Brandt On Leadership -- Competing Beyond Quality

One of the striking things about most companies is how little employees (or managers, for that matter) understand the concept of customer value. In most instances, they believe that customer value resides in something they did to a product or service -- bending a piece of metal, processing a form -- before handing it to someone else in the value chain. What they forget, however, is that customer value fundamentally is determined at the point of the end-user, whether that end-user is one, two or 20 steps away. And the reality is that if that end-user cannot see how your step in the process created value, you didn't create customer value -- regardless of how much time, effort or money you expended in taking that step. This seemingly simple concept has radical implications when you consider that the very nature and shape of customer value has shifted dramatically in the last decade. Nearly all customers -- but especially those in manufacturing -- believe that the quality revolution is over, and that quality has won. In fact, most customers think that there is a new standard -- ISO9WHOCARES? -- because they believe that most vendors now create quality products. What this means is that the nature or quality of a product itself is no longer the sole or even primary delivery vehicle for customer value. Instead, customers are evaluating a host of other "value factors" wrapped around the product, including: Delivery: In an era of just-in-time inventories -- IndustryWeek has reported on factories that receive shipments every 15 minutes -- the reliability of your delivery may be a lot more important than the last smidgen of product quality. Simply put, no one has enough inventory left to survive a spotty supplier. Customers will likely forgive you for a shipment that's a little off in quality, but if you miss a delivery and shut them down, they'll never forget. Total cost of ownership: More and more companies are recognizing that price is only part of the value equation. They're beginning to ask: How much does it cost me in toto to deal with this vendor? How well do its systems -- management and IT -- integrate with ours? Some companies even include a line on their supplier evaluation forms labeled "chemistry," and it's not polymers that they're talking about. They're asking: Is this a company that we want to do business with over the long term? Data and information: Customers expect you to offer information not just about your product, but about their relationships, histories and transactions with you -- and about their own end markets. In some cases, they may expect you to function as a sort of outsourced market-research firm, offering reports on recent buying and product-development trends. Value or solution bundles: Do you still sell product in the same old boring features-and-benefit, open-and-closed-probe method of the past? Or have you studied your customer's business and begun to figure out ways to bundle your product with other products and services -- perhaps including those of your competitors -- to create a total solution for your customer? Customers want partners that serve as solutions integrators, not hawkers of single-benefit products. Business expertise: Becoming a preferred solutions provider -- as opposed to merely making a preferred product -- means deepening your relationships with customers by offering services well beyond design, repair and maintenance. Maybe you have a great safety program. Maybe you have a terrific hiring process. Offer these -- or whatever else it is that you do well, even if unrelated to your core product -- to your customers as value-added. Their appreciation will quickly turn into deeper relationships and higher sales. Where do your employees and managers believe that your customer value lies? More importantly, where are they trying to take it -- and how? John R. Brandt, formerly editor-in-chief of IndustryWeek, is president and editorial director of the Chief Executive Group, publisher of Chief Executive magazine.