Plastics Ban or Big Bang

Posted July 4, 2018 by Customer Value Foundation
Categories: Business & Management

Tags: , , ,

The Big BAN, no Big Bang!

India is fast becoming a country that cannot control many of its day to day issues. Is this because of lack of governance or will, or just a lackadaisical attitude?

The net result is deteriorating services, which when they reach the stage of unmanageable problems, the only solution the government can think of is banning….they cannot think of managing such issues.

The ban on cars more than 15 years old is so ridiculous. We cannot inspect cars for their usefulness and viability? The easiest is to ban.

The ban on plastics is another example. Why don’t we see such huge issues in USA, Japan, Saudi Arabia and Europe. How do they manage?

Our pet excuse is we have a huge population, but our use of plastics is less than in the US. How did they manage plastics waste? What methods did they use, from strict collection policies, to even stricter littering laws?

We just seem to turn a blind eye to problems such as this, till someone in the press talks about it or posts a picture. A few days of seeming activity follow and we are back to the status quo of garbage, filth and plastics waste.

This banning culture instead of leading to big bang solutions will lead to our banning everything:

We will ban pollution. Oh, oh, we cannot, because that is the solution. Let us ban the environment. Then we won’t have to care about clean air, and we can all be banned (read die).

Let us ban old people because we cannot take care of them.

We should ban traffic because we cannot manage it. Just drive to the airport, and see the many cars parked en route, some next to police stations. Instead of being challaned, they have now encouraged street vendors selling food and drink.

Let us ban till we have nothing to ban other than big government with no big bang solutions other than bans.

Perhaps we should ban them before we ourselves get banned, as the polluters and the source of the problem.

Most of us in business or as users do not think about pollution, ecology, society or any of these things. We think of ourselves and our convenience. The convenience of the company is to make products that sell, and make money. The convenience of users is being able to use something as one desires, conveniently.

Convenience is in a sense, selfishness. What is good for me seems to overtake what is good for all of us, and the earth. Remember, if we abuse, Mother Earth, we will suffer. Mother Earth can survive without us, but we cannot survive without her.

So the first thing is how the user can be brought to curb plastics pollution:

  1. Make it convenient for him to throw the package into bins and recycling streams. Sadly, these do not exist.
  2. Make it inconvenient for him to use the package: This does not mean inconvenient packages, it means a large cost to prevent throwaway packages. Let’s take Sunset point at Naddi, Dharamsala. Once a pristine site, now it is littered mostly with plastics and also with paper, cans, etc.

Can we charge a punitive fee like Rs 15 for a plastics or glass bottle, whereas the cost of the bottle and product maybe Rs 12. At the exit of Sunset point, let the user deposit the bottle and get his money back.

This will send an instant message to the user and also the seller and the manufacturer, that it is not business as usual. Let it be inconvenient to pollute.

  1. Build awareness. Let us use neuroscience to get dreams of being capsized in plastics bottles, or the like. Let us use social media.
  2. A large scale ban can force manufacturers to react. Let them look at pollution when they sell raw materials. What if a GST like tax was added to the raw material and refunded through proper recycling of the end product?

Users can:

  • Bring their own shopping bag. …
  • Stop buying bottled water. …
  •        Bring their own thermos to the coffee shop. …
  • Choose cardboard or paper over plastics bottles and bags. …
  • Say no to straws. …
  • Get the plastics off your face. …
  • Skip the disposable razor. …
  • Switch from disposable diapers to cloth.

All add to inconvenience. Do we have a choice?

The manufacturer has to start a circularity program of:

  1. Using biodegradable materials. For example, millet based spoons are available for ice-cream, and the spoon can be used along with the ice-cream. The plastics technology has to be biodegradable.
  2. The products have to be re-usable, and easily re-cyclable
  3. Encourage users to participate in ecology, as outlined above.
  4. Set up a fund for picking up plastics waste

Plastics pollution, indeed all pollution is a clear and present danger. There is no time for pussyfooting. Manufacturers and users have to become serious about the dangers. Let not the plastics industry hide behind the statement we are only 12% of all solid waste.

