How To Develop Value Propositions, for CIOs

How to Develop a Value Proposition Walter Adamson June, 2003 Version C Contact: [email_address] Tel: +61 403 345 632

A Common Problem
Paul DiModica, author of the book “ Sell Technology: Technology Sales Is a Premeditated Sport”, talks about technology salesmen 1 :
Q: What are the top mistakes people make when selling technology? Well, first of all, most of them come to sell instead of listen. They're not prepared, and they tend to shoot from the hip. Secondly, they don't know what they're selling.
Q: They don't understand their product? No, it's deeper than that. They don't understand the value of what they're selling and, consequently, can't explain its value. And thirdly, they sell technology instead of a solution.
If your IT leadership team is having the same problems, then you are not alone .
Learn how to solve the problem.
1 CIO Magazine, May 1, 2002.

Value is in the mind of a specific client
Value = Benefits – Cost
Benefits exist only with a particular client or set of clients in a particular business setting . Therefore, if there is no specific client and business setting you cannot promote value 1 .
Features are an objective characteristic of the product or service.
Advantages indicate how the features might help sets of clients .
1 In that case you will be promoting “features”, “advantages” or just technology .
Understanding Value - 1 Advantages Lead To Features Benefits Lead To

Value is in the mind of a specific client
Understanding Value - 1 Generic Value Benefits Advantages Features Value

Understanding Value - 2
Perception of value is tied to emotion , and personal values
eMotion -Value = eMotion -Benefits – eMotion -Cost
The outcomes, which are stated as benefits, are as much perception as measurable factual reality .
Both facts and perception are reality. But interestingly, while facts belong to organisations, perceptions belong to individuals .
The eMotion Value Proposition Model 1 explains:
Why 'good' proposals stall
Why high return (high ROI) proposals are blocked
Why the 'best' proposal does not always win
How personal distraction and effort mould perceptions of benefits
How individual recognition and reward mould perceptions of value.
1 For full details of the eMotion VP Model go to www.digitalinvestor.com.au

Innovation VP Model
The model for creating business innovation
The process begins with collaborative discussions about the business, by the business – Business Analysis
IT Analysis provides the opportunity for CIO leadership in business innovation
Alignment must be monitored and maintained
IT Analysis Innovation Business Analysis Act Plan Do Check Maintenance Cycle Alignment Pre-Alignment Generate VP

VP Model - Business Analysis
Collaboration Workshop, led by the Business Executives
Facilitated by industry insights
Insights into the structure of the industry, the strengths, weaknesses and threats of competitors, and the complex factors that drive the economics of individual companies.
Two key questions to be discussed:
What are the factors that drive the economics of the sector as a whole, and individual companies/competitors?
How does the strategy, priorities, capabilities and performance of our organisation compare and relate to those factors?
Output is “Pre-Alignment” Information
Ideas and thoughts that are not in isolation from previous and current IT initiatives.
There will be some sense of informal alignment, or lack of it .

IT executives need to be able to answer 2 key questions:
How does IT influence, enable and drive the individual factors identified in step one, at a sector level and organization level?
What is the priority, sequence, timing and risk profile of IT investments needed to enable the factors identified by the business analysis , in order to achieve the organizational goals?
A key to developing an innovative value proposition is:
Asking the right questions
Understanding the needs behind the needs
VP Model – IT Analysis The CIO needs to know who the industry IT innovators are , why they can sustain that lead, and how that relates to the business factors, absorptive capability and risk appetite of their own organization.

The CIO needs to know the industry
The competitive landscape and who is leading and lagging
Industry trends, customer buying trends, and collaboration
Technology trends and their economic impact
Understand who is creating wealth in the industry
One key is to understand Economic Value Add (EVA)
Calculate the productivity of key resources
Which services, products, assets have unusually high EVA?
What can be learnt from those successes?
Benchmark productivity – globally
Best performance in the industry – key metrics, and why?
VP Model - Industry Analysis Bringing this kind of information to a business unit is extremely powerful as most do not have the time and capability to study the industry and competitors. This type of information can underwrite a new value proposition and business innovation , as well as building outstanding relationships and demonstrating the value of IT.

