It is a common mistake to assume that value is associated with products, especially in business to business markets. An example of this mistake is the interchangeable use of the terms supply-chain and value-chain.
Just because products are bought, updated and delivered by downstream channels doesn't mean that the value associated with the product is realized by these transactions or efforts. No matter how hard everyone in the chain wants it to be.
A global leader in the elevator business describes a pivotal moment in the development of their business: "For years, we thought value was delivered by adding technology and capability to our lifts. Our designs kept pace with or passed those of our peers. Our engineers focused on reducing parts, sources and platforms so that we would achieve economies of scale and keep our costs low. Our marketing teams explored all of the connected systems, looking for opportunities to grow by selling more, related equipment. Both activities resulted in growth, but we suspected that neither resulted in new value, because our customers seemed bored by it all."
He continues: "One day we got a note from a building manager. One of four elevators had stopped running. But instead of having to make calls, rally resources, and redirect traffic, this customer watched our service van leaving, before he was aware that the lift had broken."
Value sometimes feels abstract, speculative or soft and as in this case, dollars don't always trade hands, so it can be a challenge to measure. But when it is understood, clearly and simply, it is always the most powerful tool to achieving competitive advantage.
The VAN MOMENT secured the suppliers' position with the manager. But the impact was larger than one manager, one building and one company. The manager's experience (and others) set the new service standard for the market, and the manufacturer began to behave more like a team of lifting experts than a factory manager. Owners and operators naturally selected for predictable, reliable lift operation, and the knowledge that smart people would be there for them. Third party designers and architects sought out the expertise of the manufacturer earlier in the design process, trusting that their client's operations would be improved after their work was done.
Why is value not always tied to products? Because more often then not, value is realized later in the life of the product, for reasons we that are hard to predict.
Be honest: Do you manage your supply chain or your value chain? Do you know what happens after you deliver?
What is your VAN MOMENT?
