Book Review- What The Customer Wants You To Know by Ram Charan

The book review was originally published in SCMS Journal Of Indian Management, Jan-March Isssue, 2008.
Title of the book : What The Customer Wants You To Know
Author : Ram Charan
Publisher : Penguin Portfolio
Pages : 178
Price : Rs. 295
The latest book from Ram Charan, famous for his ability to explain complex business issues in simple terms, explains why in this era of internet the conventional price-centric approach will not make sellers succeed. Sellers may have excellent products, customer relationships, great strategies, differentiated technologies, faster times to market, high operational efficiencies etc but still fail to get the sale. Sellers have to actually help customers meet their financial expectations, win against their competitors and succeed in the market place or help customers’ businesses to succeed in many dimensions. While customers may not articulate their requirement in explicit terms, they want their suppliers to help them accomplish their goals by acting as partners and not as one-time transactors.
In order to achieve such a scenario, the seller or supplier should know how the customers’ business works so that you as a supplier/seller can make it work better. And, the conventional sales approach will not enable you to achieve this. One has to adopt a new radical yet practical approach. Such an approach will help a supplier to release itself from the hell of commoditization and low prices. It can help one to differentiate from competition, lead to better prices & margins and , even higher revenue growth. At the heart of this new approach to selling is an intense focus on the prosperity of one’s customers. The approach is radical because no longer you measure your own success first. Instead you measure your success by how well your customers are doing with your help. You are not selling a specific product or service; you are focused on how your company can help the customer succeed in all the ways that are important to the customers. In short, you help customers meet their business goals & priorities by adding value to them. Charan says that this ability to create value for customers will differentiate you in the marketplace and you will be able to command a price for it and he calls this new approach Value Creation Selling or VCS.
According to Charan, VCS is radically different from how most companies sell today in five ways:
Ø The seller and its organization devotes large amounts of time & energy – much more than it devotes today-to learn about the customer’s business in great detail. One should probe to find out what are the customer’s goals, which financial measures they concentrate on, how they create market value and what key factors differentiate their products or services from competition etc. While one may be tempted to look at these from a short term, Charan advises that greatest opportunities lie in the medium & long term.
Ø Use your capabilities & tools to understand how your customers do business & how you can help them to improve that business. The sales force alone may not be able to achieve this. You need to muster support from many parts of your company in order to achieve that. People from every department will have to become intimately familiar with your customer. You have to compile large amounts of information, both facts and impressions in order to determine the best approach for helping your customers win. This may necessitate frequent formal & informal interaction between people and departments within your company and between your company & the customer.
Ø You have to gain knowledge about not only your customer but also your customer’s customers. To tailor your solution to your customer’s markets, you have to know who their customers are, what they want, what their problems and attitudes are and what decision making process they use. You have to work back from the needs of the end customers to the needs of your customer or you should have knowledge about the customer value chain.
Ø The execution of this VCS approach needs longer cycle times to lead to generation of orders and revenues. The approach requires patience, consistency & determination on your part to build a high degree of trust with your customers. This is necessary as this new relationship between you and the customer has to be far deeper than in the past for two-way information exchange to take place.
Ø The top management has to reengineer the reward & recognition systems to make sure that the organization as a whole is fostering the behaviours that will make the new approach effective. It is not just the sales target but also other efforts mentioned under the four points above. Members of the other departments who contribute to the new approach also shall be recognized & rewarded for their efforts.
The sales people have to develop an ability to research & understand the customer’s business, like market segments and trends in the customer’s industry and more important how the customer’s business makes money today and how it will continue to make money in future. They must develop a very clear idea about the customer’s business needs. They should also understand that VCS doesn’t end once the sale is made. The VCS is most relevant for any B2B company. And everybody in the organization must understand this is no quick-fix solution. Value creation selling is not just reducing the costs for the customers, it is also about increasing revenues for them. Author cites the experience of Tyco Electronics which supplies equipments to Toyota, Japan. Tyco’s people are located in Toyota’s factories where they can get and give ideas to improve Toyota’s cars by improving their own products. Tyco, according to Charan, is selling value and not just products to Toyota.
