Business value management has become a must-have, not just for global enterprise software vendors. In this post, we explore the 5 key reasons to implement value management.
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.
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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.
2. PIONEERS HAVE THE ADVANTAGES
Early adoption of value management
In the early 2000s, a few leading global vendors began to implement value management practices. These practices operated under different names, such as “value engineering” and “industry insight.” Initially, teams relied heavily on Excel spreadsheets. Different members developed various analysis methods and presentation formats. While this approach was an improvement over feature selling, it led to inconsistent results. Success depended on the sales executive, value engineer, and how well the customisation matched customers’ needs.
Standardisation and software solutions
Over time, these practices matured. Leaders were assigned to develop standardised analyses and quantitative tools. Presentations were also streamlined wherever possible. Some companies went further, purchasing specialised value management software. This not only increased efficiency but also supported standardisation efforts.
Throughout the last decade, many vendors have adopted value management practices. These were often led by former pioneers of value-based sales teams. In a few advanced cases, what began as presales activities expanded into post-sales. This evolution created “end-to-end business value management practices.” Customers now receive assessments of potential value and can compare the achieved value against the projected outcomes.
Building stronger relationships
This approach does more than showcase the value of the customer’s investment. It also strengthens relationships, reduces disputes, and often delivers value beyond the original projections. Both organisations benefit by focusing on achieving expected results on time.
Vendors that implement end-to-end value lifecycle management gain a clear competitive advantage.
3.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.
4. YOU CAN BUILD ON EXPERIENCE
For the vendors arriving late to implement 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!
5. 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?
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