The time has come for the plastics industry and individual companies to get together with the Government and set up a time bound program for plastics to shift to biodegradable, to pick up larger percentages of plastics waste, and larger conversion of waste to useful products.

This has to be like the automobile Bharat Stage emission norms and the Euro emission norms. These have to be strict and enforceable. Companies should fear being banned.

 

Gautam Mahajan, 
President, Customer Value Foundation and Inter-Link India

Founder Editor, Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 98100 60368
mahajan@customervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value InvestmentHow Creating Customer Value Makes you a Great Executive 

Come to the ​Second​  Global Conference on Creating Value, May ​2019 ​ in New York, U​SA

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Value Takers Vs Value Makers

Posted July 4, 2018 by Customer Value Foundation
Categories: Business & Management

Tags: , ,

Are You a Value Creator or A Value Taker

I am writing this, because I want readers to think about the future, and not be like me, when I was in middle and senior management to think only about the well-being of the company rather than the well-being of those we were impacting, the world at large, ecology and sustainability. While many might think this is meant for CEOs, this is the right time for all of us to start thinking about serious issues like ecology, corruption, value destruction or being one sided (my company uberalles, the company must win, right or wrong)

In my forthcoming book Value Dominant Logic, I tell the story of my heading a team to bring out and commercialise the one piece PET beverage bottle. We were led by the desire to win, to be ahead technically, and to see our product dominate. We never entered the debate of whether what we were producing could damage the environment, or not be good or sustainable. Why were we like that?

Were we driven by our customers’ needs, or for us to disrupt glass packaging? Or for helping our company make profits for its shareholders? Or for the larger eco-system?

Readers must start to think truly about the Customer (for most, it is what we can get out of the Customer). The Customer just not as a buyer, but the Customer representing us as a user, as part of society, as one who needs to improve the well-being of those around us.

In this article, I wish to debate Customer Value creation (and Value creation in general) versus value extraction. Too many people believe they are creating value whereas they are extracting value. The global financial crisis of2008 makes us rethink the modern capitalist system which is far too speculative: it rewards takers over true makers or wealth creators. It allows the growth of finance, and greater rewards for speculative exchange of financial assets versus investment that leads to new physical assets and job creation.

In the recently completed First Global Conference on Creating Value at Leicester UK, organised by DMU and me, Ashok Ashta, an attendee wrote:

I personally enjoyed the blend with the practical as instantiated by the Fujitsu presentations. The three speakers I found the most thought provocative were: Chris Baker, Scott Sampson and Michael Shafer. If there is one line that will remain embedded in thought, and that I will perhaps reuse is, “students looking to work in financial institutions such as Goldman Sachs etc. are aspiring to work in criminal organizations!”

Debates about unsustainable growth are increasing calling for reforms and rethinking of the financial system. We need the financial system to re-focus on the long term, and sustainable development rather than quarterly returns, and gaining exorbitant executive pay. This includes proper governance and thinking about the future of us, and our planet.

Mariana Mazzucato in her book, The Value of Everything argues that critics of the current financial system remain powerless – in their ability to bring about real reform of the economic system – until they become firmly grounded in a discussion about the processes by which economic value is created. It is not enough to argue for less value extraction and more value creation. First, ‘value’, a term that once lay at the heart of economic thinking, must be revived and better understood.

“Value has gone from being at the core of economic theory, tied to the dynamics of production (the division of labour, changing costs of production), to a subjective category tied to the ‘preferences’ of economic agents. Many ills, such as stagnant real wages, are interpreted in terms of the ‘choices’ that particular agents in the system make, for example unemployment is seen as related to the choice that workers make between working and leisure.”

By losing our ability to recognize the difference between value creation and value extraction, Mariana argues, we have made it easier for some to call themselves value creators and in the process extract value, like the financial services companies.

Thus GDP and corporate annual reports must reflect the quality of life indicators, happiness, caring etc. versus just financial gains.

Value extractors in finance and other sectors of the economy get more emboldened. Here, the crucial questions – which kinds of activities add value to the economy and which simply extract value for the sellers – are never asked. In the current way of thinking, financial trading, rapacious lending, funding property price bubbles are all value-added by definition.

