Get More “Value” From the Value Chain

June 6, 2013

Strategy Concepts

For many of us running businesses we think there’s just us. Well, there’s us, our company/team and our product or service.The Value Chain

And out there somewhere is our customer, our client. Either they’re a prospect or they’ve purchased from us before and are an active or dormant customer.  We might think it’s us against the world trying to get our message and value to our clients.  I often feel like ‘we’ have to do it all.  Success is all on our shoulders.

But, there’s often someone or something or some group in between us and our customer, either with greater access to those customers or in access and delivery of our service or our product.  Someone or something that is also responsible for our customers taking value from our product or service.

Here’s the classic Michael Porter look at the Value Chain from his best seller Competitive Advantage: Creating and Sustaining Superior Performance, courtesy of Wikipedia.

The Porter Value Chain

So a question is: Within this ‘chain’ of players (with focus on the Primary Activities, not the Support Activities of the firm) between creation of the product, delivery of the product and, let’s use the term, extraction of value from the product or service, how do we get more leverage with or how do we use the chain to deliver value to us or more value to our customer?

That became one long question. . .

Trying again.

How can we use the chain between us and the customer to be even better?

Establish a clear understanding of the other players

I’ve recently been meeting with the top distributors or wholesalers in our industry.  And, throughout my professional career, I’ve noticed that there tends to be only two sides to the coin whenever it relates to opinions about distribution and wholesalers (in the above Value Chain, the logistics providers and operations ‘middle-men’).

On the one hand, you most often have the people responsible for working with wholesalers and distributors who will take the position in support of the middle-men and say they are one of the most important members of the value chain in our industry, that without them we can’t succeed, and that they have access to the best clients. They have the relationships. They control the market. And to not have good relationships and not work with wholesalers and distributors, we will be in absolute critical state that will lead to failure in our business, failure of our products to sell, etc.

On the other hand, there are usually members of my team with a completely contrary opinion – that a wholesaler or distributor is just in the way, that they are paid a commission or they are paid a discount or they get some particular rebate and that it’s a payment more along the lines of blackmail than it is for helping us. That is to say, it’s the other side of the coin with the belief  that wholesalers add no value, that they only take value from the companies that have products and that they essentially do, in fact, blackmail you into paying them rebates or not promoting your products, not having favorable placement, etc.  This group of people believe sales should be made directly to customers.  They contend that our company should not work with wholesalers or distributors or we should eliminate rebates and performance benefits since this is just an evil that must be dealt with.

My position is actually in the middle – there is control but also opportunity.

Go meet with them

Customer input is critical, right?  Well, the same goes for any potential partners.

So, I went out to meet with the top wholesalers/distributors in our industry.  I did this with clear objectives.  My own personal goals – to identify ways I can “use” them to have a better offer of our product and our services to create happier customers and to increase sales.  I’m not having meetings just to have lunch. I’m there to understand how then can help me execute my strategy.

Since we’re talking strategy, the goal is to identify the maximum utility or the maximum benefit that we can get from the wholesalers who are, in fact, well established in the middle of our market.

Find Common Ground

I’m looking for shared objectives. In any interaction, we should be looking for those areas that the other company is  focused on (their priorities) and what they’d like to see happen in the marketplace or business and/or how they’d like to work with suppliers.  I’m matching their priorities against mine and looking for those collaborative opportunities, those, to use a cliché, ‘win-win’ opportunities that will help me achieve my goals and help them achieve their goals.

I identified a number of collaborative opportunities that allowed me and my team to achieve our goals (e.g. more frequent interactions with customers with less sales force time, easier access to our products).  A couple of distributors are building on-line stores for our customers and needed products to “seed” into the stores – I want to get better visibility of our products.

That’s just one example where, from within the value chain, we can find opportunities to work with other players to create a stronger position for ourselves and our company. That being said, surely there will be some companies that will not have shared goals and with whom we will not have aligned expectations.  We would not have the same overall strategic objectives. And we won’t find commonality. We want to find and extract the maximum value from those partners that are aligned with us where we can find commonality in executing our strategy. For those companies with whom we don’t have shared objectives, we don’t have shared goals, and we aren’t in a position to help each other achieve our strategic objectives, then perhaps they shouldn’t be partners and we should be looking for other ways to service our customers.

An action you can take today is to create a list of companies or people that are between you and your customer (or that also serve your customers with some product or service) and target one to meet with.  Schedule a meeting or a telephone call (hell, cold call them) to understand their objectives.  Try to identify a shared objective that will open the door to one shared project that will help you execute your strategy.

<——- Over Here! Don’t forget to “Tweet”, “Share” or “Digg” this post. [hr]
, , , , ,

No comments yet.

Leave a Reply