5 REASONS TO IMPLEMENT VALUE MANAGEMENT

Business value management has become a must-have, not just for global enterprise software vendors.

Business value management identifies sources that will provide real value to customers, to result in additional economic profit, using a holistic approach that indicates the alignments between the customer’s strategic and operational goals, the vendor’s solution capabilities, the solution pricing, and several other business considerations. Business value management focuses exclusively on the benefit to the customer.

Vendors who are yet to create their value management practices are being impelled to do it, fast. Fortunately for the late arrivals, they have significant advantages compared to the companies pioneering this field some years ago.

  1. PRODUCT BELLS AND WHISTLES ARE NOT ENOUGH TO CLOSE A SALE

The traditional sales approach of software vendors places significant emphasis on demonstrating the features and technical advantages of their offerings. This is, of course, essential but, in most cases, just talking about these bells and whistles is not enough: and sales executives need to go far beyond, to prove the technical suitability of their solution across the IT areas.

In a world in which product differentiation tends to be relatively small and customers face increasing complexities, it is difficult for vendors to position their offerings by merely talking about product features. Customers not only want to know if the product suits their needs, but also the quantified value vendors can be expected to deliver in their specific business case. Is it USD 1 million, USD 2 million? This means that, for any vendor, it is fundamental to have a parallel conversation with their customer to explain the alignments between their product capabilities, and the customer’s strategic and operational challenges, and quantify the economic benefit of their offerings.

  1. PIONEERS HAVE THE ADVANTAGES

In the early 2000s a few leading global vendors started to implement their value-based sales practices under different denominations: “Value Engineering”, “Industry Insight”, etc.

Originally, these practices generated heavy use of Excel spreadsheets, with different team members developing varied approaches to analyses and presentation formatting. While far better than feature selling, this delivered large differences in results depending on the sales executive, the value engineer, and the match between the customization they offered and customers’ real needs.

Over time practices matured, assigning leaders to develop standard analyses and quantitative tools, and standardize their presentations wherever possible. Some companies even went a step further and purchased specialized value management software, which delivered further efficiencies while supporting their standardization efforts.

Throughout the last decade, value management practices have been adopted by many vendors: led, in most cases, by former leaders of the pioneering value-based sales teams. In a few well-advanced cases these practices, originally conceived as a presale’s activity, have expanded into post-sales to become “end-to-end business value management practices”, where customers get an assessment of the value potential to be realized and, once they go live, they are able to compare the value achieved against the expected value creation (ex-post, not just ex-ante analysis).

This approach not only demonstrates to the customer the value of their investment in the vendor’s offerings, but also strengthens relationships, reduces disputes and, in most cases, the value delivered is far higher than the projected value. Additionally, it helps both organizations focus on doing whatever is necessary to achieve the expected results on time.

Vendors who can implement end-to-end value lifecycle management for their customers, have a clear competitive advantage.

  1. THERE IS NO TIME TO WASTE                                                                                                                  

It will be very difficult, if not impossible, for a vendor to gain a customer’s attention by talking solely about product features when major competitors are pitching the value creation potential of their solutions. In the early 2000s value management was something “nice to have”, ten years later it was something “important to have”, but today it is a “must have”.

If your competitors are talking to your customers about delivering value of USD 1 million per year, ceteris paribus, they have a clear competitive advantage if your approach cannot show value. What is more, if your solution is superior, wouldn’t it make sense to quantify your value? How would your customers react to your solution if you could show a value tag of USD 1.5 million? Enterprise software vendors that have not yet built a value management practice are being compelled to do so, fast.

  1. YOU CAN BUILD ON EXPERIENCE

For the vendors arriving late in building their value management practices, it is not all bad news. As a profession, value management is a “maturing specialty” in the enterprise business software industry, and today it is relatively easy to identify and recruit individuals with relevant experience in the field. The challenge for vendors is not in getting the people, but in building the value management practice itself: creating value assessment tools, value communication logic, unique collateral (outside-in, business case and other templates) delivery processes, etc., … and then scaling it!

How you can do this and the pitfalls to avoid will be the subject of our next blog contribution!

  1. YOU CAN LEVER THIRD PARTIES

While building a value management practice from scratch may be exciting, it is also open to failure, especially for vendors who do not have the resources to recruit and build their own dedicated team. Some companies have tried to reduce this risk by outsourcing their value management practices. The main advantage that outsourcing brings to any company, is the expertise: the lessons they learnt from past and present experiences, in other customers’ cases. Outsourced consultants also have access to the most advanced tools and knowledge, enabling them to build value management practices that are operational in just a few weeks, at best-in-class standards.

Would any third-party value management providers be suitable for you? Not really. You need to consider if you want to cover the end-to-end sales cycle or a specific part of the sales cycle, you also need to foresee your evolution – are they flexible enough to accommodate this, or do they practice a one-approach-fits all? – and you need to be sure that you will get the level of customization you require.

Lastly, look at their price. Are they cheap? Are they expensive? And, most importantly: have they calculated the value they will deliver to you? If they are unable to calculate the value that they will bring to you, how are you expecting them to calculate the value of your offerings?

Whichever option you choose for your business, keep in mind: the market is moving quickly, customers are expecting you to prove your value and if you are not moving now, you are being left behind.

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