The focus of a service-based company should not be to increase sales or lower costs, but rather to create value for everyone involved in the ecosystem of their business model. While actively creating value for your customers isn’t a revolutionary idea, they are only one piece of the puzzle to creating an effective strategy. It’s often overlooked, but companies also need to be focused on adding value for their suppliers and employees to maintain strategic partnerships and stimulate growth. Holistically engaging all three groups of stakeholders allows for a unique scenario where everyone wins.
Growing Loyal Supplier Relationships
While sometimes forgotten by companies, value creation with suppliers can increase stability in the partnership. Rather than just maintaining existing relationships, companies can focus on growing loyalty with suppliers. Directly or indirectly enhancing a supplier’s business can snowball into numerous positive impacts on your company such as lower costs, more efficient distribution, and increased goodwill with your partner.
Yes, it’s important, but it is also tricky. Often, when you’re reaching out to suppliers to work toward improving processes and lower costs, you’ll be engaging in tough love and need to demonstrate you genuinely care about their business as much as your own. Adding value to your suppliers will usually be mutually beneficial, but sometimes emotions can get in the way. What if it doesn’t work as you intended? What if the supplier becomes offended? In many cases the rewards outweigh the risks.
A strong example of creating value with suppliers in a traditional manufacturing scenario is Nike and its network of garment factories. They identified early on that their products could be produced more efficiently, cheaper, and at the same quality if the factories employed lean manufacturing techniques. Now, Nike trains hundreds of garment factories in the techniques, strengthening their relationships into a partnership.
For service firms, it isn’t as easy to identify your “suppliers”. In consulting firms, contractors and subject matter experts can be perceived as your suppliers. To create value for them besides offering compensation for billable hours, you can advocate on their behalf. An example could be as simple as communicating their challenges to a client if they’re struggling or allowing them to roll off a project if it really doesn’t suit their capabilities or interests. These subtle investments in the individual can make a huge difference when it comes to how they perceive your professional relationship.
Retain and Enhance Employee Relationships
The Great Resignation of early 2021 showcased the importance of companies focusing on adding value to their employees. Now, companies are experimenting with increasing value for employees in hopes of increasing retention and reducing burnout.
Companies have often clung to traditional benefits like vacation time, merit bonuses, and holiday parties to keep their employees content. But professionals are craving more these days. In the wake of the pandemic, eyes were opened to how efficient working from a home office can be. Autonomy and flexibility are more desired and thus becoming more common as employers work to retain employees that want a healthy work/life balance.
Benefits aren’t the sole desire of today’s professionals; they also want to feel their company is invested in their professional and personal growth. Don’t ask your employees to do more with less. Some internal ways to make work more attractive include standardization of common processes, cross-training, and operating with slack.
Give your employees a clear indication you care about their mental health and the work they produce. Standardizing consistent processes your employees do will not only make them more efficient, but it will relieve the stress of decision-making if there is a clear path to success. Cross-training employees allows them to feel empowered as well as more valuable to your organization. Operating with slack (meaning don’t be so rigid with deadlines, structures, and final deliverables) is more likely to produce engaged employees who enjoy their work and feel confident enough to ask for help when they’re overwhelmed. By improving their work experience, employees will be more productive and genuinely care about the quality of their work.
Creating Value for Customers with Innovation
Enhancing the customer experience is probably the most obvious and easiest focus for companies. However, it’s important to use a different lens when visualizing common customer pain points. Over time, companies often lose sight of their original vision and prioritize short-term objectives like quarterly revenue or stock price. While these are important for reporting purposes, maintaining excellent customer relationships will create more value in the long term than these vanity metrics.
To foster an emphasis on providing value for the customer, use key performance indicators (KPIs) like net promoter score or customer retention rates. When you regularly survey your customers using these methods, you’ll be able to track satisfaction over a long period of time.
A popular and powerful exercise is mapping the customer journey step-by-step to identify potential pain points the customer may encounter when using your product or buying your product. You’ll use this information to improve your customer’s experience. To be truly innovative, you must think of small improvements at every step that lead back to your grand vision.
Remember, just because something works doesn’t necessarily mean it can’t be improved – even if it’s improving on a competitor’s product. For instance, you can take the shortcomings of a similar product or service and build a product in the industry that differentiates you and makes a user’s life better.
Take Amazon and the Kindle. Although they are the dominant e-reader today, they were not the first manufacturer to break into the space. In 2004, Sony released the Librie EBR 1000, which had many of the same product features as the new Kindle, except for one feature. Sony’s version had limited options for digital books as they only offered their own format for them and had to be downloaded via computer.
With Amazon’s innovation on the device, Kindle users could download books from anywhere if they were connected to WIFI. With this “bookstore” model, the ability to use the product exponentially grew, making it extremely desirable to use a Kindle. Thus, they provided value in a unique way to the e-reader customer and dominated the market.
Executing a Value-Based Strategy
By now, your wheels must be turning and evaluating your own company’s strategies with these three groups. Creating value for all stakeholders in a service-based company is essential for long-term success. A typical way to do this is to define and understand why your suppliers/employees “sell” to you and why your customers pay for your services.
“There are several ways to increase supplier surplus and employee satisfaction without hurting the company’s bottom line. Unfortunately, most managers only devote seven percent of their time to developing employees and engaging stakeholders.”
While it may be challenging, investing more in these relationships can lead to significant benefits for all parties involved. When these concepts are executed strategically (and together!) they can drastically strengthen and grow your business and its partnerships.