As sales people we have been drilled and drilled in “Value Propositions.” Over time, our concepts of value propositions have changed–as they should. Value propositions used to be generic claims (usually generated by marketing) about value, perhaps statements about our products–things like “best quality,” “richest functionality,” “highest performance.” and so forth.
At one point (decades ago), these generic generic value propositions became meaningless and undifferentiated as everyone started claiming the same. How were we to set ourselve apart? By the way, too many companies are still stuck in this mode!
In the past 15-20 years, we have adopted the view that “value is in the eye of the beholder.” Sales people are now trying to understand what customers value, then present their solutions in the context of what they value. Marketing provides tools to help sales people do this, whether they are questioning guides, justification guides, or other tools. This is and continues to be important. Rather than generic value statements, we focus on specifics that are relevant to the customer—each individual involved in the decision-making process. We, also, focus on quantifying and justifying the impact of our solutions in terms relevant to the customer and what they are trying to achieve.
While this approach is not new, too many organizations are not doing this. There is still tremendous opportunity to grow in this area.
In the past 3-5 years, we’ve started seeing the early stages of a much richer approach. A few organizations and thought leaders are starting to recognize the importance of value creation. The shift here is profound and important. Value propositions have focused on the value our solutions will create for the customer–solving a problem, helping address an opportunity, reducing coast, improving their customer experience, improving profitability, increasing share and so on.
Value creation focuses on how we help the customer buy. I like to call it “the value we create in the process.” It could start with Insight, a Challenging Idea, a Provocative approach. Getting the customer to recognize and commit to changes that improve their ability to achieve their goals.
It continues by positioning the selling team as facilitators to the buying process. Helping the customers to buy— how do they organize and align themselves, how to they manage the change within their own organization, how do they establish their priorities, how do they make a decision. It moves through the sales process to implementation in helping the customer implement and achieve the results they seek.
We focus on how we create value in each interchange we have with the customer.
In many ways, value creation is the most sustainable differentiation a sales person or an organization creates. Products come and go. We may be superior today, but tomorrow a competitor releases a new product that offers superior value, and the day after, there’s something else.
We can only succeed in value creation by being intensely customer centric. Without deep engagement in entire customer buying and implementation process, we don’t maximize value creation.
Value creation is about our people, how we work together, and how we work with our customers. It is, currently, the most sustainable differentiation we can have in competing for our customers’ business. It is easy to copy and improve on products, it is difficult to copy what we do, how our people work with and engage our customers. Sure, competitors can hire people away–but that’s just a person. Value creation works only in a culture of extreme customer centricity. It is the way our people and organization put everything together and how “we” engage the customer through their entire process.
So value creation is important. Very few organizations and individuals are doing this well or consistently, but every day it improves. To be a little crass, we don’t have to do a whole lot, since most organizations are still prisoners of the “generic value proposition era.” Just thinking before each sales call, “What value will I create for the customer in this call,” is far more than most.
But we are on the cusp of a new era in value creation. It’s value co-creation. Where value creation is one directional—what value do we create in the customer buying process. Value co-creation, minimally, is two ways and can be multi directional.
A way to think about value co-creation is to think of synergy. Synergy was one of those $100 words consultants used to talk about a long time ago, but the concept is that 1+1=3 (or more). It’s premise is by truly collaborating, we can produce a better result than separately. In the context of what I have written so far we might think:
- Generic Value Propositions: 1+1=1 (well maybe a little more)
- Value propositions specific to what customers value: 1+1=2
- Value creation can look like: 1+1=3
- Value co-creation (as I hope we discover): 1+1=10 (or much more)
Value co-creation moves from teaching the customer to learning from each other. It causes us to leverage our individual and shared experiences together, creating something that we could not have produced separately or in the traditional ways I’ve spoken of earlier in the post.
Value co-creation is tough, it requires a much different and richer customer engagement/experience model. As a consequence, value co-creation, at least for the next few years, is probably best applied to very select cases (which we can learn from).
Value co-creation requires deep alignment. I’ve expressed some of the critical success factors in my posts on strategic alliances and partnering. (I’ve also written an eBook on this, email me at dabrock@excellenc.com. I’ll be glad to send it to you.) I’ve expressed in the following:
Exploded it means: Shared Vision x Shared Values x Shared Risk x Shared Resources x Shared Rewards. (note, shared may not mean equal–which enables the small or individuals to co-create with giants).
