Value Creation: The Definitive Guide for Business Leaders
Publication Year: 2016
Increasing disruption, diminishing returns, and demanding Customers require business leaders to create more Value, remain relevant, and stay ahead of competition. CEOs have to evolve a “Value Creation” culture for the company so as to properly balance the interests of Customers, Employees, Investors, and the Marketplace.
- Front Matter
- Back Matter
- Subject Index
- Chapter 1: Why is Value Creation Important for CEOs?
- Chapter 2: CEOs as Value Creators for Business/Customers
- Chapter 3: How CEOs can Use Value Creation for Customers
- Chapter 4: CEOs can See how Their Values (And Their Company's Values) Creates Customer Value
- Chapter 5: Business Transformation Ideas for CEOs to Create Value
- Chapter 6: How CEOs can and Why They should Create Value for Employees
- Chapter 7: How and Why CXOs such as CFO/Marketing/HR Create Value
- Chapter 8: Value Creation and Customer Service/Loyalty Tips for CEOs
- Chapter 9: How CEOs can Use Value Creation to Enhance Pricing
- Chapter 10: CEOs Learn from Value Creation and Education
- Chapter 11: Conclusion: How CEOs Drive their Companies to Become Leaders through Value Creation and Increase Profits through Customer Value
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Copyright © Gautam Mahajan, 2016
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First published in 2016 by
Library of Congress Cataloging-in-Publication Data
Name: Mahajan, Gautam.
Title: Value creation: the definitive guide for business leaders / Gautam Mahajan, President, Customer Value Foundation and Inter-Link Services Private Limited, New Delhi.
Description: Thousand Oaks: SAGE Publications India Pvt Ltd, 2016. | Includes index.
Identifiers: LCCN 2016001974| ISBN 9789351508977 (pbk.: alk. paper) | ISBN 9789351508991 (ebook) | ISBN 9789351508984 (epub)
Subjects: LCSH: Strategic planning. | Chief executive officers. | Customer relations.
Classification: LCC HD30.28 .M3234 2016 | DDC 658.4/012—dc23 LC record available at https://lccn.loc.gov/2016001974
ISBN: 978-93-515-0897-7 (PB)
The SAGE Team: Sachin Sharma, Sudeshna Nandy, Megha Dabral and Ritu Chopra
Published by Vivek Mehra for SAGE Publications India Pvt Ltd, typeset in Berkeley 11/13 pts by Zaza Eunice, Hosur, Tamil Nadu and printed at Sai Print-o-Pack, New Delhi.
Advance Praise[Page C]
This is a rich and rewarding book which will launch organizations into the world of value creation for customers and other stakeholders and will convert good CEOs and companies to great ones with longevity and higher profitability. This book is a conceptual breakthrough which goes beyond the great Total Customer Value consulting work Gautam did for Godrej.
Chairman, the Godrej Group
This book is a classic because it will change managerial thinking just like Tom Peters did in In Search of Excellence. Value Creation: The Definitive Guide for Business Leaders will shift managerial focus to creating value for the entire business ecosystem and not just for the shareholders. It will make firms agile, adept, and visionary for the future. The book will cause CEOs to think, change mind-sets, and become creative, winning the future. It will create more astute and alert executives, and increase profits. The book gives ideas about creating value at different levels for employees, customers, and shareholders. If you want to be successful and win in the future, you should not miss this trendsetting book.
Chairman, Frost & Sullivan
For those who want to learn to create value, you've come home to this brilliant book. This book integrates hugging customers and customer-centricity to unleashing the power of value creation for business success.
This eye-opening book is about common sense, and gives you instantly practical ideas without being a burden on your time. Incorporating Gautam Mahajan's uniquely creative concepts will change your mind-set and lead you to superior achievements.
Chairman, Mitchells Family of Stores; Author, Hug Your Customers and Hug Your People
[Page D]I enjoyed Gautam Mahajan's recent book, Value Creation: The Definitive Guide for Business Leaders. It is very timely given the current conversations about value creation around the world and the waste created by driving stock prices on a quarterly basis with rewards going to a limited few. The book is a valuable catalyst, which should result in a more robust dialogue about long-term value creation for enterprises large and small. The key take away is that customer-centric businesses create value for all stakeholders which should result in higher valuations and stock prices over the very long term.
—Edward A. Lapekas
Retired CEO and Chairman of the Board, American National Can Group and former President and Chief Operating Officer, Beverage World Wide Division, Pechiney (later Rio Tinto)
Insightful. Full of harsh realities about the world of marketing and management as you know it.
Gautam suggests a new vision, common sense and human authenticity … an excellent springboard for a much needed marketing turnaround … Marketing with Meaning!
—Professor Luiz Moutinho
Foundation Chair, Marketing Adam Smith Business School, University of Glasgow, UK Adjunct Professor, Marketing, Graduate School of Business, University of South Pacific, Fiji. Founding Editor, Journal of Modelling in Management (JM2)
The days of waging battle against customers are gone. Now, success comes from getting in the trenches with the customer and working toward a win–win outcome. To survive in a world of supremely educated buyers who, above anything else, are time-poor, hungry for insight, and demanding progress, unless you can assume the customer's perspective, enriched by your experience with other similar customers, your outcomes will never be great. This is the [Page E]time to create value for your customers and in this book Gautam provides priceless signposts to get started on that journey.
CEO, The TAS Group; Author, Account Planning in Salesforce
I loved this book. No one globally knows more about buyer–seller dynamics than Gautam Mahajan, author of Value Creation: The Definitive Guide for Business Leaders. Likewise, no one knows more about how senior management should change these dynamics to create new value for both company and customers—which in some cases multiplies the bottom line, rather than just lifting profits incrementally.
As Gautam relates, too many CEOs and senior managers discount the payback potential of adding customer value. But he believes these executives will soon regret their reluctance to embrace customers when their companies start experiencing limited growth and diminishing value in the near and long term. He peppers his clearly written, no business-speak narrative with real-life examples of companies both creating and destroying enterprise value. His examples should persuade most CEOs and management readers to change course in the direction of true customer-centricity that taps into customer value, rather just talking the talk without walking the walk.
Unfortunately, as Gautam reminds us, most graduate business programs resist change and continue teaching future executives to embrace cost-control as their primary goal, which can doom them from the start. He also throws shade at the commonplace corporate practice of focusing first on increasing shareholder value—which Jack Welch calls “the dumbest idea in the world.” Creating shareholder value is an outcome, not a goal.
On a practical level, Value Creation: The Definitive Guide for Business Leaders lays out for CEOs and senior managers the change process for moving their organizations from company-centric to real customer-centricity. And when their companies start adding value to customers, they typically get a long leg up on still inwardly focused competitors.[Page F]
Gautam does not let go unscathed those companies trying to accrue value to themselves by stripping value away from customers. He addresses fundamental shortcomings of common win–lose strategies that ignore the latent opportunities for sellers to extract more value from customers. Instead, he urges CEOs and executives to focus on win–win opportunities to add value to customers, in ways that will add value back to the company, especially at a time when customers are gaining new power and customer loyalty is eroding at an alarming rate.
For CEOs, senior execs and middle managers wanting to anticipate where higher-ups are steering their companies and why, Value Creation: The Definitive Guide for Business Leaders is without question the right book at the right time.
Author, We Are Buyers. You Are Sellers. You're Busted
This book is fantastic, a 10 out of 10! Gautam provides CEOs with a practical guide to rediscover the customer relationship as an inspirational source of innovation that is applicable to any industry, and is very much needed today to drive lasting competitive advantage for sustainable, profitable growth!
Value Creation Transformation Consultant
This book is a gem! While it is geared to CEOs, its style will be appreciated by anyone interested in helping their organization maximize the long-term value they create and minimizing the short-term value they destroy. Sprinkled throughout this book are real-world examples from real companies, analyses from widely respected sources, and references to articles which are available to everyone. If you are either beginning the value creation journey or updating your successful strategy, you should look no further than this book for information, inspiration, and insight.
Principal Adviser, Middlesex Consulting
[Page G]Does a CEO want to make the stockholders happy or extra happy, or would he want his employees engaged or passionate about their jobs? Also, would he want his customers to be satisfied or to be loyal customers? Well this doesn't happen by chance, in fact so many companies and organizations around the world need to read this excellent book by Gautam Mahajan covering a great assortment of very important topics. This is a must read for executives, practitioners, and professionals who will see so many of the different components to create customer value in their organization. I use this book as a desk reference and finding myself referring back to the many critical topics. Gautam is truly a respected global leader, speaker, editor, and mentor.
Chairman, Customer Value Creation International
In this excellent, very important book that supplements and extends the theory of value innovation and the creation of “blue oceans” as described by Kim and Mauborgne, Gautam Mahajan describes the priority, strategy, and difficult complexities of value creation as the core of a new generation of investment and management theory and practice that is now required in all businesses. The book clearly explains why a fundamentally new type of investment and CEO leadership is required and has to be supplemented with new C-level executive positions in order to focus the organization and its partners on creating new value for customers in order to survive past an average life expectancy for businesses that has decreased to about 12 years while creating value for all stakeholders including employees, business partners, and society.
—William L. Miller
CEO, Innovation Extension Center LLC
Gautam Mahajan has created a new handbook for customer value. New ways of intelligent and outcome-oriented thinking are combined with an individual approach for the 21st century in management and benchmarking of value-driven customer [Page H]services. The book is highly recommended for the CXO level as really important, as well highly recommended for lecturers and students in international business schools.
President and Visiting Professor, International Council for Leadership, Governance, Entrepreneurship, Management, Swiss Quality Competencies and Qualifications
This book isn't just good reading, it's a new mindset. If you are a CEO, it will help you build your company successfully. As a result of applying the concepts in this book you will create value for your customers and for your company.
Additionally, apply the long-term strategies outlined in this book, in detail, and you will see that success is so much more than something that can be captured by having short-term focus. A concept in this book that is examined carefully is how to create value for your customers before you can take value from your customers. What an incredible idea, giving more so you can receive more. As a business owner who has always presented a “Nice is Right” strategy, I can relate to the author of this book. He really “gets it.”
If you own a business, run a business or just want to find out the importance of adding and providing value to your business relationships, this is the book for you. A must read.
Author, Speaker, HuffPost Blogger Nice Guys Finish First #1 Best Seller Ranking on Amazon
A content-rich framework for creating sustainable value to your customers, employees, partners, suppliers, distribution channels—and thereby, ultimately to stockholders—in a series of stand-alone, yet connected, chapters. There is something within the material for everyone, irrespective of where you may be on [Page I]your customer-focus journey. Gautam Mahajan will have you finding fresh new opportunities to powerfully lever the word “value” for your business.
Author, Who Stole My Customer’ Winning Strategies for Creating and Sustaining Customer Loyalty (Second Edition) Former Head of Customer Value, IBM
Every CEO's job is about creating and delivering value to all stakeholders. And this book is guaranteed to start the CEO's day on the right track—that of understanding and focusing on key aspects of internal and external customer value, presented with an easy narrative style that helps refocus on the fundamentals of addressing customer expectations. Better than your first cup of coffee!
Value Creation & Strategy—Blog website
The Mobile Ecosystem in India—Blog
Creating customer value is essential for success, and Gautam Mahajan's latest book is a must reading on how to do it! It really is good. It flows well, has great substance, a solid logic which causes one to think and helps put many conflicting concepts in their proper place.
Founder of Customer Value Management; Author, Mastering, Customer Value Professor, Customer Value, University of Montana, USA
Yesterday, the landscape for competitive business owners extended between the Yellow Pages and a 20-mile radius around your consumer. Today, competition is global. With efficiencies in technology and greater access to consumer information, the edge is no longer guaranteed to the company with the biggest marketing budget—it's going to the company that offers their customers [Page J]the greatest advantage, benefit, and value. It's all about “Value Creation.” Gautam Mahajan's book offers many tips, ideas, and insights for the value-focused CEO to attain just such an advantage.
