What is a market-driven value chain?

There is a lot of noise on blogs and in magazines about sales. That you need to become social. “Selling through social networks”, “Social marketing”, “The end of traditional sales”. If didn’t know better I would believe that the world is changing completely and that I could just throw all I know out the window. The thing is, the change isn’t that big.

The key question is not if you are social or not. It’s if you can take in the customers true needs and efficiently turn them into products and services that live up to those needs (and can make Money from this). Spending money on connecting to customers and then not being able to meet their needs is a waste of your resources and your customer’s time. You need to think about your gaps are.  Focus on what really matters.

I found a slide share about the 2012 future value chain trends These are the things you need to keep in mind when planning for the future:

  • Growing concern about sustainability
  • Shifting of economic power
  • Scarcity of natural resources
  • Increasing spread of wealth
  • Increase in regulatory pressure
  • Increased urbanization
  • Increase in customer service demands
  • Increased importance of health and wellbeing
  • Increased impact of consumer technology adoption
  • Aging population
  • Impact of next generation technologies
  • Rapid adoption of supply chain capabilities

Instead of simply looking at your social capability you need to look at how this picture affects your company and how you incorporate this future in your strategies. If social selling is a part of this or not will pan when setting the strategy.  There is more written about strategy on my earlier blogs.

If you are selling products that are environmental friendly using a minimum amount of resources to produce and distribute, directed at elderly middle class people in big cities like Calcutta or Shanghai, inspire wellbeing and are available at the simple push of a button on whatever platform the customer has in their hand at the moment you have nothing to worry about…

Now that I have written about the market we are facing, back to the topic, what market-driven value chain is about? It’s about connecting the potentials found in sales with the potentials in production and distribution. This has been called Agile, Quick Response and Mass Customization. It’s S&OP but with a focus on what value you are creating in each part of the company, it is all about what I wrote in my earlier blog “Is your company customer driven?” One question that pops up in my head is “How do you measure customer value throughout the chain?” First of all it is unique per customer, second of all it is quite difficult to connect customer value to e.g. mounting a component to the product, or is it? All customers want to land the deal where they experience the best product at a price they relate to the expected life of the product, the durability, the amount of work it was to acquire, and the satisfaction of owning the product (to mention a few).  Is there no way of measuring this? Yes you can.

  1. You can of course ask the customers, but most customers do not want to be bothered with surveys. In B2B sales you should on the other hand never close an opportunity as lost without asking the prospect why you didn’t land the deal, keep score, learn from your failures.
  2. You can measure their purchase frequency and look at their purchase behavior.
  3. You can monitor all their claims. What values are not meeting up to my customers’ standard to a degree that they have contacted your company? This is where you can add means of staying connected with your customers, but be wary that you will have to deliver quality in answers and actions to make Facebook, Twitter, Google+, and so on work in your benefit.
  4. You can monitor how frequently they are in touch with you or in your shop and how frequently this leads to a purchase.
  5. Fill rate, are the goods or services available at the time the customer wants it? Remember to keep inventory real. To have 20 in stock in your computer system is not the same as it being available to your customers unless you have routines that make this true. For services you need to track the wished appointments to see if you can make more time available in the popular time slots.
  6. You need to monitor your competition. What are they offering, at what price? How does your product and price compare if you look at customer expectation? Do you need to add products in your line to meet higher demand and quality or add low price products with lower standards

There is more, but we need to round this off. In a market-driven value chain you must measure and you must communicate these values to all parts in the chain. You must make it clear to each part of the chain what their part in the measurement is and you must find ways to connect drops and peaks to why they happen and where they originated from. Not so that there can be finger pointing, it’s to find ways of improving the process.

To successfully move to a value chain I found Lora Cecere’s slides really good. As a base you need to secure the processes – How do I do the right things right? Look at your Business Strategy – What are the right things to do to increase company value? Look at the Value-network Supply Chain Strategy – What are the right ways to support the business strategy? What are the right trade-offs between value drivers for each value network?

Areas of focus:

From Lora Cecers' slides in the presentation "Leveraging Analytics forMarket-Driven Success" Thursday, January 24, 2013, published by CGT, Consumer Goods Technology
From Lora Cecers’ slides in the presentation “Leveraging Analytics for
Market-Driven Success”  Thursday, January 24, 2013, published by CGT, Consumer Goods Technology

Check out the site http://supplychaininsights.com/ if you haven’t already discovered it, or go to http://www.slideshare.net/loracecere to find Lora’s presentations.

A more dynamic approach to sales

In an LinkedIn discussion I started recently I aimed to get some answers upon the thought if sales reps care to sell your profitable products or just the ones they feel are the easiest to sell or are most comfortable selling.

The audience was really active and helpful, I got many valuable insights and perspectives.

However, the result was also somewhat shocking.

Most of the comments told me that if I just put a compensation plan in charge I will get any of the products sold – but it has to be compensated.

That makes me worried. By nature, a compensation plan is at operational level – how many phone calls to perform, sales meetings, quotes etc as well as order revenue metrics per week and year. These KPI’s may be – hopefully – be connected to the overall strategic goals (check out our sales scenario app at AppStore: http://itun.es/se/-x4oH.i), but the compensation plan is usually written on a yearly basis.

My experience is that you by then has no chance to act agile in between. My colleuage, Håkan, wrote a blog post last year that said something like: “if things go wrong – and they do…”, in “With a map and a compass”, which is true. The essence is that it is a need to set a sales strategy. You really need all people you have on board to go in the right direction and act on a daily basis to fulfill that strategy. As stated above: connect the strategic goals to an operation level.

But then you cannot – in your intentions to secure your strategic goals – go on cementing your KPI’s in compensation plans  and CRM alarming systems if you’re not on track.

Why?

Because the truth may be false. Things may have been happened since you printed down your strategy, of course. It may be an Italian comedian as prime minister that drives your important PIGS market to freeze status or a better development in the US employment statistics.

The only thing that is for sure is that nothing is for sure. Things are happening and if they can go wrong they intends to do so.

How agile does your business has to be? The answer on that guide you in how dynamic you need to set compensation plans and operational KPI’s.

Of course, you need that “alarm system” to tell you if the ongoing outcome deviates from your original plan, but you also need to have a “correction system”. If you wait too long acting upon deviations, you may put more and more heavy artillery in place to be on track again.

I name this intermediate stage “tactical”. You have your strategy – fine – and your activity based targets for individual behaviour on a weekly or monthly basis. However, based on the outcome, implementing the “tactical control system” would provide an agile and competetive approach that in the long run decreases your business risk as well as increase profitability.

In many ways a sound communication model is solving many issues. This discussion is not an exception. I wrote a blog post “Demand strategy decision making in an agile world” about decision making in an agile world recently. In the post you may get inspiration and help while implementing a more dynamic approch in sales.

In the end; how and what you sell has an impact on the rest of your company. My tip is to sit down once a month; look at the alarm system, take decisions, create decision points and be open minded.