Charan has identified nine malaises which act as indicators of the breakage of the selling process:
1.Your sales force spends most of their time with the customer’s purchasing department. Purchase department is mostly a mere order executor and the decision maker regarding the purchase may be located elsewhere: in marketing , production, product design, engineering etc.
2.Entire discussion about a possible sales revolve around price rather than value addition possibilities.
3.Sales training is mostly focused on improving conventional sales techniques of being persistent and working under pressure. Charan says this will not result in any improved results as you are not trying to solve the real problems of the customer.
4. Incentive schemes designed to toughen the sales force to get better prices and better margins. These may not result in any value addition for their customers.
5. More intense focus on customers. While the intensity increases, it doesn’t solve the fundamental problems that affect sales.
6. Sales people not included in the design of the company’s offering. Nobody recognizes that sales person is the single person in the company who knows about what customers want or need. This robs the company of its insights into the customers.
7. Little thought about and less interaction with the customer’s customers. Delivering what the customer’s customers want only will make customer’s customers happy and hence you should have developed an idea how you can help the customers to achieve their aim.
8. Sales people internally focused. They are mostly concerned about how to meet the administrative demands on their jobs rather than helping the customers to improve his benefits.
9. Sales management is convinced it is doing a good job. Mostly they will be chasing new orders or satisfying the existing customers with after sales service. Sales people don’t get time to develop a business acumen about how the customer makes money.
Charan quotes Lou Eccleston, former President of Global Sales, Marketing & Services at Thomson Financial “Your success is governed by how well you understand what you can do to create value for the customer. If you can’t impact the customer’s performance in a positive way, then you are going to be a commodity product and you are going to get commodity prices”. Charan cites the experience of the company Unifi Inc, a North Carolina based textile company to underscore how VCS can dramatically achieve a turnaround in the fortune of a company. Sales people have to become business thinkers, developing their business acumen to diagnose their own and their customer’s businesses.
VCS is a customer-centric strategy. Hence sales people and companies must make enough efforts to put the customer at the centre of whatever the company does.
Information: The key to VCS: According to Charan, information is at the heart of the VCS. Detailed information, both facts and impressions are required. The more you know about your customer, the better you and your company will be at identifying his concerns and take initiatives that address those concerns. When it comes to information, it is not the quantity that is important but the quality. In order to get information, you have to become the customer’s trusted partner.
In order to become a trusted partner you must understand the following:
The customer’s opportunity and the competitive structure in which he operates.
The customer’s customer and the customers and the customer’s competition.
How decisions are made in the customer’s organization.
The customer’s company culture, value system etc.
The goals and priorities of the customer for short term and as well as long term.
Charan suggest that a company should prepare what he calls a Value Account Plan (VAP), which defines the value proposition and the business benefits the customer can expect to get from it. VAP demands great deal of indulgence. There are three components for VAP:
A customer snapshot which gives the details of the customer like its locations, business, key executives, decision makers etc.
The value proposition defining the customer need you plan to meet, the customized offering to the particular customer, the prices and the implication of these on your company’s revenues, costs, cash, investments and profitability. This has to be differentiated from the conventional approach in that it should come out with a list of benefits to the customer beyond the cost savings to him. You should look at your offering as a solution to customer’s problems and do “value pricing” so that customer looks at it from a total benefits point of view and not only cost savings.
List out the business benefits of the value proposition. A change has happen from thinking about value in terms of Total Costs of Ownership(TCO) to the Total Value of Ownership(TVO) which is an estimate of all the benefits the customer stands to gain. Benefits have to be listed over a period of time rather than immediate benefits. Not only quantitative measures like margins, cash flows, ROI, revenue growth, market share etc but also qualitative benefits may be listed.
While preparing a VAP, constant interaction with customers may be required. When you are trying to protect their interests and benefits, such constant interaction will be welcomed by the customers.