When price determines value, and if there is a deal to be done, then there is value. Therefore, a pharma company can sell a drug at a hundred or a thousand times more than it costs to produce, there is no problem: the market has determined the value.

The same goes for chief executives who earn 340 times more than the average worker (the actual ratio in 2015 for companies in the S&P 500). The market has decided the value of their services – there is nothing more to be said.

Second, Mariana continues the conventional discourse devalues and frightens actual and would-be value creators outside the private business sector. It’s not easy to feel good about yourself when you are constantly being told you’re rubbish and/or part of the problem. That’s often the situation for people working in the public sector, whether these are nurses, civil servants or teachers.

Mazzucato adds that when Apple or whichever private company makes billions of dollars for shareholders and many millions for top executives, you probably won’t think that these gains actually come largely from leveraging the work done by others – whether these be government agencies, not-for-profit institutions, or achievements fought for by civil society organizations including trade unions that have been critical for fighting for workers’ training programs.

All of which serves only to subtract value from the economy and make for a less attractive future for almost everyone. Not having a clear view of the collective value creation process, the public sector is thus ‘captured’ – entranced by stories about wealth creation which have led to regressive tax policies that increase inequality.

This is not only true for the environment where picking up the mess of pollution will definitely increase GDP (due to the cleaning services paid for) while a cleaner environment won’t necessarily (indeed if it leads to less ‘things’ produced it could decrease GDP), but also as we saw to the world of finance where the distinction between financial services that feed industry’s need for long-term credit versus those financial services that simply feed other parts of the financial sector are not distinguished. You can think of other examples: poor road construction leading to increased repairs builds GDP. M&A fees add to GDP. The middleman making more than the producer

So think of becoming a value maker, a value creator and not just a value extractor, the role of many when they are in management. Maybe this is the time for you to think of your role. Are you going to be a blind follower? Can you do something at your level? Examples of what you can do at your level, is to be transparent, caring for your employees and society, not accepting dishonesty from above. You can start to provide an island of ‘goodness’ in your department, and if many do this, the message will be heard at the top. We call this the bottom up approach, versus the top down system we live in. The power is with you.​

Gautam Mahajan, 
President, Customer Value Foundation and Inter-Link India

Founder Editor, Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 98100 60368
mahajan@customervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value InvestmentHow Creating Customer Value Makes you a Great Executive 

Come to the ​Second​  Global Conference on Creating Value, May ​2019 ​ in New York, U​SA

Is Value Co-Creation Always Necessary?

Posted April 18, 2018 by Customer Value Foundation
Categories: Business & Management

Much has been written by experts on value co-creation. Some believe that without co-creation value cannot be provided.

I have a view which is similar to my view on other items. For example, experience is not always necessary for value. A journey is not always desired by a customer, so why put him into a journey?

Co-creation in my view is not important in many cases, and in some cases it is extremely important. I have divided co-creation possibilities into four quadrants. The first quadrant (green) is the best for co-creation. The value creation interactiveness is high and so is the product/service experience. The worst is the third quadrant (red) where the product/service experience is low and the value co-creation interactiveness is low.

Below is my matrix on Value Co-Creation:

gm_value_co_creation

Yellow quadrant

Let me start with the yellow box, which is the case for items/service for normal use. Many items are used in a routine, normal fashion. These include salt, soap, a smart phone for a lay user such as myself. I just want these to work for my satisfaction, and I do not desire an interaction with someone in your company. Many of us fall into this category.

Lessons for the company:

Make it simple to understand and use (the user should not need to find a knife to open a soap packet, or to find a button on a smart phone or put a sim card of a different size into the phone (a micro sim to be put into a normal sim slot or have multiple chargers for multiple phones)

Let it work as intended (my smart phone pushes the turn on image for an incoming call into a small inset on top of the phone, which I cannot easily enlarge, and so I have to go through gymnastics to answer a call. I know some of you are sniggering because you don’t have this problem, but those unlucky fellow creatures who have this problem are saying, give us a fix (which requires us to go into the red quadrant, and being made to do an useless task. This is not co-creation, it is destruction of value)

Do not make the user do unnecessary work when using your product (the above is an example)

