Channel Your Inner Sherlock To Find Value Mismatch In Your Company
Cost isn’t just about dollars
The “cost” to deliver can also be labor, transport, life cycle, carbon footprint, quantity of resources, etc.
The good news is that there are tools available for measuring value. For example, using Function Analysis and FAST Diagramming, one easy way to think about value is by comparing how the current features and performance of a product stack up against what customers really want. At the same time, compare how much it costs to deliver each feature or performance relative to those wants. If customers are getting exactly what they want, then there is not a mismatch. But if customers want one thing and you are providing another, then you might have a value mismatch.
Cutting the cord
For example, think about why so many young millennials are “cutting the cord” to cable TV. On the one hand, many young millennials only wanted a handful of channels (like HBO and ESPN), and they wanted to be able to watch those channels on their smartphones and tablets. Moreover, they didn’t want contracts, long-term agreements, or all the hassle of waiting for the “cable guy” to come and install their equipment.
But the big cable companies didn’t get it. They thought customers still wanted hundreds of channels. They assumed that customers still watched TV on the couch in their living room. And they assumed that customers were willing to sign up for two-year deals as a way to “lock-in” prices at current levels.
This was a classic value mismatch waiting to happen. And it’s exactly why the new streaming competitors like Sling TV were initially so successful – they pared down the number of channels available, significantly reduced costs of being a subscriber, made it possible to stream all shows and movies on mobile devices, and got rid of contracts entirely.
Cable isn’t the only culprit
But it’s not just the cable TV industry where this type of value mismatch takes place. It can take place in any industry where companies are not close to their end consumer. Thus, any search for a value mismatch always starts by taking a closer look at what customers want, what customers don’t want, and what the competition currently provides. Don’t forget that each of those wants must be compared against the cost to deliver.
How does your function compare to your cost?
When it comes to identifying value, the starting point always involves two key factors: functional performance and cost. From there, it’s important to measure these variables from the perspective of both the customer and the business owner.
From their perspective, customers would prefer to have as much performance as possible, all at an amazingly low price. This might explain why super-cheap, high-quality 4K televisions from companies like TCL are flying off the shelves this holiday season. Really, 4K TVs for less than $500, are you kidding me?
However, from the perspective of a business owner, the goal is to introduce so many additional features that a product becomes a “premium” product worthy of a sky-high price tag. Think about the way luxury car makers market their automobiles. Or the way companies like Apple market their new $1,000 smartphones. They always emphasize the features that support such a rich price point.
It comes down to value
In many ways, thinking about value is really about thinking where these two perspectives on value coincide. Companies that do best are the ones that provide the perfect mix of performance at an attractive cost.
And never underestimate the power of taking away non-essential functions to unlock product value. For example, think about the furniture industry. IKEA discovered that customers were willing to assemble their own furniture in exchange for unbelievable prices, as long as the whole process was fun and enjoyable (and filled with nearly unpronounceable Swedish names of furniture!)
The important takeaway here is that you need to become a detective to spot a value mismatch. Once you do, you need to think about ways to change your company’s processes and approaches in order to add value in the eyes of the customer and correct this mismatch. Don’t know where to start? Let us be your detective. We know what it takes to identify and, more importantly, solve Value Mismatch. Click here to get started.
Quote of the Day:
“Your most unhappy customers are your greatest source of learning.” – Bill Gates