Charan deals in detail how a Value Creations Sales force can be developed. He cites to pre-requisites for achieving this: buy-in for the change and extensive training. He is clear that for creating a VCS, the present way of working cannot be stopped altogether and the new process started. The new approach has to be tried in parallel while the existing practices continue. Charan suggests that a start has to be made with sales personnel who possess the personal attributes to understand and execute he new approach. Senior people from sales must enthusiastically support the initiative for it to become a success.
Charan quotes the examples of Unifi, Thomson Financial and Infonxx to tell the reader about the qualities one has to look for in the sales people. According to Charan, the following factors assume importance while selecting people suited for VCS:
Affability: Must be socially affable to establish excellent relationship with the customer’s organization, within his own organization, a great communicator who acts as a link between the two organizations.
Conceptualizing problems and solutions: He should be able to sift through large amounts of unrelated data to generate alternative ideas about offerings that work for both the customer and the seller; able to identify specifically what the customer needs and how his own organization can create more value for the customer
Leadership: Leadership in the VCS context has more to do with the ability to manage a team of people over whom he may not have any hierarchical authority. He may be required to facilitate a dialogue between the seller and the customer and get others involved to suggest ideas, device solutions and make decisions faster, better and deeper than the competition while keeping profitable revenue growth in sight.
Tenacity: Extracting customer information necessary for the VCS is not an easy task. It takes extensive effort and time. Collecting and analyzing information about the customer is a never-ending process. Sales people must have the patience and tenacity to keep driving the team and the process.
Business Acumen: Sales people must understand the customer’s business and its processes all expressed in the language of business. Companies may have to create courses internally to teach these skills.
While these skills are essential requisites in the sales people, training the sales force for the behaviours needed for VCS is essential. The top management must make sure that the head and regional heads of sales are inducted into the VCS process and take ownership for the training. Even a certification process can be planned. Linking a sizable portion of the rewards, say up to 40%, of the incentive pay to implementation of VCS can ensure that leaders take it seriously. One must keep in mind that this doesn’t happen overnight and require tremendous effort and persistence. The best training has to come from the company’s senior leaders. Representatives of the customers’ organization shall also be involved in the training process. For handling highly specialized areas, outside experts can be sourced.
Charan also explains the process of making the sales pitch in the VCS scenario. The sales force must be able to present the quantitative and qualitative benefits to the customers. The sales pitch team must have at least one expert in finance to provide the quantified benefits. While power point presentation can be used, one must be able to establish the various points of value proposition. One must be devoted to listening rather than telling. The purpose is to encourage dialogues so as to result in better total benefits to the customers. While customers may not be very articulate about their concerns, one has to be prepared to deal with three critical questions that will be at the back of his mind:
1. Is the value proposition realistic? Credibility rests on making only those promises you are confident of fulfilling.
2. Are the proposed benefits exaggerated or realistic? Your presentation should precisely demonstrate how the benefits are delivered and how their value to the customer calculated.
3. Can the value proposition be executed in the customer’s shop? Despite all the information collected about the customer, it is for the customer to implement the value propositions you make. Depending on how candidly the customer discusses about his ability or inability will help you to make the changes to accommodate his concerns. The process of dialogue with the customer has to be continued indefinitely in the VCS process.
Charan ends the book with advice on how to sustain the VCS process momentum and taking it to the next level. Management has to make VCS its top priority or it will become just another fad. Top management has to show lot of persistence and energy to drive the change. They have to bring about a change in the work ethic. And since the sales force can’t do this alone, linkages between various functions must be established. Charan underscores the importance of linking rewards to the whole VCS process not only for the people in the sales organization but also for the members of the other functions as their contributions are also important in the successful implementation of the VCS.
In order to take VCS to the next level, Charan advises that the sales people shall not be afraid to raise issues with the customers. The sales team must be fully prepared when the go for a discussion or meeting with the customer .Organization should have developed reasonably thorough knowledge of the customer’s industry and their customers. And the whole process requires a huge change in the way the company thinks and operates in putting the customer first.
While those who have already read his earlier books, especially What The CEO Wants You To Know and Profitable Growth Is Everybody’s Business may find a few concepts repeated, the book provides engrossing reading.