Finding Your Hidden Sources Of Value
There may be unrealized opportunities for your solution to deliver even greater value to the customer. This insight provides a methodology to uncover your hidden sources of value.
Why Your Sales Proposition Doesn’t Capture Your Full Value
Your solution can probably do things for your customer that you haven’t discovered yet. That means you are missing out on; new ways to communicate your value, outsell the competition and defend your price.
The sales proposition or marketing message is rarely the full story. It is time to uncover all the ways your solution can help the customer to ensure the success of his, or her project, maybe even his, or her business.
Understanding Your Full Value
Understanding your full value, requires capturing the value of your product, or service in use. That is its impact on the operations of the customer business, department, project, etc. More specifically the impact of these on something that gets measured in terms of impact on performance, or results.
To find out your solution’s full value you need a full process view of how the customer interacts with your company and its solution.
At the micro level it it is about how your customer buys, stores, uses and pays for your solution – what is often called the ‘procure to pay cycle’. At a macro level it is how your solution impacts on the success of the customer’s; project, department, function or facility.
How Do They Get Value From Your Solution?
What do your customers do with your solution that impacts on their success? Well, here is a simple model of the customer’s process to help you find out.
The seller needs to know of the internal workings of the customers business, project, function, or facility in order to understand how value is created and measured. That is the steps that lead up to and follow the purchase of your solution.
Modelling the customer’s process is important to identify opportunities to optimize how they order, store, use, etc. your solution in order to deliver greater value. It gives rise to this question: How efficient is your customer’s process for converting your solution into value or more specifically results for their business or project? That is a powerful question for any seller to ask.
Your Customer’s Revenue Cycle
You can look at the Revenue Cycle (in the above model) as an input-output model, where you are one of the inputs. Looking at it this way gives a better understanding of the sources of value.
It is also helpful in understanding how to help the customer to meet the ‘lean-ness’ and efficiency challenges of getting more outputs (what ever they are for their business/project) from less inputs (time, money, etc.). With this in mind how do you and can you impact on the outputs?
Q: How efficiently is your customer converting your solution into value or more specifically results for their business or project?
Reflective of this Revenue Cycle view, some manufacturers have added a new KPI to their supply chain performance measurement. That is to count stock turn not from the point of delivery, but from the point of sale by the customer. This is enlightened self interest.
Moving your finished goods from your warehouse to the customers warehouse, or onto the customer’s shelves is clearly not the complete end to end supply chain view. The most effective strategy to maximize stock turn (and relatedly revenues) is to help the customer to do the same.
Up To 50 Ways To Add More Value
If there are 8 parts of the process (as per the diagram) then that is 8 potential sources of value to be explored, or perhaps up to 50 different ways to add value based on the more detailed model below (click to expand). The possibilities are endless.
Examine the above diagram. What parts of the customers process does your solution touch off and what are the consequences? More specifically:
– Where can you impact on the customer’s processes, making them more effective?
– Where can you strip time or cost out of the customer’s processes?
– Can your solution and the manner in which it is ordered, delivered, billed etc. eliminate, combine, automate or slimline any of the steps in the customer’s process ?
Each of these steps in the customer’s process are potential sources of extra value. The key question is how might any of these might be changed to impact on the customers business performance, either in terms of cash flow, margins, or revenues.
Some Tips In Uncovering Your Hidden Value
1. For each step in the customer’s process of business model apply the 5 headings of Value Case formula to find your value at each step, for example:
– Economics – can you reduce the cost, or the cash tied up?
– Risk – can you reduce the risk?
– Compliance – can you make compliance with internal and external standards or regulations?
– Strategy – can you help over come internal constraints, address head office concerns, etc?
– Politics -can you help overcome internal constraints, keep stakeholders happy, etc?
2. In looking for the sources of value ask the question ‘What makes our customer successful in front of his customers in his marketplace? ‘ For example is it: Innovation, Speed, Distribution, Knowledge, Strategy, Price, Service Brand, Advertising and so on. Then explore how your solutions impact on these value drivers for the customer.
3. Pay particular attention to core transformational element of the customer’s business process / model, what we call the the ‘Make / Do’ process.
This is the real alchemy in the customer’s business – the core of value creation. That is how the customer uses your solution to make a product, deliver a service, affect change or otherwise get a result in their business.
Use the diagram on the right to explore the impact of your solution ticking the boxes that apply.
4. A word of caution – value is what the customer says it is. The salesperson can recite a list of ways in which his solution can be used and how it can deliver value. However, it is only when the customer associates your solution and its use with real benefits that the value proposition becomes credible.
5. The search for sources of hidden value:
– Needs to be cross functional, that includes production, finance, procurement, warehousing and logistics, marketing and so on.
– Should take one market segment at a time – in so doing you will find that what they value differs and how they extract value differs too. For example, you have to look at food industry customers and pharmaceutical customers differently, big and small customers etc.
by Ray Collis
Ray Collis is author of 4 books on accelerating growth, His articles are just a sample of the research underpinning the Growth Pitstop - a powerful formula for accelerating growth. Ray is available to speak at conferences and events internationally.
One Response to Finding Your Hidden Sources Of Value
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Good read Ray. I like the graphics to help illustrate the point.