—Charles E Gaudet II
Best-selling author, The Predictable Profits Playbook: The Entrepreneur's Guide to Dominating Any Market and Staying on Top
One of the most important tasks in marketing is to create and communicate value to customers to drive their satisfaction, loyalty, and profitability. This new book will keep you enlightened on both concepts and application of value creation and it serves as an influential source for academics and practitioners alike.
Professor of Marketing, University of Cologne
In his latest book, Value Creation: The Definitive Guide for Business Leaders, Gautam Mahajan makes a compelling business case for the imperative of focusing on value creation. Blending his wealth of experience, personal and practical examples and an abundance of marketplace research, Mahajan offers practitioners a hands-on toolkit for unlocking the potential of creating value in their own organizations. Not fearful of challenging conventional wisdom (see his premise about the notion that companies are to serve a greater purpose than profits), his candid and authoritative point of view will serve leadership well in their aspirations for institutionalizing a culture of value creation.
—Scott M. Broetzmann
President & CEO, Customer Care Measurement & Consulting
[Page K]Gautam succeeds in liberating value from its abstract strategic prison and turns it into an exciting project for the entire organization. Today more than ever, CEOs need to be visible and relevant to their highly diverse stakeholders. While CEOs are often dragged into a swamp of compliance, this book allows CEOs to rise as the commanders of value. This book provides them the concrete words, discourse, arguments, and frameworks to unambiguously choose for value creation as central course of action and performance. The value creation theme will destroy silos and give the organization a new tangible horizon that extends way beyond the CEO's own tenure.
NHTV Breda University of Applied Sciences (The Netherlands), and Pennsylvania State University, USA
A very timely book on why and how companies must embrace and implement value creation culture, not just for shareholders, but also for customers, employees, and the community at large.
—Jagdish N. Sheth
Charles H. Kellstadt Professor, Marketing, Emory University, USA[Page L]
I dedicate this book to all those who believe in and promote the concept of Value Creation and to those I have reached out to and those that have reached out to me.
My Value Creators are my family, Veena, Karan, and Shiv.
Perspectives on Value Creation…[Page xi]
Executing proactive, conscious, inspired and imaginative actions that Create better gains or benefits for Customers and all stakeholders, including enhanced returns on investment
Satya Nadella on Microsoft new vision:
To empower every person and every organization on the planet to achieve more1
The role of Marketing is to Create Customer Value and Capture Value. Create a Customer Strategy
There is only one valid definition of business purpose: to create a Customer. Value is created for Customers, and wealth is generated for owners
Financial people believe businesses make money. In reality, businesses make products for Customers. Money is a result earned by products delivering Value that Customers are willing to purchase.
The distinctive difference between the 1985 and the 2004 American Marketing Association definitions of marketing is the lack of exchange. In the new definition, a focus on creating and delivering Value through Customer relationships replaces the historical focus on the exchange paradigm
Don Peppers and Martha Rogers:
The only Value your company will ever create is the Value that comes from Customers—the ones you have now and the ones you will have in the future
The world is changing. Today management gurus are espousing Customer Value and Value Creation. Are you?
Satya Nadella, CEO of Microsoft, has crafted a new vision for his company to change for the future through Value Creation by empowering every person and every organization on the planet to achieve more! You need this kind of thinking to win in the future.
This book is to inspire CEOs and executives aiming to reach the top, and those on the top to remain there for a longer time. Even small business leaders and entrepreneurs will find the ideas in this book easy to implement and mostly inexpensive, because it means mostly adapting the right mind-set. The book focuses on why you should Create Value and how Creating Value can give you and your company longevity, sustained success and higher profits than other businesses, innovating and grasping opportunities before others do. Growing the Customer asset effectively requires a culture of Creating Value for the Customer before you can extract Value. This book changes managerial thinking to focus on Value Creation for other stakeholders (read employees, Customers, partners, unions, and society) to improve shareholder wealth significantly. This book makes Value Creation a distinct management practice1 as opposed to the old profit and company-focused ideas taught by many B schools. Do remember, as you do all this, that Customers Create Value for your companies.
Keep in mind, companies turn toward the Customer, just as sunflowers face toward the sun. They do so to get sustenance and absorb what the Customer has to give. The connection does [Page xiv]not often go beyond this. Are companies really like sunflowers, or is there more to the relationships between the Customer and companies?
Unfortunately, the crucial role of the company toward the Customer remains static. It has not moved far in the last 100 years, except to track the Customer more closely (CRM2), understand his transactional ratings better (CSat3), know whether he likes companies (NPS4), improve multichannel contact (call centers and multimedia), and install better systems and processes. I suspect that much of this expenditure is justified from the cost-cutting or efficiency perspective, rather than true Value Creation for Customers.
The Customer is central to the company's needs and should be treated as such, and not as a taken for granted asset5 that does not need to be maintained unlike other capital assets, such as machinery, buildings, furniture, etc.
CEOs understand that their manufacturing managers must have a plan for maintaining their machinery, both routine and emergency. Maintenance of Customers is relegated to CRM and loyalty programs. Maintenance is not handled well, nor seen as a core task.
This book is for CEOs and managers to help them create more Value for the Customer and other stakeholders and thereby for the company. It advocates using the Customer asset effectively. The focus of Value Creation is not just on innovation but implementation. The book also indicates what factors prevent true Value Creation and what destroy it. The book will help CEOs get out of the present mind-set as Customers become stronger [Page xv]and companies, more fragile. How attractive your company is to Customers can make or break a company when measured through a Customer Value Index, and shared with marketplace and Customers. Such a public Customer Value Index will make companies work harder to Create Value.
This is a main effect and strategic book, and does not go into contextual or moderating variances between companies depending on external factors, the environment, the economic state of the company, and so on.
This book is for CEOs who have been Creating Value, partly consciously and sometimes unconsciously, probably much more instinctively. And somewhere they have destroyed Value unwittingly or unknowingly. This book is a wake-up call, because the deliberate creation of Value and the mindful avoidance of Value destruction can put you and your company in another league—the league of next forward-looking practices and increased success. All this through a focus on helping your employees and partners to create more Value knowingly and conscientiously for Customers! You need to move your employees’ current functional thinking (as taught in business schools) to Creating Value. They will become better employees and create more Value for not only the Customer but your partners, society, and also for you, your company, and its investors as they move from functional thinking to Value Creation. Value Creation is also about making decisions with flexibility and managing dilemmas.6 We do not spend time on the dilemmas faced by CEOs; however, by concentrating on Value Creation for Customers and not giving away Value to Customers, dilemmas are minimized.
[Page xvi]Mahajan's Five Laws of Value Creation are given below:
Table P.1: Functional versus Value Creation Management
- The 1st Law: Value Creation is a basic requirement or a necessity for the advancement of human activity, progress, and creativity. Value Creation is important in all fields, education and academics, society and government, social work, innovation, entrepreneurship, and business. It impacts humanity. It is essential for executives and leaders.
- The 2nd Law: Value Creation is proactively exceeding what is basically expected of you or your job. It is going beyond your functional and routine roles to Creating Value in your ecosystem. Value Creation can be planned or spontaneous, and in both functional and emotional thinking.
- The 3rd Law: Value Creation impacts all stakeholders, you, your colleagues, your employees, your partners (supply chain, delivery chain, unions), and society to create resounding Value for the Customer and, thereby, for the shareholder.
- The 4th Law: Value Creation leverages a person's or an organization's potential, learning, and creativity while making it meaningful and worthwhile for people to belong and perform, both physically and emotionally.
- The 5th Law: Value Creation must exceed Value destruction or reduce negative Value and be done conscientiously.
[Page xviii]Only CEOs can assess what their real role is. For success, management gurus state that leaders must set the right priorities (and I would say that one of the high up in importance is a real Customer priority), hire the right people, and then be able to establish a relationship with people. Yet another role is to ensure that your company survives for the long term and so does he. Notice that the average life of a company was 28 years in 1974, while in 2008 it was about 12 years (see Figure 1.4 on page 20). And a CEO ran a company for an average of 10 years in 2008, whereas today, the CEO lasts for only about 2 years—a result of short-term focus and inadequate attention to the Customer. Mckinsey reports that the number of companies dropping out of the top three rankings in their industry increased from 2% in 1960 to 14% in 2008. What's more, market leadership is proving to be an increasingly dubious prize: The once strong correlation between profitability and industry share is now almost non-existent in some sectors. “According to our calculation,” says Mckinsey,7 “the probability that the market share leader being also the profitability leader declined from 34% in 1950 to just 7% in 2007.”
Customer rewards to companies that add more Value include:
- A 1% increase in satisfaction/Value typically increases share price by 4.6% (based on a 10-year University of Michigan study).8
- A 5% increase in Value increases return on investment (ROI) by 7.5–10%.
- Market share follows Customer Value created. Companies with over 40% market share tend to have 30% more ROI than companies with 10% market share (PIMS9 data over 1,000 American companies).
- [Page xix]PIMS data also show that the top quartile of Value Creating companies for Customers had 30% more ROI than the ROI of those companies creating the least amount of Value.
- Share of wallet increases significantly with increase of Customer Value.
Companies, likewise, have to Create Value for their employees and Customers, partners and unions, and become firms of endearment and great at creating happiness (as exemplified by Zappos, the clothing and shoe company led by Tony Hsieh, whose philosophy is to have a human face and deliver happiness). They then create inordinate Value for their shareholder and investors. They attract the best talent and retain the high Value Customers. Such companies are termed as firms of endearment (see the book of like name by Raj Sisodia, David Wolfe and Jagdish Sheth)10 and have radically new rules for business. Firms of Endearment created a 1,026% return over a 10-year period, eight times more than the S&P return in that period. And in 5 years they returned 128% versus the S&P return of 13%, all by focusing on the Customer and endearing themselves to their employees and partners. Such a focus on Customers leads to higher profits. And therefore, companies need a Chief Value Creator (the CEO), a Chief Employee Value Creator (Chief of HRD), and a Chief Customer Value Creator (generally the COO).
Value Creation11 in the past was thought of as Creating Value for the shareholder,12 the investor, or the company. Today the intended [Page xx]recipients of Value Creation are your employees, Customers, partners, labor unions, society and, thereby, the shareholder or investor.
This book gives the CEO what he wants to know about Value Creation and success, and how to balance the elements of Value Creation.
It tells you why the intended recipients of Value Creation are important to the CEO's success, and to the well-being, prosperity, and longevity of the corporation. It shows you how to Create Value and how it relates to success. It helps you take the steps toward changing an entrenched mind-set and become flexible and creative.
Value creating companies tend to be long-term and long-lasting companies. They have capital self-actualization or display conscious capitalism, create emotional bonds, and understand that love is a killer differentiator. Share of wallet is replaced by heart share.
CEOs are painfully aware that their business, employees, and Customers will undergo a sea change. Product and market expectations will change in the new digital world. Competition will become more intense and Customers will demand their rightful role as sustainers of your company. Therefore, the future will require agility, adaptiveness, and ambidextrousness (3As) and the ability (the 4th A) of CEOs to Create Value. Some CEOs may find it convenient not to focus on Customer relations, particularly with pressures to innovate and deliver new products fast and through e-commerce opportunities. But these CEOs will still need the 4As to be winners.
What prevents companies from being more focused on Customers?13 Is it because that is the way we always did business (if not broke, why fix it)? Is it the way we were taught to manage businesses and Customers? Or were the Customers passive and less demanding? Or was the competition less intense? Or did competition do what we do? Or is it because of President Eisenhower's14 [Page xxi]differentiation between urgent and important work (we tend to prioritize urgent work and, therefore, feel we are doing the right things)? Or is it that short-term focus on improving the bottom line has deluded managers to expect long-term sustenance from the Customer, come what will? (Value Creation will improve both short-term and long-term profit, once it takes hold as a corporate culture.)
