Last week, Jeanne Yocum wrote a post that caught my attention. In it she talked about what John Harthorne, co-founder of MassChallenge, the largest-ever business accelerator, said about the two parts of the business equation: creating value and capturing value. He posits value is created through finding solutions to problems that need fixing. Later, value can “captured” in the form of profits. His concern is that lately American business has focused too much on value extraction rather than on value creation.
That thinking resonated with me. There are, of course, many examples of value extraction run amok. I recall the merger and acquisition craze in the ‘90s and more recently the sub-prime mortgage fiasco. These resulted in a few people making huge amounts of money while many others lost jobs and investments – hardly sustainable business practices.
But, you might ask, how does this play out in my small business?
Closer to home I also see value extraction, albeit on a smaller scale and done in a different way. Take the reaction of some small business owners to our slowed economy.
When business dropped off in local restaurants, the reaction of some owners was to cut back on costs – ingredients and service. What had been a treat – great food in a welcoming atmosphere – was no more. Not surprisingly, fewer people came and more cuts ensued. Some of those restaurants are gone.
Others restaurant owners took the opposite approach. They doubled down on quality, giving a lot of thought to what made the dining experience at their restaurants special, and then did more of that. Maybe there were fewer choices on the menu, but those that remained were excellent. They focused on what was in season so ingredients were not only less expensive, but also were at their peak of freshness. At one area establishment we were greeted by the owner herself, who thanked us for coming and made us feel especially welcome and appreciated.
I needed a replacement wastebasket for a kitchen slide out. At one big box store, I was sent to four different aisles (all wrong) and walked out without what I came for, resolving not to return. Later, I called r k MILES, a small, local chain; one of their employees took down my name, number and what I wanted and called back in under five minutes with an offer to special order the trash basket. Guess where I’ll go first next time. Think about how many people will hear my story.
So, what’s your takeaway? People are spending less. How can your business be the one that creating value?
Think about your entire customer experience as a process – before they walk in the door, while they are there and after they leave. Are you paying sufficient attention to each of these important stages?
Before: Are you clear in defining your target market and articulating value proposition. That is, who exactly are you trying to talk to and what do you say? Be focused, as opposed to trying to be all things to all people. Want to complete in multiple markets? Establish your business in one market niche before you move on to the next. Be very clear about the benefits of buying from you – what’s in it for the person using your product or service.
During: Is your business solving problems that need fixing? While this sounds simple, it’s actually not. Solving implies doing more than just “sweeping the dirt under the rug;” it conveys finding workable, complete answers. Don’t overlook the proviso that it’s ones that need fixing.
Enlist the help of your staff to answer these questions. Look at how many people leave with what they came for. I love it when cashiers ask me if I found everything I was looking for. Do your customers come back? Do your customers see you as a resource? Unsure? Ask them.
Harlequin’s Gardens of Boulder, CO, recently solved a problem for a woman from Western MA when she called to order a gift certificate for her adult daughter’s birthday. The store doesn’t accept credit cards. Realizing that waiting to receive the check from Massachusetts would cause the gift to arrive late, they sent the certificate out immediately saying, “If you can’t trust a gardener, whom can you trust?” I’m betting that mother and daughter will be loyal customers and tell many others this story too.
After: What are you doing to stay in your customers’ minds? Do your follow up after the sale to make sure that the product or service you provided is solving their problems? Do you send a thank you, perhaps with a small gift – a discount coupon or some bit of useful information?
I just bought a new Brother laser printer from Costco. I would appreciate a coupon from Costco for a couple bucks off a toner cartridge or printer paper or an article from Brother about ways I could get the most out of my new printer.
Make clear that customers are your best referral source and that you appreciate referrals and then demonstrate that. Don’t just hope that customers will return. Woo them back.
In closing, let me ask the same questions that Jeanne did, but in a slightly different way. Do your actions show that you are motivated by value creation or by value capture?
Since 1991, Laurie Breitner has assisted organizations with operational improvement, organizational development and strategic planning. Learn more at http://www.breitnerandassociates.com.