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.

1. Creating Value for Your Customers
by Becoming a Knowledge
Organization
Ed Kless

2. “The customer never
buys a product. By
definition the customer
buys the satisfaction of
a want. He buys value.”
-Peter F. Drucker

3. What is a Business Model?
How your company creates
value for and capture value
from customers

4. “Disruptive threats
come inherently
not from new
technology but
from new
business models.”
-Andrew Grove

5. Current Business Model
Revenue = Capacity + Efficiency + Cost-plus
pricing
Current Business Model

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. The Knowledge Organization
Knowledge Organization Model
Profit = Capital X Effectivenes
s
X Value-led
pricing

8. Two models
Revenue = Capacity + Efficiency + Cost-plus
pricing
Current Business Model
Knowledge Organization Model
Profit = Capital x Effectiveness x Value-led
pricing
↑ ↑ ↑ ↑

9. From Revenue to Profit

11. $0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
Cost
Price
Value

12. The Whale

13. From Capacity to Capital

14. Four Forms of Capital
• Financial
• Structural
• Intellectual
• Social

15. 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.

17. From Efficiency to Effectiveness

18. Anti-efficiency
• Continuing education
• Knowledge management/CKO
• Total Quality Service (Ritz-Carlton)
• Mentoring and coaching
• Networking
• Business development
• Social media
• Value-led pricing

19. What you can measure you can manage!
- Peter F. Drucker

20. From Cost Plus to Value-led Pricing

21. “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

22. 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

23. The One Percent Windfall
Revenue * .01 + Net Profit

24. Far Niente

25. Causation Chain
Product/Service ➙ Cost ➙ Price ➙ Value ➙ Customer
Customer ➙ Value ➙ Price ➙ Cost ➙Product/Service

26. Behavioral Economics

27. Anchoring

28. Barron Joseph von Neinbach Model
WA HF PF
C
B
A

29. 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