It also could be that major global think tanks and B schools continue to focus on process and system improvements, while also looking at non-financial parameters. One example is The Value Creation Journey.15
The book is divided into sections that are of interest to CEOs, and it also points out that Value Creation impacts all aspects of our business life. The book shows that if the Value Creation mind-set change materializes in a company, competitors will find it difficult to emulate and catch up, unlike products whose lead times are becoming low. The book is like a Swiss army knife with tools that the CEOs can utilize: what they could look at and why, and Value Creation for Customers, employees, partners, society, and thereby for the organization.
How do CEOs ensure they remain ahead of competition? How do CEOs make certain Customers, employees, and investors want to stay with them? The stakeholders want more Value Creation from the CEO. This book is a collection of chapters that tells you how to Create Value and become enduring and successful business leaders. Read about Value Creation and its benefits to you and your company and stakeholders in the chapters that help CEOs become business heroes.
You can read any essay when you have a couple of minutes.
Figure P.1: Value Creation Positively Impacts Your Stakeholders Employees • Becoming educated on the latest management ideas of Value Creation leading to Self Improvement and to superior performance and Value Creation for other employees, the department and the company and avoiding Value Destruction. Customers • Increase Value to Customers, increasing loyalty, market share, and the Customer asset. Create Value for the Customer before you extract Value. Partners • Creating Value for your partners (supply and delivery chain and unions) will increase Value for you, as they become more loyal to you and go the extra mile to benefit you. CEO • Value Creation is a strategic and practical guide for CEO success and leadership style: refocuses on important work and not just on urgent work. Shows the CEO how focusing on Value Creation is a natural business practice, and it does not add to costs but to success and profits. decision-making can be made by understanding what creates more Value, and helps in managing dilemmas. Society • Creating Value for society and having Values that resonate with the Customer will make you a preferred employer and company of choice for the Customer, and they will reward you with more business and/or higher prices. Values Create Value. Company • Value will be created for the company, it will get longevity and long-term success, and increased ROI. Value Creating companies will get a higher Customer Value Index, and become more desirable to your Customers and non-Customers. Shareholder • Shareholder wealth will increase in the short and long term. Their company will be more respected and profits and share price will go up. A 1% increase in Customer Value will increase share price 4.6%.[Page xxv]The Book Layout
The major part of this book is about why Value Creation is important, how it impacts the thinking of CEOs in the short term versus long term, and how you can add Value to Customers, employees, and build Value Creation in various departments. We talk about Creating Value in training, in leadership, and in making the Customer your partner and ambassador. Our suggestion to the CEO is to change the focus of departments such as HR and IT to become Customer focused and become line managers. We dwell upon reducing the focus of executives on routine and functional tasks and concentrate on important Value Creation jobs instead, that is, “outsource” routine work. We discuss future, self-tuning companies and why they should have agility, adaptation, and ambidextrousness. Such companies are run by able CEOs, moving from ‘selling to Customers’ to becoming the Customers buying aide. We show how your Customer Value Index can be improved through Value Creation.
This book also discusses the change in market environment, the Customers and companies of the future, and the changing ecosystem.
The book, early on, examines why Value Creation is important to CEOs and why embracing this management practice is a sustainability and growth necessity for them. Having understood this, the book tells business leaders how they can become Value Creators for the business and the Customer, and how they can use Value Creation for the Customer for their own and their company's good.
Next, the book shows how the CEO's and the company's Values and ethics are important and Create Value for the Customer and, thereby, immense Value for the company. From this, the CEO is given ideas on business transformation to create more Value.
The logic for Creating Value for the employee and how to do so is examined. Following this are chapters that discuss how various Chief Experience Officers (CXOs) can Create Value (HRD, Marketing, Finance, and others).[Page xxvi]
[Page xxvii]More granular is how Value Creation can be increased in Customer service and in strategies to increase loyalty. And then, we come to the profit part on how to increase prices and Value to the company.
We then show how Value Creation can be used in education and how it is a more universal tool usable outside of business in society.
Lastly, the book helps the CEOs to drive their companies to a leadership role and to increase profits through Value Creation. Value Creation implementation steps are discussed.
The appendices have interesting articles on Value Creation, and more Value Creation ideas and definitions.Background: The Evolving Ecosystem
To understand the need for Value Creation as an important management practice, we must understand the environment and the ecosystem. In this section, we will look at the change in the market environment, the evolving ecosystem including the changing Customers and the changing companies.Change in the Market Environment
Technology and disruption, digitization, emerging countries as market powerhouses, social conflict of the haves and the have-nots, religious militancy, aging and youthing16 (baby boomers aging, millennials entering the Customer stream), rapid changes, and unbelievable and unseen opportunities have to make CEOs rethink their businesses and their purpose. On top of that, more and more CEOs are seeing the wisdom of long-term thinking versus the potential harmfulness of short-term-ness, and are crafting a purpose for the corporation. Purpose is more than just profits, [Page xxviii]but a reason to exist meaningfully in this world where we are using 150% of our resources. Purpose therefore demands focus on sustainability and citizenship. Both corporate consciousness and capital consciousness advise the separation of shareholders from the corporation and suggest that eventually enlightened shareholders/owners will emerge. CEOs also need a purpose. For both the company and the CEO the purpose has to define who you and the company are and what makes you distinct and different.
This thinking becomes more important because a CEO is forced into the new digital world of artificial intelligence (AI), unbridled gadgetry using biotech and bio instruments, the Internet of Things, more workers and unemployment, lesser/more dependency on the worker. The CEO has to think about spending power, inflation, currencies and payment means, definitions of geographies, markets and industries whirlpooling together into indiscernible continua, while social and government stakeholders will impact micro and macro marketplaces (micro meaning the individual, macro meaning everywhere). Bundle this with active, forceful, and destructive Customer reactions, better knowledge assessment, and anticipation with the half-life of new technologies reducing, and you can easily see that the CEO's life is not easy!
What does a CEO do to get ready for this new world?
First he has to realize that his role is to Create Value and balance this for all the stakeholders, while understanding that they are all interconnected. He has to lead by learning how to create this Value [Page xxix]in a fast moving world where his stakeholders are changing and are becoming more demanding. The CEO always knew this, but did not prioritize this role as the world had been slow moving and the demands from the employees, partners, Customers, society, and government had been less intense. Thus, he has to re-learn and change focus and direction to be the winner in the coming decades. This book helps him to do this, to consider options and show why and how to balance the seemingly conflicting (but actually complementary) pulls and pushes on him.
Management gurus urge CEOs to embrace these new paradigms. It just is not possible to become enlightened without taking the first few steps while grappling with competitive pressures, changing technological and product landscapes, growing employee and Customer demand, compulsion to perform for the short term, and so on. But what is important is to take the first baby steps toward the new paradigm, while wrestling with transforming existing thought processes.
This new thought process is Value Creation. It is not really a new thought process; it always existed, but it has been relegated to the back burner, and Value Creation continued as a normal course of doing business (and mainly for the investor or owner). Value Creation by those who could create meant going beyond what was expected from you in your job. People were not conscious; they were Creating Value or destroying Value. And therefore the effort was muted. By making Value Creation a mainstream activity, CEOs can then embark on changing for the future.
Value Creation is for society also,17 and we discuss its role in education and in society (examples include the Value of an address [giving digital addresses to people who are homeless or in slums and do not have a proper address], government).
[Page xxx]In a way, Narendra Modi, the prime minister of India, has embarked on changing India by talking about Creating Value for the underprivileged, the industry, the common man, the bureaucrats, and society at large.
But how is this Value Creation going to happen—not just by throwing money at the problem? It starts by building the self-esteem of the downtrodden or the citizen when he is harassed and bullied by the government (read income tax, read municipal corporation, read the courts, and so on). How do we get this person's self-esteem18 up? He has to feel good about himself and his environment. He has to feel adequate, important, and wanted.
And this, from the point of view of the CEO, is true of the front-line people and the other staff. How do we make them feel wanted and important? This book tells you how to build this self-esteem and get a feel-good factor for these people. This is the first step to Value Creation.
It is only people with self-esteem who can become aware of their environment and, more importantly, of their role in their own success and the success of those around them including the corporation. This is the first ABCD step (awareness, belonging, communicating and Creating Value, and not destroying Value). And it is only the aware who can Create Value. If you are not cognizant of (good and bad) things happening around you, you cannot effect change or want to change and, therefore, cannot improve or Create Value.
So this book tells you how to make your people Value Creators for their employees, Customers, partners, and society and how this contributes to the growth of your company and your success.
For society, we tell you the Value of the Values that you, the CEO, and your company stand for. Values include morals, ethics, lawfulness, sustainability, charity, goodness, conscious leadership, conscious capitalism, and culture.
We tell you how Values Create Value. We tell you how to Create Value for your Customers and how that Creates Value for you and your company.
[Page xxxi]This, then, is the company of the future.19 And this depends on you, the CEO. Mckinsey, citing AI gains, has shown how robots are replacing executives (it is happening as robots replace law clerks, pathologists, retail aisle placers, and petroleum geologists). My answer is that this will happen if the executive is not Creating Value! Even more, could Customers who Create Value for the company replace managers who are creating less Value? Humans decide what technology should do, and technology may decide what humans should do (or we hope should help humans do so). Thus, AI and technology may change the face of call center responses, the way we approach Customers and business.
The revolution has started with the release of the Journal of Creating Value20 and key management gurus agreeing that Customer Value is crucial for businesses.21 I (as have others) have delivered courses on Value Creation (such as one for engineers, and others for HR professionals, CFOs, front-end staff, IT, and so on).
To start, let us examine the Customer and the company of the future.Customers and Companies of the Future
Before we can go into Value Creation, we must embrace the future, and then respond to our best thinking on the future. Let us define the future as the foreseeable one for 5–10 years from now. We have to start with Customers and then asses how companies have to adjust to the changing Customer.[Page xxxii]The Customer of the Future
The Customer, in the future, will perform more due diligence before buying, become more digital, look at more options, listen to others’ opinions and digital word of mouth, and have less time and desire to physically ‘browse’. He will want to browse and buy more on the net. He will be looking for confidence and reliability in the supplier. He will want interaction when and where he wants and how he wants. He will be better informed, more price-sensitive, and often will come to buy with his mind made up. Often, he will wish to interact with people who can change his behavior or the way he lives, buys, or thinks.
He will bypass brand for social media scores (brand equity is giving way to social media score equity!)
Imagine the Customer selfie and how it reflects his life and lifestyle. Marketers can look for the first time at the Customer's life through his eyes on Facebook, for example. The consumer is saying look at the world through my eyes.
Because of all this, the Customer will leave a trail that big data can and should pick up. While concerned about his privacy, he will allow companies to track him and please him because as they become knowledgeable about him and his needs, appreciative of his habits, availability, strengths, and weaknesses, they will become more relevant to his needs and to customize for him.
The opportunity and ability of companies to get their work done by Customers will increase. Thus, a car manufacturer can alert a Customer that his car is on the assembly line and the Customer can see it. Conversely, the Customer might want to know if his delivery is on time, and it can be tracked, like if his pizza is on its way and what the expected time of arrival (ETA) is. This will be true for the service person: where he is or whether he is carrying a part I need. This ability exists today but will become more universal, and follow-up by the company will become less and by the Customer more.
The Customer would like the delivery process to be different, where he can pick up purchases close to his home, rather than sitting and waiting for delivery. The convenience of the Customer [Page xxxiii]will become an important selling point, as will concern for his time, energy, and psychic needs.
The first thing that is bound to happen is that conventional selling will change and Customers will deal with people who can present them with product and service options that they want and when they want them (and help them buy and become their buying aides). They want something relevant and desirable to them at a particular point in time. Companies have to help Customers in the Customer decision journey. Thus, if camping, they may want location of good burger shacks or the right insect spray, or if in a mall, options and the best way to navigate to shirts (and stores, and other options).
