numbers--win. In this situation the desired outcome of the sale is the same, but the focus and the process are dramatically different. The diagnostic sales professionals work more like physicians. They provide high-quality diagnostic services, prescribe and treat responsibly, and attempt to ensure optimal health for their patients (customers). Keep an eagle eye on impending issues. The rewards of keeping close to the customer are well known. We must ensure that customers attain the valuable results they expected when they purchased our solutions. That means not just solving problems that crop up, but actually watching for and diagnosing problems before the customer may recognize them and ask for help. To capitalize on these valuable resources, you must create conduits for continuous feedback. These feedback mechanisms connect the end of the value chain back to its beginning. The information that's captured by customer service employees actually flows back into the cycle and serves as the basis for the development of new solutions. Thus, the conclusion of one revolution becomes the impetus for another. This may sound like a daunting amount of work, but the result is its own reward. Think of how you would respond to a solution provider who brought these capabilities to your door...a resource who would help you achieve a successful implementation, quantify and maximize the return on your investment, and ensure the sustainability of your optimized business performance. This sounds like a highly valued business partner, a source of continual competitive advantage...a position we all want to occupy in our customers' minds. * registered mark About the Author Jeff Thull is president and CEO of Prime Resource Group. He has designed and implemented business transformation and professional development programs for companies like Shell Global Solutions, 3M, Microsoft, Citicorp, Intel, IBM, and Georgia-Pacific, as well as many fast-track startup companies. He has gained the reputation for being a thought-leader in the arena of sales and marketing strategies for companies involved in complex sales. He is the author of the best-selling book Mastering the Complex Sale--How to Compete and Win When the Stakes are High and the newly released The Prime Solution: Close the Value Gap, Increase Margins, and Win the Complex Sale. Please visit Prime Resource Group. Or call Jeff Thull at (800) 876-0378 or (763) 473-7529.
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