Let the product/service not let the user down (the salt has coagulated in the packet and does not pour easily) (or my instant coffee from a flexi bag has completely powdered finely from the granules you find in bottles, and the coffee does not taste that good)

Make it easy for the user to contact an intelligent person if the user is unhappy or has an idea (so now you have a problem, whom do you complain to? My salt has coagulated. The call centre guy responds but it is not supposed to…. You idiot customer, how did you let it coagulate…Maybe this lot was chemically different (it cannot be, says the call centre person. Your option is to throw the salt away and re buy, and find a place in your fridge (but first make sure the salt will be ok in the fridge. You don’t know, but you know you should not put the salt in the fridge but you have no choice. You poor sap, you are only a customer)

Red Quadrant

My next quadrant is the red quadrant, which you wish to avoid, but are forced to journey to when you have a problem, and you meet or talk to a company person who knows it all and cannot understand why you are a moron. The soap wrapping is easy to open, and you have spent time in the shower using your teeth to open it. The company guy says you fool you are not supposed to use your teeth…and you say it did open and he says but it does not need your teeth…

Lessons for the company:

No customer is stupid enough to want to talk to you

He must have a genuine problem

There must be something wrong or there is room for improvement in your product or service

Listen

Do not make the customer feel like an idiot

Orange Quadrant

This in highlighted grey because the colour drop down box only has main colours and not the orange one (there is a box that says stop highlighting). I know if I complain, they will say you do not know how to use MS Word, which I have been using for a long time, but never needed an orange highlight. Whom do I turn to? I can google and waste more time.

This is the quadrant which can be used for highlighting problems, getting innovative fixes, in co-creating a better mouse trap… I had a conversation with LinkedIn that I could not get my California contacts. I was told that they would help and came back saying there was a problem and they would fix it. Now California works, New Jersey does not.

My wife just got 250 mails from Bharat Matrimony saying she is a registered member. Everyone is introducing himself to her as a potential suitor. The registered member is Radhika and not my wife whose name starts with a V… There is no way to contact them but to unsubscribe, and the messages keep coming…Ugh! I have this problem with a big bank. Some guy who has an email gm@yahoo,com has put his address as gm@gmail,com and I keep getting his mails. I cannot make this go away. Help!

Lessons for the company:

While you had an opportunity to help in the other quadrants, this is the one you can co-create in and make friends. Take this opportunity to shine (P&G would call it Connect and Develop)

You can get ideas not only for improvements but for other products and service

So take the customer seriously, and have innovative, knowledgeable, friendly helpful people service him

Do not make this a value destruction opportunity

Green Quadrant

Here is the real co-creation opportunity, for you to develop a better cell phone. For example, I would like a better search facility that covers the address and the notes. So if I remember you as Jane’s husband, and I have Jane in the contact notes, I want to be able to find this contact.

Or I want my text messages to be easily storable, or I want to get back contacts inadvertently deleted (why can’t there be a cache), and I want all my text message to appear, or I want my call log to be stored on the net so I can pull out the messages I made in Beijing four months ago. I do not want to toggle the on off switch when I cannot activate an incoming call. Everyone will benefit, though most accept the phone for what it is.

Lessons for the company:

Look for opportunities to improve

How can you make it easier for me to use your product and love it

How can you co-create disruptive and creative elements

Friends, companies have an immense possibility to distinguish themselves…but they don’t. They end up antagonising the customer no end, whereas they could make him/her their friend, and learn from them and develop and co-create with them.

Overall

Avoid destruction

Seek co-creation opportunities

All opportunities do not mean co-creation

Are you laughing at me or are you with me?

 

Happy to answer your questions.

