When we conduct our Grassroots Strategy workshops, a task on day one is to draw your value chain – the steps your offering goes through before reaching an end-user. In the business-to-business world, value chains can include different distributors, specifiers, installers and value-added resellers, all of whom can influence what gets bought by whom. We recommend looking at not just product flow, but also at how decisions and money flow up and down this chain.
5 Pitfalls to Avoid when Value Pricing Software
We had a client many years ago that was struggling with how to bring a new software offering to market, specifically how to price it. Their core product was equipment used in manufacturing processes and the associated parts and accessories. The equipment was a large capital purchase for their customers, but they made most of their money of the ongoing purchase of parts and accessories (think razor blades). Their new software would help their customers design and optimize their manufacturing process and choose the best mix of parts and accessories. The challenge lay in the fact that, although the software would create tremendous value for their customers, it had the unfortunate side effect of frequently reducing the number of parts and accessories that they needed to buy. The leadership team was stuck with some wanting to postpone the software release indefinitely and others wanting to price it very high to make up for the potential lost parts revenue – and no one really thinking about customer value.
Software pricing can be complicated and confusing, but it need not be a reason to panic – even for organizations that are more comfortable pricing hardware. The primary thing to keep in mind is that all the rules of customer value still apply. Below are several of the pitfalls that we see customer fall into when pricing software, and some thoughts on how to avoid them.
Reliving the Glory Days and Boomerang CEO’s
In case you missed it, Robert Iger returned to the helm as CEO of the Walt Disney Company in November, less than two years after “retiring” in 2021. This makes him the latest in a series of high profile ‘boomerang CEOs’ who return to their former posts after allegedly leaving it to a successor. Other companies where this has happened include: Dell, Enron, Best Buy, Starbuck’s, Yahoo, Procter & Gamble, JC Penney, Bloomberg, Seagate, Apple and Xerox.
Business Travel…Can you really stay healthy?
Here it is March, and for most of us our New Year’s resolutions have faded in the rearview mirror. Yet as we adjust to a post-Covid world, many would like to avoid returning to old bad habits. In particular, as business travel rebounds to near historic levels, fellow road warriors struggle to maintain a healthy balance.
No matter what your goals or resolutions are, having a healthy approach to business travel is key to ensuring it doesn’t negatively impact your health, stress and effectiveness at work. At Amphora, we take the work we do seriously, but also believe that it is critical to Invest time to take care of ourselves.
After decades of travel, learning from our mistakes and listening to pointers from others we have compiled a list of a few simple tips that might make your travel just a little bit less stressful and perhaps a bit more rewarding.
RACI: Love them or hate them, but used correctly, they can add value
After years of documenting key processes, re-writing job descriptions and automating org charts, many organizations still struggle to have clarity and alignment around roles, responsibilities, and authority. This impacts business processes, project execution and day to day decisions resulting in frustration, inefficiency and sometimes poor decision-making. We have seen this issue in action with our clients across many industries.
Several years ago, we were working with a major candy manufacturer. One of the key triggers for calling us in was the country president’s growing dissatisfaction with his organization’s inability to make decisions without bringing problems to him. One example that happened to be on his desk when we talked was a Halloween candy promotion with their biggest retail customer, Walmart. We eventually talked his team through the situation and discovered the core issues – three different managers each thought they should make the final decision, and they could cite their job descriptions to defend their position: The account manager for Walmart who was responsible for “maximizing revenue at his account,” the VP of Marketing who was responsible for “maintaining and improving our brand equity across the country” and the CFO who was responsible for “implementing our pricing strategy across channels and key customers.”
As one of them lamented to us, “lots of people can say ‘no,’ but no one is sure who can say ‘yes’”. This is one of the classic symptoms of unclear accountability and misaligned objectives. So, how do we solve this problem?
One approach for clarifying responsibilities is the RACI Matrix.
The Adventures of 2023 Planning and Lessons From a Tumultuous 2022
By any measure, 2022 was a year of nearly unprecedented change and for many of us, one that we are not in a hurry to see repeated. While 2022 saw most of the covid-related restrictions lifted, experts are still debating the lessons and the long-term cost to things like education and small businesses as well as impacts on mental health. In addition, many businesses are still struggling with covid-related supply chain issues, including supply chain ‘whiplash’ in industries that saw big spikes in demand.