Currently, we see value co-creation in very rich strategic alliance and partnering relationships. There are increasing numbers of organizations doing this very well—but these are usually separate from the main stream sales focus. Over time, we will see these practices become an important part of our customer experience and engagement strategies.
Companies focused on life cycle customer experience management — from prospect through the entire life cycle are starting to incorporate elements of value co-creation.
Social business will force more and more organizations into incorporating value co-creation into their customer engagement and experience models. Social business will also force organizations to look at value co-creation in their supplier, vendor, and procurement models. Customers and suppliers are on the precipice of entirely new relationships.
Social networking will extend value co-creation from just the customer and us to the community. This in turn will accelerate the ability and need for more to move into value co-creation with our customers.
The ability to co-create with our customers requires that we can first co-create within our own organizations. We must move beyond silo’s to working as fluid teams, building teaming and collaboration as a core competency within our own organizations. My friend, Vala Afshar (@valaafshar) and his colleague Brad Martin have written a must read book on the journey their company, Enterasys, is making in Social Business Excellence. They aren’t a client, but I really admire the work Vala, Brad, and the whole company is doing. Be sure to read this book and learn from it.
Value c0-creation is increasingly important. I’ll be writing much more in the coming weeks, but I wanted to get some initial thoughts into the community to have you start building on it.
What are your thoughts?
How do we move from generic value propositions through to value co-creation? Can we jump forward?
What are the critical success factors? How do we engage our people? How to we engage our customers? Who do we engage?
Dave, I think you are spot on by talking about working WITH customers on value. I believe the relationship with customers is going to be either competitive (always haggling over price and other expectations), cooperative (polite, but one side doing all of the effort), or collaborative (both sides sharing the responsibility of addressing the problem, the solution, and the impact). Side note: if you are not sharing responsibility for the problem, solution, AND impact, I don’t think the relationship is as collaborative as you might hope.
But before we go further, can you answer two questions for me?
One, what exactly is your definition of value? Is it the (SV)2 x (SR)3 equation you shared or something else?
Two, is value created or exchanged in the selling experience? In my opinion, value is created by the organizations the seller and buyer represents, respectively. The seller and buyer then exchange that value. Collaboration, then, is a major factor in maximizing the value being explored/discussed/negotiated/etc. IF there is a genuine difference between the terms “created” and “exchanged,” then the sales person must also consider how the organizations involved are capable of collaborating. Can the seller’s organization create new value? Can the buyer’s organization do the same? If the answer is no, then that changes the nature of the interaction (even if buyer and seller are personally collaborating), does it not?
I guess that second question was pretty loaded with rabbit trails, eh? C’est la vie. It’s how my brain works – when the drugs aren’t working…
Wow, Tim, I knew you would hold my feet to the fire on the sweeping generalizatins and pontification. Some thoughts–but just a starter.
1: Definition of value: We toss the word around a lot, but never define it. It’s actually pretty difficult. Value is something of worth or importance to the recipient. Lots of the sales literature defines value as the difference between the benefits and costs. While that’s an element, I think it’s not the complete definition of value. Focusing on sales, I would tend to call it, “providing the customer (or recipient) something that enables them to achieve a goal or objective).” The there are the subcategories of superior, differentiated, etc.
2. Is value exchanged or created? My response is an unequivocal “Yes!” Or at least it has the potential to be. Clearly, value has an element of exchange. We provide a solution that creates value for a customer, for which they pay us something that creates value for us. The exchange might not be currency or money, something else. I feel good in contributing my time and money to a charity and being able to have an impact on whatever it is they are doing. Or, this “discussion” is valuable to me because it forces me to clarify my thinking (I don’t know that it is producing value for you–so we may still have to look at the exchange piece).
3. I think value can be created and we see elements of this all around us–a lot of that is what I call value in the process. Helping the customer learn or discover. (We do this for the exchange value of potentially winning a deal, not just out of the goodness of our hearts). Value is actually dynamic—though too many create it as static. It changes over time–increasing or diminishing.
4. Going back to, is it exchanged or created–I think to be sustainable, there need to be both factors at work.
5. We see all sorts of intended or unintended value creation around us all the time. For example, our business and personal financial dealing would be virtually impossible with the interrelated (between competitor in fact!) financial exchanges. The fact they work together and share information creates value for all. Likewise, airline and other reservation systems. I don’t beleive the semi conductor industry could exist, without some sort networked value creation among the participants. The risks, challenges, and investments are just too high for any single participant or even a couple. So value co-creation may sometimes be an unintended consequence–though necessary. Perhaps we need to be more purposeful in value co creation.