 

Gautam Mahajan,

 

President, Customer Value Foundation and Inter-Link India

Founding Editor of Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 9810060368
mahajangautam.mahajan@gmail.comcustomervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value Investment

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

Why McKinsey Says Link the Customer Experience to Value

Posted March 10, 2018 by Customer Value Foundation
Categories: Business & Management

“Many customer-experience transformations stall because leaders can’t show how these efforts create value. Patiently building a business case can fund them, secure buy-in, and build momentum.”__McKinsey

Joel Maynes and Alex Rawson, Partner at McKinsey go on to say:

  • “The road to failed customer-experience programs is paved with good intentions. Executives are quick to see the end-game benefits of a customer-centric strategy: more satisfied customers, increased loyalty, a lower cost to serve, and more engaged employees. But they often fail to understand clearly what a superior customer experience is worth and exactly how it will generate value.”
  • “Without a quantified link to value and a sound business case, such efforts often can’t show early gains, build momentum among functional executives, and earn a seat at the strategy table. They stall before they ever really get going. When establishing a link to value is done well, it provides a clear view of what matters to customers, where to focus, and how to keep the customer experience high on the list of strategic priorities.”

 

Lyn Hunsaker in CustomerThink said Customer experience value creation occurs when you empower customers to achieve their goals with greater satisfaction in a win-win approach

I said in CustomerThink, CX is one aspect of creating value. But in the case of a CVA (Customer Value Added) measurement, the questions are asked of the decision maker, not the user who has been in the transaction. The decision maker may not have had transactional experience, but he has an impression of the difference between competing offers. And the decision maker makes the decision.

Michael Hinshaw in CMO Magazine states for the past several years, improving customer experience (CX) has been rightfully viewed as one of the most important things any organization can do to drive value. And Jim Carrass of Customer Value Creation International (CustomerValueCreation.org) sent a link to me about Customer Value Creation, making me think about Customer Value (CV).

  • CV tells us why people buy, and why they do not buy from our company
  • Creating better Customer Value will increase your market share. Delivering a great experience should give you a bigger market share. Is your company getting a larger market share with the experience it is delivering? If not, ask why not?
  • Customer Value tells you how to create value faster/better than competitors, a core idea that is missing in CX. You cannot just increase CX for your customers. Your company’s CX has to be better than the CX competition provides to its customers
  • Customer Value gives you implied weights of what is important to the Customer
  • How companies are able to get out in front of their competitors and stay there
  • Customer Value is inclusive. It includes CX, Customer success, Customer effort, customer journey, Value Proposition and so on. It includes cost, benefits, experience, emotions. Great CX enhances Customer Value

 

Sometimes, we do not have an experience with a product or service, but we still buy it on the basis of the value it delivers. Often we do not notice the experience because it remains embedded. Take salt; we do not directly experience it. We experience it when it is missing, or in excess.

The goal of many organisations is to create value for the customer. Service-dominant logic‘s specific goal is to co-create value for the customer. The goal of the Customer Success Association is to Create Customer Value. Customer Experience impacts customer value and so is very important. Customer experience seeks to increase value through every interaction. Annette Franz, Founder/CEO, CX Journey Inc. states the value that CXPA offers resides in both education and networking.

CXPA says that companies recognize the importance of value as a key ingredient in building and maintaining customer loyalty. CXPA does not mention experience as a key benefit to members.

CX is also a key ingredient in creating Customer Value

Let me give you an example of a pesticide company which had excellent satisfaction scores, and were working on improved customer experience. Over two years, while scores increased, market share and sales did not increase. They then embarked on a Customer Value creation program and started a courtesy system (where their employees started to be courteous to each other in the office). Along with the courtesy system, they started customer circles for frontline people to align them to the customer and deliver greater value. They also started an evening meeting to pick up and discuss issues that customers faced during the day, opportunities with customers and possible new accounts. They found that those people who were setting up appointments for the field staff were not noting down complete addresses, and were haphazard about ensuring that field staff did not have to criss-cross the town to get from one customer to another.

After 3 months, they found sales call per field person had increased from 3 per day to 5 per day; sales per salesperson had increased by 30%; market share had gone up because of new acquisitions; on time support had improved. All this because of a customer value focus on customers, and starting customer circles for frontline people. The customer value-added score before and after the 3 month period had improved considerably. The satisfaction score had improved marginally because of on-time service improvement.

This is exactly what Mckinsey had suggested at the beginning of this article would happen with a greater focus on customers: more satisfied customers, increased loyalty, a lower cost to serve, and more engaged employees.

What should business people and companies do?

