The links between the value chain and ROI
If the last 2 years has taught us anything is to expect the unexpected and to adapt … and it’s not over yet. At the time of this report in October 2021, the UK is in significant economic and political turmoil with a 3rd PM of the year, an onset recession, increased utility costs and mortgage interest rates set to triple!
All these elements make planning and budgeting for 2023 tricky. Leaders will need to strike a balance between making opportunist moves whilst mitigating risk. All this in the pursuit of maximising revenue growth, profitability, and resilience while cutting spending in areas prone to waste.
How does a value chain analysis create customer value?
The value chain is an overview of the organisation’s activities that are either strategic or supportive activities. A value chain analysis allows you to assess where true value is created and where improvements should be made. A company can gain competitive advantage by performing these activities more effectively than its competitors. We have found that most marketing activities have a very close link to Sales, IT and Operations and so we focused on those value chain elements for this research study.
In August 2022, we conducted 30 qualitative interviews with leaders from selected areas of the value chain.
- Operations – CEOs and COOs
- Marketing – Marketing leaders
- Sales – Sales leaders
- Information Technology – CTOs and CIOs
These leaders were from small to large sized companies of 5 to 1000+ employees. Industries included Technology, Energy, Financial Services, Recruitment, Education, Biotechnology, Transportation, Healthcare, Legal, Professional Services and FMCG.
We wanted to answer a specific question …
What are the common challenges across different business/value chain functions?
The interviews revealed how issues are shared across each value chain function graph below. Siloes, alignment and prioritising limited skills and capacity came up as the key issues faced by these leaders.
We took this a step further and then grouped these challenges into bigger related categories and this highlighted that the 3 key solutions required across the value chain are Insights, Processes and Tools, and Alignment.
Theses solutions seem simple enough, but remember these leaders are struggling for both capacity and skills to be able to just deliver day to day operations and these solutions require additional work that underpin the day-to-day deliverables.
What do the value chain leaders say are their challenges?
1. Processes and Tools
Operations: Revenue and people scale up rapidly, but organisational processes and systems struggle to keep pace. This limits the CEO/COO’s visibility and ability to increase productivity against both short and long-term objectives.
Sales and Marketing feel the pressure to demonstrate their short- and long-term ROI that justifies budgets, systems, and headcount, but “We don’t have the skills to identify our tech stack’s reporting, analytics and integration needs and abilities”. They recognised that relevant KPI setting, and reporting would set the right ROI expectations including track Customer Experience (CX) and customer relationships.
IT are trying to strike a balance between efficient and cost-effective operations versus the impatient ad hoc requests from individual functions to integrate new and legacy systems… all of this whilst navigating how to improve data quality caused by employees’ poor quality data input process.
Overall summary: It’s important for all these teams to understand, review and align their systems (tools and processes), data needs and capabilities in a realistic timeline and budget.
2. Alignment
Operations: As a business grows, operational leaders struggle to keep their finger on the business pulse. They rely on functional autonomy, but this often creates siloes and biased viewpoints making it complex to fully embed changes “Activities are pointless unless they last”.
Sales leaders felt they have limited cross-functional support internally to help them identify high value clients and build the pipeline to generate revenue.
Marketing: As the Customer experience (CX) now spans across most of the organisation, marketing struggles to align with internal functions to identify high value clients and CX touchpoints that create a brand experience, deepen customer relationships, and increase revenue.
IT, nowadays, spans across every part of the business that could be a source of differentiation, but IT leaders recognised there is a gap between digital and business teams, and they need to find a common language by creating and aligning a long-term digital strategy and objectives that maintain digital effectiveness, but provide steppingstones to their version of ‘digital transformation’.
Overall summary: All leaders recognised that functional bias makes alignment complex, and they need to agree on an aligned strategy to create maximum customer value.
3. Insights
Operations: CEOs and COOs want to set a relevant vision and strategy which requires them to have their finger on the pulse of both the internal and external insights. Insights would (1) engage and get the support of their senior leadership team and (2) allow the organisation to alternate between short-term and long-term goals.