VP Model - Asking Questions
Start with good sense of the business situation
Industry
Company and its issues
Personal (relationship)
It is about the art of questioning and analysis
What is the business’s perspective of the situation?
What are they doing now and why?
What are the tensions in what they are doing now?
What is the ideal or “tomorrow state” as currently perceived?
What barriers are faced in getting there?
Which barriers have the biggest impact and where?
What are their investment criteria?
What is the decision-making process?
What has been agreed to now and and in the past in IT initiatives?
How do they perceive the value added by IT so far? Why?
What is their ideal solution and how do they know when they achieve it?

VP Model - Discovering Needs 1
The objective is to uncover the business’s specific needs
Concentrate on identifying the real needs:
Place yourself in their shoes
Place yourself in their customer’s shoes
Work on improving your questions and interaction
Be aware of “knowing too much” - let the business talk!
Then, move to offering a credible solution
Float options, build and test your solutions
Work in parallel to action the needs into an IT strategy
Do not spend time or energy
“ Selling” features, unqualified advantages, and technology
Turning the needs analysis back to a generic IT solution
Disparaging alternative IT solutions from the business
Work to generate business ownership of the proposition

VP Model – Discovering Needs 2
The most powerful tool is the “Day in The Life”:
Live a day in the life of the business and their customers
It is powerful because
The business commits to spend time and energy
You commit to contribute and report
It brings ownership through joint generation of the VP
It BUILDS WIDER RELATIONSHIPS
Focus on your (IT’s) customer’s customers
Workshop the outcomes to generate the VP
Build a case which delivers “ladders of value”
Also build ladders of compelling IT investment strategy

VP Model – Generate the VP
A useful technique
When we have this ..... We will be able to do these things ... Which means this in business terms ...... And we’ll be able to measure the benefits this way .....

Describe the desired goal
When we have this... We will be able to do these things.. Which means this in business terms.... And we’ll be able to measure the benefits this way..... Describe the business as we see it in the future.. Express the vision for the business process ......

Describe what achieving that goal means in new activities
When we have this... We will be able to do these things.. Which means this in business terms.... And we’ll be able to measure the benefits this way..... Describe or state the new things that are possible. State what is achievable now that was not previously

Describe the business results of achieving the goal
Source : CPI Methodology When we have this... We will be able to do these things.. Which means this in business terms.... And we’ll be able to measure the benefits this way..... Describe in business terms what the impact of the improvement will be...... What is the impact on the business ?

Describe the measures by which the outcomes will be judged
When we have this... We will be able to do these things.. Which means this in business terms.... Cost per transaction in process (reduction) Cost to prepare a presentation (reduction) % Reused material in reports (reduction) And we’ll be able to measure the benefits this way.....

Test the Value Proposition
Is there a common understanding of the central need?
Why should anyone want to use the proposed solution?
What genuine value does it return?
Examples of things to consider:
What problem does it solve for potential customers?
Does it open a new market?
Does it better exploit an existing market?
Does it eliminate or reduce inefficiencies?
Does it solve the same problem as competing systems but at less cost?
Consider using different words for different audiences

IT Support for the Value Proposition
How can systems support the VP?
What is the timing, sequence, priority and risk?
Can they be built within a reasonable time?
At an acceptable cost?
Examples of things to consider
Are the skill sets and technology necessary to build it available?
Should it be insourced or outsourced?
How does it fit the current systems architecture?
Does it have to be integrated with other systems and data?
Does it improve the underlying technology fabric?
Does it improve the company’s operations?

IT Risks in the Value Proposition
What if the value proposition is false?
Can you build the right system (vs. build the system right)?
Is there appropriate on-going liaison with the business?
Does the business take responsibility for the VP?
Can other business initiatives throw this initiative off track?
Will the business own and track the benefits from the VP?
What are the consequences if a possible risk condition does arise? How can they be mitigated?

Conclusion
By following the “Business Analysis” – “IT Analysis” model, the CIO and the IT Leadership Team can:
Learn how to generate value propositions
Coach the businesses in generating value propositions
Deliver technology investments linked to value propositions
IT Analysis Innovation Business Analysis Act Plan Do Check Maintenance Cycle Alignment Pre-Alignment Generate VP

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How To Develop Value Propositions, for CIOs

by Walter Adamson on Oct 26, 2007

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How To Develop Value Propositions, for CIOs — Presentation Transcript