  • Continue to deliver great experience and satisfaction to your Customers
  • Give a great experience to your employees and partners. Recognise Customer Experience is one aspect of Customer Value
  • Recognise that this is not enough. You have to be better than your competition — You must deliver more customer value to your customers than your competition delivers to its customers.

Remember relative Customer Value Added relates to business results. Customer Value includes the image of the company, the company people, the relationship, the product, and the costs (both price and non-price)

 

Gautam Mahajan

President, Customer Value Foundation and Inter-Link India

Founding Editor of Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 9810060368
mahajangautam.mahajan@gmail.comcustomervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value Investment

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

The Productivity Conundrum: Why is Productivity Declining?

Posted March 1, 2018 by Customer Value Foundation
Categories: Business & Management

Productivity declined 0.5% in the last 5 years globally till 2017 end, whereas it gained 2.5% in some previous decades. Puzzling:

McKinsey[1] states three factors include waning productivity growth rates in the last 15 years, the global slowdown due to the financial crisis on 2008, and that digitisation has not caught on.

Job growth has happened in the last few years, but not with productivity gains.

While productivity declined 1% in the 1990s growth due to computers and digitisation was ending in 2005.

Mckinsey feels that digitisation and computerization has led to cannibalisation and reduction in footfalls (up to 10% in retail). Transition barriers and lag effects are culprits. Operating and business models are changing and transforming bringing in a lag.

There is a feeling that productivity growth will be about 2% per year in the coming decade, 60% coming from digitisation gains.

I would imagine that low growth in the economy, low investments and changing workloads are reducing the effectiveness of people. This is combined with user unfriendly systems.

Let me give you an example:

I am asked to do more and more on then net like paying bills and e-transactions. But when something goes wrong I cannot access the provider and get answers easily. That reduces my productivity as I have to spend unnecessary time. Companies need to rethink this and think about the customer and the convenience of the customer.

LinkedIn, Amazon, SBI, HDFC, Uber are all guilty of this.

We cannot have a lopsided productivity view: the convenience of the company at the expense of the convenience of the customer. Let me give an example: If on Uber your location is not precise due to their location system, then there is a productivity loss for them and for me. Their map showed the cab was 4 minutes away and the driver thought he had arrived.

In SBI e-statements full details of payments and receipts are not given and it is not possible to get this easily from the net or by a personal visit.

I can go on and on. Productivity gains must take into account the customer also, not just the company for it to be pervasive. If you decide not to create value, you will get nowhere. Except to use robots for productivity gains without corresponding gains for the customer, and consequently for you.

 [1]https://www.mckinsey.com/global-themes/meeting-societys-expectations/solving-the-productivity-puzzle

 

Gautam Mahajan

President, Customer Value Foundation and Inter-Link India

Founding Editor of Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 9810060368
mahajangautam.mahajan@gmail.comcustomervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value Investment

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

[1]https://www.mckinsey.com/global-themes/meeting-societys-expectations/solving-the-productivity-puzzle

Are Value Creation and Destruction Two Sides of the Same Coin

Posted February 3, 2018 by Customer Value Foundation
Categories: Business & Management

Value Destruction: Non Value Added Tasks Destroy Value

Companies have many non-value added tasks, processes, events, wastage that are non-value adding. These include starting meetings late (wasting time of many participants waiting for the meeting to start;) reading unnecessary e-mails; correcting mistakes (especially for Customers and in production or in tax reporting); unnecessary travel which could be replaced by calls or video calls; 20 people picking up bosses at airports; not doing legal or moral work.

Non-value added tasks are actually value destructing tasks. A whole discipline has been brought into play where value destroyed has become important. This in of itself is an important discipline because it looks at net value which is value created minus value destroyed minus non-value added activities.

Value co-destruction occurs mostly when there is a misuse of resources, either incorrectly, inaptly or unpredictably. This happens when the available resources are used, say in an interaction. Companies can misuse their processes to create more value for themselves, thereby destroying value for others such as employees and customers. This is planned misuse. Accidental misuse can also be disastrous for customers and destroy value for them. The reader has examples of what has happened in his eco-system Corruption destroys value for some while adding value for others.

Value co-creation has implied that both sides get benefit and that it is mutually acceptable. I get what I deserved. Value is destroyed when I feel I got less than I deserved or if something is unfair.

