Chapter OneThe Value-Added Organization
What makes great organizations great? Is it their products? Is it their service? Is it their employees? Yes, yes, and yes. Value-added organizations are great because they deliver a valuable total experience to their customers. This chapter is about how your company can become a value-added organization. The way you approach your career, interact with your peers, and interface with customers determines the level at which your company competes.
At the end of this chapter, you will be able to
discuss how organizations compete;
describe the chief characteristics of value-added organizations; and
explain how you, interacting with your peers, determine how effectively your organization competes.
THREE STYLES OF COMPETITORS
Since 1981, I've had the privilege of working with some of the best organizations in the world—global leaders in their industries. I learned as much from them as I taught them. One of the lessons they taught me was how to compete in an industry.
At the most fundamental level of competition are equalizers, or qualifiers. They want to be as good as everyone else in their industries. They seek ways to close the gap between themselves and their competitors. Equalizers have a lot of catching up to do. They live the "me too" philosophy.
If one competitor offers twenty-four-hour service, equalizers will copy this. If another competitor offers better quality, equalizers will attempt to close that gap. They are always seeking ways to level the playing field between themselves and everyone else. Their competitive focus is external. They take their cues from the competition and respond appropriately.
One step up from the equalizers are the differentiators. They want to be better than the rest of the pack. While equalizers try to close the gap between themselves and everyone else, differentiators seek ways to expand the gap between themselves and everyone else in their industries.
Differentiators live the "and then some" philosophy. If one of their competitors offers forty-eight-hour turnaround time on orders, differentiators will try to do it in twenty-four hours. Like equalizers, differentiators take their lead from the competition. They have an external, competitive focus. Their goal is to be better than everyone else in the market. Their competition is their benchmark.
Value-Added Peak Competitors
These are the highest-level competitors. Value-added organizations (and people) march to a different drumbeat. They rarely focus on the gap between themselves and the competition. They concentrate on bridging the gap between potential and reality—their potential and the customer's reality.
Value-added peak competitors are organizations and people that embrace and live the value-added philosophy. They expect the best from themselves, which enables them to maximize the value they bring to their customers.
Value-added peak competitors have a positive addiction to excel-lence—they're hooked on doing things well. They pursue excellence in all that they do. They've discovered the secret of companies that adopt a business excellence approach: they outperform the competition, create lasting value, and achieve long-term success in the process. A 2000 U.S. Department of Commerce study of Malcolm Baldridge National Quality Award Winners found that the stock market performance of companies that practice business excellence beats the S&P 500 average return on investment by five to one.
There are no sacred cows in these value-added peak competitor organizations. They challenge the status quo with this question: "Does this policy, procedure, or process add value to our efforts, or does it just add cost?" Your company's practices that add cost without value diminish your position in the market. They slow you down. It's like driving with one foot on the brake and one foot on the accelerator.
The value-added way of life is a simple philosophy that permeates every aspect of your being: do more of that which adds value to your life and less of that which adds little or no value—whether it's time management, career development, personal and professional relationships, or spiritual, emotional, and physical well-being.
Value-added peak competitors are proud of what they've accomplished but possess the humility to admit that they can still grow and get better. Couple this humility and pride with a curiosity about their own potential, and value-added peak competitors also challenge themselves with this question: "Is this the best we can do with the resources we have available, or can we reach higher?"
Value-added peak competitors benchmark their accomplishments against their own company's potential, not against the rest of the market. They respect, but do not fear, the competition. They realize that their primary mission is to serve customers better, not just to beat the competition. They defeat competitors by serving customers better. Their primary focus is their customers.
It is a customer-value focus that defines value and success in customer terms. It's not value until the customer calls it value. Value-added peak competitors view success as their ability to help their customers achieve higher levels of success. By helping customers become more successful, value-added peak competitors, in turn, experience success.
Value-added peak competitors focus more on making a difference than on just making a deal. They realize that if they work tenaciously to make a difference for their customers, they will have all the deals they can handle. And they make a difference with their employees. As you will discover throughout this book, people represent the single, unique dimension of value. Why? Because there's no commodity in creativity, and there's no traffic jam on the extra mile.
Organizational excellence is the natural outcome of individual and team excellence. How employees approach their careers, interact with their peers, and engage customers affects the bottom line. Becoming a value-added organization is a top-down, bottom-up, and inside-out process. Everyone in your company must buy into this philosophy.
How You Approach Your Career
Whether you're the CEO, the vice president of sales, a mid-level manager, a customer service rep, a factory worker, or a salesperson, your performance affects your organization's performance. Are you a cost center or a profit center for your company? Do you add value or cost to your company's efforts? What are you doing to add value to your company's efforts?
Employees who are value-added peak competitors seek ways to add value because that's the way they live their lives. They naturally put forth extra effort. Excelling is a habit for them. One effective way to add value is to identify impact areas where you can make a difference for the customer and for your company. Your behavior, attitude, and the way you treat customers can have a positive impact on your company's performance.
A few years ago, I was working with an equipment dealer in Sacramento, California. In an effort to identify impact areas, we assembled a group of employees and asked them, "How do you personally add value?"
One of the mechanics said, "On every piece of equipment that I service, I perform a five-point safety check just to be sure that everything leaving my repair bay is safe for our customers to operate."
One of the salespeople in the group heard this and asked, "Do you perform that test on everything?"
The mechanic said, "Yeah."
And the salesman responded, "I can sell that value added this afternoon."
Other employees in this company also found ways to add value. One manager added value by the amount of face time he spent with customers. He could get things done. By having his ear that close to the ground, he was able to prevent many of the fires that other companies fought. He was a real go-getter.
One salesperson added value with her twenty-four-hour accessibility to customers. She gave them her home phone number, cell phone number, and inside company contacts. She made sure that she was never out of touch with her customers.
In the same vein, an accounting person understood her role as building bridges with customers to draw them in, not walls to keep the bums out. She looked for ways to help customers qualify—not disqualify—for credit.
A driver went the extra mile for his customers by adjusting his delivery route for his customers' convenience. "I want to make it easy for our customers to receive our deliveries. Other drivers won't do that," he said. This driver made it a habit to do what others viewed as a hassle. This positive addiction to excellence is what characterizes value-added peak competitors—they make habitual what others consider to be a hassle.
"What am I personally doing today to add value to our efforts?" If everyone in your organization asked and answered this question daily, I believe you could lift your organization to the next level—with your employees. After all, employees are the greatest source of unique value for companies.
How You Interact with Your Peers
Everyone in an organization has a customer—internal and/or external. External customers are those traditional customers outside your company who pay for your goods and services.
Internal customers are other employees in your company whom you serve. The service department is the internal customer of the parts department. Customer service is the internal customer of the sales department. Information technology serves marketing. Employees serve management, and vice versa. The human resources department serves most other departments. Identifying your internal customers allows you to build customer satisfaction with them. Who are your internal customers?
Two corollaries follow this internal customer relationship. First, you can serve your external customers only to the degree to which you serve your internal customers. Second, everything you do to serve internal customers has an outward, rippling effect on your external customers.
Customer satisfaction has a direct relationship to employee satisfaction. Satisfied workers create satisfied customers. Loyal employees create loyal customers. Customer loyalty parallels employee loyalty, making loyalty a leading predictor of your company's profitability. Satisfied, loyal customers return and bring their friends, too.
Value-added organizations pride themselves on teamwork. They realize that a team is only as strong as its weakest member. They leverage this synergy to serve their customers better. Three traits characterize value-added teamwork:
1. "We is greater than Me." Teams fail when there's too much "me" and not enough "we." Synergy is the collective effort of everyone on your team. Two people working jointly on a project bring more collective effort to the table than the sum total of their individual and independent efforts. As Jack Welch, legendary CEO of General Electronic, puts it, "None of us is even close to being as smart as all of us." This is synergy—we is greater than me.
2. Value-added peak competitors treat each other with the same respect that they desire from their best customers. Employees who work together in an environment of mutual respect form a special dynamic that extends to the way they treat their external customers. A culture of respect develops.
3. Members of a value-added team build each other up, not break each other down. With all the competition you have on the streets, do you really need internal competition? Of course not. How you support fellow team members and serve internal customers affects your organization's performance. Remember, organizational excellence is the natural outcome of individual and team performance.
It is unfortunately all too common in companies for one department to view other internal departments as competitors, not as peers or teammates. One department feels the need to compete with another. An expression in management psychology vividly describes this phenomenon: the silo effect. One department acts as if it has walls surrounding and isolating it from other departments. It acts as if it were a separate company, often competing for in-house resources and credit.
How can you effectively fight a battle on the streets when you have several departments from the same company battling each other? The message you need to spread internally is "We are not the enemy." Value-Added Selling is a team sport. The salesperson may sell the first item, but it's the customer's total experience with a company that brings him or her back.
How You Engage Customers
In value-added organizations, serving customers is a privilege, not a pain. Customer service is more than a department. It's a philosophy in which everyone in the organization feels—and acts—accountable for creating satisfied customers.
Value-added organizations are proactive with their service. They nip problems in the bud. They anticipate and act in advance. Being proactive means never having to apologize to the customer for poor service.
Because of their strong customer focus, value-added peak competitors define value in customer terms. Thus, customers will pay for the value with a higher selling price. If you define value in seller terms, you will pay for it with a higher discount.
Selling is relationship management. How well do you manage the relationship with your customers? Customer loyalty goes with the person, not with the brand. One of the great marketing myths is brand loyalty. While customers prefer brands, they reserve loyalty for people. This loyalty results from their total experience in dealing with a supplier. What kind of total experience do your customers have with your company? How is your customer loyalty? How is your repeat business?
Value-added organizations constantly seek ways to innovate and create additional value for their customers. A desperate curiosity about their own company's potential coupled with a strong customer-value focus encourages value-added organizations to dream and to stretch. They live by asking "What if?"
"What if we could do it this way?" "What if we could design a better way for the customer to accomplish business goals?" "What if we could make it easier for the customer to do business with us?"
Value-added organizations are great because of their people. They believe that people can and do make a difference. With the commoditization of products and the convergence of services, companies are churning out millions of look-alike products and services. The single, unique dimension of value is people.
A company president said to me recently, "Tom, we used to be a value-added-peak- competitor organization until we lost our best people. Now we're just like everyone else."
Value-Added Selling Review and Action Points
1. To become a value-added peak competitor, you must pursue excellence in all that you do, challenge the status quo, and judge your accomplishments by internal, not external, standards of performance.
2. Live the value-added philosophy by applying this simple yet powerful attitude to your daily activities: do more of that which adds value to your life and less of that which adds little or no value to your life.
3. Organizational excellence is the natural outcome of individual and team excellence. How you approach your career, interact with your peers, and interface with customers determines the level at which your company competes.
Chapter TwoValue-Added Selling Philosophy
The line from Peter Allen's song by the same name, "everything old is new again," seems like an appropriate way to start this chapter. Value-Added Selling is a dynamic philosophy. It is evolving strategically and tactically as you read these pages. The philosophy itself is stable, even as new ways to apply it emerge. This chapter introduces you to the Value-Added Selling philosophy and its rock-deep-roots principles.
At the end of this chapter, you will be able to
discuss the meaning of value;
define Value-Added Selling;
discuss your value add-itude®;
describe the characteristics of value-added salespeople;
recite what buyers really want from sellers;
explain the real impact of discounting on your company; and
list the reasons why salespeople fail to sell value-added solutions.
Two things determine value: what someone gives up and what someone gets in return. This ratio of output to outcome is a true measure of value. Customers assign value as they answer this question: "Is the product or service a fair exchange for what I give up in time, money, and energy to acquire it?" In Value-Added Selling terms, price is what buyers pay, and value is what they receive.
Equity plays a major role in one's perception of value. To get as good as you give is a good value. To get better than you give is a great value, and so people make relative value decisions, weighing sacrifice against gain to determine value.
In Value-Added Selling, there are special value considerations:
Like beauty, value is in the eye of the beholder. It's the buyer's perception of value that counts. More precisely, his perception of equity registers as value in his mind. You really don't know what value is until you first hear it from the buyer. If you want to determine what someone really values, observe what he is willing to sacrifice to acquire it.
Value is bigger than price. Value is an outcome, result, or return on investment. First comes the investment, then the return. The yield of your solution determines its value more than the price to acquire it. Buyers who obsess on price must learn to think in terms of return on investment. They are locked in inappropriately to output, not outcome.