creating new value takes vision

by Kenneth Rudich

In the last post, “An Economy Built on Quicksand,” I revealed how the start of a global economy back around 1982 has forever changed the U.S. economy.  One economist even went so far as to describe it as moving from an economy built on bedrock to one being built on quicksand.  This post follows-up on that theme by discussing the complexity of delivering value in an economy built on quicksand. 

the two drivers of value

There are two generally recognized drivers of value.  One is when a person or organization creates value; and the other is when there is a demand for value.  Though separate, these two go hand in hand while striving to satisfy people’s needs and motives.  Together, they form the backbone for delivering value.  But because they are separate, they also add complexity to the task of trying to consistently deliver value across time.       

Let’s look at what has become a very common scenario. 

A new innovation comes along and it fills a need or desire that people didn’t know they had before it became available.  It creates value. 

With the passing of time, the demand for that particular innovation may grow even though the value it delivers remains essentially the same.  In this way, the created value gets transformed into a demand for value, which was the purpose for creating that value from the beginning. 

Once that demand hits a critical mass, however, it motivates others to try offering a comparable product that claims to do an even better job of producing value fulfillment.  Perhaps it will cost less while delivering the same benefits, or cost the same but deliver more benefits.  Or maybe it costs more but also excels at delivering more.  However it happens, it creates new value, spurs a shift in demand, and steals customers away from the original. 

Then, possibly, an altogether new and alternative product emerges and it trumps the entire group of comparable products.  It may even be disruptive enough to make them obsolete.  So now the comparable group must either create new perceived value to reclaim their old competitive stance, or lose out as a consequence of the substitute product taking their place. 

In other words, there’s the challenge of continually keeping pace with changing perceptions of what constitutes value over time.  And to be sure, people are fickle, and markets are fickler. 

Examples abound of course, but let’s briefly review just one. 

How many people currently own a manual typewriter and use it daily? 

The manual typewriter was a great invention in its time, but was later trumped by a comparable product that offered relief to otherwise weary fingers – namely, the electric typewriter.  That was then followed by the wordprocessor, which offered still more functionality.  And then the personal computer came along and it, well, it’s now become the runaway favorite — at least for the time being.        

the quicksand analogy    

This is where the quicksand analogy enters the scene, insofar as it refers to the rate of speed with which we have begun to rotate through these cycles of change. 

It took nearly a century for the manual typewriter to lose popularity.  Roughly thirty years for the word processor to replace the electric typewriter, and less than two decades for the pc to overtake the word processor. With each successive round of innovation, the product shelf-life got shorter.  Just as importantly, this particular timeline coincides with the metaphorical shift from bedrock to quicksand when you consider that the economy changed its trajectory about same time the word processor came out. 

Moreover, this innovation cycle is exceedingly slow by today’s standards.  Imagine if we could somehow see the same timeline unfold in our now highly turbo-charged global economy.  That would change it from evolutionary in character to revolutionary in character. 

I’m guessing the manual typewriter would have lasted probably ten years, maybe three for the electric typewriter, and less than one for the word processor.  As for the pc, the ceaseless eruption of new applications pretty much keeps it in perpetual flux (Not to mention it’s entirely conceivable the pc will soon be displaced by something else, given all the new devices that keep coming out). 

ramifications for individuals and organizations

This trend imposes significant implications for individuals and organizations alike.  Key among them is the notion that if you’re not moving forward, you’re moving backward.  As a result, there’s a big onus on individuals to keep themselves marketable by constantly upgrading their current knowledge and skills; a good majority may even find it necessary to re-invent themselves several times over in the course of their adult working lives.  For businesses, it entails the obligation to endlessly innovate in order to remain competitive.  Staying nimble is incalculably important in this environment, because a lapse will always carry the risk of losing the ability to deliver value better than someone or something else.    

And who knows where this ever-escalating race might yet lead?  Will today’s hot algorithm become tomorrow’s quaint antiquity?  Will you wake in the morning using software version 1.0, spend the better part of lunch installing version 3.21, and then 5.0 over dinner?  Will your job skills be current during the appetizers and obsolete by dessert? 

The bedrock you see in the rearview mirror is remnant of the industrial age.  Up ahead — quicksand.                  

what to do?

The intent of this blog is to delve deeply into the question of what to do (or at least what to try) to stay marketable, whether as an individual or an organization.  All future posts will be focused around that objective.  Your contribution to that dialogue is more than welcome.  Won’t you join in?

global competition

 by Kenneth Rudich

It was 1982 when I initially realized the U.S. economy was on the brink of taking a sharp turn, one that would forever change its trajectory.  

The evidence was seemingly everywhere.  Already the nation was littered with shuttered factories as unskilled manufacturing jobs were moving abroad to take advantage of cheaper labor.  Legions of other companies were struggling too, and they either were in the midst of a massive restructuring to become lean, or they were being dismantled and sold off in pieces.  Unemployment steadily crept upward during all this, and the mood of the country in general was something akin to bereavement.  

Across the Pacific, meanwhile, the Asian economy was taking root and starting to simmer.  As people gazed in that direction they were transfixed by what they saw.  For the first time in recent memory the U.S. was about to take a backseat, economically speaking, to Japan.  It truly was uncharted territory.  

