Growth Insights for CEOs

Revenues Not What They Should Be?

Posted by The Chief Outsider



Review your company strategy and value proposition in order to raise profits.Could Be Your Strategy or Value Proposition Needs Refinement

If your organization’s revenue isn’t up to par, a good place to start is to review your company Strategy and Value Proposition.

Strategy

In his book The Advantage, author Patrick Lencioni describes Strategy as a collection of intentional decisions a company makes to give itself the best chance to thrive and differentiate from competitors. I would extend the description to make it clear that intentional decisions prescribe specific trade-offs, in effect what a company will do and won’t do.

In my experience, Strategy disconnects typically occur when the CEO and management team fail to make difficult trade-offs. Without declaring trade-offs, companies run the risk of diluting strategy and falling prey to “everything is important, which means nothing is important.” With clear trade-offs, your management team and staff operate with greater discipline, you know what to measure, and resources are allocated according to priority. This leads to better execution and superior outcomes.

Southwest Airlines is an excellent example of a company whose leadership made a series of strategic trade-offs. These included decisions such as state-to-state routes versus transcontinental routes; use of secondary versus primary airports; and use of one airplane model versus several. This helped the organization achieve faster turn-around (more on-time flights) and lower ticket prices by avoiding larger gate fees at busier airports.

Strategy should be reviewed annually, and more frequently if you’re competing in an industry with high degree of change, disruption or innovation.

Value Proposition

A Value Proposition is a compelling, tangible explanation of how a company or individual will benefit from using, buying or engaging your products and services. Think of it as your promise to the market. To be effective, the Value Proposition must meet three criteria:

a)   It must be easily understood and believed.

b)   It must be of high perceived value.

c)   It must be actionable and supported operationally.

If your board and staff can’t consistently answer the question “why should I buy from you” in 15 seconds or less, it can be a sign that the organization’s value proposition is amiss. It could also mean that you simply haven’t done enough “voice of customer” work to really understand how best to reconcile your business strategy with a value proposition that inspires the market to take action.

A solid Value Proposition goes a long way in creating internal alignment around Sales Channels, and helps various parts of your organization understand and see both the direct and indirect role each plays in delivering on the company’s promise. It also informs your brand and reminds customers they made a smart buying decision.

Topics: CEO Choices, Value Proposition