Most companies buy into the ethos of value based pricing models and propositions as part of their go to market strategy. It is a widely accepted principle to charge for services based on the alleged value the client actually receives in exchange.
But how many of the same companies extend the logic of value based propositions to value centric project delivery?
Value centric delivery
No secret to anybody that the majority of companies expect most of their revenue growth from up and cross selling opportunities into their existing client base. Millions are spent on marketing initiatives promoting a wider product range in order to increase the size of wallet share with their key clients.
But shouldn’t in a well functioning relationship, the idea of happy clients always come back for more result in a natural increase in ‘up-demand’?!
What is the main blockage?
So.. What is blocking companies to focus on generating ‘up-demand’ rather than promoting ‘up-selling’?
whilst value based proposition is a well accepted concept, value centric project delivery is much less so.
Not many of the companies truly understand what value their clients see during and after their engagement.
How many of the suppliers have a value creation and extraction plan in place? How many of these companies have any process in place to adapt projects to changing clients needs?
Traditional project and client managers, even consultants, they tend to deliver against a scope that was defined at the very beginning of the project. Even with the best intentions, it is often impossible to predict what exact value the client is actually going to get before we even started it. Changing business environments, new technologies and internal politics are stakeholders that often influence (should influence) where the client is going to see the quickest return on investment.
However, there is very little evidence of any agility when it comes to constantly adapting the ‘value creation and extraction process” !
I think the problem is twofold…
Firstly, suppliers are reluctant to adapt project scopes either because it has a bad impact on margins or simply the people in charge of running projects and managing accounts lack the skill set of understanding – not to mention – challenging clients’ needs or taking any risk of creativity. Quite often they excel (and they are hired on that basis) in doing the exact opposite and instead of focusing on scopes, they should focus on the value and ROI.
In addition to , It is also often in companies’ interest to prolongue the value extraction process and charge more money instead.
What is my fundamental problem with that?
In my view, project rigidity, lack of creativity and fixed scope based delivery slows down innovation…if you don’t adapt projects to real ROI, unnecessary circles will be ran resulting in missed opportunities. And if innovation is slowed down, ultimately revenue growth will be slowed down too.
If clients get slower access to real value, they will be more reluctant to spend more money on any other services.
Say bye to up- spelling and embrace up-demand!
so, companies should spend much more time on analysing what exact value they deliver or more importantly could deliver to their clients and generate ‘organic’ up-demand coming from clients rather than spending fortunes on promoting solutions that their clients might or might not see the benefit in.
Because even in difficult economic times, most companies will find budgets for projects that deliver value.