Customer Value - Today’s Competitive Domain

In today’s competitive marketplace, businesses and organisations of all types compete around the value that they are able to deliver to their customers. Recognising how customers perceive that value can be challenging as that value can constantly be shifting as customers’ needs evolve. Viewing value from the internal lens of the products and services offered is flawed and effective strategy requires that you seek to stand in the shoes of your future customer and their needs.

Active Knowledge Question:

How do you know if the value you deliver to your customers will outcompete all others in your chosen market?

What Is Value?

Businesses exist to compete. They exist to provide the greatest value they can to the community of customers they seek to serve. It is around this value that they compete. If they do this well, great profit is one of the outcomes.

Customer value is the value our customers believe they gain in buying from us. We can seek to define that value for our customers, but ultimately, it is how they perceive value that will be the determining attribute.

Value does not equal price, although price can often imply a value. Value is best viewed through the eyes of the customer and related to the need/s they seek to fulfil, and what that fulfilment means for them.

Our customers are more informed (and ill-informed) and more equipped to choose and change whom they buy from today than ever before. Many diverse agents influence their preferences. Their needs are constantly evolving and impacted, again, by many diverse agents. For any business to get a good handle on customer value, they must commence with the way in which 'the customer' is viewed in their business.

Businesses that look at their customer through the lens of their products/ services are also challenged in developing a customer focus as they view the relationship and value delivered from their own perspective, rather than that of the customer and their needs.

Customer value can really only be grasped, focused on, and grown through a customer focus best described as a ‘customer-first’ approach. But placing the customer and their needs first as the centre of focus can be confronting.

Customers First?

Are you in business to profiteer from your customers, or are you in business to meet their needs better than anyone else?

Your answer will determine whether your customers come first or, in reality, are used by your business solely to earn profit. Only one of these choices – customer or profit – can be first. 

A ‘customer first’ focus requires placing the customer, and their needs, at the centre of your business and everything else then orientates to this view. Very few businesses achieve a true customer focus, and this failure limits their potential success.

A customer focus is not so much about a person or group of people but rather about their needs and the value delivered to satisfy those needs.

The ability of a business to achieve a true customer focus is often stymied by a profit-first motive and cost reduction initiatives that are developed to deliver budgeted profit outcomes.

A true customer focus, once developed, provides a competitive platform through which the business is able to continually deliver greater value, therefore, outcompeting others in their market. While also continually finding new opportunities for growth to expand their business and the relationship they have developed with their customers.

The ability to place customers first rests in the purpose for which a business exists. 

Purpose Anchors Need

Purpose is perhaps one of the most important foundations in creating a great business and is vital to strategic thinking. A well-articulated purpose statement for a business is its cornerstone and the first piece to be laid in building a great business.

Purpose must deliver meaning and focus on customer need and value, and, therefore, direction. The right purpose can be powerful in underpinning the long-term success of your business. A focus on purpose can do this, as:

• It clearly defines the need you are seeking to meet in the community and, therefore, keeps everyone focused on the customer value you are competing to deliver.
• Through this focus, you can become the best of the best in delivering that value and outcompete anyone else in your chosen marketplace.
• The focus on customer need can become a source of innovation and growth. It will allow you to find new ways of meeting the existing, emerging and related needs that will fuel new opportunities and growth.
• It allows you to lead change and not chase it. You are focused on your purpose and need, and, therefore, readily appreciate the impact of change and step ahead of it.
• It prevents you from chasing every opportunity that appears before you. It supports emergent strategies and can serve to challenge paradigms as they take hold in a business.

Undefeatable strategies are crafted to fulfil the purpose for which your business exists, but strategy is always forward-looking and about the capability to compete.

Tomorrow’s Needs

In our competitive landscapes, technology has, and is, continuing to dismantle barriers to create an open global marketplace for all players. Resourcing and workforce capability continue to be more ‘open source’, and incumbency can, at many times, be a greater disadvantage than advantage.

The legacy value drivers such as location, plant, IP, technology, distribution channels, brand, etc. are losing their resilience. Their effectiveness in securing customer value is being eroded more rapidly than ever before.

