Managing the levers of value:
How key strategic disciplines are unified to drive customer and commercial value.
Can you continue to orchestrate orthodox functions like strategy, sales, marketing, customer service and operations to deliver differential advantage and customer value, or is a fundamentally better approach required? Progressive leaders are now industrialising sources of differential advantage by unifying critical disciplines to drive growth, improved customer and commercial outcomes.
4 perspectives on growth
1. Revenue, margin and cash flow
Sustainable revenue, margin and cash flow are all critical to long-term growth and the ability to optimise operating costs is ever-present. But exactly how do existing silo'd customer and market facing functions contribute to such growth?
Clearly, they should and in many cases do, but it's often not systematic and more than likely any contribution is variable and unpredictable. Evidence would suggest that some of this results from poor organisation, competing incentives and a lack of streamlined cross-functional process and team-work. Market economics, changing customer preference, political and social circumstance obviously play a part, but there are new ways to systematically improve growth prospects and engineer improvements in specific customer and market facing capabilities and operations.
2. Customer economic value
What specific levers, processes or disciplines drive economic value for customers?
Many companies don't even measure the benefit premium to customers, That is a function of the value customers attribute the product or service minus the price paid, the benefit premium or value add*. But economic value customers receive is a little different. That's the differential benefit they could enjoy with your product or service, over that which they currently have or which any competitor could provide. Simply, put as the value customers need to switch from some other product to yours, estimated as being at least as much value (benefit premium) they are currently receiving plus a 'switching or transfer premium'. Customer economic value can be delivered through a wide range of disciplines including: innovation, customer experience, relationships and service.
The trick is to know how to manage these disciplines and which ones deliver more or less differential advantage to specific customers. This was once the domain of 'gut feel' and intuition, but that's no longer good enough, it's science, evidence-based decision making, process and particular capabilities that will 'win-out'. The first step is to understand and build capability in key strategic disciplines, then systematically improve them.
3. Intangible assets and intellectual capital
Sustainable revenue, margin, cash flow, cost reduction and economic customer value delivered are important measures of growth, amongst many, that can be managed more effectively through inter-connected disciplines rather than functional silo's. However, intangible assets and intellectual capital, which collectively represent most of the value of any organisation, need much more attention. Arguably these are the assets which should pre-occupy strategy, sales and marketing, sadly, all too often front-end operations focus on short-term tactical gains rather than disciplines to increase the value of capital assets like these. This only contributes to the divide between C-suite expectations and front-end functional silo's.
4. The levers of value
Many market leaders are already abandoning redundant functional organisational models to find differential advantage in new operational models drive by commercial and customer outcomes, not internal organisation. They know that there are different kinds of value and different ways of managing them. They can see that shorter term P&L focuses metrics are important but also that customer and longer term intangible value and intellectual capital measures are also needed to steer the business in the right direction. The is the job of unified, cross functional disciplines and teams.
It's not about tactical versus strategic, it's about 'always on' strategy and smart tactics, systematically developed and delivered using a 'shared operating model'. The same disciplines contribute to strategic and tactical success, they drive short-term and longer-term commercial and customer value and they provide the levers for intangible asset and intellectual capital growth.
There are at least 38 disciplines supported by a unified operating model that collectively provide the levers for accelerated capability building and sustained growth.
* Golub and Henry, 1981, Marketing strategy and the price-value model