LeveragePoint Value Management Blog

Activating a Winning Capabilities Strategy

When it comes to developing competitive capabilities, it’s foolish to try to boil the ocean. It’s simply not possible for everyone to become all things to all people, no matter how much training may be available. So companies are beginning to bracket their efforts, by being selective in identifying those critical capabilities that are required to create a strategic differentiation and win in the market. These capabilities then become the basis of a focused effort to strengthen their resources in a strategic way. 

In many cases, however, it is the combination of several capabilities that creates success, and that combination changes with each person, each team, each project, and each business unit. No single individual or team possesses all of the capabilities required to meet the oncoming waves of competition and change.

For example, one key capability set for many companies today is the ability to understand, communicate and capture the value of their products for their customers. This requires deep knowledge of one’s own product (which most companies have in some fairly explicit form) and of the customer’s business model (which in most companies is partial and scattered between marketing, sales and customer service with no holistic view available). Customer knowledge needs to be integrated into a set of capabilities around value management and accessible to everyone from innovation and product development, to marketing, to sales and customer service.

Once a firm’s critical capabilities for competitive advantage are understood, what is needed is a way to locate and capture those strategic capabilities within the firm’s resources—people, methods, and tools—and share them as needed in real time. New capability cannot be developed on the spot every time it is required. There simply isn’t time. Instead, capability must be thought of as a global resource to be shared throughout the global organization. And there’s the rub: what is a requirement for a winning strategy also seems impossible to achieve.

But it isn’t. To achieve this goal, what is required is a new way of thinking about what we mean by capability. And that new perspective is what has given rise to what we call the eWorking platform. With eWorking, capability is not something that someone has; rather, it is something that one uses—the result of a creative interface of an individual’s experience and knowledge added to the collective experience and knowledge of the organization. eWorking helps professionals move beyond what they know to what is known, transforming what they can do to what can be done. The eWorking solution puts the expertise and resource base of the entire enterprise at the fingertips of the user in a focused and time-sensitive way, just enough to fill the individual’s current gap at the moment of need (see Figure 1). 

 

To be truly effective in the rapidly changing marketplace, a solution must be not only adaptive, but also fluid enough to respond in real time to the increasing waves of change. eWorking platforms not only capture best practice and experience of the front-line people who apply the methods, they simultaneously drive the evolution of business methods and iterate those methods in real time. As a result, management can rapidly improve or change business methods to adapt to actual patterns of use or unpredictable circumstances. The tools, methods and data can be instantly updated with improved methods and best practice. This is real-time change management, a subject that is ripe for discussion in this space.

As one example, earlier this year we talked about a marketing professional who had just come onto a project. He had some of the needed expertise and knowledge, but was lacking the full picture and due to unexpected internal changes there was nobody to quickly bring him up to speed. However, the company had been using the eWorking platform which had identified and captured the previous project leader’s expertise. The project in question involved the launch of a new product and the creation of value models and value communications to be used by the sales force. The capability the new project leader required had already been embedded in the tool he was using to create the required output. Even though his predecessor was no longer with the company, the needed part of his predecessor’s capability remained embedded in the tools. The new project leader was able to activate that capability and use it to his advantage. 

 LeveragePoint has developed and employs an eWorking platform (see Figure 2) for the LeveragePoint for Value Management product suite, which is now in use around the world. What is being seen by those who use it is an ability to identify, capture and apply capability in a surgical way as it is required. And that begins to change the entire capabilities paradigm.

Jonathon Levy

Chief Strategy Officer

Paddling Up the Value Waterfall

The pricing waterfall is a classic and widely used framework for understanding and managing transaction pricing. It illustrates the drop (like a waterfall) between an official list price and the final "pocket" price that the seller sees. Usually it's not a straight Niagara-like plunge, but rather a flume with a series of multiple drops. These drops are caused by various discounts and related pricing practices. For companies with complex product lines and pricing policies this is quite challenging and has given rise to a number of pricing transaction software companies such as Vendavo, Pros and Zilliant.

Certainly companies can and do benefit from more effectively managing their transactional pricing waterfalls. We would argue that companies must also look further "up-stream" and manage their value waterfalls too. In other words, companies need to be able to create differentiated economic value and list prices should be based on the economic value that offering provides to the customers. As readers of this blog know, we advocate using value models based on Economic Value Estimation for this task. Better aligning price with value will enable higher pocket prices because there is less customer demand for special discounts. The chart below shows how the value management waterfall flows into the price (transaction) management watefall.

Transaction (or price management) software is very good at analyzing massive amounts of internal sales data. This data is used to provide dashboards that show the leakages of various pricing policies and the controls that manage them. Where does value management data come from?  Since we are typically asked this question when implementing LeveragePoint for Value Management here are some answers:

• Internal Common Wisdom - Value models often begin with a few well-thought hypotheses that are shared within the marketing team.  Just by making explicit individual's often implicit assumptions and then aligning them among a small team can be immensely productive.
• Wiring in Sales - Since sales interact with customers every day, they are well positioned to get the latest field data about the state of customers' business models and inights as to the relative impact of their offerings versus competitors. Tapping into this data stream closes the loop between sales and marketing.
• Customer Research - We've seen this done in a variety of ways.  A marketer at one of our clients plans to use LeveragePoint to collect data in her field marketing tests. Other companies commission third-party customer research studies which can be used to build models in LeveragePoint for Value Management that are then tested with customers by sales.
• Web Data Sources - Business intelligence sources like Dow Jones and Thomson-Reuter provide timely data on companies and industries.  We are particularly excited about WoframAlpha which provides powerful new ways to find and work with quantitative data.

