14th October 2015
Expert advice from Leadin: Identifying and developing your network of value creation
Slow economic growth coupled with increased global competition over recent years has forced many professional service companies to reconsider their strategy and operations. Businesses often focus on improving operational efficiency to protect market share and they usually do this by trimming costs and overheads. The problem with this approach is that it assumes your business model will remain relevant and, more importantly it often results in cutting the capability to develop the skills required to remain competitive.
An alternative approach is to re-evaluate your business model by identifying all the areas where you can generate value. There are many techniques available to re-evaluate your business model but we find this five-step approach always delivers and it is equally valid for medical device manufacturers, research companies as it is for service providers.
1. Segment your portfolio based on client value
This means looking deep into your companies offering and identifying the most valuable contribution that you generate for your clients. Analysis of client value is not straightforward; it requires both quantitative and qualitative measures. Once you have identified where you create value for your clients, you can rank them from both your client and your businesses point of view.
2. Identify value co-creation opportunities
Remember that the value chain extends all the way to the end user, be they a consumer, a patient or a health board. It is not enough to focus on understanding your clients’ needs. True value creation comes when you cooperate with your clients and form a shared understanding of the full value chain. This is often where user research comes in. Researching the value chain and identifying all the stakeholders gives a richer view of business operations and helps identify new product or service opportunities
3. Leverage your most valuable product or service
Researching your users and cooperating with your clients will help identify your most valuable product or service. However do not simply increase the price of your most valuable product or service. Use your customer research to establish the perceived value from your clients’ perspective. You can then set your pricing accordingly.
4. Increase the return on capital employed (ROCE)
In financial terms if your return on capital employed is higher than your cost of capital, then you are generating value. It’s especially important for service businesses to capture all the capital employed in creating value – this capital employed will include ‘human capital’ and you need to design logic to accurately capture this. You also need to capture the increase in human capital produced by your activities.
5. Develop your value creation infrastructure.
Nowadays the value chain is rarely linear it is more often a ‘network of value creation’. This network will include both up and down stream partners. To accurately map your network of value creation you need to consider the value you create, or help create with your suppliers and your clients as well as your clients’ clients. Once you have this mapped you can look at developing the network and maximising opportunities for all involved. This may also identify new opportunities within your existing network for deeper collaboration or co-creation.
Taking time out to review your business using this five-step approach will help define a more focussed business with clear value creation goals. This will in turn help protect and grow market share. It is not, however a one off activity, reviewing your positioning and competitive advantage should be ingrained in your business DNA. Identifying new opportunities within your network of value creation should be second nature and something that is done throughout your organisation. We have helped many companies through this process and helped in the task of embedding it within their organisation. If you think we can help you then please get in touch.
Leadin offer User Research, User Experience and Digital User Interface design and development services. We work with business from across many industries including the Health and HealthTech sectors. We specialise in designing intuitive, multi-user digital interfaces for complex systems and environments. Our approach and expertise has attracted companies like Jaguar Land Rover, DVLA and ABB to commission us to design and deliver their products and services. Our accomplishments are based on the comprehensive understanding and involvement of real users of systems.