Building the Value Machine

Transforming Your Business Through Collaborative Customer Partnerships

Peter Cheverton, Kingsley Weber

• Publisher: Kogan Page
• Year: 2009
• ISBN:
  9780749458645
• Edition: 1
• Topic: Business
• Subtopic: Customer Relations
• Index: Business

Building the Value Machine represents the type of business that many aspire towards - a business that is able to align its internal functions, including sales and marketing, in order to collaborate with its key customers and create real and unique value for mutual benefit.This book provides a solution to the challenge of finding the right organizational structures, the right planning and operational processes, and to place all of that under the right kind of leadership to create the 'right kind of value'. This is the kind of value that will be good for both the customer's business and the organizations. Building the Value Machine explores how to target your customers effectively, match the capabilities of the business with the needs of the customer, and align all business functions through successful leadership. The result is a business that is truly aligned with its customers, and fully attuned to the vital match between knowing which opportunities to chase and being able to deliver the value required. It will help any business learn and develop both its processes and its value propositions.

Part I

The Value Machine

1

The value machine

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Value is in the eye of the beholder – we know it to be true. Take two apparently equal ‘great ideas’ and a customer will very likely see one as valuable, and the other as not. It’s got little to do with the quality of the ideas as they leave the supplier; it’s got everything to do with how they arrive at the customer – how they impact on that customer’s circumstances.

So, value happens within the customer – we also know that to be true – which is why the customer is king, the focal point of our attention, and the most important piece in the whole business jigsaw.

But is it really so?

Most people seem to think so. It’s a notion that has been beaten into us for so long that any other possibility has to seem absurd, almost heretical. Attend any cross-functional management meeting and sooner or later someone (usually from Sales) is going to say something like: ‘It’s the customers that matter, you know, the people out there, the people who pay our salaries’. Sound about right?

Sure, but where does this get you? For a start your competitors are looking to just the same customers, and what do you think your competitors are saying to themselves about this issue of who pays their salaries?

It is said that competitive advantage comes from the true understanding of the customer’s needs. After many years of saying just such things myself, at every opportunity provided, I am not about to disagree, but the statement does not go far enough; it doesn’t complete the task. A customer might be very helpful, in their own interest, in giving a supplier absolutely clear instructions on what they regard as valuable – but what if that instruction is given with equal clarity to all competing suppliers; where then is the competitive advantage in that?

Value starts with knowledge of the customer, but that is only the beginning of the pursuit of a unique value proposition, and so true competitive advantage. If anything is to come of this vital spark of knowledge, what we might call a customer insight, then it has to kindle a flame within the supplier’s organization, a flame that sets light to the supplier’s internal resources. True competitive advantage has to come from within the supplier’s organization; if you are a supplier then it has to be about you.

Does this sound dangerous ground? For years we have been urged by all and sundry to focus on the world outside, not inside, which has been good advice for those businesses that found the fluff in their own navels more fascinating than what went on behind the closed doors of their customers.

But having now learned to look outside, to see and understand the customer’s needs, we find that this is not enough. We know that value happens inside the customer, but it has to be created somewhere else – inside the supplier’s organization – and this is where things often go awry.

Ask any sales professional how they feel about the ‘internal functions’ of their business and prepare yourself for a stream of invective. This is where all their great ideas get stuck, mangled or ignored, and don’t forget, these were the ideas that came from the customer-focused end of the business: the sales team. That’s what they say.

Ask those internal functions how they feel about the sales professionals in their business and be prepared for more invective. These are the people who don’t seem to understand what is possible, or even more importantly, what is good for our business. Why don’t they chase the right kind of opportunities – the ones that suit us? That’s what they say.

Let’s not argue about who is right or wrong (there is often enough guilt on both sides to have the whole business condemned), but focus on what has to be done about it.

THE ‘RIGHT KIND’ OF VALUE

This book will argue that the really important issues really do exist inside the supplier’s own organization. Their challenge is to find the ‘right kind’ of leadership that will foster the ‘right kind’ of collaborative working and planning processes that will allow the creation of the ‘right kind’ of value, and yes, with the ‘right kind’ of customers.

Any fool can ‘delight their customers’ – just cut your prices in half and send out a customer satisfaction survey to see how easy it can be – but that’s not the challenge behind finding the right kind of value. The right kind of value is the kind that is good for the customer’s business, and the kind that will be good for our own.

The business that thinks this way and pursues these goals is the sort of business that will be described in this book – the business that wishes to become a true value machine.

HOW GOOD MUST WE BE?

We will address, and help answer I hope, a number of important questions:

• How good will we need to be at observing and predicting the customer’s true needs?
• How good will we need to be at selecting from those opportunities the ones that match our current capabilities, and even more importantly, the ones that will help us build new capabilities?
• How good will we need to be at taking those twin insights – customer focused and internally focused – and using them to develop new business strategies?
• How good will we need to be at communicating those strategies across the breadth of our own business, ensuring that everyone involved can develop their own functional plans to create the value propositions required?
• How good will we need to be at developing those value propositions alongside the customer, through the ‘scary’ process (scary for some) of customer collaboration?
• And how good will we need to be at delivering on our promises to the customer – those famous moments of truth – and ensuring the appropriate rewards to our own organization?

In answering these questions, and by noting the gap between ideal and current performance, you will come to your own priorities as to what needs to be done. It isn’t necessary to be good at everything, but it is vital to be good at those things that matter. Determining the difference is one of the first tasks for the leadership team.

