The Nuts and Bolts of Customer Value

Thanks to Dave Brock, I was introduced to an article in MIT Sloan Business School’s magazine, which details an 8-step process to improve workflows, starting with identifying and prioritizing problems, mapping the flow, implementing an improvement, measuring results, and making adjustments as necessary. It’s actually pretty straightforward, and I mentioned to Dave that I thought it was a bit simplistic.

He didn’t disagree with that assessment, but he made the important point that the reality is that too few understand even these basics. That rings true with me, because I often find that salespeople aren’t usually clear in their own minds exactly how they add value to their customers.

There is a lot of talk about creating value for customers. We all know it’s important, but it’s kind of like the recipe for rabbit stew: first, catch one rabbit.

How do we catch the rabbit to make the value stew?

Let’s first define value in B2B sales terms. Essentially, every business is a cash flow engine, which runs on cash to acquire resources and fund activities that customers will pay for—in order to create more cash.  Financially, you create value in one way only: by increasing cash flow. To add value, you have to affect their business in such a way so as to either increase cash flow or prevent its reduction.

So, the big picture of value creation is that you must improve your customer’s cash flow engine in some way. There are three general ways to do this: increase revenues, lower costs, or make ore efficient use of assets. That will address “why” they should buy from you.

But we still haven’t caught the rabbit. To do so, we must answer the “How” question. How, specifically, do we cause those cash flow improvements?

The answer lies in process improvements. Carrying the engine analogy one step deeper, every engine is a collection of systems that work together to generate the results it’s designed for. Your customer’s business comprises a bundle of processes and workflows that all fit together. Every process receives inputs and applies work to them, to create an output that a customer values. The customer can be external or internal. External processes that create value for customers include manufacturing, outbound logistics, sale and support, etc. Internal processes are those that keep the lights on, satisfy legal requirements, account for results, and so on.

These processes are the levers that you can manipulate to create business improvements. It’s as simple—and difficult—as that. You create value by improving relevant processes in some way. You may reduce inputs, increase throughput, speed up the process, remove constraints, eliminate steps, improve quality, and any other myriad ways. Functional improvements are the route to financial improvements.

So, you can’t solve problems, produce profits, or even generate useful insights unless you have a deep and complete understanding of the processes you affect. That’s where ideas such as those in the MIT Sloan article are valuable. Whether you use their process, or one of your own, you must first understand in detail how the processes that you touch with your product or service currently work—the inputs required, the activities and work applied to those inputs, the outputs expected. Next, you must be able to clearly identify and articulate one or more of the ways you can improve the process. Basically, there are four ways you can improve any process: solve known problems (these are usually the low-hanging fruit because they are already aware of them); take advantage of opportunities; adapt to changes; or manage risks.

So, by understanding the nuts and bolts of the relevant  customer processes, you can connect your solution to specific improvements that will lead to quantifiable cash flow improvements. If Dave Brock is right in saying that too few salespeople understand these basics, becoming an expert on your customers’ workflows presents an untapped opportunity for you to set yourself apart from your competitors and increase the perceived value of your solutions.

There’s an added benefit—and a caveat—to becoming an expert in your customers’ processes. You gain personal respect and trust—as long as you don’t leave the process improvement job to others. While your company may provide help from marketing and sales enablement with education and collateral material, it is absolutely essential that you become the expert. As Matt Dixon and Ted McKenna say in their book, The JOLT Effect, by owning the flow of information, you bolster the customer’s perception of you as the expert. They quote one rep, who said:

“I always want my customers to see me as the source of information and a subject matter expert. If I abdicate that role, they’ll only see me as a glorified admin and then they’ll start relying on their own research rather than looking to me as a guide and trusted advisor.”

Financial value rests on functional value, and when you can understand and credibly discuss both, you will be a rare and valuable resource that your customers will cherish.