by Cindy Barnes
What does this mean for traditional, large businesses?
Large businesses are losing much of the control and power that they once exerted. Of course, the huge monoliths still have money and power, but they are experiencing an increasing exodus of customers and harder, more cost-driven negotiations with other businesses. Falling sales, declining profits and loss of customer loyalty – however measured – are the leading symptoms of this downward spiral. As this loss of business occurs, senior management looks everywhere for someone to blame – suppliers, government legislation and departments in their own businesses. Typically, business leaders moan about their customers and blame their sales force. What they do not see is that their own structures, processes and behaviours are part of the problem.
In today’s increasingly connected world, how can these companies attempt to improve customer engagement if they do not include the customer in their go-to-market solution? The customer is an integral part of the commercial ecosystem and businesses and organizations are living systems. According to Linda Booth Sweeney, ‘In a spider’s web, what happens on one part of the web affects every other part. The same is true of living systems, whether an ant colony, a forest, an organization, or a city. Like a spider’s web, a living system is so intricately woven that no part exists in isolation’ (Booth Sweeney, 2008).
Systems are the best way to envision a solution to the growing complexity in today’s commercial environment. Adopting a systems approach means focusing on interrelationships, patterns and dynamics as well as specific components. The field of ‘systems thinking’ has evolved over the past 50 years and now offers a set of methods and tools to help focus on systems as the context for defining and solving complex problems, and for fostering more effective learning and design. Systems thinking helps businesses to shift from tactical activities and jumping from crisis to crisis, to move towards a less fragmented, more integrated way of doing things. The Value Proposition Builder™ tools and methodology enables businesses to undertake a systems approach. A complete shift may take years, but many benefits can be achieved far quicker. This book will discuss in later chapters how to achieve early benefits.
So, what kinds of businesses actually consider taking this systems approach? It takes a very brave company chief executive officer (CEO) to tell shareholders that the business intends to take a long-term view that looks beyond the next quarter’s earnings. That is why large corporations tend to look for quick fixes such as new sales training regimes, rebranding programmes and supplier renegotiations. In the long term, none of these approaches produce the desired joined-up impact.
What companies try
When a business does attempt to make a genuine change, how does it start? What is the first step?
Companies tend to start by focusing on things they can control, such as operational fixes that reduce cost and/or improve efficiency. Technical, scientific or engineering-run businesses usually take this approach first. Many of the companies that have used the Value Proposition Builder™ framework are technical companies. Most began their improvement process by investing in relevant technical aspects of their business. On the other hand, consumer businesses look to brand and repackage offerings, work that falls within their particular comfort zone. Only after all the technical and operational work was complete, or a new branding/packaging exercise implemented, did the executives take the next step and examine the strategic, go-to-market aspects of the company.
The businesses showcased in this book were doing well when they went down the path to obtain greater understanding of their customers and market. In fact, most of the businesses that embark on value proposition work are in good shape and want to improve their business. They all took the initiative to understand their customers before their companies were in any kind of trouble, trying to obtain a clear picture of what their customers valued as well as what annoyed them. By using a third party specializing in this research, each was able to obtain honest and enlightening insights. In all cases, the feedback shocked them. Up until that point, all the executives would have sworn they understood how they were valuable to their important customers. But their views were proven to be at worst wildly inaccurate or, at best, incomplete.
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CASE STUDY
Glanbia Ingredients Ireland (GII) is part of Glanbia Group – a global nutrition company supplying ingredients and branded products into food and nutrition markets around the world. In the three-year period before engaging specialist support, GII had invested significantly in building a new infrastructure and streamlining the operations in all their plants. Once they had concluded their focus on operational improvements in their business, and had systems running well, they decided to examine what their customers valued about them, their business and offerings. Understanding their customers’ views was a significant step to expanding Glanbia Ingredients Ireland’s commercial ecosystem.
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CASE STUDY
NATS is a leading global provider of air traffic control services. Headquartered in the UK, each year it handles around 2.4 million flights and 250 million passengers in UK airspace alone. In addition to providing services to 13 UK airports, and managing all upper airspace in the UK, it provides services around the world, spanning Europe, the Middle East, Asia and the North Atlantic. NATS’s main focus is, of course, safety. Before embarking on a customer value proposition project, NATS worked tirelessly to maintain and enhance its unsurpassed air safety record, focusing on operational improvements and constant innovation. Finally, the business reached the point of needing to truly understand what its customers wanted and why, and what its customers valued over and above safety. NATS wanted to figure out how it could design an improved go-to-market approach that put customers, in fact all stakeholders, at the heart of its business.