FROM GOOD TO GREAT…

Good ideas are to be found all around us – your own business will be sitting on plenty (though sometimes they lurk in unexpected corners) – but by addressing the questions posed above we give ourselves the chance of developing them into truly great ideas.

We all like to celebrate those truly great ideas, the ones that change the whole nature of value in business – the development of mass production (and prices to match needs), the invention of the globally merchandized consumer brand (and needs to match prices), the creation of the World Wide Web – and looking for the personal inspiration that lay behind them has always been a source of fascination for ambitious business folk. But in seeking to replicate them such ambition is often thwarted, and not due to any lack of personal brilliance but because the source of their true greatness is misunderstood. The real celebrations should not be about individual entrepreneurs but about the great businesses and the great processes within those businesses that turned good ideas into great ones.

Sadly, most processes are duller than most people (note I say ‘most’) but we ignore them at our peril. Putting our faith in personal inspiration is too easy; we have to face the hard graft of making things happen through the sometimes-grinding gears of the business organization. Processes are necessary, and when they can be made to be great processes then things start to run a little smoother. Business processes are rather like the well-oiled technique of a truly great comedian, the sweat and tears that lie behind those oh-so-simple punchlines. They say that comedy is 5 per cent inspiration and 95 per cent perspiration. Well, that goes for business too…

This book aims to chart the path of perspiration, but there is also some good news for those who favour the inspiration route. Once the right leadership is in place, and once the whole business is aligned behind the same strategy, it’s funny how inspiration starts to occur more readily, that is to say, the ‘right kind’ of inspiration.

JETTISONING THE BAGGAGE

All of this comes at a price, and part of that price will be the jettisoning of some rather old and timeworn baggage. Never easy, and particularly so when the ‘baggage’ in question worked quite serviceably, in its day. Baggage is to do with people – somebody always owns it – and a great deal of pride and ego will be found wrapped around it.

Always remember: those people who grew up with ‘what once worked’, and benefited from it by being good at it – well, those are the people now in charge. So who’s going to talk to them about being rid of ‘old baggage’? It takes real guts to tackle the bosses in this way, but perhaps even more courage is required from the bosses themselves; getting rid of baggage is often about getting rid of their own past. The true value machine depends on such leadership ‘guts’.

In particular it’s time to leave behind one of the most venerable of business tools – the famous four P’s of marketing. For too long otherwise clever companies have tried to shoehorn their activities into these four ‘boxes’, as if they were some untouchable and inviolate quartet. But now it’s time to break out; the days of doing things ‘to’ our customers – through our products, our price, and our promotion, while keeping those customers firmly in their place – are fading fast; now we must aim to collaborate ‘with’ our customers, in pursuit of truly customer-focused value propositions.

Of course, it remains easier to do things the old way, the way of the four P’s. Doing things ‘to’ customers, and better still without their knowledge until it happens to them, will always have an attraction for a supplier; the attraction of being in control. Everything feels a lot more comfortable, there are no conflicting agendas, no competing egos; it’s just a pity that it doesn’t work so well any more. (We will consider some alternatives to the four P’s in Chapter 8.)

But doing things ‘with’ the customer is not as easy as it sounds. Customers can steal good ideas and pass them on to cheaper competitors. Customers can be short term. Customers can lie. Such are the realities of life, realities that make true customer partnerships a rarity – but then we are not proposing that this is something that must be done with every customer – customers are not equal – some customers are a good deal more equal than others… and those of course are the right kind of customers.

THE VALUE MACHINE MODEL

The challenge of building a business that can set loose the power and creativity of its internal functions to work with customers in pursuit of better value propositions is captured in the model shown in Figure 1.1 – what we will call the Value Machine Model.

Figure 1.1 The value machine model

The model describes a business that knows how to target its customers, recognizing that as investments some customers promise a better return than others. ‘Returns’ can mean many things – volume, revenue, margin, share of business, access to new opportunities (to name but a few) – but are not limited to the customer in question. Some customers are even more important and valuable, being of benefit not just in themselves but to the whole business, even to other customers… We might call these our true Key Accounts, about which a good deal more will be said in Chapters 5 and 6.

The model describes a business that knows how to match its own capabilities to the needs of the customer, learning how to enhance those capabilities as required, in pursuit of a unique match between supplier and customer. It does so with a steady eye on the changing nature of the customer’s business and market, and an equally steady eye on the ‘money-making-logic’ of its own business. The skills required to effect these ideal matches will be described in Chapters 7, 8 and 9.

The model describes a business that knows how to align all the relevant functions behind that targeting, and behind the pursuit of those unique matches. It achieves this through a leadership that is alive to the dynamics of the market, the customer, and their own business.

The result is a business that has done away with the invective of the sales team blaming the internal functions, or the internal functions berating the sales team.

It is a business where the customer is something more than ‘king’. Instead of pretending that the customer is always right (a pretence that we never fully accept, and so rebel against – so negating the whole notion), we can now regard the customer (right and wrong) as the source of our business wisdom; they are our means of ensuring that we are doing the right things.

It is a business that knows how to learn, developing its processes and its value propositions through both the rigours of hard experience and the joys of accidental discovery.

It is a business that knows how to convert the great mass of market and customer data (a mass that sometimes threatens to sink a bus...

Table of contents

• Cover page
• Imprint
• Title page
• Table of Contents
• About the author
• Foreword
• Acknowledgements
• Part I: The Value Machine
• Part II: Targeting
• Part III: Matching
• Part IV: Aligning
• Afterword
• Getting further help
• Index
• Full imprint