Differentiators that Make a Difference

Transcription

1 Differentiators that Make a Difference Value, Differentiators and Proof Tom Sant

2 Why Differentiators Matter: Providing Support for Our Value Propositions The ultimate goal of differentiating our offer and our company: Win more business. Do it faster.

3 Smart Buyers Look for Positive Impact Revenue generation Cost avoidance Operational efficiency Reliability of mission-critical operations Quality of deliverables or execution Sustainability Worker productivity Customer satisfaction Regulatory compliance And other key performance indicators

4 It s not what you sell; it s what they ll gain Focus on the hole your customer needs to make, not on the drill.

5 The Estimation Heuristic Why the Inuit hunt whales. Basic principle: Choose the course of action or alternative that offers the highest rate of return. Basic principle: Choose the course of action or alternative that offers the highest rate of return.

6 The Basic Value Proposition (Value s - Cost s ) > (Value a - Cost a ) where: Value s = the value of your solution Cost s = the cost of your solution Value a = the value of the next best alternative Cost a = the cost of the next best alternative

7 A value proposition is a promise to deliver specific results that the client desires, backed up by evidence that we can keep our promise.

8 The Importance of the Value Proposition It answers one of the three questions that clients ask when they are making a buying decision: Am I getting what I need? Is it good value? Can they really do it?

9 It answers one of the three questions that clients ask when they are making a buying decision: Am I getting what I need? Is it good value? Can they really do it?

10 And Differentiations Helps Answer the Third It answers one of the three questions that clients ask when they are making a buying decision: Am I getting what I need? Is it good value? Can they really do it?

11 Four Principles of Value 1. The payback measurements must be client-focused If the client doesn t care about it, it has no value. 2. The presentation of payback is more persuasive if it s quantified Show me the money! 3. The value proposition is more likely to be noticed and remembered if it s graphical Most decision makers don t read; they skim. 4. To bullet-proof your value proposition, you must base it on your differentiators Otherwise, your competitor just says, Me too.

12 The Process 1. Identify customer-desired outcomes 2. Quantify the value 3. Select relevant differentiators 4. Prove your claim

13 Step One: Identify Customer-Desired Outcomes

14 Four Areas of Outcome Strategic Value Budgetary compliance Profit improvement Downsizing Mergers / acquisitions Market share Reduced risk Better clinical outcomes Strategic outcomes: Financial metrics Market share Growth rate Shareholder value

15 Four Areas of Outcomes Strategic: Business / Financial Budgetary compliance Profit improvement Downsizing Mergers / acquisitions Market share Reduced risk Better clinical outcomes Tactical: Technical / Infrastructure Introducing best practices Adding flexibility Improving QC Automating a laborintensive process Regulatory compliance Tactical outcomes: Operational performance Productivity Headcount Quality, compliance

16 Four Areas of Outcomes Technical / infrastructure goals Introducing best practices Adding flexibility Improving QC Business / Financial Budgetary compliance Profit improvement Downsizing Mergers / acquisitions Market share Reduced risk Better clinical outcomes Social / Political: Internal - Improve morale - Reduce absenteeism - Decrease turnover External - Gain public support - Win approval - Enhance recognition Social / political outcomes: Improved relations with employees, suppliers Customer satisfaction Sustainable / green operations

17 Four Areas of Outcomes Technical / infrastructure goals Introducing best practices Adding flexibility Improving QC Business / Financial Budgetary compliance Profit improvement Downsizing Mergers / acquisitions Market share Reduced risk Better clinical outcomes Social goals Internal - Improve morale - Reduce absenteeism - Decrease turnover External - Gain public support - Win approval - Enhance recognition Personal goals

18 Activity # 1: Identify Outcomes 15 minutes Identify specific, quantified outcomes in each of the three areas where clients typically seek results. Use the examples as a guide to create your own.

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34 Done!

35 Activity 1: Identifying Typical Outcomes Share your results.

36 Categorize the Outcomes By Business Function By the Buyer s Role

37 Create an Outcome Map for Your Opportunity Identify the key business functions with the client organization that will be part of the decision team. For example: CEO, CFO, VP of Sales, General Manager of Quality Operations List the function across the top row. Fill in the specific outcomes each function desires in the columns below. Prioritize the outcomes in terms of the client s decision process.

