Creating Value for Your Customers
by Becoming a Knowledge
Organization
Ed Kless
“The customer never
buys a product. By
definition the customer
buys the satisfaction of
a want. He buys value.”
-Peter F. ...
What is a Business Model?
How your company creates
value for and capture value
from customers
“Disruptive threats
come inherently
not from new
technology but
from new
business models.”
-Andrew Grove
Current Business Model
Revenue = Capacity + Efficiency + Cost-plus
pricing
Current Business Model
Four Assertions
• Growth without profit is perilous.
• Non rival assets are more leverageable
than rival assets.
• Effecti...
The Knowledge Organization
Knowledge Organization Model
Profit = Capital X Effectivenes
s
X Value-led
pricing
Two models
Revenue = Capacity + Efficiency + Cost-plus
pricing
Current Business Model
Knowledge Organization Model
Profit ...
From Revenue to Profit
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
Cost
Price
Value
The Whale
From Capacity to Capital
Four Forms of Capital
• Financial
• Structural
• Intellectual
• Social
Facts about Knowledge Workers
• They own the means of production.
• Their organizations need them more than they
need the ...
From Efficiency to Effectiveness
Anti-efficiency
• Continuing education
• Knowledge management/CKO
• Total Quality Service (Ritz-Carlton)
• Mentoring and c...
What you can measure you can manage!
- Peter F. Drucker
From Cost Plus to Value-led Pricing
“The single most important
decision in evaluating a
business is pricing power. If
you’ve got the power to raise
prices wit...
The 1 Percent Effect
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
- Fixed
Costs
+ Revenue - Variable
costs
+ Price
2.7%
3.7%
7.3%
...
The One Percent Windfall
Revenue * .01 + Net Profit
Far Niente
Causation Chain
Product/Service ➙ Cost ➙ Price ➙ Value ➙ Customer
Customer ➙ Value ➙ Price ➙ Cost ➙Product/Service
Behavioral Economics
Anchoring
Barron Joseph von Neinbach Model
WA HF PF
C
B
A
Sage Firm of the Future Symposia
• San Francisco, CA: November 18-19
• Chicago, IL: May 13-14
• New York, NY: August 12-13...
Creating value for your customers by becoming a knowledge organization
Creating value for your customers by becoming a knowledge organization
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Creating value for your customers by becoming a knowledge organization

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This presentation is dedicated to the possibility that a organization can be run more effectively when it concentrates on developing into knowledge firm rather than a product or service firm. Creating such an organization is hard work and not for everyone as it requires leadership in the organization to think differently than they have in the past about what it is that they do.

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Creating value for your customers by becoming a knowledge organization

  1. 1. Creating Value for Your Customers by Becoming a Knowledge Organization Ed Kless
  2. 2. “The customer never buys a product. By definition the customer buys the satisfaction of a want. He buys value.” -Peter F. Drucker
  3. 3. What is a Business Model? How your company creates value for and capture value from customers
  4. 4. “Disruptive threats come inherently not from new technology but from new business models.” -Andrew Grove
  5. 5. Current Business Model Revenue = Capacity + Efficiency + Cost-plus pricing Current Business Model
  6. 6. Four Assertions • Growth without profit is perilous. • Non rival assets are more leverageable than rival assets. • Effectiveness is always and everywhere more important than efficiency. • Value-led pricing is superior to cost-plus pricing for capturing value.
  7. 7. The Knowledge Organization Knowledge Organization Model Profit = Capital X Effectivenes s X Value-led pricing
  8. 8. Two models Revenue = Capacity + Efficiency + Cost-plus pricing Current Business Model Knowledge Organization Model Profit = Capital x Effectiveness x Value-led pricing ↑ ↑ ↑ ↑
  9. 9. From Revenue to Profit
  10. 10. $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 Cost Price Value
  11. 11. The Whale
  12. 12. From Capacity to Capital
  13. 13. Four Forms of Capital • Financial • Structural • Intellectual • Social
  14. 14. Facts about Knowledge Workers • They own the means of production. • Their organizations need them more than they need the organization. • The office is their servant, not their master. • Effectiveness is far more important than efficiency. • Judgments are more important than measurements. • Ultimately, they are volunteers.
  15. 15. From Efficiency to Effectiveness
  16. 16. Anti-efficiency • Continuing education • Knowledge management/CKO • Total Quality Service (Ritz-Carlton) • Mentoring and coaching • Networking • Business development • Social media • Value-led pricing
  17. 17. What you can measure you can manage! - Peter F. Drucker
  18. 18. From Cost Plus to Value-led Pricing
  19. 19. “The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.” -Warren Buffet
  20. 20. The 1 Percent Effect 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% - Fixed Costs + Revenue - Variable costs + Price 2.7% 3.7% 7.3% 11.0% 1.5% 2.5% 4.6% 7.1% McKinsey AT Kearny
  21. 21. The One Percent Windfall Revenue * .01 + Net Profit
  22. 22. Far Niente
  23. 23. Causation Chain Product/Service ➙ Cost ➙ Price ➙ Value ➙ Customer Customer ➙ Value ➙ Price ➙ Cost ➙Product/Service
  24. 24. Behavioral Economics
  25. 25. Anchoring
  26. 26. Barron Joseph von Neinbach Model WA HF PF C B A
  27. 27. Sage Firm of the Future Symposia • San Francisco, CA: November 18-19 • Chicago, IL: May 13-14 • New York, NY: August 12-13 http://na.sage.com/fotf Ed.Kless@sage.com

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