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Both Glanbia Ingredients Ireland and NATS (see the case study boxes), armed with information about what customers valued and did not value, were able to develop a plan to adjust their internal structures, processes and behaviours so as to capitalize on what customers truly valued, what innovations were needed and what things to fix so as not to lose business. Both businesses took a significant first step towards creating a new, holistic approach to their marketplaces and customers and were able to realize benefits very quickly from this joined-up approach.
Andy Head, Business Development Director at NATS, says: ‘The Value Proposition BuilderTM process gave us a new framework to engage with our customers and allowed us to develop the key design that underpinned all the organization changes we needed to become more customer-centric.’
What not to do
While it is vitally important to include customers in the change process, there is a very big step between knowing what customers value and then implementing an effective change and solution. Many businesses take the first step and use the Value Proposition Builder™ approach to obtain customer insights, and then do not take it further. Having listened to their customers, they go on to change only one or two things, and then carry on running their businesses as before. Gaining the customer insights is only the first step. The difficult part is changing the structures, processes and behaviours in a business so as to build on what customers value.
Below is a list of typical, tactical changes that businesses make in an attempt to implement their value propositions. Individually, none of these responses will make a significant impact:
Do one or two things at a time without looking at the whole system.
Reduce prices. When margins and/or revenues are threatened, some executives take the simplistic view that the only reason customers are not buying is price. Unless the business strategy is commodity pricing, price is rarely the key factor and, after a short-term flurry of buying, reducing price will ultimately reduce revenues and margins.
Raise prices. Arbitrary price rises without good justification typically anger customers. After a temporary increase in sales revenues due to the price
rise alone, customers start looking for other suppliers and revenues fall off.
Rebrand product lines or the whole company. Today’s customers are savvy. ‘Papering over the cracks’ or rebranding what is essentially an unchanged product or business will not fool them. Spending money on branding too soon, before implementing any genuine change in the business, is a waste of money.
Create new products and/or services without involving the sales teams or selected customers in the process. Remember, products and services are ‘for the customer’ and it is always a good idea to understand exactly what is wanted and needed. Both the direct sales staff and the customer give invaluable insights into the best solutions.
In all instances, these businesses fail to develop a marketing strategy or fail to adjust the existing marketing strategy. Not only should a business examine its entire operation but it should also develop an appropriate marketing strategy to serve as a blueprint for all subsequent activities. The marketing strategy is a ‘plan’ that supports all ‘go to market’ activities. Without this, selling activity is not supported by the business and revenues do not meet expectation.
Typically, the sales force takes the brunt of the business focus where revenues and profits are concerned and management puts in place activities to ‘stir up’ sales efforts. Below are some common selling activities that don’t work:
Introduce a new sales training programme. Frequently, the reasons for falling revenues have more to do with the overall marketing strategy, business approach and aligned sales and company behaviours than a lack of selling skills. The most frequent problems affecting sales are conflicts relating to the sales process, the channels and how the business supports this process. One consumer electronics business spent £1.5 million on global sales training with zero impact before embarking on value proposition work. Focusing on selling skills alone can be an expensive mistake.
Hire a ‘big hitting’ new sales director for his or her contacts book. The days of the hero salesperson who sweeps in and saves the day are over. Of course personal relationships help, but they only get a company through the door and speaking to the right person or people. Ultimate success will be down to a company’s sales proposition. The business processes must support that sales proposition.
Train technical people who work with the customer so they can play a sales role. This approach is common in highly technical businesses that employ specialists to do technical support at customer sites. There are many problems in trying to turn these individuals into salespeople. First, they don’t want to sell; they are typically uncomfortable in the role. Second, their relationships are usually with the customer’s technical or operational staff and not with procurement or senior management (the roles most frequently involved in significant purchases). Third, by making a technical support person the commercial interface, it undermines his or her former strong position as someone giving ‘best technical advice’. The customer will now worry that the advice has some ulterior motive involved with selling.