Funnel systems of selling and time of sales are getting outmoded. Dynamic and iterative buying process on a 24×7 basis will become more prevalent. Which means sellers will need an adaptive and innovative selling method and thinking.
Conventional selling will become modified to being more relevant to the Customer (Customer relevance will become a selling point). Crowd selling to Customers will give way to focused selling of relevant items to those Customers looking to or thinking of buying (or should be thinking of buying).
In the physical world, an example of Customer relevance and crowd selling is like going to a fair and having hawkers selling curios, snacks, etc. Once the Customer seems attracted, one-to-one selling takes place. (The Customer's virtual buying guide will direct him to the desirable curios or snacks.)
This happens in traditional malls, particularly in the East (Thailand, Korea, India, etc.), where the sellers sit outside the shops, looking for interested Customers (though they do try to interest Customers, which sometimes becomes intrusive). Customer aggregations will reduce as marketers concentrate on being relevant and customized. The Customer no longer needs to go to crowded places where there is a variety of stores. The stores will come to him.
Thus, relevant, discrete, and unobtrusive selling to individuals will become more appropriate. This is how the e-selling mode will further develop.[Page xxxiv]
The buyer may also look for those sites that provide him with this buying (I am differentiating buying from selling) facility.
The Customer will start to look at sites/stores that give him options to explore and select, and to have different payment and credit options. He will want to be able to get to adaptive sites that will let him experience the product, as an example, a sofa and how it would look in the room; a car and its leg-room.
Ted Rubin, a digital media expert, talks about a hybrid store building that serves a community allowing a great digital and thereby a great Customer experience. He suggests a video that answers questions even before they are asked. I would say that the Customer wants to be able to see and play with the products, such as a laptop, TV, or a car, on the net to get a feel for it, just like he can peek into a book today. Or he wants to be able to see the physical features of an air conditioner or a refrigerator on the video and how these features work, and see how he can control the temperature, air swing, etc. Else he might want to feel the leg-room on a particular seat in a plane, or the best way to get onto a cruise ship to avoid lines. Google, for example, has some of these features and can alert Customers on the best route, least wait, or airline arrivals.
The Customer will want customized products (color, size, delivery and assembly method and timing, etc.). These will have profound impact on the manufacturing companies. This change has started but will become more universal. Flexible manufacturing and delivery will replace manufacture of scale, where scale used to be a competitive advantage.
Companies have to employ and use big data and social media to pinpoint the Customers’ needs and his location so as to be able to understand the Customer and service him. Companies have to be data-driven; also, they should be able to comprehend Customers and their needs, manage leads better, get involved, and integrate social media.
Sometimes, Customers may find it easier to engage with existing suppliers and get them to collaborate and solve their problems, co-create, or develop new products and services for them.[Page xxxv]
Accenture suggests that while Customers are better informed, all this can cause overload. Worse still, Accenture adds that they will face confounding web sites, huge call center wait times, and difficulty solving their problems no matter which channel they use. “It all adds up to increased Customer switching that has put an estimated $6.2 trillion [up from 4.9 trillion 5 years ago] in revenue opportunity in play globally.”22
Already Customers are available on (or they may have access to) the net. Perhaps, they will be hardwired, or their brain waves will be tapped (already there is talk of controlling your TV with brain waves).
The Customer could provide this (or capture and then supply as needed) to selected suppliers. Brain wave mapping will make him a more intelligent buyer, and the supplier who has such information from the Customer will become more effective. Perhaps the supplier will know before the desire is articulated what he needs to do. The Customer is already getting wired 24×7 through devices. Perhaps there will be some neural wiring allowing him to understand his needs better. This will change the buying and selling paradigm even further.
Will the Customer be able to tap into AI to articulate his needs, or evolve his thinking on what he wants? Will he be able to assess what he really wants not what he thinks he wants? And which company can help him?
Products will change beyond our imagination. For example, there will be different transportation systems, electric and solar flight pods, and liquid nitrogen engines. Will there be space travel, or time transfer or teleportation? Will science fiction become real, or can we make it real? (Science fiction in medicine and health care, for example, is becoming a reality.) These are real challenges in front of marketers. Products will change our thinking—the Customers’ and the companies’.
[Page xxxvi]Finally, while all of this may lead to less interaction, the Customer will expect companies to be truly H2H (Human to Human) as and when he wants.The Company of the Future
As with Customers, there will be many different companies of the future!
The first challenge is to understand and perceive the Customer of the future. Should one be re-active or proactive? As the Customer becomes more dynamic, the management has to follow suit and become more adaptive. The strategies can no longer be static, they have to become iterative and vibrant, and change with the market. This changes the strategy paradigm, where we let the marketplace decide and change our direction, or we can change the direction of the marketplace by anticipating the Customer as his needs are developing, changing, and to capture this to be able to make the Customer want to buy from you (forget selling?).
An example of being proactive is to become a self-tuning organization.23 Companies such as Google, Netflix, Amazon, Microsoft, Apple, and Alibaba employ this to understand the Customers’ needs. They use their knowledge to deepen their interaction with their existing Customers to collaborate better, to offer them better solutions, products, or services which are thought out jointly with Customer or the understanding of the Customer.
The other central thought is about more self-tuning and aligning of Value co-creation, where firms will emulate Apple, AirBnB, and Trip Advisor. The idea is to convert Customers from just being transactional buyers to avid promoters of the brand while working together to create mutual Value, strategies, products, and refinements. This makes the Customer an active player, than [Page xxxvii]just a passive buyer, and excited about talking about the brand. (The brand score is giving way to the Customer score!) These companies can then access the Customer's networks (see section, Creating Value from Your Customer's Network, Chapter 3). We want Customers to go from being transactional, supportive, and promoters to be co-creators and feel like co-owners. Just see the apps that support Apple and Android.
This transforms the company into just supporting buying by Customers to making them partners. It gives companies better insight, faster knowledge of Customers, reduces costs, and increases self-tuning (flexibility). Thus, companies have to find such Customers and visualize through self-tuning where and how to operate, trace, follow, and gain partnership positions with the Customer. It is happening and will happen more. You will have to change your company's direction in this fashion.
Change is a strategic thought process and requires the 4As. The first three As are agility adaptation, and ambidextrous (see the Self-tuning Organization), and the fourth is ability of CEOs or able CEOs. Ambidextrous means a company has to be an exploiter (of Customer's preferences) and an explorer (offering things beyond what the Customer has thought, so that new preferences can appear) simultaneously.
Remembering the Customer's needs evolve depending on where he is and what he is thinking, what new products, apps, and services come his way, companies have to be relevant and collaborative and able to supply him what, where, and when he wants, and even before he knows that he wants.
Find the Customer, where he is, supply him with what he wants or make him want something right then and there. The Customer may be wired, and it is possible that his neural impulses could be tapped to provide what he really wants not what he thinks he wants. The Customer is partially wired through cell phone or internet watch, because his position is known through tracking of his actions, such as selfies and conversations with his friends, etc. Google already knows when I send a message to a friend suggesting a con call and puts it on my calendar, or my flight plans. See Doc Searls article in Appendix I[Page xxxviii]
Retail stores will have to be digital and physical (physi-digi24 versus digi-physi25). They will have to build a community that communicates with them. They will need to supply great H2H experience even though hidden in the net. Stores like Tesco are without walls (with online portals), selling non-traditional items like financial services, and allowing other companies to access their resources and programs.
Videos that allow Customers to interact, explore, understand, feel, become comfortable with, and want to buy will be developed and be self-tuning to the needs of the Customer.
Anticipatory service and products will become a norm and the Customer will have better, informed choices.
As companies change and focus toward the Customer, they will be forced to self-tune to the employees and their needs. Departments (will there be any? I doubt it) will have an H2H interaction with employees, sharing, co-creating, co-working/thinking, and collaborating together. The employees will be diverse and creative in different ways and companies will have to foster an atmosphere of creativity, constant change, adaptability, and agility.
Such employees could experiment, do market research in different ways to provide products to the Customer that are adapted to his needs.
Many thinkers suggest that offices should be in the cloud; not physically existing. People will get out of the box into a great big co-connected and innovative space, with freedom and flexibility. Intrapreneurs and intra-owners26 will be cultivated. They will work in an open source environment with few secrets.
Such thinkers feel that the concept of the CEO is dead, and managers and gatekeepers will disappear. This is simplistic, and managing complex, flexible, adaptive and agile companies will require different type of management systems, those which are more focused on Creating Value for the stakeholders. The rigid [Page xxxix]organograms and structures will disappear as internal competition and collaboration dictate different hierarchies.
I believe that the office of the cloud is clouded with digital thinking and does not represent the huge manufacturing and physical world. True, some multinational offices may become cloud-based because of necessity, but by and large the manufacturing company of the future (and other companies) will change less drastically. Manufacturing companies, railroads, airlines, and hotels will need people to run them. They will not get entirely robotized in 10 years (and someone will have to manufacture and program robots, unless robots become self-generating). Workers, employees, and physical locations will remain. Manufacturing will become more digitized or digitally driven (processes, quality, improvements, information, and so on).
What will change is that companies will shift to new products, fast introduction, short shelf life, and customized and flexible manufacturing so that assembly line products will be distinct. That is, every subsequent product will be different from the first one in consumer-based manufacturing. This has happened in furniture, where one line can produce a table, followed by an office chair with customized upholstery followed by a sofa. Inventory goes down and wait time for products reduces. Or they will go to smaller lines.
Even more interesting would be digi-physi using techniques like 3D printing to produce the same products in different part of the world after digitizing, transferring, and producing. Distributed manufacturing would make the world shrink and impact companies.
Certainly, for many mass products such as cement, fertilizers, salt, steel, aluminium, etc., conventional high-speed manufacturing and subsequent transportation, warehousing, and delivery will continue. Here, the biggest change will come from product development, like better crop nutrients, that can be delivered without wastage and without contaminating the environment. Quantities of crop nutrient will drastically reduce, changing the current manufacturing techniques. Agriculture will be more technical in seeds and products.[Page xl]
The major changes will come from big data in space, robotics and autonomous systems, synthetic biology, regenerative medicine, agri-sciences, advanced materials, and energy (including storage). Just the spending in manufacturing using the Internet of Things (Mckinsey study)27 might be as high as 1.2–3.7 trillion dollars in 10 years and all spending would be 4–11 trillion dollars.
The changes that will come will be in the selling, anticipating needs, iterative and adaptive selling, and production control and sequencing. Changes in shipping and delivery will happen. Delivery chains will move from a centralized system to a localized system of delivery. I think the idea of drones, drop boxes or dropping smaller products at a pick-up point, like current post offices where you are given a code to retrieve your product, will reduce costs. Your presence or waiting at home will disappear except for large products.28
[Page xli]Company thinking will become more Customerized (customized for individual Customer). Companies will become a hybrid structure, where they are accessible and approachable the way the Customer wants it. The rise of digital has given Customers many channels and avenues. It has given companies the same power, if they can use it in a self-tuning, intelligent way.
Companies will also become more society-centric, where their Values will Create Value for the Customer, employees, partners, and society.
Companies will have to understand that loyalty no longer is what they thought it was. Loyalty will have to be a collaborative, adaptive process between the company and the Customer. The company will have to be loyal to the Customer, too.
What I fear most with companies and employees led by digitized, canned programs, where their innovativeness will come from using known techniques and cookbooks for unknown applications, is that they will lose their ability to think of problems in a fundamental, common sense way and become followers of the “cloud,” without understanding the basics and the science behind what makes things happen.