The ability to create capital value in businesses is elusive for many leaders, as they feel overwhelmed with the level of competition and change that is occurring in their markets. Capital value lies in certainty; a certainty that the business will create an enduring income into the future, but business leaders are often less than certain about their business.

In traditional strategic management thinking, the rationale went something like ‘focus on formulating your strategy and then implement it while aligning your organisation along the way’. It was an approach that put strategy first – and then organisational structure. Today, this thinking needs to do a 180-degree turn to focus on developing an organisation that is always evolving. It will then be capable of crafting and delivering strategies that are required to sustain and grow customer value.

Competitiveness is the ability of your business to deliver on the strategies that are necessary at that time to win. Winning is all about delivering greater value than anyone else to the community you serve. It is about adaptability and agility but, more importantly, it is about identifying decisively where that greater value lies tomorrow.

Being decisive is not catching up. Being decisive is setting the rules of the game and moving on before competitors even know the game has changed. I describe this trait as being competitively fit, and it is driven by the competitive engine that exists in every business.

A competitively fit business naturally leans into customer value with a focus that enables them to continually redefine and reset that value, always leaving their competitors playing catch-up.

Capabilities

While capability will influence how you compete, ultimately it must be tailored, crafted, and built to enable you to outcompete all others in your chosen market.

Capabilities cannot be left to chance or at what simply exists today. They must be crafted and developed to fit exactly with how you intend to compete in your chosen market – what customer value do you intend to deliver tomorrow?

Success is not something that just happens overnight. It requires focus, hard work, perseverance and compounding. To succeed on an enduring basis requires a lot more than just being good and following everyone else’s lead in the market.

It requires conditioning, the continual development of the right capabilities and the right mental attitude. In the case of businesses, the right attitude is represented by and reflected in the competitive engine of your business.

But often, the sense of what capabilities the business should be building is amiss. Ask senior leadership the question, ‘What is the business really good at?’ and the response is often vague, non-committal, and conflicting.

Success will come to those who know what they excel at and how to turn their capability into something that will allow them to outcompete all others in their chosen marketplace.

What your business excels at should be the cornerstone of how you have chosen to compete within your marketplace. Remember, we compete around the value we are able to deliver our customers against their needs. And therefore, we should seek to leverage our strengths into that value, not chase a competitor’s strengths.

Always remember that need and value are complex. There are many unique positions that you can take within that matrix which allow you to position your offering, so they outcompete others in your chosen market. Capability is always a reflection of this competitive posture.

How have you positioned the value you deliver to your customers so that your strengths are brought to the forefront to deliver a value that will outcompete all others? And how are you investing in your capabilities so that you can continue to do that in the future?

The Customer And Cost Reduction

Often, I find that achieving a customer focus trips over cost reduction initiatives. You could say it becomes a choice between a customer focus and a profit-first motive. But the better answer lies in sustaining both initiatives and repositioning the role of the cost reduction programs.

Cost reduction programs often reflect the need to restore or sustain targeted profits in the short-term, while hoping the impact on customers will not be so great as to drive them away from a business. It’s not a great strategy and typically reflects where things have not gone as planned. There is a better way to develop sustainable cost reduction within a business, which does not compete with but rather supports a true customer focus.

Cost optimisation is spending the right amount of money in the right places so as to build and sustain the competitiveness of a business. It’s about increasing expenditure in some areas and reducing expenditure in other areas, while always having an eye to cost drivers, adaptability and the competitive posture of the business.

A business that has perfected cost optimisation will gain the maximum competitive value from every dollar it spends every day.

Businesses exist and are made to compete, and if they do that well, profit is one of the outcomes. They compete around the value they deliver to their customers, and that is an evolving value where the true goal is to be the business always setting the next level of value for the customer and the market. Everyone looks to you for what is next, and that will only occur if you are the fitness in the pack and maintained this position through the competitive engine in your business.

An entirely new level of performance.

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All the best in the success of your business,

Richard Shrapnel