Or the value co-creation was one sided.

And then there is the question whether value can be co-destroyed. It can, as I explained earlier.

The definition of value is benefits minus cost. Others call this benefits minus sacrifice. Whatever you sacrifice could be construed as value destruction…Ouch, this takes too much time or effort, or they make me feel like a fool.

However, very few researchers have looked into the possible downsides of value co-destruction. The risk of losing customers this way is highly likely, as 40% of customers who had a bad experience will discontinue doing business at the offending firm. To prevent nearly half of consumers from churning after a bad experience, it is therefore crucial that both parties communicate their expectations extensively toward another so value can be co-created instead of destructed.

For Customers

Necessary work is essential for, vital to, indispensable to, important to, crucial to, needed by, compulsory required by or requisite for the Customer

Relevant work is pertinent to, applicable or germane to, or appropriate to the Customer. This is work that can be eliminated without deterioration of present service or product

What work is the Customer willing to pay for?

Every business enterprise has at least eight stakeholder groups, whose concerns must be considered when analysing business processes: customers, suppliers and partners, managers, employees, creditors, investors, governments and community groups

Customer Value added of task: (Value to Customer after the task) MINUS(Value to the Customer prior to the task)

Who is the Customer? Are some classes of work for internal customers necessary? If such work is free now, would someone pay for these services or work?

It is the final bill paying Customer at the end of the entire value chain who determines if the work/task adds value

Similarly, for Businesses

Necessary work is essential for, vital to, indispensable to, important to, crucial to, needed by, compulsory required or requisite for the Business

Relevant work is pertinent to, applicable or germane to, or appropriate to the B. This is work that can be eliminated without deterioration of present service or product

Let us list some of these tasks:

Customer Business Tasks List

The more companies can align their priorities with the those of the Customers and make the tasks that are relevant and necessary for Customers, that is make their business priorities the one’s important for the Customers the more successful they will be.

Customer anxiety, keeping them waiting, ignoring them, Unnecessary contact, annoying customers, poor quality all are a wasted effort for the company and the Customer and should be cut out. These are relevant to the customer as they are exposed to these all the time.

In the example, if the company was to take Customer Value, Customer experience and effort, customer redressal seriously and move them into the top right hand quadrant, then customer needs and company needs would start to coincide.

This is shown in the chart below.

GM Tasks Matrix BW

Gautam Mahajan

President, Customer Value Foundation and Inter-Link India

Founding Editor of Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 9810060368
mahajangautam.mahajan@gmail.comcustomervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value Investment

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

 

Use Customer Value to Fill in the Cracks in Customer Experience

Posted December 10, 2017 by Customer Value Foundation
Categories: Business & Management

There have been cracks in the CX story. And now there is another article by a CX proponent, Charles Bennett of the Next Ten Years, Great Customer Experience does not always mean great business performance.

He goes on to say:

“The theory says customer experience is proportional to revenue. At least that’s what “best practice” thinking has taught us. The better the customer experience the better the business result.

Really? Problem! This is not always true. There is new thinking emerging that differentiates customer outcomes from customer experience. It adds a new dimension which helps companies differentiate from their competitors.

It also explains why some great customer experience companies fall into decline and why some dreadful customer experience companies are massively profitable.”

He examples Spirit Airlines, which has terrible CX, and people say “never again” after traveling it. They rank at the bottom of the American Customer Satisfaction Index, the lowest Net Promoter Score and gain the greatest number of customer complaints, by far! And yet they are profitable, and people buy and travel them. (You could ask if NPS relates to business results!)

Spirit Airlines is amongst the most profitable airline in the world with an operating margin of 23% in 2016 . You can’t deliver that sort of business performance unless customers are buying, and buying they certainly are. There must be another customer dynamic going on.

Another example is Subway, ranked 8th in the Temkin Customer Experience Survey of 300 odd US companies. Yet their revenue figures fell 4.3% in 2015 for the second consecutive year. It opened 911 new restaurants but closed 877.

Bennett goes onto add “You would expect that great CX would mean a higher market share and a higher ROI for your company.”