The future will provide new ways of Creating Value for the Customer.[Page xlii]
I acknowledge the valuable contributions of leaders who have commented on this book and created Value for me, and have encouraged me in working on Value Creation. My thanks to those who have supported me in growing the thoughts on Value Creation. Although I am not naming such friends, they know that they are Value Creators.
I would like to thank SAGE for recognizing the importance of the subject and helping me start the Journal of Creating Value, and my Editor, Sachin Sharma, who took personal interest in this book and has driven me to make this a better book.[Page xliv]
Appendix I: Articles I Like[Page AP-1]
For the CEO, there is a practical Value creation guide—simple things your colleagues can do to add Value to the Customers.
The other articles reinforce some of my earlier essays and are certainly worth reading.82 Ways to Add Value for Customers
This article exemplifies Value Creation ideas by Aki Kalliatakis, Managing Partner of The Leadership LaunchPad. 1 You will note that there are many ways to Create Value, and I am sure the reader will find his own way to do so!
“Ideas are like rabbits. You get a couple, learn how to look after them, and pretty soon you have a dozen” (John Steinbeck).
In 1996, I encountered one of those life-changing articles in the Harvard Business Review. It was titled “Value Innovation: The Strategic Logic of High Growth Companies,” by W. Chan Kim and Renee Mauborgne. In this article (see http://csom.umn.edu/assets/2435.pdf), they defined “what separates high growth companies from the pack,” and came to the conclusion that the companies that were able to constantly and innovatively come up with new ways to add Value for their Customers were those that experienced the best profitable growth in their industries.
For someone who has a reputation for being very careful about spending money, I uncharacteristically booked a flight to Paris just to meet with these two authors, who were generous enough to give me a few hours of their time. Subsequently, they also published their best seller Blue Ocean Strategy, which shared many tools and techniques for generating ideas for Value innovation.
[Page AP-2]People in our client companies really struggled to be innovative in the seminars and workshops that we conducted, so eventually we decided to help them by identifying as many ways for adding Value for Customers as we could. This resulted in my book (Rugby on Saturday is Just Not Enough) but the list of 82 ways of doing so is replicated here in the form of questions that companies can ask themselves when they get stuck. The first three questions are what Kim and Mauborgne call “The Four Actions Framework,” and many other ideas are also derived from their work.
Not all of the ideas mentioned here will work for you. For example, you may sell only to consumers (B2C) or only to other businesses (B2B), and some questions may be irrelevant. Or there may be some things that you can do which may be inappropriate in your industry. Nevertheless, even if only 70% of these ideas work for you, there are probably many possibilities for creating loyalty through added Value. (The questions are not listed in any particular order, nor are similar themes bunched together.)
Value innovation questions to ask:
- Can you dramatically reduce, or even completely eliminate, things that cost Customers money, or make your products more expensive, more complicated, or diminish Value for them? (Look especially at the things that your industry takes for granted, and which can be challenged by a new entrant.)
- Can you reduce or eliminate your Customers’ time-wasters, or things that create time-related stress for them?
- What can you increase, or even create from scratch, that will improve your products, services, and/or delivery (or your systems and processes) to add irresistible Value to Customers’ lives, or help them to be much better at what they do?
- Can you include your Customers and understand their needs when you initially research, design, and develop your products, services, and systems? What would they tell you about their experiences?
- Can you conveniently deliver your products and/or services at exactly the right time when Customers need it, at exactly the right place, in the exact desired quantity, and in the exact condition that your Customers want? If not, how could you do so?
- [Page AP-3]In businesses where Customers traditionally buy and fetch (or wait,) for their purchases, can you deliver products and/or services to them for a small fee, or even for free?
- Apart from delivery, what else can you possibly do at places convenient for your Customers—like on their kitchen table at 11 o'clock at night, or in the middle of their annual holidays?
- Can you provide enhanced or special products and services for Customers (at a premium price, if necessary), which they can use when they need to?
- What appropriate guidance and advice can you give your Customers when they are “wasting” money, time, or effort on something that can be done cheaper or better if they knew the possibilities? (What “shortcuts” can you show them to make them better at what they do?)
- What “unusual” payment terms can you offer different Customers to suit their varying needs and preferences (without making your finance manager grumble)? (Include discounts for early payment, extended payment terms to make it easier, or even selling smaller quantities to make it more affordable.)
- What growth opportunities can you create for your Customers? How can you help them to make more money, or to sell more to their Customers, or take business away from their competitors? (If you sell directly to consumers, ask similar questions.)
- Can you give Customers support in the branding, marketing, and promotion of your products and/or services? (Especially if you work with resellers of your products and services, such as agents, brokers, franchisees, or even retailers.) Extending this further, can you help them to promote their products and services better?
- Can you give support to your Customers in the delivery and logistics to their Customers? (e.g., can you bypass their premises and deliver direct to their Customers?)
- What training, advice, counseling, or consulting can you give to your Customers for their personal growth and development in their lives, or to increase the success of their businesses?
- [Page AP-4]Can you introduce your Customers to your other Customers or associates in order to strengthen their network, to form strategic alliances, or to benefit in some way? Also can they invite their friends and colleagues as potential Customers to your business or your network?
- What other companies or people can you link within joint ventures, or refer our Customers to, that will complement what you do and create convenience for them?
- Can you create opportunities to innovate together with your Customers in order to help them by offering new products and services that they long to buy? (Sometimes they may not know what they yearn for until you tell them or show them, but they will unconsciously know if you talk to them.)
- Can you use your knowledge, expertise, and experience of your products, services, and other Customers, to train your Customers, or explain things to them in such a way that their own lives are transformed for the better?
- What intelligence or expertise do you have about their industry and yours, about suppliers and competitors, about various operations, processes, systems, and procedures, which, if shared, can be of great use to your Customers? Do you have access to information that they may find helpful or at least interesting?
- What can you show or teach your Customers regarding basic installation, maintenance, repairs, or similar so that they do not have to call you out every time they have a problem?
- Can you totally customize and/or personalize exactly what products and services your Customers seek from you? How easy is it for your business to make everything bespoke? (If that is what they seek!)
- Can you gear up your business to be more responsive to the special needs of Customers, to their crises and problems, and to their “mission-critical” activities? In other words, when things go wrong in their lives, how capable are you of identifying when it happens, and helping them?
- [Page AP-5]What enhanced or special services can you offer Customers that mean they do not have to do certain difficult or irritating things anymore?
- Can you improve the physical packaging of your products to make Customers’ lives easier?
- How can you ensure that Customers and prospects have a positive experience when they first enquire about your company, products, services, and/or systems? How easy is it to get information about what you offer?
- Can you make the place(s) where Customers purchase your products and services more attractive and accessible?
- Can you make the transaction environment where Customers interact with you and buy or use your products or services more secure?
- Can you improve the speed of all activities related to the purchase and delivery of what you sell to your Customers?
- Can you improve the process of unpacking, storing, and installing new products that Customers buy from you? Also, can you improve your Customers’ ability to store and pack the product when it is not in use?
- Do you regularly experience what Customers experience when they do business with you? How often do you go out and use your own company's products and services, or go undercover to see what it is like for your Customers?
- Can you make it easy to maintain and upgrade products, services, and information for your Customers?
- Can you do your maintenance, repairs, and upgrades without disrupting the lives of your Customers, and/or at times convenient to them?
- If the use of your products creates “waste” or scrap in some form, what can you do to help Customers to dispose of, re-use or recycle this?
- Can you make it easier for Customers to dispose of the products that they buy, either in the form of some “trade-in” or by taking back and replacing with something new for them?
- [Page AP-6]Can you make unaffordable and difficult-to-buy products and services more easily affordable for your Customers? (“How can we make it affordable?”)
- Can you look across alternative industries, not only at substitutes for your products and services, but also at different functions and forms but with the same purpose? Does this lead to some new ideas for your business?
- Most industries compete within strategic groups. Do you understand what factors, especially along the dimensions of price and performance, will determine your Customers’ decision to trade up or trade down from one group to another.
- In what ways can you Create Value innovation by looking across the chain of buyers: the purchasers, users, or influencers of your products and services?
- What opportunities are created if you look across complementary product and service offerings, especially at Customers’ headaches and frustrations?
- What opportunities for Value innovation are created if you looked across functional (utility and rational,) versus emotional (feelings) appeal to Customers? (This is the classic differentiation question: Is a Harley Davidson just another motor bike—or something deeper than that?)
- What opportunities for Value innovation are created if you look across time, and the external trends that affect people over time? How will this trend affect your Customers tomorrow?
- What new innovative ideas can you generate if you observed and learned from other companies, other industries, other countries, or even other eras?
- Can you simplify your Customers’ lives—physically, emotionally, and intellectually? (What complicates their lives and causes them to expend more effort?)
- How can you reduce the pain of your bureaucracy (like invoicing/payment systems) and can you give Customers any “shortcuts” (like discounts for EFT payments) to make life easier?
- [Page AP-7]Are your manuals, instructions, handbooks, menus, signs, contracts, and other paperwork clear, easy to read, and easy to follow?
- Do you use technology such as the internet, social media, YouTube, email, smart phone apps, and text messages to add Value for Customers (rather than to complicate their lives, or to use it only for your advertising and promotions)?
- Can you bundle and sell two or more related products and/or services together to make the lives of your Customers easier and more convenient?
- How often do you “live a day in the life of your Customers” in order to understand what are their problems and headaches, even though it may have nothing to do with what products or services you sell them?
- Can you do anything for Customers when they have to do repetitive, tedious, unpleasant, or boring things over and over again?
- Can you offer Customers experiences where they can avoid busy peak times, or somehow help them to avoid crowds at busy times? Do you have the flexibility to serve Customers at times when they want to see you?
- Can you speed up what you do for specific Customers who are in a hurry? Is there a special till, counter, or special queue? Can you shorten order lead times if they ask?
- What can you do to reduce Customers’ risks and sense of uncertainty? Can you help them with the dangers that they face or costs associated with certain business risks?
- What legal or legislative requirements and issues complicate your Customers’ lives that you can help them overcome? What licenses and permits do they need that you can help them with?
- If there are critical dates or deadlines related to your products and services, what can you do to give Customers timely warnings and reminders about these?
- What warranties and guarantees can you give to your Customers that will set their minds at ease—and demonstrate the confidence you have in what you offer?
- [Page AP-8]What would make your Customers strongly desire to be associated with your brand, or to tattoo your logo on their shoulder?
- Do you have a great corporate memory of special details and little quirks in your Customer's lives so that all your people are able to respond in a warm way? Can you even wish them “happy birthday” on their birthday?
- What can you do to make Customers feel special and appreciated in some way, to demonstrate to them that they are “not just another account number,” and to show them that you are not at all indifferent to them?
- Customers love fun and memorable experiences. What can you do to create excitement and “entertainment” when they deal with you? What will make them laugh and remember your business with fondness for the next forty years? And what other emotions can you arouse in them that can give them a good feeling?
- Is there some way in which you can give your Customers “I-would-have-never-have-done-this-myself” experiences?
- What can you do that will pluck at Customers’ heartstrings, that will let them know that you truly and genuinely care about them—and the rest of the world for that matter?
- Do you have a unique or beautiful physical location, and/or physical aesthetics that make them want to visit you—just to have a break from the world? (Starbucks Coffee and Sam's Mum's Cookies.)
- What rewards, appreciation, or celebration can you use to show gratitude to your regular, but especially to your best, Customers?
- Is there anything that you are happy to give your Customers for “free” that will really make them feel special?
- Are there circumstances when you are happy to waive standard fees that are normally payable by your Customers? Or situations when you are happy to break the rules for them? (But do not do this only when they are unhappy!)
- Would there be added Value for Customers if you occasionally brought them together in a “Customer club” or a community? And why would they come?
- [Page AP-9]Can you give a community of Customers a chance to discuss common problems, new uses, and possible enhancements or innovations for your products and services?
- Can you become a more “environmentally friendly” company in a way that appeals to Customers?
