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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