Is Value Leakage Sabotaging the Execution of Your Strategy?

If your company is investing heavily in creating innovative and high-value solutions, but is not seeing the profitable results you expect, value leakage could be sabotaging your strategy.

Innovation is not complete until your customers can comprehend and invest in the total value of your solution and can accurately measure improved performance and the net profit impact on their businesses.  

You could assume that because a value capability exists, enough customers will buy it and you will achieve your predicted results. The flaw in this assumption can be summed up in two words: value leakage.

Evidence indicates that current business case examples and ROI models identify less than half of the value their solutions can actually deliver and quantify less than half of the value they identified. This suggests that the average seller is going to market with 70% to 85% of the potential financial impact (value) of its solutions not communicated, much less understood.

“It’s not just about how you sell,” one VP of H-P’s business intelligence unit said in the book Mastering the Complex Sale, (2010 John Wiley & Sons, Inc.) “It’s the whole end-to-end alignment of the organization from the perspectives of strategy, marketing, value proposition, portfolio, sales execution, tech support, consulting, and whatever else you do. If you miss one of those pieces or a function has not bought into the direction you are trying to go, you can waste a lot of cycles trying to move the organization. You have to get very strict up front on understanding and defining your value capabilities and your differentiation.”

These 5 critical steps will help align your leadership and stop your value leakage:

1 – Start with the customer first.  Your leadership team must understand the business drivers and performance metrics of your customers and, only then, move from the customer to the lab. Any potential new solution must have a demonstrated and quantified value connection. Don’t allow trade-offs in design for the purposes of cost, quality, timing, or price without a clear understanding of the financial impact on the customer.

2 – Connect your solution’s value to the specific business processes they will impact.  Find the resources to connect each facet of a solution’s value to the specific performance measurements and to the key individuals in the customer’s organization who are responsible for that performance. A data analytics software provided by Zilliant, as an example, indicated an impact on 53 separate processes within their customer’s business. The credibility gained by portraying this level of understanding of their customer’s situation and having the ability to depict the impact across their business, created a compelling solution and the confidence for the customer to make the investment.

3 – Quantify the business impact of your solution.  Ensure that marketing connects and quantifies the solution’s value and portrays it in a tangible and relevant way to the customer’s world. Shell Global Solutions built realistic and compelling business value simulations that illustrated exactly how their customer would achieve very specific and tangible business results.

4 – Recognize the constraints your customer must resolve to achieve the full value of your solution.  Recognizing those constraints and providing the ability to address the risks and costs associated with customer change is a powerful source of differentiated value. A major provider of radiology equipment to hospitals recognized that their customers could not achieve the true value of their equipment without increasing the number of referrals they received from area physicians. They began to offer marketing support and business development specialists who worked with the hospitals to increase the number of physician referrals, and they were paid for those services.

5 – Equip your sales force with the ability to quantify the business impact of your solution. Quantify value in a collaborative manner with customers and in such a way that customers will ‘‘own’’ the resulting financial impact. Shell Global Solutions refined their strategy by rethinking their portfolio in order to optimize value to their customers. They developed an organization-wide value creation capability that produced a powerful enabler of value delivery to its customers and extraordinary profitable results for Shell.

Value leakage doesn’t stop at the door. It finds its way to the most lucrative opportunities and can sabotage even your most valuable customers. If your company is taking high-value and innovative solutions to market, ensure that your strategy is anchored on a collaborative effort with your customers to clearly define, quantify and connect your solution’s value across their businesses and to their bottom line—their net profit. You will clearly recognize the results—successful and profitable execution of your strategy.

Key takeaways:

These 5 critical steps will help align your leadership and stop your value leakage:

1. Start with the customer first before moving to the lab.
2. Connect your solution’s value to the specific business processes they will impact.
3. Quantify the business impact of your solution.
4. Recognize the constraints your customer must resolve to achieve the full value of your solution.
5. Equip your salesforce with the ability to quantify the business impact of your solution.