- What can you do to give back to your community, and can you do so in the name of your Customers?
- Are the people who work in your company skilled, knowledgeable, experienced, highly competent, and world-class in everything that they do?
- Are all people in your business trained to spot opportunities to help Customers even more, (and possibly lead to greater loyalty, retention, referrals, and/or cross-sales)?
- Do the people in your business have access to the best tools required for the job, such as computers, software, mobile telephony, PDAs, and other technology?
- Can you enhance Customers’ experiences through the warmth, good nature, humor, and positive attitude of your people?
- Can your people effectively deal with angry Customers, manage the stress, insults, abuse, and anger without “losing it” themselves, and use their skills to help calm frustrated and upset Customers so that they willingly come back again?
- When recovering from Customer complaints, frustration, difficulties, and problems, do you have the ability to prevent future recurrence and take proactive internal action?
- Can you increase the reputation, esteem, eminence, admiration, standing, and status of Customers, not only within your organization, but within their organization, family, social, or business circle?
- Can you help Customers to grow and develop as individuals, to feel better about themselves, and to be proud of who they are or what they have achieved?
- Do you have useful information that you can give to Customers or let them access on your website?
- Do you communicate regularly and sufficiently with Customers using a number of media such as newsletters, email bulletins, videos, meetings, and similar?
- [Page AP-10]Are there any other structural ties that you can use to link you with your Customers and that will add Value for them?
- What do you know about your Customers’ “other lives” (like their families, hobbies, pastimes, and holidays) that you can use to add Value for them when possible?
- What can you do to attract current non-Customers to our business? Who are the Customers that would not be traditionally able or willing to do business with us, but we can attract them because of the new Value that we offer? What would make them say, “I'd kill to be able to buy that?”
And some bonus questions:
Excellence is Being Great at the Things your Customers Value Most
- Who do you want your Customers to become as a result of your efforts?
- What if we did things exactly the opposite of what our competitors did?
- What would make it impossible to make this in China for 50% of what it costs us?
- What if we had to do this for one-tenth of the cost that it takes right now?
- What if we could charge 10 times as much as we charge now for this?
- What if we had to do this in one-tenth of the time it takes us now?
- What if we had 10 times as much time as it takes us to do this now?
- What would we want Oprah to say about us if we got onto her show? Why would a film-crew from the other side of the world want to come and record and report on our business?
- Is what we do fair, generous, and makes us proud?
- What one thing could you do differently right now that would have a tremendously positive impact on your business? (Why are you not doing it right now?)
- [Page AP-11]What if all advertising in all mass media was banned tomorrow? How would we be able to communicate with Customers about our Value?
- What if Walmart (or the world's biggest company in your industry) opened a branch right next door on Saturday?
- Do we have any solutions in search of Customer problems?
Customer Value Foundation helps to measure Customer score (CVM score).
- What do my Customers Value most? What is important to them?
- How do I compare to my competitors? How do I perform better than them and become more attractive to Customers?
- What will it take to excel.
- How else could I find excellence? What tasks do I conduct first (my priorities)?
The below article “To Offer Great Customer Service, Dare to Be Bad.“2 is by Frances Frei and Anne Morriss, the authors of Uncommon Service: How to Win by Putting Customers at the Core of Your Business, published by Harvard Business Review Press.
“Service excellence can be a slippery concept. We know it when we see it, and when we see it, we're usually better off? But what exactly is great service?
In our work with service companies, we use a very specific definition: Excellence is being great at the things your Customers Value Most. If you're great at something that few of your Customers care [Page AP-12]much about—see Saturday delivery from the U.S. post office—it doesn't count. In fact it is counterproductive.
Because here's the problem. Your capital and energy are limited resources, so to afford to excel at the things that matter most, you have to under-invest somewhere else. Our advice is simply to underperform rationally, in the area your CustomerValue least.
Take Walmart. Walmart Customers want the lowest possible price on the things they use every day. And Walmart delivers, with reliably rock-bottom pricing and fantastic product variety. To afford it, the company under-delivers on other part of the retail experience, such as sales support and ambience. You won't find any arm of helpful employee at your average Walmart, and its décor isn't likely to give your ideas for your home renovation. Yet Walmart Customers are delighted to make these trade-offs.
This is the pattern among service leaders in every industry we have studied. It turns out that winning service companies aren't great at everything. They're bad at some things, but the pattern isn't haphazard. It's mapped tightly to their Customers’ priorities.
How do you pull this off in your own business? The key is to choose your weaknesses carefully. Your goal is strategically bad service, bad service your Customers will tolerate, even wear as a badge of honour, as long as they get what they want most in return. Many IKEA Customers are proud of the fact that they have to assemble their own stylish, affordable furniture.
What do my Customers Value most? Imagine you have a few of your best Customers in front of you. What do they care about? Which parts of the service experience are important to them (low prices, quick response time, etc.)? Now list those service attributes in order of importance, from their perspective. To be sure you're right, test the list with real, live Customers. We guarantee you that some part of that conversation will surprise you, and the interaction itself will build trust. A market research firm can also help you.
How do I compare to my competitors? Performance is a relative concept. Once you're confident about what your Customers want, put your current service offering in the context of your industry. See how you stack up compared with the other key players, [Page AP-13]particularly on high-Value dimensions. Does someone else own excellence? Is there little difference between your service model and everyone else's? This type of mapping will lay out the options for any potential strategic shifts.
What will it take to excel? Or, put differently, what would your Customers be willing to give up for the things they really want? For example, some health care companies are betting that patients will trade access to a high-status physician for immediate care from someone with fewer degrees (see CVS's Minute Clinics). What trade-offs would your own Customers make? Would they give up cutting-edge technology to get a service rep on site faster? Table that R&D initiative, and add slack to your service teams.
How else could I fund excellence? Trade-offs in the service experience is one way to create the resources for greatness, but you'll likely need other strategies as well. Charging extra is the simplest approach, but it's not easy to pull off in a tough economy. Consider others: running the back office more efficiently or reducing costs in ways that also improve service. Progressive Insurance has saved a bundle of money on fraud by sending high-service vans to the scene of an accident, both to dust off Customers and to make sure that the accident actually happened. The Customers they want, the ones who aren't trying to defraud them, love the experience. The vans more than pay for themselves.”The Customer of the Future and your Future
Businesses today tend to herd Customers as if they were cattle, but a revolution in personal empowerment is under way and buying will never be the same again, says author Doc Searls. He discusses his new book, The Intention Economy, with WSJ's Gary Rosen. The article is called “The Customer as a God.”3
“It is a Saturday morning in 2022, and you you're trying to decide what to wear to the dinner party you are throwing that [Page AP-14]evening. All the clothes hanging in your closet are “smart”—that is, they can tell you when you last wore them, what else you wore them with, and where and when they were last cleaned. Some do this with microchips. Others have tiny printed tags that you can scan on your hand-held device.
As you prepare for your guests, you discover that your espresso machine is not working and you need another one. So you pull the same hand-held device from your pocket, scan the little square code on the back of the machine, and tell your hand-held, by voice, that this one is broken and you need another one, to rent or buy. An “intentcast” goes out to the marketplace, revealing only what is required to attract offers. No personal information is revealed, except to vendors with whom you already have a trusted relationship.
Within a minute offers come in, displayed on your device. You compare the offers and pick an espresso machine to rent from a reputable vendor who also can fix your old one. When the replacement arrives, the delivery service scans and picks up the broken machine and transports it to the vendor, who has agreed to your service conditions by committing not to share any of your data with other parties and not to put you on a list for promotional messages. The agreement happened automatically when your intentcast went out and your terms matched up with the vendor's.
Your hand-held is descended from what they used to call smartphones, and it connects to the rest of the world by whatever ambient connection happens to be available. Providers of commercial Internet connections still make money but not by locking Customers into “plans,” which proved, years ago, to be more trouble than they were worth.
The hand-held itself is also uncomplicated. New technologies and devices are still designed by creative inventors, and there are still trade secrets. But prototyping products and refining them now usually involves actual users at every stage, especially in new versions. Manufacturers welcome good feedback and put it to use. New technology not only evolves rapidly, but appropriately. Ease of use is now the rule, not the exception.
OK, now back to the present.
[Page AP-15]Everything that I just described can be made possible only by the full empowerment of individuals—that is, by making them both independent of controlling organizations and better able to engage with them. Work toward these goals is going on today, inside a new field called VRM, for vendor relationship management. VRM works on the demand side of the marketplace: for you, the Customer, rather than for sellers and third parties on the supply side.
Since the Industrial Revolution, the only way a company could scale up in productivity and profit was by treating Customers as populations rather than as individuals—and by treating employees as positions on an organization chart rather than as unique sources of talent and ideas. Anything that stood in the way of larger scale tended to be dismissed.
The Internet has challenged that system by giving individuals the same power. Any of us can now communicate with anybody else, anywhere in the world, at costs close to zero. We can set up our own websites. We can produce, publish, syndicate, and do other influential things, with global reach. Each of us can be valuable as unique individuals and not only as members of groups.
But the Internet is young, and most development work has been done to improve the supply side of the marketplace. Individual Customers have benefited, but improving their own native technical capacities has attracted relatively little interest from developers or investors.
As a result, big business continues to believe that a free market is one in which Customers get to choose their captors. Choosing among AT&T, Sprint, T-Mobile, and Verizon for your new smartphone is like choosing where you would like to live under house arrest. It is why marketers still talk about Customers as “targets” they can “acquire,” “control,” “manage,” and “lock in,” as if they were cattle. And it is why big business thinks that the best way to get personal with Customers on the Internet is with “big data,” gathered by placing tracking files in people's browsers and smartphone apps without their knowledge—so they can be stalked wherever they go, with their “experiences” on commercial websites “personalized” for them.
[Page AP-16]This nuttiness also has infected retailing in the offline world. Take, for example, the pile of “loyalty cards” and key tags that stores require you to carry around so that you get a supposed “discount” while they collect data for personalizing your promotional experience in the store. Loyalty cards are the Main Street version of requiring you to log in and provide a password for every website that needs to know you!!
The only way to stop this insanity is for Customers to start showing up as human beings and not just as cattle to be herded. That is what VRM is for. In the not-too-distant future, you will be able, for example, to change your contact information with many vendors at once, rather than many times, over and over, at many different websites. You will declare your own policies, preferences, and terms of engagement—and do it in ways that can be automated both for you and the companies you engage. You will no longer have to “accept” agreements that are not worth reading because, as we all know, they cover the other party's butt but expose yours.
In addition to your personal tool kit, you will have software that can knit together your apps with the services offered by companies, saving work for you, and creating business for them—all in real time. On a business trip, for example, you can have your phone's apps for travel, budgeting, mapping, reminders, and fitness all working together to compare offerings, make reservations, issue reminders, and even fill out your expense report along the way.
Today nearly all the apps on your phone and all the public-facing services of companies are isolated in what techies call “silos.” Their reach is confined only to what they do. Even services such as Travelocity and Priceline are silos, just ones that combine the silos of hotel, airline, and car rental companies. With new VRM tools, you will be able to work not only across many silos at once but to improve them by making connections and providing useful data they would not get on their own. In the process, you show your Value as an independent Customer to the whole marketplace.
The move toward individual empowerment is a long, gradual revolution. It began with the first personal computers, which [Page AP-17]caught on in the early 1980s. With PCs, people got the power to do what big business called “data processing”—but in many more ways than any company could ever do. The next stage in the revolution was networking. There were “local area networks” and “online services” available before the Internet, but none that made individuals free to network on their own. The Internet did that.
The third stage was smartphones. With smartphones, the individual has both computing and networking in a device as portable as a wallet—but not as personal. Smartphones do provide a lot of freedom, but they are still controlled by phone companies, and in some cases (notably Apple's) also by the manufacturer. This was not true of the PC, and it is not true of the Internet.