Reflecting on all this as we do our own planning for 2023 at Amphora, we are reminded of two key principles that we have stated before, read the blog below for a refresh on these principles!
So You Want to Be a Software Company?
There is a strong appeal to becoming a software company, but is it really the right answer for your business? As these two examples show, the answer is far from clear.
Don’t Apply the B2C Customer Journey to B2B
Regular readers of our blog know that we have an instinctive negative reaction to consumer marketing concepts being applied in B2B. Ideas like personas and brand equity are critical in B2C marketing, but when inappropriately applied in B2B they can drive bad decisions based on customer preferences and personalities as opposed to real business needs and the economics underlying those needs. So, it would not surprise you that we were initially skeptical about applying the concept of “customer journey” to B2B markets.
Mapping this B2B customer journey alongside our client reinforced four key themes. Find the complete blog with these themes below.
Bringing Your Strategy to Life
Many years ago we worked for a client in the commercial waste management business – they hauled garbage from commercial businesses and construction sites. We were called in because, despite having spent a large sum with a top-tier consulting firm for their strategy, they were stuck on how to implement it. The summary of the previous consultant’s work was a strategy statement that read “in our industry, we will provide the best customer service, be the most innovative, be the most efficient and have the best people.”
Continue reading to see what happened, our definition of strategy and how to bring your strategy to life.
Why Won’t Those Stupid Customers Buy My Valuable Solution?
“We could grow faster if those stupid customers just understood the real value of our solution.” If we had a dollar for every time we have heard a client say some version of that, we would be rich. The problem with that line of thinking is that it is a dead end. If customers are stupid, and knowingly buying something other than their best option, then what hope do we have of changing that?
We have come to believe that the ‘stupid customers’ line of thinking is a convenient, but at best superficial, explanation for not making a sale. The truth is that individual customers may seem stupid – they certainly make decisions that we don’t understand. But whole segments of customers are not systematically stupid, or they wouldn’t still be in business. Nearly always, a better explanation is that we have failed to fully understand value from the customer’s perspective.
Taking the Customer’s Perspective?
OK, time for a quick test. If you were looking at this menu board, what would you expect to pay for a bottle of Piper Heidsick champagne? This is a real picture of the menu board that my wife and I were faced with on a recent Friday evening (I have doctored it only to… Continue reading Taking the Customer’s Perspective?
Value Chain Economics: The Secret to Market Leadership
One of the first things we have our clients do in our Grassroots Strategy workshops is define the market or “opportunity” from their customer’s perspective. The primary question we ask is “what is the problem you solve for the customer?” Seems simple, right? Not always. Answering that question is predicated on understanding who is the… Continue reading Value Chain Economics: The Secret to Market Leadership
Do You Know the Momentum of Your Business?
When we run strategy workshops with clients, we usually start with a discussion of the momentum of the business. Borrowing from the concept of momentum in physics, this is our attempt to capture the trajectory of the business – where it is likely headed in the absence of any change in strategy? This foundation is… Continue reading Do You Know the Momentum of Your Business?
Make Sure You Don’t End Up With a “Paper Strategy”
The last two years have been pretty crazy. Whether your business has been doing well or badly in this environment, much of the last two years have probably felt a lot like crisis management. Starting with the new year in 2022, it’s a good idea to refocus your efforts on achieving your long-term strategic goals… Continue reading Make Sure You Don’t End Up With a “Paper Strategy”
What Lessons Can We Take From This Turbulent Year?
The end of the year is always a time to take stock of where you are and think about how you might adjust your plans for the future. Even if you are normally not one to make new year’s resolutions, this past year certainly must have caused you to stop and reflect. Many pundits have… Continue reading What Lessons Can We Take From This Turbulent Year?
Five Pointers to Avoid Being Stuck in a Segment
Grassroots Strategy is a powerful conceptual framework, it changes how many of our clients think and leads to exciting new ways for them to conceptualize their businesses. After having worked with our client teams to crack the code in applying key concepts like differentiation, customer value and market segmentation, it often strikes us that the module on Voice of the Customer (VOC) taught towards the end of the workshop could seem a bit mundane.