38 Client Business Functions Desired Outcomes

39 Marian Mercy Hospital System Client Business Functions CEO CFO Medical Director Director of IT Desired Outcomes

40 Marian Mercy Hospital System Client Business Functions CEO CFO Medical Director Director of IT Desired Outcomes Integrate 3 new acquisitions Achieve Top 100 Hospitals ranking Improved core measures of performance

41 Marian Mercy Hospital System Client Business Functions CEO CFO Medical Director Director of IT Integrate 3 new acquisitions Improve net profitability Desired Outcomes Achieve Top 100 Hospitals ranking Improved core measures of performance Reduce A/R by 5 days average Reduced spend on drug therapy (prompt shifts off of IVs)

42 Marian Mercy Hospital System Client Business Functions CEO CFO Medical Director Director of IT Integrate 3 new acquisitions Improve net profitability Zero never events Desired Outcomes Achieve Top 100 Hospitals ranking Improved core measures of performance Reduce A/R by 5 days average Reduced spend on drug therapy (prompt shifts off of IVs) Accurate workload tracking Reduced medication errors

43 Marian Mercy Hospital System Client Business Functions CEO CFO Medical Director Director of IT Desired Outcomes Integrate 3 new acquisitions Achieve Top 100 Hospitals ranking Improved core measures of performance Improve net profitability Reduce A/R by 5 days average Reduced spend on drug therapy (prompt shifts off of IVs) Zero never events Accurate workload tracking Reduced medication errors Increased ROI from the Health Information System Simple, fast implementation Access to outside expertise

44 Now Prioritize and group. 1. Which function or role has the most important voice in the decision? 2. Which outcomes are connected?

45 Marian Mercy Hospital System Client Business Functions CEO CFO Medical Director Director of IT Desired Outcomes Integrate 3 new acquisitions Achieve Top 100 Hospitals ranking Improved core measures of performance Improve net profitability Reduce A/R by 5 days average Reduced spend on drug therapy (prompt shifts off of IVs) Zero never events Accurate workload tracking Reduced medication errors Increased ROI from the Health Information System Simple, fast implementation Access to outside expertise

46 Activity # 2: Build an Outcome Map 15 minutes Complete the Outcome Map for an opportunity you are currently pursuing. 1. Name the relevant business functions involved in the decision 2. Identify outcomes that each function seeks. 3. Prioritize the top outcomes: strategic, tactical or political? 4. Look for opportunities to group outcomes.

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62 Done!

63 Activity 2: Build an Outcome Map Share your results.

64 Step Two: Quantify the Value

65 Some Principles for Quantifying Value 1. You know more than you think you do. 2. Impact calculations do not have to be precise. 3. Use conservative estimates. 4. Get the customer to collaborate: How will you measure success? What specific impact will you be looking at? How are you doing in that area today? Do you have baseline data that you can share? Can we agree on some assumptions?

66 Six Ways to Quantify Value Anecdotal Benchmarking ROI modeling Payback analysis Internal rate of return Net present value X X X X X X X Impact on Sales Payback Point

67 Anecdotal Evidence of Value Example Point Benefit

68 Related: Case Studies to Establish Value Problem: the challenge our customer faced. Action: what we did to help them meet the challenge. Result: statistics and metrics showing the impact our actions had; a testimonial from the client.

69 Six Ways to Quantify Value Anecdotal Benchmarking Competitor A Industry Average ACME 0 total cost of ownership

70 Six Ways to Quantify Value Anecdotal Benchmarking ROI modeling Typical Bank Performance Assume: $2,000,000 trust Assume: 10% return per year Gross yield: $200,000 Trustee fee: approx. ½ to 1% = $10,000 to $20,000 Investment management fee: ¼ to ½% = $5,000 to $10,000 Internal cost of administration: Assume 1 $40,000/yr Taxes (at corporate rates): 35% = $70,000 Gross income: $200,000 Fees: $ 10,000 to $20,000 Fees: $ 5,000 to $10,000 Administrative costs: $ 40,000 Taxes: $ 70,000 Net income: $60,000 to $75,000 Metropolitan Bank Performance Assume: $2,000,000 trust Assume: 10% return per year Gross yield: $200,000 Total trustee, investment management, and administrative fees: 2% = $ 40,000 Taxes (at trust rates): 12% = $24,000 Gross income: $200,000 Fees: $ 40,000 Taxes: $ 24,000 Net income $136,000

71 Six Ways to Quantify Value Anecdotal Benchmarking ROI modeling Payback What is Payback? How long it takes for the monthly savings / benefits from an investment decision to recover the original cost. Unit of measure = a time period Very powerful for recurring benefits

72 Six Ways to Quantify Value Anecdotal Benchmarking ROI modeling Payback Internal rate of return What is Internal Rate of Return? The investment return rate per annum arising from a comparison of all savings against the initial cost of that investment This measure is a percentage indicating an annualized rate of profitability on the original investment)

73 Six Ways to Quantify Value Anecdotal Benchmarking ROI modeling Payback Internal rate of return Net present value or economic value added What is Net Present Value or Economic Value Added? A measure of whether a sales proposal delivers a profit or a loss using an annual cost of money applied to the timing of the original spend & future savings This measure is in money: positive for a profitable proposal, negative for a loss-making one

74 Payback, IRR and NPV are related Spend 100 Today -100 IRR 20% 365 days +120 Payback (12 Months) % (Original investment) NPV (EVA) Min return % / Interest

75 Use methods you are comfortable with. Avoid value proposition paranoia. Gain agreement from the buyer prior to the proposal, if possible.

