(video by Strategyzer)
Many years of involvement with entrepreneurial start-ups as well as companies wanting to scale up or tune up has identified a pattern. There are tire kickers (going through the motions) and there are tire checkers (pro-maintenance).
Every organization, whether ‘for profit’ or ‘not for profit’, needs to check their tire pressure.
In the automotive world, the right tire pressure is a balance between traction and fuel economy. This holds true for business as well. You want the optimal amount of traction in your market at the right cost for your business. Traction is about building a stronger connection on the ‘market’ roadway you are travelling. To assess your traction and fuel economy mix, you need to answer 4 questions. The questions are simple – the answers are not. But collectively – the answers will explain the type of traction you are getting for the resources you are expending – where you are gripping, where you are slipping and where you are making or losing money.
Think of these questions as the 4 tires of your business vehicle – the answers are the decisions you are making for your organization.
- Why will people choose your business? What will you SAY to them that matters?
- Why should they believe you? What will you DO to make it true?
- How will they be better off for choosing you? What will they GET to prove it’s true?
- How will you track your Progress and your Success? What indicators will you WATCH to guide your decisions?
The questions are the same for every organization, but the answers are different for each organization. The choice of tires depends on the size and type of vehicle, the driver, the load and the road. For your business, your answers will depend on the size of your business, your market, your goals, your value proposition, your management, your culture and your processes. And like tires, these need to be operating at the optimal balance between traction for your business and the cost (i.e. fuel economy) of doing business. If you have high fuel economy (spend less) – you have lower traction (resonance with your market) and are going to be less competitive in your market. On the other hand, greater traction (resonance) at a high cost to you will not be sustainable for your organization.
Take a moment to check the traction and fuel economy on your ‘business tires’ using a scale of 0-10 where Zero is Don’t Know, 1 is Poor and 10 is Excellent . The scale positions ‘Don’t Know’ the lowest, as even the selection of a Poor score shows recognition of your situation and the opportunity to focus on improvement.
Tire # 1: how well does your value proposition RESONATE with your target audience?
Tire # 2: how well is your business model designed around ALL the key success factors for delivering on your value proposition?
Tire # 3: how TANGIBLE is the deliverable that makes your value proposition true and valued by your target audience?
Tire # 4: how USEFUL are the metrics you collect for monitoring progress and measuring success?
Fuel indicator: to what extent are the costs of doing business generating the returns you want?
These scores will give you a preliminary look at which tires are slipping and which are gripping, and whether your cost of traction is working for you. Do you need more traction or more fuel economy or both? Focus on your lowest score and how it relates to the other scores. A change in one will generate a change in the others. 360traction can help you connect the moving parts.
Last week, I read an article in the Globe & Mail that asked: “how much value am I creating for my organization?” So the natural extension of that question is “how much value is the organization collectively creating for themselves and for clients, customers and shareholders?” The answer depends on which metrics the organization is tracking to define collective value.
Traditionally, value is measured financially by revenue and margin growth, and cost savings, which are outcome or ‘lag’ metrics. This approach puts value in a single bucket. Value must be created for and delivered to customers, so that value can be captured by the organization. This expands the definition of value to include specific metrics for cultural, operational and relational value, as well as financial value. The result is a better assessment of where value is being lost or found. The collective value generated drives the traction achieved by the organization. It is a 360 view of traction.
The question of collective value for any organization can be placed under the 360 lens to connect value and traction to help organizations find and fix the gaps.
This expands the tracking of value beyond financial lag metrics to cultural, relational and operational lead metrics and demonstrates how they work together to build value and traction.
So, the question of collective value requires a broad reach across the organization to include three key drivers of value. Let’s take a look.
While operational value is usually focused on cost reduction – a focus on operational innovation can increase operational value by enhancing the organization’s value proposition. This is important as the value proposition is the promise that customers and clients use to connect their expectations of value from the organization to the reality and ROI of the value received. An enhanced value proposition, that delivers competitive traction, requires innovative operational delivery – not just efficient operations.
Relational value is the engine for revenue generation via the customer or client experience with the organization. Relational value works collaboratively with operational value. Relational and operational value enhance the experience the customer or client has with the organization to the point of building not only engagement but also advocacy. The power of advocacy is retained revenue growth through upsell and cross-sell, plus new business at a reduced cost of acquisition. Shareholder engagement is another key relational metric on the investor relations side – that builds greater tolerance among shareholders during stock price fluctuations.
And finally, cultural value –the internal purpose– driven, working environment where employees are engaged by the purpose of the organization because they see the value proposition as authentic and even inspiring. They see the alignment between what the organization says externally and what it does internally. This builds internal engagement, which becomes advocacy for the organization. Employees who advocate on behalf of the organization are much more credible to customers, clients and prospects, than claims made by the marketing or corporate affairs departments.
Why does this help to measure collective value? Tracking these four types of value metrics ensures a 360 view of the leading cultural, relational and operational measures that serve as the guideposts of the organization, and the financial lag measures that are the goalposts of the organization. This broader definition of value generates more opportunities to understand where value is being lost, regained or achieved. The result is greater clarity, better resource allocation and more prioritization of actions that influence traction for the organization.