In Delivering Profitable Value, Lanning claims the primary business objective is maximizing over the long-term the value the company delivers at a cost allowing profitable returns. As we’ve seen before, value is defined as the net desirability customers perceive in their resulting experiences. So if the company should be focused on improving those experiences, who specifically does that? Who does the research to learn what the desired experiences are? Who connects the capabilities of your products and services to those experiences? Who monitors whether the intended customers are gaining more value or less value over time?
In most companies, no one does. Some would argue the CEO should also be the Chief Value Officer. In theory that’s correct. The CEO must evangelize and support a value-driven perspective for the company. They must create a strategy, an organization, and operating plans for a profitable value-delivery system. But their responsibilities are so broad they can’t get involved in the details. They have to delegate the tactics and operations to others. But who?
Many would point to the Product Manager and to some extent I agree. Unfortunately, in many B2B companies the Product Manager is the expert on the product and spends most of his/her time helping develop new products or helping sell the existing ones. It’s rare the Product Manager has the time, the priority and the skills to do the market and customer research necessary to feed value-driven decisions.
The best solution I’ve seen is the creation of an industry or segment manager. With responsibilities orthogonal to the product managers, this position spends most of their time researching, monitoring and predicting the trends in the target market. Internally they become the champion for the intended user and represent in detail the experiences that add the greatest value.
How about at your company? Are there other positions that spend the majority of their time on the tactical and operational side of value delivery?
Effective customer research relies on many pieces; well-defined objectives, carefully formed questions, methodical analysis and speaking with the right people. The bad habit many companies fall into is conducting the research with their favorite customers. This isn’t ideal.
There are several factors which contribute to this temptation. First, it’s much easier to call a friend to arrange a meeting then to contact a total stranger and convince him/her to spend time with you. Then there’s the feeling that because they already know and trust you, you are more likely to get honest opinions and insight into their needs from a friend than from a stranger
who may not be comfortable revealing this information in a first meeting.
The negatives, however, outweigh the positives. Remember that the main objective of the research is to gain a deeper understanding of the needs and opportunities in your target market. Each interview or survey is a data point which adds to your overall understanding. The closer the interviewee is to your intended customer, the more valuable will be their input. So the key
criteria in evaluating the usefulness of interviewing your favorite customer is how close are they to your intended customer, not how much they have bought from you or how much they like your company.
Another problem is bias. By being a customer, and most likely a repeat customer, they have already proven they prefer your value over alternatives. It’s a self-selecting group. It’s like asking people in the ticket line at a Lady GaGa concert how much they like Lady Gaga.
I’m not suggesting you ignore your current customers. They are a source of valuable information. But you do need to balance their input with other points of view. Interview customers who stopped using your products and customers who use your competition’s products. If you can arrange it, interview prospects in your target market who have never heard of your company. The combination of all these points of view will add up to a more thorough understanding of your opportunities.
What methods do you use to select candidates for research involving face-to-face interviews?
The ancient Greeks speculated about the basic building blocks of matter and called them atoms. We all try to reduce things down to their basic elements. In order to understand complexity, it’s helpful to break things into their fundamental pieces. Once you know what the pieces are and how they work you can assemble them into components and systems with a better understanding of how the whole thing operates.
This started me wondering about the fundamental elements of business and I quickly concluded it all depends upon your business perspective. If you take a product-oriented view, the “feature” is your atom. Products are composed of many features. Lists are made of desirable features. Some features are selected for the next product and others are deferred. You compare your features to your competitor’s features. Even in your communications, you talk about your product’s features or you talk about the benefits your product’s features provide.
If your company has a strong financial or operational perspective, your atomic view is based on “dollars”. You carefully track how many dollars you collect, how many dollars it costs to generate that revenue and your cash position is measured in dollars. Annual performance goals for employees may be based on how many dollars they are able to bring in or how few they spend.
The value-driven company has an external view. The basic element for these companies is a “user experience”. It’s the sum of these experiences that make up the value a customer gains in doing business with your company. These experiences are of many different types. The most obvious is operational. By using your company’s product, does the customer achieve an outcome they want? For example, can they now calculate the dollar value of their sales funnel with your CRM system? Experiences extend beyond the operational. They can include the ease or difficulty of getting a question answered, training
options to learn the capabilities of a new release or the challenge of migrating their old database to your new software.
Peter Drucker said the purpose of a business is to create a customer. Therefore it seems like the experience atom would be the most useful building block with which to understand and improve the relationship between your company and your intended customer.
Beyond features, dollars or experiences, are there other elements you’ve found helpful in thinking about your business?