Fail to adjust sales rewards structures. In fact, failure to adjust the whole company’s key performance indicators (KPIs) to reflect a new approach is more accurate. Rewards drive behaviours. No matter what a business says it wants, if the remuneration systems say something else then most employees, and especially salespeople, will work to the performance measures given. Most salespeople receive some of their salary or bonus based on these measures, so this behaviour is not surprising. A common situation occurs when businesses tell their salespeople to sell ‘solutions’ and then measure them on selling an individual component of the solution. It is typically easier to just sell the component. So if that is how the salesperson is measured, then that is what he or she will sell.
Ask service-line sales staff to ‘cross sell’ and/or ‘up sell’ without giving them adequate training or incentives. This response happens so often in large corporates today that it is almost a definitive sign that the business needs realignment and a good hard look at its marketing strategy. One of two scenarios is typical. In the first, many different salespeople from the business each try to sell different things to the same customer (very common in siloed businesses). And in the second, a business acquires or develops new and different products and expects the salesperson to start selling them without adequate training or positioning.
Fail to change sales material, specification sheets, price lists and other customer material. A new product/service or market positioning should be reflected in all support materials and in anything that the customer sees. Once again, using the example of moving to ‘solution selling’, if a company wants to sell solutions then it should describe solutions in all its literature and not the component parts. It should provide salespeople with solution pricing and not divulge the individual cost of components of the solution. Everything needs to be adjusted to support this shift in the sales approach.
Fail to adjust all the internal metrics. In reality, a whole company is involved in the selling process. Everyone in a company needs to be armed with an appropriate understanding of both the organization’s value proposition and its sales proposition. Everyone who interfaces with customers or potential customers – from the receptionist to delivery drivers, from warehouse supervisors to design engineers – needs to understand how and when to promote the company’s offerings and behave accordingly. These people do not need to be salespeople, but they should understand their role in the overall selling process and be rewarded or recognized for appropriate behaviour.
As the list above shows, there are many false steps that can be taken in trying to implement a value proposition within a business. However, successful business change is possible. There are four key insights – based on leading more than 600 businesses through all or part of the Value Proposition Builder™ process – which, if followed, will help a business to move in the right direction:
1 Include both customers and customer-facing staff in the creation of marketing strategy and change initiatives.
2 Work on every aspect of the business at the same time, not just a single process or department.
3 Make strategic changes to structures, processes and behaviours before looking at tactical fixes such as creating a brand story.
4 Build on the foundation of good work already started or carried out previously.
Applying these lessons can have important positive impacts:
Winning customers: everyone in the market (and sometimes within different parts of the same company) is vying for customer mind-share. Whoever gets there first with the strongest message, wins.
Gaining market share: at the high-value end of the market, strategic companies will gain customer mindshare by selling at an appropriate level and delivering a single, appropriate message, while at the commodity end of the market competition will drive down prices and erode market value.
Better margins: by approaching changes tactically and in a piecemeal, siloed fashion, companies end up commoditizing their own offerings and market position.
All of these insights lead to the 1st Law of Value Proposition Selling.
Law 1: the whole company plays a role in supporting the sales process.
To follow this law, a company needs to start with a holistic view of the business – and include key customers (and prospects) in this exercise. It then needs to develop and decide on its overall market approach and understand the impact this decision has on existing business structures, processes and behaviours. Only then should tactical activities that are in line with the strategic direction be implemented.
Is this approach complicated and expensive?
It need not be. The process does not have to be revolutionary, nor does it have to cost lots of money. In reality, tactical fixes often cost millions without producing results. The company mentioned earlier that spent £1.5 million on an ineffective sales training programme also invested more than £2 million on an advertising campaign. But what was it advertising? Nothing had changed substantially in the business. The
advertising was papering over the cracks rather than fixing the fundamentals. And while the business did look at ‘strategy’, different departments used different consultants to work at inappropriate levels in the business, each with different briefs. This approach cost a lot of time and money, yet did not yield a cohesive strategy and did not include the customer. This is why it failed.
Why is including the customer so important?
An inclusive marketing strategy is vital for sales, marketing, product development and innovation throughout the entire business. One global financial services business illustrates how the organization itself can get in the way of finding the right messages. This organization had a 1,000-person internal research team that spent five years trying to understand why small retailers were not using its services and why their behaviours were often actively hostile. The problem? In its interaction with these retailers, the internal team looked only at the rational factors, such as price and the configuration of the service offering. The retailers, on the other hand, were acting on their emotions. They were angry with the financial services supplier and did not feel that their issues were ‘heard’. This critical insight had been completely overlooked.