Companies are spending more time on how to compete in competitive markets using value. Four factors give best companies a competitive edge that drives growth:

1. Intimately manage your top 10 – 20 key clients.
2. Identify and manage your exceptional & strategic suppliers.
3. Focus on your unique value proposition for your market – your competitive edge.
4. Align throughout the company around the top 3 factors, always— allocating resources, developing talent & managing operating costs— for growth.

In an earlier blog, we explained the first two factors that drive growth. In this blog, we will expand on factors 3 and 4.

3.      Focus on your unique value proposition for your market – your competitive edge

Satisfied clients can lead to increased profits, yet creating satisfied clients is not as simple as lowering prices and offering incentives when the market becomes competitive.

When their market share is threatened, companies usually make mistakes. Their first response is to meet the competitive threat by discounting prices. However, discounting prices dilutes the value that could be retained despite increased competitive pressure.

Discounting results in reduced market share because companies cannot win the volume needed to compensate for the fall in price.

If companies accept discounting is the only way, prices continue to fall. However, this trend can be reversed when companies spend time revisiting their value propositions for their major clients. Also, it can be reversed when they focus on communicating clearly the true and unique value of their products and services.

The more tangible that your value is, the easier it is for you and your team to be truly relevant to your customers. Delivering value, measured as dollars, means helping clients improve their performance, increase their sales, reduce their costs or reduce their exposure to risk and liability.

We completed a consulting project with a large multinational technology and manufacturing client, both innovative in the digital world and leader in their manufacturing space. Our challenge by the MD and his C-Suite was to help them accelerate their growth plans.

Our analysis showed some of their top 20 clients used all 5 business units or a mix of products and services, so the focus was to determine the business’ competitive edge. We had a planning meeting with key senior people from 5 business units, a mix of the sexy digital stuff and the core of their business- manufacturing.

When we work with our clients on value, we interview both the internal team and their top clients and then work through a detailed process around how to compete on value and not price.

Interestingly enough there were people in the room who had not met each other. At the same time, we were doing executive interviews with senior managers and executives from their top 20 clients. Apart from general questions, our interviewing team was focused on the question of value and their shared future focus.

One of our most sought-after processes is around growing your customers business which is a key part of the executive interviews, as senior people share what the future could look like based on value.

After numerous meetings with our client and key decision makers, we developed a unique value proposition that connected intimately with their top 20 clients but had a direct impact on the rest of their 453 clients.

 

You are probably already delivering some of this value; you just need to know how to calculate and communicate this value to your clients using the language of money: financial smarts.

To help your senior team, an article for the Strategic Account Management Association focuses on linking financial smarts to value. Download this article.

Remember multi business units in global companies are rewarded for being successful in their space, your top 20 clients do business with your company, and not individual business unit’s, so they want the value that your business can deliver as an aligned team.

4.      Align and engage the total company around the top 3 factors: clarity around allocating resources, developing talent & managing operating costs— for growth

In a world gone mad with the theory that everybody buys on price, if you achieve organisational alignment on the top three factors then you gain a real competitive edge. Alignment amplifies the first three factors and companies that get the alignment right, never discount their prices based on a competitive threat.

Alignment changes how parts of your business interact, from HR, product teams, in-field sales teams and the broader company to re-create client excellence. 

In companies, it is critical all internal teams and cross-functional teams focus on managing key clients more effectively. Kodak is a great example of what happens when the total company is not aligned around an envisioned and strategic future.

What happens when you create alignment and engagement across your business? Sustained success.

INSEAD has a great example of this in their case, Richardo Semler: A revolutionary Model of Leadership, by Maddux and Swaab. This case and our fourth factor examine how alignment is the only thing that drives all the behaviours internally that allows your business to be successful, externally. A key part of the case talks about what most of us know about Ricardo’s main success of how he transformed Semco and what it has achieved over the past four decades.

The C-Suite team in your business should read the case and then meet to have a conversation about the learnings. Let us know if you need some challenging questions for this meeting. A key outcome of this meeting should be all leaders reaching consensus on how do we change our business to succeed in the first three factors. So, you must rethink how you allocate resources, manage talent and manage costs.

The key understanding here is that this approach creates a competitive advantage that allows you to stand out from your competitors and internally it is a much better place to work. If your shared purpose is common and known across the organisation, people become innovative and diverse teams produce results and ideas that are relevant.

This shared purpose means that everybody knows who the top clients that you serve are and what you can do to bring value to them daily. We have just completed a consulting project in Singapore with one of our global pharmaceutical clients, and their top clients were scathing on how this organisation’s account receivables team were relentless in chasing outstanding invoices. Top clients were put on stop credit and product deliveries stopped over minor invoices that had not been paid in 45 days.

Thankfully the MD saw this as an opportunity and asked me to stay a couple of extra days to oversee a project that started that afternoon with the CFO and the accounts receivable team.

I had the head of the Strategic Account team share the full P&L of their top clients, and then the accounts receivable team went into action. At the end of the second day, they had already worked out a 12-month client meeting plan to focus on how this team could work with top clients in dealing with outstanding payments.

In fact, it became a competitive advantage driven by the total organisation. People from the supply chain group also joined in and when I left them after my last visit, there was joint planning around how to deliver faster and create value for the end customer through their logistics expertise.

Costs that do not support the top 3 factors need to be cut hard and fast; teams need to be allowed to spend money where it counts and slash immediately where it no longer adds value.

An executive in the C-Suite needs to drive this approach because costs like waistlines are getting fat over time and everyone wants to maintain the status quo.

Focus on Growth – Now

Time is running out because the global marketplace will be cruel to companies that do not change!

Your bold reshaping of your business based on client intimacy, market realities and the unique capabilities of your company will drive growth. A motivated team with a clarity of focus will beat every time a competitor only using ‘price’ as their weapon of choice.

Discussions around growth is a leadership responsibility. Value creation happens when talent is energised and released to grow your business.

The full blog is available as a pdf for you to download and share with your colleagues and network. Thank you for reading.

If you need to discuss any or all of the four factors, please contact Stephen or Gary on +61 2 9450 1040 or mail@gordianbusiness.com.au.