The market destroys companies that fail to deliver value!
Business success is the result of superior performance of a product with extraordinary levels of service and compelling emotional value sold at the most leveraged price. Without fully understanding the supply chain, value proposition and markets, this cannot occur. Executives in most industries are adapting to shorter product life cycles, rapid commoditization of once differentiated products and weakening of prices by customers with leverage. The strategies and operational initiatives that delivered value last year are losing their impact today.
What does it take to acquire and deliver value? In my experience, the conditions for success are:
- The business and supply chain are aligned to deliver superior customer value.
- Knowledge and capability exists internally (in the company) and externally (in the supply chain).
- The focus is on products where only a small fraction of the value is being deployed (thus making it a prime target for renewal development and leverage).
- Value must meet customer needs, stakeholder needs and shareholder needs.
- Value must be defined, which requires a detailed understanding of the relationship between price and functionality of products and services.
- The total organization and supply chain must buy in to the value strategy.
The combination of functionality of product or service offered to the customer (the value of utility), the price they will pay and the emotional impact (the value of esteem) results in true value. It is inevitable that companies will need to integrate and align the supply chain to meet business objectives and achieve success.
What are the six steps to achieve these conditions for success in value optimization?
- Assemble expert teams to define future markets for their products and services and develop plans to dominate them.
- Define strategies based on differentiation, innovation and cost leadership.
- Assess the strategic capabilities that need to be resourced, developed, protected and leveraged ahead of competition.
- Exploit the market value of intellectual capital.
- Invest in developing internal teams and strategic supply chain partners.
- Define and extract value.
When looking to suppliers to acquire and enhance your product’s value, it’s important to understand that acquiring and delivering supplier value does not rest solely on the procurement or supply chain teams; it is a business-wide process. Without a forward business strategy, investment, alignment and business-wide participation, value will not be optimized for your company, your suppliers or your customers.
How will you ready your company for the challenge ahead?