I was working on an MBA at the time, and I remember being told the U.S. was transitioning from a manufacturing-based economy to a services-based economy, from producing tangible goods to intangible products.  This was heartening news because it insinuated the currently bad situation was only temporary, that the economy would rebound after a bit of correction, return to an even keel, and then go galloping on as if nothing had ever happened.  

But the reassurance of that explanation didn’t last.  A few days later, after listening to another economist describe the same circumstance as moving from an economy built on bedrock to one being built on quicksand, I began to recognize it wasn’t as simple as merely shifting from tangible to intangible products.  That was only part of it, and a relatively small part at that.  Something bigger yet was at hand.  And though I didn’t fully understand exactly what, I do remember my intuition telling me he had just said something extremely insightful.  From there, it always stuck with me.     

Thirty more years of watching the economy twist and turn has since given me the perspective of hindsight.  I now get what that economist was trying to say back then and, none too surprisingly, it remains as relevant today as ever – in fact, even more so.  

You see, it wasn’t about whether the economy was manufacturing-based, or services-based, or anything else-based for that matter.  Nor was it about the fate of the U.S. economy alone.  Rather, it was about the new reality of having to deal with unprecedented competition and the impact it would have on the lifecycles of products or services. 

In the next post, “The Complexity of Delivering Value,” I delve more deeply into how this change has added a great deal of complexity to the task of consistently delivering value across time. 

value defined

by Kenneth Rudich

My dog Reddi constantly burdens me with costs in terms of time and money.  I have to walk him, feed him, train him, bathe him, and play when he gets restless.  There are vet bills and licensing fees, plus squeaky toys and special treats.  And then, too, there’s that perennial chore of having to tidy up in the wake of his path, if you get what I mean.  

Every single day he’ll exact a price, but never once have I resented it.  The truth is, when he looks up at me with those adoring eyes and wags that slender tail, or greets me with a splendid show of canine jubilation, or curls up beside me just to be nearby, I am rewarded with a sense of satisfaction that far exceeds the costs of keeping him.  At moments like these, he is, in every way, the very definition of a marketing concept called value.  

the concept of value

Economists define value as the perceived benefits relative to the price or cost, as shown in the formula: Value = Perceived Benefits/Price or Cost.  

The perceived benefits are usually traceable to some underlying set of human motives, which may be social, functional, physiological, or psychological in origin.  

Sometimes these motives are of equal priority; but more often they will vary in importance, such as divided into primary and secondary ones. Thus a person may agree, albeit reluctantly, to forgo one or more secondary motives if the primary motives are met.  For example, a financially strapped individual may settle for an economy car even though a luxury car is preferred.  In this case, the primary motive of securing transportation (functional) outweighs the secondary motive of prestige (psychological).  

The price or cost represents what someone is willing, able, or authorized to give up in exchange for the perceived benefits.  

It too may have motives attached to it, such as the amount of money, time, or energy a person is willing or able to invest.  For instance, some people will gladly pay a premium for convenience or prestige.  Others would rather exert extra time and energy to hunt for a bargain. Economists refer to this as price elasticity, and it can help with establishing the optimal price people will pay in exchange for a product or service.  

Ultimately, the satisfaction of motives, not just needs, is at the heart of delivering value.  If the price or cost exceeds the perceived benefits [a key motive (or motives) is under-served or not served], then value is decreased or non-existent.  If the perceived benefits equal or outweigh the costs, then value exists and is perhaps even maximized, which produces a level of satisfaction known as value fulfillment.  

Ipso facto, my dog Reddi delivers value fulfillment for me because the perceived benefits of having him around clearly overshadow the costs (bear in mind that he’s fortunate I’m not counting on functionality as a primary benefit, given his gross negligence with matters like housecleaning, doing laundry, or picking up after himself).  

create value, build brand

In the last post, “As the Marketing World Turns,” I touched on the idea of building a memorable brand from the customer perspective.  If you follow where I’m now going with this post, then you’ll recognize that value is the foundation upon which such a brand rests.  

The better you know and understand the people you serve, the better the foundation you’ll be able to build for your brand.  Here is a short list of questions you might want to deliberate when assessing the value of your product or service:  

• what value creating attributes or activities can enhance the connection with your brand?
• what underlying motives seem to be at work, and how do they get prioritized?
• what role does cost or price play in the perceived value of your product or service?
• how can value creation help to position your product or service in other people’s minds?
• how does your value proposition stack up against that of your competition or of other substitute products and services?

This article titled “Marketing Strategies by World Hotels for Customer Retention” is an illustration of value creation from the perspective of the lodging industry.  Notice the attention to detail for identifying, and then catering to, specific motives.  

Brand management and marketing must rigorously entertain questions about delivering value on a regular basis, and then tweak the value proposition accordingly.  To do anything less will result in the equivalent of trying to climb up a waterfall. No matter how hard you work, you’re not likely to get very far with making your brand stand out.  

In future posts, and with a hopefully generous amount of input from others interested in the same topic, I would like to explore in-depth some of the better tools, techniques, and ideas for managing and marketing value across time — whether for realizing individual goals or helping an organization to meet its objectives.  My vision is that the eventual pooling of insights will lead to a rich form of creative cross fertilization, in which we not only inspire one another, but also achieve greater success because of it.  

Insofar as the usability of this blog is also important to me, I would like to invite suggestions along those lines as well.  

Welcome everyone.  And may we all deliver value with dexterity and skill!