6. Likewise, I’ve seen my clients involved in very rich alliances, enabling them to meet market needs that neither could to independently, and in which there is both creation and exchange.
7. As I think about it, if you include the element of exchange and creation as a definition of value, then perhaps value co-creation becomes redundant. But maybe I’m overcomplicating things 😉
What do you think?
I’m finally taking a moment to respond – I didn’t what to do it without proper thought (which is why I enjoy your blog so much). So here are my musings…
(1) “Definition of value: We toss the word around a lot, but never define it. It’s actually pretty difficult.” – I couldn’t agree more. In simplest terms, I define value as anything a client will complain about. Because if they are complaining about it to you, you sold it to them (even if it wasn’t part of the brochure). I think the key here is to recognize that value is made up expectations. The degree to which you, as a seller, can meet those expectations is the degree of value you are offering/delivering. Now, defining how those expectations are created is a whole other discussion…
(2) “Is value exchanged or created? My response is an unequivocal “Yes!” – I think you are right here. It’s basically a continuum from exchanging on the low value end to creating on the high value end. So here is my extra thought: Is the ability to influence the creation process directly tied to your level of sharing assets (people, energy, time, and resources)? In other words, it seems fairly obvious that collaborating produces value that is created. Is the opposite true as well? You’re equation for value co-creation certainly taps in to this idea.
(3) “(We do this for the exchange value of potentially winning a deal…)” – This made me pause for a moment. The value we create WITH a client (as opposed to FOR a client), may or may not result in an exchange. Is it possible that the value we are seeking/exchanging is not the deal itself, but the influence, insight, etc. we will want to use later? Is that not some form of an informal deal that is already completed? Then, we use that influence, insight, etc. on another deal – this time involving money (making the client relationship a bundle of multiple value exchanges). What do you think?
(4) – (6) See my previous comment/question.
(7) “What do you think?” – I have been tinkering with the idea that Value EQUALS the Outcome (with some sort of exponential qualifier to show the degree of its strength/complexity) DIVIDED BY the Problem (with some sort of exponential qualifier to show the degree of your collaboration in defining it) AND the Solution (with some sort of exponential qualifier to show the degree of your collaboration in solving it). The Part I am struggling with is the AND part. It should be one of these: +/-/x/÷, but I can’t quite settle on which one. Any ideas (since you are way better at math than I will ever want to be)?
Wow Tim, you keep pushing me. Great ideas/points which help clarify my thinking. Two issues keep popping up in my mind.
1. I think we have traditionally focused on creating value FOR versus creating value WITH. I think that’s a big shift, whether we call it creation or co-creation, the shift to WITH incorporates many trends regarding collaboration, insight, etc.
2. You challenged me on (7). Basically, while you may not have intended it this way, we may be talking about a concept that might be called Return On Value (ROV). I’ll have to noodle on this for a while.
This is a great discussion, raises tough questions without easy answers. Thanks so much Tim!
Hi Dave,
Great post. I had to think about it for a few days before I could post a reply because there is so much going on in this post.
The concept of value creation moving to value co-creation is very rich. I see the challenge being the internal sell more than external sell. Maybe it really is two different things. The internal sell first and the customer sell second.
Who do we engage? In my opinion alignment within the organization (you mention silos) is critical to even beginning the discussion. There are hard strategic choices of which customers to target as collaborative co-creators in markets where there is synergy for mutual growth. Who decides the market? Who chooses the customer? How do you pick a test case? What customer wants to be a test case? The road to destruction or obsolescence is paved with companies who only listened to and partnered with their largest customers. (the innovators dilemma)
Within the organization, what seems beneficial to one silo is marginally important to another silo. Some will debate that the only benefit is more sales from the customer because “how can a customer help us develop products, they do not understand our technology?” or “we enable them..not the other way around.”
One could argue that once the internal sell is complete and you have the silos in collaboration, the decisions of who and what to target made, the rest is execution of the strategy. That seems like the easy part… BUT how to articulate the mutual benefit of co-creation? The whole definition of Co-creation requires that two parties are developing the value. so one entity can not come up with the strategy and pitch it to the other, it somehow has to grow together. I wonder if the companies who are engaged in such a relationship can articulate how it all began? I wonder if they would say, “it just sort of happened…”?
I look forward to more posts and discussion on the topic.
