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TSG TSG Velocity SAMA Part 1 2009


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The Summit Group Point of View, Strategic Account Management Association

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TSG TSG Velocity SAMA Part 1 2009

  1. 1. The value road map: Part 1 Taking value creation to the next level in an increasingly competitive marketplace Introduction By Philip Styrlund The forces impacting profitable growth are intensifying, and as a result companies chief executive officer in many industries face accelerating commoditization of product and service margins. the Summit Group The need to create and deliver value has never been greater. Leading companies are responding to the challenges hindering profitable growth by refocusing efforts on Shakeel Bharmal creating value for customers. Yet “value” is one of those business words that has lost its President (canada) meaning to many and become increasingly difficult to deliver. The concept of value is the Summit Group at risk of being commoditized. This has happened to many words with a foundation in a fundamental idea, but overuse, misunderstanding and the inability to execute have escorted them into the jargon junkyard to join words such as “synergy” and and James Robertson “re-engineering.” Eye rolling is a common response when a business leader or consultant Vice president of business development speaks of value. the Summit Group Value is a simple word that should hold powerful meaning. Value represents the notion that to generate revenue from a customer, it must receive something in return that makes its expense, as well as investment of resources and time, worthwhile. The central challenge for many businesses remains: In the face of intensifying global competition, how can they increase the value delivered to customers to drive sustainable, profitable growth? “Value” is one of Simple yet elusive As we have seen in our engagements with hundreds of Fortune Global 500 companies, those business creating value is often an elusive goal. After efforts to understand it, many companies words that has struggle with executing against that understanding. Other companies may succeed at carrying out a number of initiatives or launching products that create value but lost its meaning to then stumble at being able to sustain the efforts beyond the rollout or product launch. Successfully creating, capturing, delivering and sustaining customer value creation many and become requires cross-business alignment, an enterprise-wide approach and the application of higher-order go-to-market capabilities, including structured listening, analytics, increasingly marketing and sales integration and process change. No one of these elements is sufficient. All must be synchronously executed to focus the entire organization on difficult to deliver. sustainably delivering customer value and driving profitable growth. The value road map series In a four-part series we will draw on our 17 years of experience working with leading Fortune 1000 and Global 500 companies to describe a value creation road map that has enabled these organizations to differentiate themselves, transform how they go to market and elevate the value they create for customers. A small number of companies have cracked the code to enjoy sustainable customer loyalty and revenue growth. In Velocity® ••18•• Q3 and Q4 2009 C o p y r i g h t © 2009 S t r at e g i C a C C o u n t M a n a g e M e n t a S S o C i at i o n . a l l r i g h t S r e S e rv e d . reproduCtion o r d i S t r i b u t i o n w i t h o u t e x p r e S S e d p e r M i S S i o n i S S t r i C t ly p r o h i b i t e d .
  2. 2. these articles we will share what the best do differently to create, capture and deliver sustainable value. (The value road map is not Figure 1. The value road map intended to be a prescriptive, “tick-the-boxes” approach to value creation. Rather, we seek to provide a flexible thought framework that recognizes each company’s unique situation, which in turn means the value road map “dosage” and steps may change.) The value road map comprises seven steps (see Figure 1): Step 1: understanding customer value drivers Step 2: aligning your capabilities with the customer value drivers Step 3: developing and differentiating your products and solutions Step 4: articulating the value you create Step 7 Step 5: capturing value Sustaining value Step 6: delivering the value proposition Step 7: sustaining value Step 6 In this initial installment of the value road map series we describe Delivering the the first two steps: understanding and aligning. value proposition Step 1: understanding customer value drivers Value creation begins with a portfolio analysis of high-potential Step 5 market segments and customers. The purpose is to identify and prioritize major opportunities for creating and delivering value. Capturing value This ensures focus where there is likely to be the greatest return. In particular we recommend identifying “lighthouse” customers within prioritized market segments to jump-start your value creation journey. These are typically innovative, collaborative companies Step 4 expected to lead their industries and be open to working with suppliers to accelerate mutual growth. Engaging first with these Articulating the lighthouse companies enables you to: value you create • Focus resources where there is the greatest potential. • Learn and gain insight with market-leading companies. Step 3 • Create a springboard for your initiative by securing quick wins, delivering results and building a loyalty to the logic. • Develop a replicable approach and solutions that can be scaled Developing and to other segments and customers. differentiating your Step 2 products and solutions The key to value creation is knowledge acquisition: gaining deep insight and absolute clarity on your customer’s business value drivers. To accomplish this, leading companies work hard to elevate and institutionalize their capabilities for “listening louder” to their customers. John Chambers, chairman and chief executive officer of Aligning your Step 1 Cisco Systems Inc., said at Cisco Live 2009 in San Francisco, “For capabilities with the customer value drivers 19 years the one thing which has separated us from our competitors is our ability to listen to our customers.” Understanding your customer’s business is nothing new. As writer Peter Drucker said, “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” Our research Understanding indicates, however, that relatively few companies get it right. customer value drivers So what do the best do differently? First the best companies reorder their thinking: starting with their Velocity® ••19•• Q3 and Q4 2009 C o p y r i g h t © 2009 S t r at e g i C a C C o u n t M a n a g e M e n t a S S o C i at i o n . a l l r i g h t S r e S e rv e d . reproduCtion o r d i S t r i b u t i o n w i t h o u t e x p r e S S e d p e r M i S S i o n i S S t r i C t ly p r o h i b i t e d .
  3. 3. customer’s customer to understand why it selects one product, service or solution To listen louder, the best companies intentionally The central challenge for many over another. Third Box Thinking™ is a principle that operationalizes value seek to increase their entire organization’s contact and businesses remains: In the face creation by reordering and aligning how you think with your customer’s cadence with relevant customer staff across functions of intensifying global competition, value drivers. Traditional go-to-market and decision levels. Listening how can they increase the value processes lead with the product. In our to the customer is not just experience this mind-set is one of the the responsibility of sales, delivered to customers to drive hardest things to change, especially marketing or service: Value when you have enjoyed product success. creation is everyone’s business. sustainable, profitable growth? Third Box Thinking begins with the How can you listen louder as an customer’s customer. (See Figure 2.) organization? Increasing your Value is created by thinking from right touch-points with the customer – higher, • Establish strong alignment and focus to left: starting with deep insight and wider and deeper – is key to gaining on the customer’s top priorities and understanding of what your customer’s richer insights. One company we worked initiatives. customers care about (seek?), what your with measured its percentage of staff customers do to deliver value to their “touching” the customer each month; its • Assess and refine opportunities for customers (care about?) and what you baseline was around 30 percent. Its goal co-innovation as a basis for developing can provide (bring?). It’s about reverse was to reverse this so that 70 percent of a mutual growth blueprint. engineering your relevance and listening its organization engaged the customer • Establish a tighter joint business beyond your product: suppressing the on a monthly basis. Procter Gamble plan and elevated rhythm for the urge to discuss your solutions before Co. established “mirror teams” with the relationship. you understand what really drives the same intent. Relationships are mapped These “next practices” enable leading customer’s business. and proactively developed with owners companies to discover, understand and Leading companies engage lighthouse of key customer business initiatives. validate the customer’s key value drivers, companies and ask the question, “What do Gaining deeper insight into customer a deep understanding of which maximizes you care about and why?” The challenge value drivers requires understanding the the potential for creating value, ensures is to approach and ask in such a way as “why behind the what” by repeatedly efficient resource allocation, elevates to build credibility while gaining deep, asking “why” to uncover your customer’s relationships, differentiates how you unique, strategic and tactical insight into higher-order needs. A number of our appear and counters competition. industry value drivers, the customer’s clients are pioneering an approach to business issues and initiatives and critical take collaborative value creation to the Step 2: aligning your capabilities success factors. While quantitative and next level: establishing the foundation with the customer value drivers qualitative research as well as customer for co-innovation. At the heart of this With a profound understanding of satisfaction surveys provide plentiful data, collaborative practice is a structured what your lighthouse customers care it is usually filtered through third parties, dialogue with the customer designed to: about and the value they seek to deliver difficult to interpret, harder to act on and • Gain deep insight into the customer’s to their customers, you should now unlikely to provide the depth of insight business and industry value drivers. be in the position to focus and align required to guide the development of differentiated, customized solutions. Leading companies place a premium Figure 2. Third Box Thinking on understanding the “ultimate truth”— the unfiltered voice of the customer. They proactively develop relationships with business decision makers across functions and outside their usual safe End contact points. Notably they engage You Customer Customer beyond procurement. Developing relationships higher, wider and deeper across the customer’s organization is critical to uncovering opportunities to Bring? Care About? Seek? create, capture and deliver value. Velocity® ••20•• Q3 and Q4 2009 C o p y r i g h t © 2009 S t r at e g i C a C C o u n t M a n a g e M e n t a S S o C i at i o n . a l l r i g h t S r e S e rv e d . reproduCtion o r d i S t r i b u t i o n w i t h o u t e x p r e S S e d p e r M i S S i o n i S S t r i C t ly p r o h i b i t e d .
  4. 4. Figure 3. Majoring in the majors To refine and prioritize where they focus, leading companies also evaluate: Customer’s care-about What do you have? Impact (describe and quantify) • Attractiveness—the potential profitable revenue growth for themselves. • Feasibility—their ability to deliver value considering their relative competitive position (strengths and weaknesses), strategic and cultural alignment, risks and ability to execute. your value creation efforts with their stage in the value creation road map, you priorities. Only if you are able to directly should identify and articulate where you reinforce their value creation efforts or Proactive demand creation can have the greatest impact on your indirectly address one of their business customer’s business using, for example, A few of our clients are implementing a issues that helps them become a stronger the matrix in Figure 3. Beginning with next practice to accelerate the sales cycle provider – by driving profitable growth, the customer’s key “care-abouts” – issues, and provoke demand by reversing stages reducing costs and improving operating challenges and initiatives uncovered in 1 and 2 of the value creation road map. efficiencies or mitigating risks – will you the first stage of the value creation road Through Third Box Thinking, impact be seen as creating value for them. map – you then: analysis and industry benchmarking, these clients proactively develop and Major in the majors • Describe your relevant products, articulate a point of view. They take ser vices and solutions—your the initiative to identify issues, align World-class companies elevate the company’s pertinent capabilities. solutions and quantify impact, raising value they create by “majoring in the majors”: prioritizing and focusing on the • Articulate and where possible quantify the customer’s awareness of potentially business drivers that have the greatest the impact your capabilities have on the critical business issues and creating impact on what their customers care customer’s care-abouts—the degree urgency often ahead of their customer’s most about. The level of value created to which your products, services full realization or appreciation of the is directly linked to the importance of and solutions can increase customer implications or opportunity. Validating the customer issues, challenges and revenue growth, reduce customer alignment of your company’s capabilities initiatives you attach yourself to. At this costs or mitigate risk. with the customer’s key value drivers, issues and initiatives will serve you well in Step 3, the next stage of the road map: “developing and differentiating The value creation road map in practice your products, services and solutions Early last year a leading Summit Group technology client decided that it wanted to grow faster to create value.” We will explore that and gain share in the retail sector, where it believed that its capabilities aligned with customer further in the next article in this series. business challenges yet were “underappreciated.” The ambition was to grow sales to retailers by 400 percent above the existing level within three years. Targeting a select lighthouse retail Philip Styrlund is chief executive officer of the customer, our technology client initiated a collaborative business alignment engagement to listen consultancy The Summit Group (www.summitvalue. com) and can be reached at louder, gain deeper insight into customer business drivers and uncover new areas for growth. In or (952) 891-8400. Shakeel Bharmal is president 2007 our client had been named “supplier of the year” by the retailer’s procurement organization (Canada) at The Summit Group and can be despite the fact that business had paradoxically stagnated and remained at a similar level for the reached at or (604) 218- 1076. James Robertson is vice president of business previous six years. development for The Summit Group and can be Participation by retail line-of-business executives – who it was believed would have the greatest reached at or (952) 221- 4889. appreciation for our client’s capabilities beyond the established procurement relationship – was critical to the success of this collaborative initiative. In a structured, facilitated “conversation,” Additional resources our client’s executives actively listened to each retail customer executive from store operations, For more on this subject by these writers in supply chain and logistics, marketing and human resources describe their longer-term strategic SAMA’s library, the editors recommend: Philip Styrlund, “On-demand webinar: creating business business agenda and current initiatives, after which mutual priorities and next-action steps were value,” Oct. 17, 2007,; agreed upon. This conversation uncovered multiple growth and value creation opportunities that and Philip Styrlund, Steve Andersen and David until then had remained hidden to both companies. Later last year we received an elated call from Pearson, “How can an account manager best our client’s retail account director telling us of a just-concluded multiyear enterprise agreement obtain insight into a customer and its industry?” representing 1,400 percent revenue growth over the previous year’s business. Focus: Account Manager, Vol. 3, No. 2, Fall 2006, Velocity® ••21•• Q3 and Q4 2009 C o p y r i g h t © 2009 S t r at e g i C a C C o u n t M a n a g e M e n t a S S o C i at i o n . a l l r i g h t S r e S e rv e d . reproduCtion o r d i S t r i b u t i o n w i t h o u t e x p r e S S e d p e r M i S S i o n i S S t r i C t ly p r o h i b i t e d .