Sustainable value in the knowledge economy

Whenever Mary Adams comments on Crossderry (thanks, Mary), I always make a point to work through my Google Reader inventory of her posts (here also).¬† She posted briefly (here) on Jay Deragon’s post (here) and comment thread — including some from McKinsey reps — wondering how valuable McKinsey’s “Premium” offering is.

I dropped the “Premium” subscription myself a few years ago, but I do return to mckinsey.quarterly.com pretty regularly.¬†¬† However, I’ve seen certain articles that stand out — in the way that McKinsey consulting stands out — by being on point, detailed, yet well-written and digestible (unlike some of the academic work Jay refers to).¬† I know I’m missing something, but I’m not sure its worth $150/year.

In such cases, it would be nice to have the option to buy a single article (like HBR… hint, hint).¬† Not sure of the price point, but I could see myself making a $5-$10 “impulse” buy for the right piece.

New Leader Focus Area — Costs and Pricing

Per an earlier post (here), I’ve been thinking a lot about what goes into taking over a new organization.¬† Considering the¬†economy these days, this¬†may¬†happen to more of us!¬†¬†¬†

Anyway, the principle that costs and prices almost always decline over time is a reasonable foundation for¬†looking at one’s competitive and operations health.¬†¬† Below are¬†six questions from the HBR New Leader article I originally referenced which help to¬†focus the analysis:

  • How does your cost slope compare with your competitors? In other words, are your costs lowering or rising more or less quickly than your competitors?
  • What is the slope of price change in your industry right now, and how does your cost curve compare?
  • What are your costs compared with competitors?¬† I’d also look at prices as well… competitors with prices eroding faster/slower¬†than me should tell me something about the sweet spots in the value chain, offerings most valued by the market, etc.
  • Who is most efficient and effective in priority areas?¬† A pretty generic suggestion.¬†¬†Looking at relative pricing and what that tells you about the market should give hints about “priority areas.”
  • Where can you improve most, relative to others?¬† Look hard at the capabilities you actually have or could build quickly.¬† Avoid immediate focus¬†on topics that you can’t change.
  • Which of your products or services are making money (or not) and why?¬† Don’t automatically trust the received wisdom on who makes and loses money.¬† Invest some time and money is getting REAL numbers and answers.

Synching customer value and product/service units

This management tip from The Intelligent Leader is worth noting (here).¬† I like it because it’s a concrete example of how a firm moved from product to value-based pricing — Cemex is differentiating what is often considered a commodity product.

Differentiation by¬†combining¬†basic product value with another attribute(s) — in this case a firm time commitment — is the key to this transition.¬† Whether it is more service, less risk, tighter time windows, there usually is another attribute that your best customers value.¬† More importantly, they’re usually willing to pay for it.

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