Natalie, what wonderful insight! You are absolutely right, value co-creation starts internally–being able to co-create value across the boundaries of functional or departmental lines. If we can’t do this, we will absolutely fail in front of the customer.
Value co-creation with customers involves rich partnering and alliance capabilities. We can’t do this with every customer, so we need to develop strategies about who we do this with. Additionally, it is very likely these will involve many parts of each organization, so getting alignment across both sides is critical.
I do think that we can “sell” the idea to co-create to customers. We can go to them with insight, we can go to them with ideas, we can engage them in buying into the idea and subsequent co-creation. In your industry, there are lots of examples–not of custom product development, but of co-development, early customer involvement, etc. So it can start as a sales effort, but if the prospect doesn’t quickly own it themselves and you continue to grow together, it will never be successful.
You raise some great points, I’ll be expanding on them in future articles.
Thanks so much for your great ideas. I’ve already gotten ideas for a few articles based on them.
Hi David,
I look forward to the articles. I appreciate your posts and the ideas they generate.
Natalie
I’m finally back to comment. Not sure what else I can add here, but I’ll reinforce a few things, I suppose.
Value is defined by the beholder. I liken this to the difference between Alessandra’s “Platinum Rule” and the well-known Golden Rule. Platinum = Do unto others as THEY want to be done unto. Neat twist, right? Always enjoyed that. Same thing here, in my opinion. Just like the saying that “one man’s meat is another man’s poison” or “different strokes.”
In sales, this is why pitching and the old models/methodologies are dangerous or at least wasteful and inefficient. If you’re not tuned into this, and only see the world from your own lens, you might burn quite a few good leads until you hit upon someone who wants or needs exactly what you are selling, based on how you typically see it and present it. You serve so much better by finding what others value, and providing it (when you can) or being a resource for info or how to achieve it (when you can’t provide it yourself).
Perhaps even more interesting, and a multipler of “co-value,” is when you can provide part of what someone needs but partner with someone else to provide the rest. If all parties are up for exploring the value-chain together, you can co-create some interesting solutions – and this is certainly how I would define synergy.
Hope that offers some value.
Mike, thanks for the always provocative comments.
I really like the discussion you have regarding partners. This is a huge area of errors too many make in assessing their routes to market — channel and partnering strategies. They need to evaluate the total value delivery chain to the end customer. Each element of the chain has to add value—otherwise you are adding cost. In reality, too many strategies aim for the former but achieve the latter.
The next frontier is really achieving the multiplier effect in co-value creation. It’s probably easiest to assess, implement and execute from a routes to market view. But the ultimate is co creation with key customers. I know we all will be spending lot more time on this in the coming months!
Thanks David. I’ve been having exactly this discussion with clients in recent months. A couple of challenges and observations that I am wrestling with:
1. Value co-creation might imply that both the customer and supplier organisation will be changed or even in some small measure, transformed because of their shared engagement in this transaction, process and relationship. This requires a high level of strategic awareness and confidence in the people involved. How prepared are the organisations involved in this co-creation process to actually embrace the consequences? My sense is that selling organisations are typically keener for customers to do the transforming than to be transformed themselves because of their interaction with a customer!
2. Great discussion in comments about the definition of value. Ultimately in each commercial transaction, surely it comes down to the specific ROI scenarios developed during what has previously referred to as the sales/purchase process. Historically, this has led to a proposal that is focused on presenting the business case and ROI to the purchaser. Might we now need to consider the implications of a business case format and development process that is increasingly co-created and reporting both ways? I recently saw a Neil Rackham video where he spoke of the way that it is inceasingly hard to identify who is the salesperson and who is the customer in a typical meeting between a potential seller and buyer. This seems very exciting for senior salespeople, who get the opportunity to accelerate the development of their organisation in direct response to market opportunities.
Thanks again, and I am looking forward to the next instalment of your thoughts!
Peter, thanks for the very interesting comments. Each can (and will generate some follow on blog posts, but some initial thoughts.
1. I tend to agree that we miss a huge number of value creation opportunities–more because we focus on the monetary part of the exchange than anything else. Sales people aren’t trained or attuned to things like: What have we learned from this? How can we apply it in future customer engagements? How can we apply it to ourselves in improving what we do and how we do it. The list can go on. The simplest form of value co-creation might start with spending some time looking at these, rather than just moving on to the next transaction.
2. I really like the idea of bi directional ROI and ROI co-development. I have to think about this much more.
Peter, sorry for the slow response to this comment, but these are really great discussions I hope to continue in future posts. Regards, Dave