How do you do more of what you do, right?

One of the defining moments in my connection to high growth companies was a meeting I had with the CEO of such a growth company years ago. I asked him the obvious question: “How come you are growing?”

After asking me to repeat my question (probably wondering why I even asked that silly question), he answered — half jokingly, half seriously — with “We must be doing something right”. Upon recovering from my obvious disappointment in this rather vague answer, I had to admit that his answer was probably more honest than I initially thought.

From research that we at ELP Network were involved in and that serves as the basis of our work, we know that two qualities are key for companies to grow sustainably and structurally. They excel in creating value for their customers and in capturing value (of the value created) for their shareholders. Data confirms that in highly dynamic markets, the only route to long-term value capturing is to keep creating more, better, and new value every day.

If we take the CEO’s reply and apply it to scale up companies (companies that are on an exponential and accelerated growth track), they must definitely be doing something right. Or turning the reasoning around: if you want to scale up fast, you’d better know what it is that you are doing right (and to whom).

Scale up companies have often passed the stage of experimenting with ‘minimum viable product’ versions and have discovered a proposition that works: their products and/ or services have proven to be relevant. The trick is now to leverage this in the market and prepare the company to turn over more. Hence, they aim to capture the economic benefits of scale and learning, not only to boost profits but also profitability. The properly phrased essential question to ask a scale up CEO is: How will you quickly create more value to more customers?

Create (more) value

The power of a good question is that it is sound and simple, yet triggers a deep conversation about an essential concept. The main part of the question above is: what value are we truly creating for our (potential) customers?

The spontaneous reaction of many to such a question is to describe their product and service, often using words like ‘better’, ‘more’ or other superlatives. Yet this is in the eye of the customer pinpointing what they offer, rather than the value they are creating. The essence of value is more about ‘what the proposition does’ for the client than ‘what the proposition is’ when it leaves the factory or hands of the provider.

Your McDonald’s hamburger is actually not just about ‘cheap fast-food’; it is about standardised food that is easily and quickly available ‘on your way’. The fact that the food is not served by a white shirted waiter on a candle-light table is not really an issue for McDonald’s customers. In fact, you are quite happy not having to wait for the service and to self serve at the pace you want and need, and especially not to pay for features you did not value at that moment in time anyway (but might do at another location or another time).

This is why McDonald’s and a good Michelin star restaurant’s value creation are not higher or lower when compared: they are different to (different but also the same) customers that value different aspects of ‘food’ when they walk into the respective building.

What is your value curve?

The conceptual version of the question above is: Please describe to me your value curve. A value curve is the curve that draws how McDonald’s positions vis-à-vis the key value attributes of clients. McDonald’s value curve scores high on the attributes of predictability/ consistency (BigMac is the same all over the world — hence the BigMac index that is an informal currency exchange measure), speed, and easy access.

The curve scores — deliberately and not accidentally or due to operational mistakes - low on flexibility (the counter weight of consistency), service, intimacy, and food choice/ assortment. When compared with other restaurants, it scores ‘middle of the road’ on aspects like payment, hygiene, and some other attributes.

Especially in highly competitive markets (do we have any other?), sharp value curves with spikes at the high and low end are key to jumping out (necessary, but insufficient conditions) and to (easily) reach your target market. When CitizenM entered a fully crowded hotel business, their focus was on mobile citizens with personalised rooms (choose your own light and music), compact but functional rooms with comfortable beds and multiple modern living rooms (downstairs).

A proposition that speaks to the travellers that want to feel at home on their journeys and care about comfort (high-quality, king-size beds with comfortable pillows), speed (no reception desk with long queues), design (Philips mood lighting and Vitra furniture) and a fast and easy connection to work, family, friends, and their world (Wi-Fi, big screen television, and so on).

If you want to scale up and hence wish to bring (more) value to more clients, you’d better have a laser-sharp value curve. This will focus your organisation around the proposition that you want to create value with, and makes it recognisable and easy to sell to potential clients.

But a laser-sharp value curve is not easily designed. It requires you to formulate the proposition in terms of what customers value, in other words are willing to pay for. This is the difference between ‘selling drills’, ‘selling holes’ or actually selling ‘the hope of hanging up a beautiful picture’. Too often, especially when coming out of a discovery process of your proposition in a start up phase, there is the risk of getting stuck in an ‘inside-out’ view on your proposition(s).

Most restaurant clients do not think of ‘chairs, tables, forks, or napkins’ when going to a restaurant. These are the tools, not the attributes. The tools should be in line with the core attributes (see McDonald’s), but are not the attribute that matters much to customers.

Especially in B2B markets, one runs the risk of focusing on the product features, and less on how the client really uses the products and services to optimise their business and make running their business ‘easier’. That is how dynamite companies speak of ‘the blasting outcomes that your operation needs’, and fish breeders do not speak of ‘buying air’, but rather of improving the mortality rate of their fish throughout the fish breeding process.

If you are a shipping company, you may pride yourself on the sophisticated, high-tech, and attractive vessels, while the real value for client is ‘on time delivery without  damage’ (for which you need the vessel, but also much more than that). Crocs might be nothing more than plastic (and according to some, ugly) shoes at first sight, but the real value lies in their light weight, combined with the capacity to provide stability (many light shoes do not give stability —in fact, Crocs were initially designed for use on sailing ship decks, with holes to let any water flow out of the shoes), as well as their capacity for personalisation (with colours and pins).

Formulating your proposition in terms of value created is an obvious thing to say, but less easy to do: it requires you to really put yourself in the shoes of the client and the market. We have often experienced that the real breakthrough comes from making explicit the implicit requirements, pain or latent needs of your target audience.

The term Value Innovation is often associated with the emergence of new attributes or the combination of attributes that were until now impossible to combine (such as personalisation and speed). Benihana is a Japanese steakhouse with teppanyaki chefs that cook right in front of you, and they focus on show and entertainment (new), speed and customisation (speed often goes at the expense of customisation).

Position or be positioned

A value curve exercise also forces you to list the typical attributes and actively position yourself against these, because if you do not position yourself, you will get positioned (based on perceptions, reputation, social media or other peer-reviews).

Positioning and being known for a limited list of attributes is important, as research confirms that potential clients choose their provider on a very limited number of ‘buying criteria’. Neuroscience confirms that the brain in implicit (unconscious filtering on the basis of previously registered criteria) and explicit ways drives decision making (buy or not buy) on the basis of a small number of criteria.

A laser-sharp value curve is essential in scaling up, as it is the basis of:

• Your entire go-to-market approach.
• Identifying who the target market is for this proposition: who is ultimately most sensitive to this value and how to reach these clients (more customer).
• Your essential operational processes, ensuring that you deliver the value you promised to create.
• Developing a magnet function (creating brand, market communications/dialogue) that makes you act like a magnet (in order to scale up fast), attracting clients that value what you create.

So what the CEO of my ‘defining moment’ really meant to say was: we grow (fast) because we know exactly what value to create for which types of customers (and which attributes we choose not to deliver), and we do this really fast. That’s how we become a scale up.