76 Step Three: Select Relevant Differentiators

77 Differentiate Your Solution and Your Firm What is a differentiator? Does it matter which ones you use?

78 What Are Differentiators? Product/service features Corporate capabilities Methodology Management practices Personnel Facilities Size Experience Recognition, awards

79 Common Mistakes in Differentiating 1. Not including any differentiators at all. Without differentiators, it s a commodity. 2. Using generic differentiators and random lists. Generic value has no value. 3. Substituting marketing fluff. No marketing fluff! 4. Insisting on uniqueness. It s the stack that s unique

80 Activity 3: Differentiators vs. Competitors 10 minutes 1. Identify two of your top competitors. 2. For each competitor, brainstorm 3 or 4 differentiators and then indicate (a) why each matters (how the client benefits from them) and (b) how you can prove them.

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92 Activity 3: Differentiators vs. Competitors Share your results.

93 Differentiating the Intangible In differentiating a service, emphasize: 1. How you do the work 2. How you manage the work. 3. The people you will provide. 4. Special equipment, facilities or tools you have.

94 Activity 4: Identifying Differentiators 10 minutes Identify as many differentiators and the proof to support them as you can in each category. How you do the work: Differentiator Proof: How you manage the work: Differentiator Proof: Who will do the work: Differentiator Proof: Special facilities, resources, equipment, etc.: Differentiator Proof:

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106 Debrief Share your results. Which area was the hardest to differentiate?

107 Question: How can you quickly select the most effective differentiators?

108 Answer: Create a Selection Matrix List all of your differentiators: By competitor By corporate capabilities Align your differentiators with the most common value positions you encounter. Weight the differentiators.

109 Align Your Differentiators with Value Positions Differentiator Financial Technical Social Awards for superior products True Web-based architecture Lease or buy options Standard code base Fastest loading and retrieval Open architecture Microsoft Solution Partner First to market Team functionality

110 p. 87 Align Your Differentiators with Value Positions Differentiator Financial Technical Social Awards for superior products True Web-based architecture Lease or buy options Standard code base Fastest loading and retrieval Open architecture Microsoft Solution Partner First to market Team functionality 3 2 5

111 p. 87 Align Your Differentiators with Value Positions Differentiator Financial Technical Social Awards for superior products True Web-based architecture Lease or buy options Standard code base Fastest loading and retrieval Open architecture Microsoft Solution Partner First to market Team functionality 3 2 5

112 Align Your Differentiators with Value Positions Differentiator Financial Technical Social Awards for superior products True Web-based architecture Lease or buy options Standard code base Fastest loading and retrieval Open architecture Microsoft Solution Partner First to market Team functionality 3 2 5

113 Activity 5: Create a Selection Matrix 10 minutes 1. List your differentiators in column one. 2. List the most common value orientations in the remaining columns. 3. Rank the relevance and effectiveness of each differentiator to substantiate your ability to deliver that kind of value from 1 (none) to 5 (excellent).

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125 Debrief Can you see using this tool in the future?

126 Step Four: Prove Your Claim

127 Communicating Value That Has Value Differentiators Proof What you do that no one else does. What you do differently from anyone else. Value Proposition Value That Has Value. Verifiable claims you make about yourself. Claims your clients make about you. Third-party evidence.

128 p. 89 What Kind of Proof Matters? Pile up the proof: Case studies References Testimonials Team resumés Project plan Third-party validation (press clips, articles, awards, etc.) Company capabilities Management philosophy Guarantees Quality control methodology

129 Things You Say About Yourself Resumes or CVs Company history Corporate capabilities Coverage maps Process diagrams

130 Things Your Clients Say About You References Testimonials Case studies

131 Third-Party Evidence Awards Rankings Recognition Certifications Accolades

132 Writing Effective Value Claims

133 From Value Chain to Value Claim Client centered? Focused on a specific value? Quantified? Illustrated graphically? Tied to your best differentiators?

134 Writing Effective Value Claims First: State the value the customer will receive, preferably in quantifiable terms Example: One important benefit of accepting this proposal is that Acme Ltd will see a decrease in energy consumption of 15 to 18%.

135 Link Value with Your Differentiator Then: Link the value proposition with your differentiator in a cause/effect sentence Example: That decrease in energy consumption will come as a direct result of implementing our gas and electric rationalization software, which will automatically manage your energy costs to assure that you pay the lowest possible price 24 hours a day. The only system of its kind, the software has been proven in controlled studies to reduce energy bills.

136 Prove It! Third: Provide a proof statement Case study Reference or testimonial Third-party validation Verifiable statistics Guarantees or service-level commitments Example: For example, when Leeds Smelting implemented the software, they saw an immediate reduction in energy costs of more than 20%. Similarly, Birmingham Hospital reduced energy costs by 17% during the first year of using our software.

137 Thank You!