Like other SaaS solutions, LeveragePoint for Value Management is designed to easily facilitate accessing and integrating these data sources. Providing powerful data search and integration services for specific industries will be an important part of LeveragePoint's own value proposition.

Ed Arnold

Director of Products

Risk Management is More than just Seeing Around the Corners

As Eric Lamarre  and Martin Pergler wisely suggest in the current McKinsey Quarterly, “unknown and unforeseeable risks will always be with us, and not even the best risk assessment approach can identify all of them.”  

 

No one can argue with that reality. Unpredictable waves of change, including competitive challenges, economic fluctuations, and even seemingly-unrelated global and regional events, can wreak havoc with the best-designed methods and strategies. And yet, there is a way to address unforeseen events before they occur.

 

Companies are beginning to implement a strategy for managing their strategic knowledge resources by deploying a platform for real-time change management that captures and connects their internal intellectual capital with best practice and early event detection in the field. The system allows virtually instantaneous, iterative and increasingly targeted response to bracket the organization’s response to new events and circumstances.

 

This “real-time change management” infrastructure works on the same principles as stabilizer systems on cruise ships. Since it is not possible to predict the speed and direction of each oncoming wave, the ships deploy a set of “wings” under the hull that are activated by a gyroscope. When the ship encounters an unexpected wave the stabilizer immediately responds by moving the underwater blades laterally and horizontally in the opposite direction, thereby neutralizing the impact of the wave and smoothing the motion.

 

The corporate version of this system is referred to as an “eWorking” platform. It is capable of detecting unexpected waves of change and quickly responding to them in much the same way. The power of such a system is that it can immediately activate strategies—knowledge and tools—supporting a company’s front-line knowledge warriors. This higher level of adaptability represents a big departure from the stable, static knowledge and learning systems that we find in most corporations. Much of the intellectual capital of a company is locked up inside static systems that were built for stability. But as Lamarre and Pergler point out, these days adaptability trumps stability. Thomas Friedman takes it a step further, suggesting that economic stability will actually cause companies to fall farther behind, whereas rugged, adaptable entrepreneurs and the systems that support them will be empowered.

 

LeveragePoint Innovations recently assisted one of the world’s largest CPG companies in creating a responsive eWorking pilot that evolves itself by linking its knowledge resources to the people that use them in a two-way flow, resulting in real-time iteration and almost instantaneous response to the front-line where their marketing methods are being tested by changing conditions on a daily basis. The solution was iterated three times in as many months, each time responding to user needs and refined understanding about its actual use. The result of this new platform was an estimated 21X ROI and a decision to deploy the solution globally.

 

This is the platform that supports the LeveragePoint for Value Management suite of products. It allows marketers to respond quickly to the changing competitive landscape and to other environmental changes that reset the value of your product.  It is not possible to predict every new and changing circumstance, but it is possible to respond to the unpredictable waves of change with an adaptable system that can turn on a dime. Such a solution provides a complimentary adjunct to the process of stretching corporate vision to see around the next corner, and a way of activating that vision.

 

Jonathon Levy

Chief Strategy Officer

Eastman Uses Economic Value Estimation™ to Understand the Value of New Polymer for its Customers

Eastman Chemical Company chose “The results of insight™” as a tagline to summarize and capture their focus on marrying innovation and solutions that work.  They are referring to their deep insight into chemical and industrial processes, and into the many diverse markets they serve. For a large chemical company, Eastman has a very sophisticated approach to marketing, and they understand that B2B marketing is primarily about developing deep knowledge of your customer’s business model in order to add value. One recent challenge in evaluating how value is added was with a new-generation material, Eastman Tritan™ copolyester, that offers a compelling alternative to traditional clear polymers, including polycarbonate. Eastman used the full range of the Monitor Group marketing tools covered in LeveragePoint for Marketing Strategy in uncovering the marketing opportunity for Tritan™, and used Economic Value Estimation™ or EVE® to understand how to create and communicate value.

The project that led to Tritan™ began in 2004. One of Eastman’s early hypotheses was that there was a strong market need in the housewares industry for a clear, tough plastic with good dishwasher durability. However, the low heat resistance of heritage copolyesters had limited Eastman’s penetration into dishwasher safe applications. Eastman Tritan™ copolyester provided an opportunity to engage this market space with a new material. Success depended on understanding and capturing the differentiated value that would be provided to all key participants in the value system including the end consumer.

Initial market research found unmet needs where Eastman could provide differentiated value. Manufacturers in areas such as commercial and consumer housewares and sports bottles were looking for improved dishwasher durability, lower mold-in stress, more design freedom, a BPA-free (Bisphenol A) material and lower system costs. All of these are potential value drivers. Understanding where value could be created for customers informed the product development process and market activation plan. The end result was Tritan™, a new-generation polymer now being used in many new applications and markets, opening major new business opportunities for Eastman. Tritan™ is also beneficial to consumers in that it is an excellent alternative to existing clear materials that contain BPA, thus winning respect from health conscious consumers.

 

As Eastman prepared to take Eastman Tritan™ copolyester to market, they built a series of EVEs to help them understand the differentiated value they were providing and to communicate this to potential customers across many market segments and many end-use applications. Presented in LeveragePoint for Value Management, an example EVE for Tritan™ is shown in Figure 1 (Eastman conducted this project before the LeveragePoint for Value Management application was ready so their EVE’s have been crafted by hand). 

This is just one of many EVEs for Tritan™, as each customer and application has its own value drivers and variables the differentiated value can differ in each case. Importantly, Eastman has been able to develop, demonstrate and capture differentiated value through the effective use of EVEs within product development, in value communication and as a sales tool.

Steven Forth

CEO, LeveragePoint Innovations Inc.