This revolution in personal liberation and empowerment will not be complete until we are free to use our computing and networking powers with any device we like, outside the exclusive confines of “providers.” This will not be easy. Big companies and old industries are notoriously bad at changing their ways and giving up control, even when obvious opportunities argue for embracing openness and change. There is also big money behind “big data” and supporting the belief that marketing machinery can know people better than people know themselves.
In the marketplace, fashions come and go, and giants fall, but freedom remains the guiding light. The largest and most durable opportunities are those that use the freedom we have or give us the freedom we want and need. Progress in empowering Customers will not be smooth or even, but it will happen. Today, the supply side still reigns, but by the time of that dinner party in 2022, everyone will understand that free Customers are more valuable than captive ones.”
Doc Searls is the author of The Intention Economy: When Customers Take Charge (Harvard Business Review Press). He also runs ProjectVRM at the Berkman Center for Internet and Society at Harvard University.
Source: “The Saturday Essay,” The Wall Street Journal. Updated July 20, 2012, 9:38 p.m., ET, by Doc Searls.[Page AP-18]Why Training does Not Create Great Leaders?
Unfortunately dated ideas still control industry. One such dated idea is training, another is CRM. Yet another one is that satisfaction by itself creates Value, and NPS is a great predictor of market share. Few want to let go, and unlearn and create next practices. Others want to be followers by seeking best practices.
For years, I have been flinching when introduced as a trainer. Training is for dogs, education “for human beings.” I do not teach “Sit,” “Stand,” “Bark.” I help people to educate and transform themselves to Create Value and next practices. I want them to build their self-esteem, awareness, and proactiveness.
So what is wrong with training has been enunciated so well by Mike Myatt, and he discusses the difference between training and development (and what I call education).
Quote from Mike Myatt of N2Growth in “The No. 1 Reason Why Leadership Development Programs Fail”.4
The following 20 items point out some of the main differences between training and development:
- Training blends to a norm—Development occurs beyond the norm.
- Training focuses on technique/content/curriculum—Development focuses on people.
- Training tests patience—Development tests courage.
- Training focuses on the present—Development focuses on the future.
- Training adheres to standards—Development focuses on maximizing potential.
- Training is transactional—Development is transformational.
- Training focuses on maintenance—Development focuses on growth.
- [Page AP-19]Training focuses on the role—Development focuses on the person.
- Training indoctrinates—Development educates.
- Training maintains status quo—Development catalyzes innovation.
- Training stifles culture—Development enriches culture.
- Training encourages compliance—Development emphasizes performance.
- Training focuses on efficiency—Development focuses on effectiveness.
- Training focuses on problems—Development focuses on solutions.
- Training focuses on reporting lines—Development expands influence.
- Training places people in a box—Development frees them from the box.
- Training is mechanical—Development is intellectual.
- Training focuses on the knowns—Development explores the unknowns.
- Training places people in a comfort zone—Development moves people beyond their comfort zones.
- Training is finite—Development is infinite.
If what you desire is a robotic, static thinker—train them. If you are seeking innovative, critical thinkers—develop them.
Appendix II: Short Guide to Customer Value Creation: Definitions from the Book Customer Value Investment: Formula for Sustained Business Success[Page AP-20]
Add Value to the Employee Employees consider Value to be the benefits they get (such as the association with the company, what they learn, what they can contribute, and the relationship with management), and what they earn and what perks they get. Value added employees tend to stay with companies and can add Value to the Customers and the company. Attribute Trees These are developed after the Customer waterfall of needs, pinpointing attributes of importance to the Customer. Attribute trees have a price branch (actual price, cost of doing business, and cost of ownership) and a quality branch (of goods, brands/relationship, and services). Avoid Commodity Hell Understand the key drivers of Customer business success. Discover new methods and opportunities of Customer benefit. Build these into strategy and implement the strategy. In effect, increase the Value to Customers, thus co-creating the Customer experience. Prevent your company from going into a commodity death spiral. De-commoditization starts with increasing Value Brand Equity Brand equity is not only the advertised brand but also is impacted by the brand equity of the employees. The brand equity of employees when they do things well will improve the total brand equity Brand Loyalty Initially it meant Customers being loyal to a specific brand. Today, the brand has to be loyal to the Customer! The brand must deliver on its promise. The brand must meet the Customer's expectation and Values if the organization is to expect loyalty and repeat purchases. Build a Relationship Which Is About Accessibility, responsiveness, knowledgeable people, promptness, promises kept, being informed, follow up, no surprises, doing it right. Business of a Company Eventually, the business of any corporation is to Create Value for its stakeholders, investors, and Customers. The Customer Value investment is the best outlay you can make for sustained business success and for increasing ROI. So, you need a Chief Customer Value Creator and a Chief Investor Value Creator reporting to the CEO; thus, you build a Customer-focused organization. Business Processes Often designed from the point of view of the company and purely for their own convenience. Processes should be for the convenience of the Customer. Processes should be Customer-centric. Chief Customer Officer Companies need a Chief Customer Officer, who is a Customer champion and should cut across all functions to make the company, its processes, and its Customer interaction custom centric; he should be a board-level person. The purpose is not to take complaints but to ensure the entire company is working together to eliminate Customer complaints. Departmental silos have to be broken to promote Customer centricity. Communication Communication of Customer data within the organization. Communication to employees and touch points is important for making them think through Customer issues and aligning them and motivating them to focus on the Customer. Communication of data to the Customer is important, particularly where you are better than competition. Companies Should Work On Making Customers own the relationship. Building a partnership with the Customer. Giving the Customer a worthwhile experience. Co-creating the Customer experience. Developing Customer DNA into design of processes and touching. Competitive Profiles Facilitate tabulating the CVA scores on various attributes. Enable you to see where you are better or worse than your competition, and where you need to improve. Concept of a Business No longer business selling to consumers (B2C). Now, it is consumers buying from business (C2B). How easy is it for the “Customer” to interact with the business? Cost of Retaining Customers It is far less than the cost of acquiring new Customer. This cost of acquiring and retaining can be determined and the Value for the Customer can be calculated. Creating Value Value creation is a necessary step for management transformation to Customer orientation. Value creation is executing proactive, conscious, inspired, and imaginative actions that create better gains or Value (costs or benefits or both) for Customers and all stakeholders. Customer Advocates Customer advocacy is a specialized form of Customer service in which companies focus on what is best for the Customer. It is a change in a company's culture that is supported by Customer-focused Customer service and marketing techniques. Customers as Ambassadors A good Customer ambassador recommends you to his network. A great brand ambassador also has a virtual social network where he can and does refer you. Customer as Assets Customers are assets because, if treated properly, they can ensure an ongoing stream of revenue. The Customer assets can appreciate or depreciate, depending on how it is maintained and handled, the Customer assets can be shown on your balance sheet, which impacts the way an investor views you. Companies need a specific strategy to grow and nurture Customer assets (as the Customer is indispensable to our business, as without him, we have no business). Customer Attractiveness How attractive a company is to the Customer Customer Bill of Rights They are important for the Customer and the employees, because they set direction on what to expect. Should be visible and available to Customers. Should be implemented. A Circle of Promises is needed within the company to ensure that the promises in the Bill of Rights are kept Customer Capital Asset Value of current Customer Value of existing relationship (number of relationship times the average Value of each relationship + Value of potential future earnings from existing Customers + Value of referral power – cost of retention. Customer Champion Companies need a Customer champion who is a senior officer. In a perfect Customer-oriented world, you will have a Chief Customer Officer, and many Customer Champions. Customer Collaboration Customer collaboration is a form of loyalty as the Customer collaborates and co-creates with you. Customer Conduits Are generally top-driven by the CEO and his staff, and are designed to have a common thought process in the company on the Customer. All people in the company need to be sensitized to the importance of the Customer, and be led by a Customer mission statement. Customer's DNA What annoys Customers? Customers Do Not Annoy (DNA) Customer Effort The effort a Customer has to expend on interacting with, thinking of, or working with a product and the company. Customer Experience All of the interactions a Customer has with a company and its products, as perceived by the Customer. Includes conscious, sub-conscious, and emotional feelings Customer Equity It is similar to Customer capital. Customer Franchise Value of present and future Customer relationship, or Customer capital + Customer momentum. Customer Hugging and Touching Everyone in a company who comes into direct or indirect contact with a Customer is a touch point, “hug” your Customers, and care about them. Very often “touching” is outsourced to call centers or downstream in the chain to retailers and agents, whereas companies need to find a way of touching Customers directly. CEOs should spend a day a week with their Customers discovering if they are meeting Customers’ expectations and how service and other offering can be improved. Customer Journey The journey that the Customer has to make to deal with the company. It is also the journey seen by the Customer as the company reaches out to the Customer. Company employees often have to make a journey within the company to fulfill the Customer's needs; often this journey is forced onto the Customer (e.g., call so and so) Customer Lifetime Value The Value of, or revenue from, a Customer in terms of the business potential he represents for you over the life of your relationship with him. The revenue from potential referrals from that Customer. Customer Metrics Measure what is important to Customers. Obtain information from him or on him, and ask him what is important to him, directly or indirectly, in order to measure what he deems important. Customer Momentum The ability to attract and sustain a new Customer. The ability to increase wallet share from existing Customer. Customer Relationship Management Program Essentially process-oriented, passive, and don't touch Customers. Must move ahead to CVM. Often thought of as “loyalty programs,” which they aren't. Customer Relevance What is relevant to the Customer, when, and where. Instead of selling what you have, you sell him what is relevant to him at a point in time and depending on his needs. Customer Responsibility While this can mean many things, in this context it is the responsibility that the company takes for the Customer. So if the company has a Bill of Rights for the Customer, then it has a responsibility to uphold the rights. Or if they bring out a product, they have a responsibility the product will perform and be repaired if it does not. In an overall sense, the company must feel responsible to the Customer. Customer Satisfaction It is a necessary condition for loyalty but not a sufficient condition. Higher Value than competition will lead to loyalty. Satisfaction is a subset of Value. Normally measures transactions and is not generally compared to satisfaction our competitors’ Customers get. Customer Service One definition of service is that it is a convenience, should build a relationship. Customer Share Your company's share of your Customers’ purchases of your products. Also referred to as “wallet share.” Customer Share Marketing The way you increase your share of a Customer's business. Increasing your share of the Customer's wallet. Customer Strategy Customer strategy looks at the Customer and Customer opportunity, whereas the business strategy looks at the market place opportunity. Helps align the organization to the Customer and gets top managers to be part of the Customer process. Makes the organization Customer-driven and Customer-centric. Customer Value The Customer's perception of the benefit he gets for his perception of the cost (price and non-price) versus competitive offers. Value for money means the Customer is price conscious. Money for Value means he is quality conscious. Value measures embedded perceptions. Customer Value is an investment, and Value to firm (Value of Customer) is the ROI. Customer Value Added (CVA) The ratio of the Value you add to your Customer versus the Value your competitors add to their Customers. Providing higher Value than your competition will lead to increased Customer loyalty. Relative Value wins market share and increases ROI. CVA is a leading indicator of market share. If you get “heart share” of your Customer by increasing the Value you provide, market share will inevitably follow. Higher CVA scores lead to increased market share, ROI, and wallet share. Customer Value Index This is the Customer score and ranks companies on how Customeric and Customer attractive they are. Customer Value Management Customer Value Management is a strategy to attract and retain Customers by building on the Value they assign to goods and services. CVA score are comparative and are the ratio of the score you get from your Customer divided by the score your competitors get from their Customer. Proper Customer Value Management involves everyone in the organization. Product development and technology should flow from the Customer's needs and desires often through competitive studies, that is, a CVA for each function in the company such as product development is necessary. Customer Value-based pricing models should be followed. Should consider putting Customer assets or Customer capital on balance sheets. Customer Value Management Program Integrate all Customer efforts in holistic manner. Make the initiatives more efficient and Customer-driven. Lead