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In this blog, I look at the third and final cornerstone, a company’s Value Footprint.
Your value footprint, or value proposition, is critical. The value that you create for your customers and suppliers determines the value that you can harvest. Several chapters in Islands of Profit in a Sea of Red Ink explain how to create a powerful value footprint – for example, check out Chapter 17, “Profit from Customer Operating Partnerships.” Several of my blog posts also focus on how to be effective in creating a value footprint – and importantly, how to match a set of value footprints to sets of customers (necessary for creating big value without having your costs blow up).
Here are a few important aspects of creating a strong value footprint.
Islands of Profit. The absolute most important priority is to secure and grow your islands of profit – your high-volume, high-profit customers – both to gain large, fast profit growth and to protect your core profit source. This is where pushing the envelope on your value footprint is most important and productive. And in the process you will lower your operating costs by 20 percent or more, and increase your share of wallet by over 35 percent, even in your most highly penetrated accounts.
Not just customers. You certainly have an opportunity to develop a decisive value footprint for your customers – indeed, this is where everyone focuses. But you have an equally strong opportunity to create value for your suppliers. The latter is almost always overlooked.
Showcases. I have written at length in my book and in my blog posts about the importance of showcase projects. A showcase is a small exploratory project, often with a relatively small well-run customer or supplier, in which you can jointly embark on a journey of discovery to find inventive new ways to do business together.
Vendor-managed inventory, cross-docking, category management and many other widespread innovations grew out of showcase projects.
Here the key is to keep a completely open mind and to learn by doing.
Resist the strong temptation to work with a major customer or supplier and instead work with a smaller partner who is well-run and innovative. Work where the conditions for success are highest, and the risks of failure are lowest. Great companies have a constant portfolio of showcase projects. That’s how they stay in the lead.
And, as with any process, creating and improving a value footprint must be a regular, disciplined process with responsibility, regular cadence, results tracking and clear accountability – not just an occasional one-off project.
All companies have an opportunity for huge, fast gains and sustained profitable growth. I have been personally involved in projects involving nine-figure profit gains.
The secret of success is to cement in place the three cornerstones of profitable growth – information, process, and value footprint. With these in place, the company will naturally accelerate its profitability, growth, and competitive advantage.
Jonathan Byrnes is a senior lecturer at MIT and author of the recent book, Islands of Profit in a Sea of Red Ink. He is president of Jonathan Byrnes & Co., a consulting company with which he has advised over 50 major companies, medical institutions and industry associations. Contact him at [email protected].