Sales leaders are seeking to create team confidence, new revenue streams and efficiencies for their under-resourced teams. They want to clarify their competitive sweet spot, identify new territories and high value accounts, and engage account decision committees. For this they want relevant tools (sales enablement) and content so that customer meetings deliver significant value and capture insights. This allows them to build relationships, strengthen value propositions and enhance customer experience (CX)=sales.
Marketers stated that they operate in a reactive state and miss out on new positioning and campaign opportunities because they need “properly translated insights and actionable recommendations and plans– what does it mean for us?” that would gain exec team alignment and support, justify diversified strategies, KPIs, budget and headcount. B2B marketing leaders had a desire to run Account Based Marketing (ABM) but lacked the insights capability needed help to set up and run ABM to create brand credibility and customer engagement.
IT Technical leaders can create a source of competitive differentiation, but many found that the term “Transformation” lacks a clear definition and could create a butterfly effect where one small change upstream can have catastrophic issues downstream. They want request changes to have a clear long-term “Why” backed by compelling insights and strategy which means they need to be aligned with company strategies and stakeholders and create a clear data strategy.
Overall summary: Data allows you to know ‘things’ but most leaders lacked the capability to create insights from data “What does it mean for me?”
Top Tips – How can these organisations resolve these challenges?
The value chain is focused on creating customer value (margin), but all these functions need to work together to increase that customer value and margin. So how can organisations solve these three common issues?
- Processes and Tools support all forms of activity, but they are often ‘bolted on’ as a need arises and, over time, they are not adapted to organisational changes, customer needs and competitive landscape. Process can be a key differentiator (read how Dominos did it) increasing customer experience and creating customer choice. If set up effectively, they can increase the outcomes of teams and, in the end, increase that customer value and margin.
Top Tip: Organisations need to understand, review and align their system (tools) and data needs. They can perform this internally or, if they’re looking for a fresh perspective, they might benefit by using an external resource, to challenge the status quo to review all the KPIs, CX touchpoints and create a fresh CX and a mix of short and long term KPIs and objectives.
- Alignment ensures that all value chain leaders agree on a strategy that creates maximum customer impact, but this is difficult to achieve because of functional bias. Marketing owns the customer relationship and data (along with sales) and they would be best positioned, but they lack the capability and capacity to do this.
Top Tip: Marketing could achieve alignment by owning the approach and project but get an independent representative to help navigate stakeholder viewpoints that creates an unbiased strategy focused on the customer. This would identify their competitive sweet spot and help kick start combined strategies (like ABM) which facilitates decision making on cross-functional resource support, budget and reports that focus on joint revenue creation.
- Insights are the common language for alignment and decision-making as they are unbiased and built on fact, but data allows you to know ‘things’ and most leaders lacked the capability to create insights from data “What does it mean for me?”
Top Tip: Sales, Marketing and IT need to create a combined picture of the customer that identifies the high value clients, creates joint planning, relevant sales playbooks, and processes, joint KPIs and objectives, and optimises systems to increase customer relationships and revenue.
SUMMARY
Historically, we have found that most Marketing activities have a very close link to Sales, IT and Operations. This research shows how all four functions are experiencing similar interrelated challenges.
What are the Alternate solutions to deliver customer value?
To remove any bias, an independent project owner would ensure that solutions have a key focus to deliver customer value, organisation value and ROI.
To survive and thrive, your value proposition needs to be resonating and sustainable. If you perform reviews and research this will (1) create insights and recommendations that (2) identify the right tools and processes (3) Align teams to create an excellent customer experience CX/value proposition = REVENUE.
The starting point is to create Insights from research and reviews to understand:
- What is the value of your internal resources?
- How can we leverage those resources?
- Which are unique?
- What opportunities lie externally?
- What gap can you spot in the competitor market?
- What do customers need?
As your organisation is scaling up and evolving, do you REALLY know the true value it offers? Does it meet evolving customer needs?
Keep your operations and value proposition fresh and relevant by reviewing your value chain and the external market.
If you’d like to know more about value proposition, CX or ABM, read the links provided or drop us a message.