to a wider spectrum of competitive advantage. Customer Waterfall of Needs Refers to the business processes that make up the Customer's experience with the company. Are interconnected and sequenced. Customer Circles/Customer-centric Circles Are company-sponsored group of people who have regular contact with Customers, may not necessarily include Customer in them and will focus on the Customer. Develop tactics and tasks for dealing with a Customer at a local level. Devise ways and means to make it easier for the Customer to do business with the company. Find ways to touch the Customer and give them a great experience. Customer data, information, input, complaints, or plaudits should be provided to the Customer-circles as and when it is available, or an effort should be made to collect such feedback. Customer-circles will come up with better ways to handle a Customer. Through this process, Customer awareness will invariably increase (and the Customer's awareness of the company will also improve). Since the initiative starts with and belongs to the members of the Customer-circles, they will take ownership of it and be more Customers-focused. Members of Customer-circles are touch point, back-end managers and other employees who can influence processes, systems, and policies. This is a bottom-led Customer initiative. Customer Experience (CX) Customer experience (CX) is the sum of all “experiences” at various touch points a “Customer” has with a supplier of goods and/or services, over the duration of their relationship with that supplier. This can include awareness, discovery, attraction, interaction, purchase, use, cultivation, and advocacy. Customer-in-center Approach Customers should be in the center of your business strategy, Customers should drive your strategy rather being used to fulfill your goals. Customer Value Investment The investment you have to make in improving Value. Value increasing ideas include doing things right (and cost nothing). Others like major product redesign could require higher investments. Customer Touching Wherever you touch the Customer, you have the potential to improve your scores. Scores improve not only for benefits but also for price, as the same product appears cheaper to a Customer when he is being touched (or is happier). Customer-focused action can be used to change the importance (or weights) of various attributes. Customer hugging is a term that is also used. CVA Data Should be reported at the CEO level along with financial data. Should be communicated to key personal, and selectively to Customers. Should lead to implementation of CVM. Should be used to inform measure that ensures longevity for program and Customer focus. CVA Design The design of the CVA study starts with segmentation: by product, by geography, by Customer segment, etc. your company's targeted competitors are needed along with their market share, which are used to normalize the data. A waterfall of needs and attribute trees have to be developed. A questionnaire is developed on this basis and then vetted by the Customer through in-depth interviews or focus group. The sample size has to be selected: these are based on significance levels that one is aiming for the confidence levels. The sample includes competition's Customers. Typically, sample size of CVA is one-third to one-fourth of sample size required for normal surveys where the frequencies of responses are compared. In CVA score, we are comparing average, which allow us to reduce sample size. Questions are normally based on a ten-point scale anchored at either end of the scale. Careful analysis of the data will yield usable and useful results. CVA Follow-up Prioritization of action steps. “What if” analysis and an analysis of where we want to be, what action steps to take, and how. Who is responsible for the action and the time frame? CVA Results The results will yield the following: individual scores for each of the attributes, importance weight for each attribute, competitive profiles: the relative score of your company versus the industry, the competition (competition is the industry minus yourself), individual competitors. You could get similar scores for your competitors and can plot slippery slopes and Value maps. Customer Value Management It is important to understand the implementation of Customer Value Management: Implementation Steps for implementing CVM include data analysis, prioritization of actions, setting of score increases to be expected by the action, and putting responsibilities. Customeric Customeric is a word coined to show that a company has the Customer-in-center. The Customer is the center of its strategy, its focus. The company is Customer-centric, takes Customer responsibility, measures Customer data and lets Customer thought lead the business. Customerized Customized for each individual Customer. Dealing with Customers Talk to Customers because you learn a great deal by doing so. Try to get known by Customers, as often buy from anonymous people/suppliers. Make it easy for Customers to find you. Make them feel less anonymous. Companies should be loyal to Customers if they expect Customer loyalty. Take Customer complaint seriously and have a complaint resolution mechanism in place. Avoid erosion touches. Eliminate Customer Defection Meet their expectation. Do not ignore the Customer. Improve touching by the company. React quickly to complaints. Make the process of registering a complaint easy for him. Make the company easy to contact. Build good knowledge of/information on Customer. Develop an emotional bond with Customer. Improve experience with company. Respect the Customer by not talking down to him. Front-line Employee/Touch Point Generally the lowest on the totem pole but the most important to the Customer. Face of the supplier/company. General Company Beliefs They are doing “everything” for the Customer. They have programs underway to impact the Customer. They have insufficient bandwidth or are too busy to start a Customer Value program. How Do We Get There? Customer-circles, Customer conduits, Customer-in-center philosophy, have Customer champions, reporting CVA, and Customer asset data. How Do You Satisfy Your Customer? Think in terms of C2B (Customer to business), rather than B2C (business to Customer), then think of C2C (Customer to Customer), where you build a community of Customers, understand the end-use experience your Customers are looking for, provide your Customers with the products and services that provide Value and give them the experience they want. Keep Your Promises Exceed Customer's expectation and build trust and confidence. Remember Customer satisfaction = perceived performance/Customer expectations Managing Suppliers Suppliers should be treated like Customers; you should develop a true relationship with your suppliers. Ombudsperson The concept of an ombudsperson to resolve disputes will reduce complaints going outside the company. Should be easy to find, reach, and work with. Should resolve problems fast. Path to Competitiveness To achieve strategic management, companies and their executive have to embrace Customer Value and Customer-centricity. These build competitive advantage. People Value Added/Employee Value Added This is the ratio of what your company adds to the employee versus what your competitors are adding to their employees. You want this ratio to be greater than one to get competitive edge. Processes, Services, Customer Value, and Customer Perception As the quality of processes, services, and products improve, Customer Value increases, and perception on price improves. The price perception improvement for improved service can be studies, putting a monetary Value on service. Put the Customer in Control Provide him the ability to communicate directly and painlessly with the company. Realize that the Customer should have it his way. Build a community of Customers and allow them to communicate with one another and with your company, and to blog or set up a message board thereby: letting him get easy information on products, shipments, and specials. Giving him delivery his way (maybe he can call in and his grocery bag is ready for pick up). Remember, that if we think it is right to want to control our suppliers, we should let our Customer control us, because we are their suppliers. Relevance of Work Effort from a Customer's Viewpoint Divide your work into categories that the Customer would think of as: necessary and relevant, necessary and irrelevant, unnecessary and relevant, unnecessary and irrelevant. Concentrate on the necessary and relevant tasks from the Customer's viewpoint. Reporting Customer Data Customer data should be reported on balance sheets. This is being proposed by the SEC, who wish investors to know a company's Customer assets and how the Customer assets are growing/deteriorating. Resistance to Embracing Customer Value and CVA Organizational inertia or executives feel they are doing enough for the Customer or they are into too many initiatives, and there will be a resource drain. Executives feel they understand the Customer and the marketplace. Executives worry about correlating Value data and satisfaction data. Value studies are not well-understood or that well-advertised or pushed as satisfaction studies, which are generally run by market research companies that push satisfaction over Value. Top executive are not exposed to Value as globally as they are exposed to satisfaction. Return on Customer It is the Value of the Customer divided by Customer capital. This is the firm's current cash flow plus change in equity divided by the equity of the firm at the start of the period. Satisfaction versus Value Satisfaction is measured soon after an event or transaction. Unlike Value, satisfaction does not measure embedded feelings. Satisfaction is a necessary condition for loyalty but not a sufficient one, whereas Value is. Satisfaction does not equate to loyalty, unless you have competitive data. People buy because they perceive better Value from your products. Slippery Slopes This is the graph (generally S-shaped) of re-purchase intent or loyalty versus Value or satisfaction with price and quality. It is called slippery because once you get past the very satisfied Customers, you tend to lose Customers very rapidly even with minor Value score losses. Stated versus Implied Weights Stated weights are received directly by asking the Customer to rate attributes. Derived or implied weights are obtained by statistical means, and give a better idea of the importance of different attributes in the buying decision. Tools of Customer Value Management: Where Are We? Qualitative tools: What attributes are important to Customers? The Customer waterfall of needs to derive transactional attributes and benefits, and price attribute trees to derive benefits (including the product)/price attributes. Quantitative tools: Where do we stand versus competition? Competitive profiles, slippery slopes, Value maps. Total Customer Value Management Total CVM is designed to have Value created for Customers and managed by the total company (by everyone in the company). Total CVM shows how this is to be done (See Gautam Mahajan's book: Total Customer Value Management: Transforming Business Thinking) Third Party Touching Often touching is outsourced through retailers, call centers, etc. We must examine third-party touching and see if your company can touch the Customer directly, or better. Traits of Winning Companies Obsessive about knowing, even better than Customers themselves, what Customers want. Create and manage Customer expectation. Design their products, services, and processes to maximize Customer satisfaction. Make Customer Value everybody's business. Maintain a business philosophy to add ever-increasing Value to the Customer. Have a culture driven by a vision that creates strong Customer focus. Constantly ask if their proposed action will benefit the Customer, or adversely impact them. Using CVA for Business Decision: Product, Service, and Technology CVA is used for business decision on products, services, and technology offerings. CVA helps make business decision using the Customer's input and point of view for pricing, for new product introduction, etc. Using CVA for Pricing CVA techniques can be used for pricing of products and services and to decide on the various features to put into products. CVA pricing looks at costs from a Customer's viewpoint and is based on the relative benefits you create versus competition, and the importance of each benefit to the Customer. As benefits increase, price can be increased depending on the importance of each benefit the company provides. Brand is also a benefit. Value It is the balance between price and quality. The more the Customer perceives he gets for his money, the higher his perception of the Value. It is what a product is worth to the Customer, and how he perceives the benefits of the product, given what it costs him to buy or own it. Values (of people, companies) The Values, standard, morals, ethics, beliefs, ideals, and principles that a company has and reflects in its culture and its approach toward Customers and employees, environment safety and sustainability, and society. Value Creation Executing proactive, conscious, inspired, and imaginative actions that create better gains or Value for Customers and all stakeholders. The main role of an executive is to Create Value for himself, his employees and his Customers and, thereby, for his investors. The role of a company is to Create Value for its employees and Customers, suppliers and partners and, thereby, for shareholders Value Maps Position of your company relative to the Customer's rating of your company and the competitors on price and quality. Help you make sound strategic decision. Useful in pricing and in “what if” analysis on whether to improve/reduce price, benefits, or both. Value of Customer The Value of your relationship with your Customers. Average Value of each relationship can be measured by the following: revenue per Customer. Average length of Customer relationship: total number of referrals that became Customers divided by total number of Customer plus 1 (the original Customer). Can be referrals (R), average spent per Customer per annum multiplied by relationship length with R (measure of referrals), Customer Value is an investment, and Value to firm (Value of Customer) is the ROI. Voice of Customer and Voice of Competitor CVM is akin to the voice of Customer (and voice of competitor). Many companies use CVM studies for this purpose. What Investors Want to Know? How many Customers do you have? What is your profitability per Customer? How well do you treat your Customers? How fast you are growing Customer franchise? What Is a Customer? An indispensable part of your business, without which there is no reason for your business to exist. What Is the Purpose of a Company? To satisfy stakeholders (employees, Customers, suppliers and partners, unions and shareholders) and to Create Value for them. What to Do for Customers Convert anonymous Customers into known ones. Understand and incorporate Customer DNA into any Customer initiative. Avoid erosion touches. Where Do We Want To Be? Value map prioritization and focus areas to build competitive advantage. Who Is a Customer? A Customer is someone who buys from you, or is a consumer, or someone who could potentially buy from you, or is someone else's Customer Zero Complaints Zero complaints is a similar concept to zero defects. It should be the intention of any company to get to zero complaints by examining hygiene factors, Customer journey, Customer experience, and everything to do with product reliability, usability, and service.
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