Above the Top Line

Above the Top Line

“What’s the bottom line?” is a favorite American business expression.

It is understandable especially when the focus is on cost-cutting and short-term employee productivity improvement. One Dollar in cost reduction, all things being equal, translates directly into One Dollar in additional profit. Short term this works.

But give a thought to the opportunity costs you may be losing. ?It amazes me how businesspeople do not engage more in looking at the future value of lost opportunities, especially in new customer segmentation and building customer and employee loyalty. There are Billions of lost opportunities on the table.

Some questions: ??

·??????Do you really have a compelling vision that engages your employees and customers? Do you communicate all the time in different ways so everyone gets it??

·??????Is the company’s purpose well defined separately from the strategy?

·??????Do you really have a compelling strategy in terms of true knowledge of the client segmentation you pursue and the scope of value added from your products and services?

·??????Have you taken a hard look at the overall customer value proposition that could add value to client needs? How can you improve the overall value delivered??

·??????Can you further subsegment in specialized markets as a strategy? I especially see this with great tech providers that could employ their tech in new specialized markets that have amazing growth opportunities. Yes, resources (e.g. marketing and salespeople who speak the language of the new verticals) are needed to serve new markets but there is a lot of money lost on the table. ?

·??????Do you truly understand the needs of your installed customer base? Do you have the empathy and feedback systems to look at what additional money you can make inside the customer’s needs because you took the time to actively listen? What is really behind the ARR? ?

·??????Do you partner with ancillary service providers where you can build profit share off of your installed customer base?

·??????Do you understand the reasons for customer defection rate and measure the defection rate cost on a future value basis? Do you track really customer loyalty and repurchase rate on a future value to clients? ??

·??????Do you have marketing and sales teams that are competent at articulating to the customer the total value you create and provide (esp. relevant to B2B) to extract price as a component of total value created? How are you helping your end client increase their revenue, reduce their costs, improve their customer loyalty, and/or make their employees more loyal and productive? Is this measure captured on a future value basis through B2B value calculators you show the client using conservative assumptions??

·??????Do you understand how your constructive leadership behaviors and systems could produce constructive cultures that build enterprise value for the long term? Did you know that even short-term changes in your behavior can have an immediate impact on your team in weeks and months when applied consistently? What behavior changes for you in 2023?

·??????Do you have meaningful innovation sessions with your customers that accelerate potential new service development? This is especially attractive when there are specialized higher-margin services that can add a big effect on NPV per client. This is excellent for digital services with higher margins attached.

Some Suggestions

·??????Understand the total value opportunity that could be provided inside you customer base.

·??????Pilot and experiment with new service opportunities in you core client segment.

·??????Play and experiment with new utilization of your resources to solve specialized market problems outside of your core field of play.?

·??????Take a hard look at sales and service the employee competencies and systems you have. Are they truly engaging the customer? Are your sales and service teams able to properly articulate the overall value creation from your products and services? Are they aligned by their performance expectations and incentivization? I see a lot of competency gaps and misalignments.

·??????Look at how constructive culture, especially your daily leader behavior which you control, ?can create greater employee loyalty that can be leveraged in a way to create higher customer loyalty. You can measure culture's impact on operational and financial results if you want to. ??

21st-century business still uses 14th-century debit/credit bookkeeping to capture “value” in the financial statements. Public companies at least benefit from a proxy market value measure in terms of total market capitalization. Why are book value and market capitalization often so very different? Because the intangible assets (i.e. customer and employee loyalty effects) are not tracked in standard accounting reports. For example, you can grow at 20% but still have an annual customer defection rate of 30%.??

Billions on the table.

Resource Suggestions:

Books:

“Every Business is a Growth Business: How your Company Can prospect Year after Year" By ?Ram Charan and Noel Tichy.

“The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value” By Frederick F. Reicheld and Thomas Teal??

Company Culture Tools:

Link: www.humansynergistics.com

Peter Strupp

[email protected]