Very often this is not the case. It took years before companies learnt that Customer Satisfaction did not lead to business results. Poor satisfaction did not always mean lower market share, and great satisfaction did not necessarily mean higher market share.

Customer Value Thinking

All this started at AT&T. In the mid ‘80s they got 95% CSat scores. The Board of Directors was delighted and gave out bonuses. 3 months later they lost 6 points of market share and had to fire 20000 employees. Customer Chief Ray Kordupleski was perplexed. After much analysis, he reached the conclusion that CSat did not correlate to business results, and he came up with the concept of Customer Value (Benefits – Cost), and that Customer Value was always to be measured against competition. Brad Gale, then at Strategic Planning Institute promoted the concept of Value.

Look at this yourself. You have examples of when you were upset with your airline or your favourite restaurant and even your wife. Did you leave them. It takes a lot more to do so. What are the factors that could lead to your leaving?

Continued aggravation over a period of time. Getting a better option (and you find this better option will create greater value for you).

Take my case. I owned a Honda car and liked it. Yet during re-purchase I chose the Suzuki competitor, because it gave me better value, better features at a competitive price. I bought the Suzuki because of its enhanced value over the Honda. In my next purchase, I went back to buying a Honda, even though I loved the Suzuki. At that point in time, the Honda seemed to create better value for me.

Customer Experience Replaced Customer Satisfaction

When companies started to find satisfaction was not good enough, a new term was used to replace satisfaction and it was called experience.

The experience with this transaction vs. the satisfaction with this transaction.

It allowed the industry to re-invent itself into CX. Measurement of CX is the same as with satisfaction. It is not to say that CX and CSat are not important. They are. But they form a component of the value you perceive. We do not expect great experience or emotions at a gas station as when buying a BMW.

We all have to think this through, and move ahead. Increase CX but also the value you provide. Let the cracks not break your business results and you.

So what can you do? The easy way is to do a real Customer Value creation desk analysis of yourself (your product/service) and your competitors. This forces you to look outside your company at the market, your competitors and their customers. Why do people buy from them and others buy from you.

The problem with this desk analysis is

  • It is biased by your thinking
  • You do not have real data from Customers and your competitors Customers. You may not know what Customers are saying about you and competitors’ Customers saying about them. You probably will have to guess and you could be far off from the truth.
  • You have to outside in think (rather than inside out think)

 Customer Value is Based on Competitive Reality

So this was the easy way. The more difficult way is to really hear and capture the Customer Voice in a Value study, where you measure the scores on the benefits (and the breakup of the benefits) and on the cost (which is price and non-price terms such as ease of doing business, price justification etc.). You then can measure the Value (Benefits –Cost) you are creating versus competition.

The competitions’ data is derived by asking the competitors’ customers the same questions you ask your customers (Most people do not want to do this extra step and spend the extra money. They lose out because they cannot compare themselves versus competitors). Short cuts will give you incomplete data, and you will wonder why you do not come out a winner. This is part of the problem of only relying on CX or on NPS.

attribute tree

The data you collect will tell you how important benefits are and how important costs are. You may surprise yourself by finding people consider you costlier even though you believe your price is reasonable. Or that people think price is very important and you do not think of yourself as a commodity player (which the data says you really are!)

CX is one part of the benefits, and you may find it is relatively important or not at all important in the Value study. So, if you did an analysis of budget airlines (the more finely you segment your study, the better off you are), you may find CX is not truly important, and that price and other terms, convenience and airports served, and luggage rules are more important.

Use CX Wisely

Give the experience where it is required. Reduce the need for an experience when it isn’t: I just want things to work (the flight leaves on time, there is no hassle with my carryon luggage and so on). The moment things go wrong (the airline says your luggage is too big to carry on) or flights are delayed, or you have to get a refund, you start to get poor experience; an experience you never wanted, and you will say Never Again, but you will continue to travel that airline again.

Remember your Customers’ quest for Value and a good experience as you sell to and service them, and you will be more successful.

 

Gautam Mahajan

President, Customer Value Foundation and Inter-Link India

Founding Editor of Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 9810060368
mahajan@customervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value Investment

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

Here is a simple Value attribute tree: