In his Innovation Excellence blog Thomson Dawson advises “create new value rather than compete for value created by others.” Entrepreneurs and intrapreneurs alike should keep this statement in mind as they seek success in any business or profession. Dawson argues that organizations typically focus on the urgent work of increasing revenues with the greatest profit margins while often neglecting the critically important work of increasing value of their product or service for customers.
Start with a value proposition. Catherine Heath of Help Scout defines value propositionas a“statement about the benefits customers receive from your service or the problems that your product will solve for them better than anyone else.”Three key dimensions to include are:
- Relevancy – why should your customers care?
- Quantified value – how does this benefit customers?
- Unique Selling Proposition – how is this offering different from the competition?
Stand in your customer’s shoes. According to LynnHunsaker of Customer Think a paradigm shift is required from trying to get customers to behave in ways that benefit your company to helping customers achieve their goals. She contends that this focus is so rare that adopting a “serving customer goals” framework may be key to developing a winning value proposition in your industry.
The customer, not the competition, defines value. Although “competitive advantage” might be defined by comparing your company with competitors’ offerings or prices, the key to a company’s success is the customer’s view of the value of your product or service. In other words, focus on the customer, not what competitors are doing. McKinsey’s assessment is succinct: “A product’s value to customers is, simply, the greatest amount of money they would pay for it. In other words, a product will rarely be purchased when its price exceeds its value to the customer. Conversely, whenever the value of a product exceeds its price, customers can improve their lives by buying it.” McKinsey contends you have to be “two steps ahead of customers’ stated needs” to sustain success in the marketplace.
A winning value proposition is not easy to achieve. Consider that about one-third of businesses fail within the first two years (SBA). Forbes says that the most common reasons for failure are: lack of market differentiation; failure to communicate the value proposition to customers; and leadership dysfunction. Mike Kamo of BPlans advises: “Your business can fail if you exhibit poor management skills. You will struggle as a leader if you don’t have enough experience making management decisions, supervising a staff, or the vision to lead your organization. Learn, study, find a mentor, enroll in training – do whatever you can to enhance your leadership skills and knowledge of the industry.”
Many long-standing successful companies also fail eventually because they continue to operate under obsolete business models while other businesses continue to create new value for customers. Kamo says: A successful business keeps its eye on the trending values and interests of its existing and potential customers.
Concluding with Questions to Ask Ourselves
If your products or services no longer existed, would any one care?
Does your organization focus on innovation that provides people just what they’re asking for, or do you focus on providing people what they’re dreaming of and waiting for? (Thomson Dawson)