In truth, the name VOC is a bit of a misnomer. In the past, we have attempted to change the name of this module to “Voice of the Market” or “Market Insight” but for whatever reason “Voice of The Customer”always seems to come back, despite the fact that we are describing something far larger and more important than an annual survey of existing customers that is sometimes also labelled “VOC.”
Good Segmentation Schemes Often Start Out Sounding ‘Just Crazy Enough’
One of the benefits of having coached project teams through our needs-based segmentation process hundreds of times across dozens of industries is that we can spot patterns that are difficult to identify for even the seasoned industry practitioner who has typically developed a limited number of segmentation schemes, probably in just one or two industries. One pattern that we often see is a natural clustering of customers based on size and complexity – with large customers demanding a high degree of customization for their unique requirements and small customers buying just one or two standard products serving their far simpler needs (or if they do have greater needs, we cannot afford to serve them because of their purchase volume).
While this type of segmentation works in addressing those two extremes, the problem is ‘the middle’ – the medium-size, medium complexity customers. Leaving them all in one segment is often not a good option, as they can comprise 60 – 70 percent of your revenue.
What can The Rolling Stones teach us about Voice of the Customer?
In a probably slightly twisted sort of way I often think of the Rolling Stones song “You Can’t Always Get What You Want” when I think about Voice of the Customer or VOC. It is almost a universal truth that if you ask customers what they want, they will respond with some form of “a better version of what we are buying from you (or your competitor) today at a lower price.” If you just ask directly, this is almost certainly what customers will say they want, and many probably believe it. But the goal of good VOC is to get beyond this superficial response.
Don’t Wait for the Perfect Mission and Vision Statement to Create a Strategy
We often talk with companies who are waiting to work on their strategy because they are reworking their mission and vision statements. There are key differences between mission, vision and strategy and it is essential they all fit together to drive impact. Successful companies connect these three pieces together to ensure their business focus is clear, communicated and market driven. But strategy is too important to be put on hold while you search for the perfect mission and vision.
Our advice: Make sure you don’t put your strategy on hold while updating your vision and mission statements.
Read the full blog for insights on the core components of your strategy that drive results to set you and your company up for success.
Do you Prefer Superhero Strategy Lessons from DC Comics or Marvel?
When we were kids (yes, we had cars and televisions back then), there was no doubt that the DC universe of superheroes was cooler than the Marvel Universe. DC had Batman and Superman, the two coolest crimefighters, plus we had the Justice League cartoons on Saturday mornings and Lynda Carter’s Wonder Women on TV. DC… Continue reading Do you Prefer Superhero Strategy Lessons from DC Comics or Marvel?
In search of …… silver bullet strategy
Too often, companies believe that the purpose of strategic planning is to find some magical ‘silver bullet’ that will solve all their problems and guarantee a path to profitable growth. A frustrating conversation with a client we had a few years ago comes to mind:
Amphora: What do you think of this draft strategy?
Client Executive: I don’t know, it feels like something is missing.
Amphora: Well, is there something wrong with our logic? This strategy should result in higher growth and higher profits.
Client Executive: No, but it’s based on information we already know, I was looking for a big idea.
Amphora: Yes, but this strategy is completely different than how you currently operate; it clarifies the underlying business trade-offs and forces different choices. Is there something you think we overlooked?
Client Executive: I just feel like there should be something more, like an outside-the-box idea.
Amphora: Is there any specific big idea that you think we should investigate?
Client Executive: I thought that was what you were going to come back with.
Expecting your strategic planning team to come up with the next big idea to guarantee profitable growth, is a bit like asking for a plan to lose weight without diet or exercise, or a plan to make money in the stock market without taking any risk. It would be nice if these strategies existed, but it is rarely the case.
Strategies to Stand the Test of Time
Is your strategy precise or robust? Precise: “Exactly or sharply defined or stated” (Merriam Webster Dictionary) or “Marked by exactness and accuracy of expression or detail” (Oxford English Dictionary) Robust: “Capable of performing without failure under a wide range of conditions” (Merriam Webster Dictionary) or “Sturdy in Construction” (Oxford English Dictionary) It is with some… Continue reading Strategies to Stand the Test of Time