Value creation in today's world has moved beyond simply maximizing a company’s share price or just maximizing a company’s value to its stakeholders and shareholders. Traditional models, i.e.
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How much money can we extract from customers?
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How can we sell customers more of the same product or service?
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How can we cross-sell additional/ new services/ products?
hold little water in the modern world of value creation as this model places overwhelming focus on income derived from customers Vs. Value provided to customers. Yes, financial value while relevant is not sufficient for achieving value creation.
In its true definition, companies have a responsibility to customers, employees, business partners, society at large (including the environment) and shareholders, not just today (i.e. short term) but also for the future success of the business (i.e. long term).
All too often, managers’ and investors’ fixation on short-term performance forces businesses to opt for quicker return tactics. The risks involved with short term value creation inevitably put the business at risk, especially with regard to shareholders’ value, stakeholders’ interests, customer loyalty, supplier stability and employee retention.
It would be idealistic to believe that the intents of all involved parties (internal and external) will always be aligned. The reality of business is that there will always be some kinds of trade-offs with many grey lines and areas that directly and negatively impact the business.
How can Value Creation Lead to Business Success?
By definition, value creation in its most simplistic form is “giving something of value in exchange for receiving something else that’s of more value to you”.
In order for any business to be truly successful it requires Value to be created for its Owners, Value to be created for its Customers and Value to be created for its Employees.
Fractures or gaps in creating value in any of these verticals will sooner than later result in business failure.
Consider the following examples:
Extreme Scenario 1: Your company has just developed the most incredible technology solution that might actually be the next best thing since sliced bread. You’ve hired the best possible employees and pay top salaries but you’ve priced it well into the income of the top 1%. Not only have you limited your potential market and in doing so have limited sales and revenue; neither is value being created for customers nor for owners.
Extreme Scenario 2: Your company has created a highly-desired solution and priced it so competitively for mass market adoption that the company is so busy making wafer thin profits. While value is being created for customers, neither the owners nor the employees are actually achieving any tangible value. More often than not, these solutions while being great ideas are earning disasters that guarantee demolition of company profits.
Value Creation Model for Businesses
Value creation does not occur at the time of a sale. Truth be told, sales have almost nothing to do with it. Value creation begins much earlier (at the time you start your company) and goes much deeper (i.e. why you build your solution). Without having clarity of purpose built into the very DNA of your company, any solution will look like a great idea but guarantee complexity and failure in the future.
Value creation requires clarity of vision and clarity of purpose. With clarity, decisions are easier, producing elegant simplicity and avoiding unnecessary wastage of time, money and energy. It helps your business hit the ground running, proving the much-needed profitability overlap that you value and your customer values.
“If you want to go fast, go alone. If you want to go further, go together”. ~ African Proverb
Value creation requires common goals for the group at large (i.e. your internal teams). It can be almost impossible for one person to do it all. Value cannot be created by warm bodies showing up for a job every morning without putting their hearts and minds into it. Minimum efforts result in minimum outcomes (notice we said outcome not output). Money has proved to be a weak long-term motivator. Value creation from employees requires a sense of purpose and accomplishment that re-energize and fuel further efforts. If you recruit the right people who buy into the bigger picture of what you are doing, the success of the business works as a better motivator. The whole team is about selling then, not just the salespeople.
Value creation requires relooking at and defining marketing and sale processes rather than the output itself. All too often, companies create and implement incentives programs for sales staff and managers. The actual reality is that these sales teams eventually become better at convincing the business heads to sell at a lower price than to convince customers to buy at a higher price. Performance-related pay rarely encourages people to work harder and therefore contributes nothing to value creation.
5 steps to finding the right balance between short-term goals and long-term value creation:
1. Finding the right Customers
Value creation requires businesses and their teams to strike the right balance between the process, time, efforts and monies. Spending all of these with the wrong type of customers will critically impact the wellbeing of your business. It is important to quickly identify the right customers who not just derive value from your solution but also have a high probability of turning into brand advocates for your business.
Some critical questions that can help your sales teams identify genuine opportunities include
a. How does my solution really solve the pain points of this prospective customer?
b. Does this prospect look similar to other existing prospects that we’ve helped in the past?
c. How do our solutions most successfully address customer challenges?
d. Which categories or industries would be the ideal best-fit for our solutions?
2. Marketing
Value creation requires that a business go to customers Vs. waiting for them to come to you. Marketing requires identifying where these ‘right customers’ come together be it offline or online, explaining to prospective customers that what you’re selling actually fits their needs. Lead generation is not just enough, it requires that those leads be qualified, to ensure that not just the marketing and its tactics are targeting the right customer but also that the prospect customers are actually the ones that are the right fit for your solution, thus turning leads into marketing qualified leads. It requires setting expectations so that when a marketing qualified lead does turn into a sales qualified lead, your sales team can close the deal more effectively and value delivery is achieved. Fortunately with digital marketing and the rapid advancement of digital tools, marketing had become a lot quicker, easier and less expensive.
3. Finding the right Sales Teams
For long-term customer loyalty to be built, it requires that customer transactions move to customer relationships. For any relationship to be built it requires businesses to not only offer something that represents real value, but to communicate this value effectively. To achieve this, every salesperson must be insightful, consultative, customer focused and human; before, during and after the sale has been made.
4. Finding the Gap
Any successful sales person will tell you that the foundation of sales is built on value transfer, not on sales push. Prospects need to first understand what is being offered, why it's a great idea and how it can improve their lives, before they become willing to open their wallets and hopefully become long-term customers. If the right hand is Customer Research and Market Research, the left hand would obviously be Active Listening which goes a long way in identifying, understanding and eventually filling the gap.
5. Filling the Gap
Storytelling allows marketers to wrap up the facts in a context that is engaging and to deliver them with emotion. Storytelling allows marketers to pitch the status quo as the riskier option to embracing change (by choosing your solution).
Conclusion
Value creation requires businesses to look at creating life-long customers Vs. short-term sales spikes. Consistent prioritization of rapid customer acquisitions to meet targeted sales and maintaining higher growth velocity is nothing short of short sightedness. Period. Without value creation, your bottom line and customer retention will continue to be threatened. Companies that focus investing on their most valuable customers undoubtedly create value simply because it results in R&D that drives innovation, that in turn provides better solutions and services to customers who want, need and value your solution.
While the role of marketing is to bridge the gap and reduce the friction between what companies have to sell and what customers want to buy, understanding who your customer truly is, what is the pain point your solution solves, and what customers are willing to pay for a solution will help your company create value propositions that persuade sales. For marketers to be truly successful, the solution is rooted in an ability to successfully blend long-term thinking with incredible performance in the short term.
Related Reading: Unlock the artful craft of creative copywriting for explosive growth,
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