Rethinking Value Amid Market Changes

Senior Vice President and General Manager of Wolters Kluwer Legal & Regulatory U.S.

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I like to describe the impact of the pandemic on most businesses as an acceleration of trends that were already in play. While the daily appearance of Amazon trucks on my street is somewhat new, the shift of retail away from brick-and-mortar stores toward online shopping is not. There has, however, been a marked increase in Amazon’s sales since early March 2020, and one can find similar shifts that were already in play in many, many different areas: the demise of movie theaters and the corresponding rise of streaming services, telework, telemedicine, remote education – you get the picture.

Changes such as these are difficult for us to process because we often resist change, and it’s easy to find fault with the new order of things. Why? With each change, there are winners and losers. One can reasonably ask questions such as “Are we better off in a world without movie theaters?” The reality is that old-guard businesses fail because the way consumers measure value shifts. With the pandemic, many people are demonstrating they value safety over a collective experience, and along with safety comes a healthy dose of convenience – at least for streaming entertainment.

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Fundamental value shifts occur for multiple reasons – a common example being the introduction of a new product or product category. Take BlackBerry for instance: At its peak, BlackBerry sold over 50 million devices a year and owned over 50% of the U.S. smartphone market. Today, BlackBerry has 0% of the smartphone market due mainly to Apple’s introduction of the iPhone. While BlackBerry was focused on selling large institutional deals to businesses, Apple realized that there was significant demand in the consumer market for an easy-to-use device with a network of attractive apps – and the rest is history.

BlackBerry failed to anticipate and react to a change in customers’ perception of value. When the BlackBerry was introduced, the device’s value lay in the ease of access to work email from anywhere. This allowed workers to become hyperconnected and started to change our boundaries between work and home life. With a camera, music player, browser and apps, the iPhone created a new value story of being fully connected to our friends, family and the world at all times. This was a distinctly different value story from BlackBerry, and one it could not recover from. There are many such examples one can look at that followed a similar pattern – Netflix, Spotify, Amazon, Google and Tesla, to name a few. In each case, what one finds is that the measurement of value fundamentally changed.

This brings us back to the pandemic. Many businesses – mine included – have found that some of their offerings suddenly have much less value. Given our collective difficulty in processing changes, it’s easy to instinctively double down on the existing product offering and try to save the business by discounting or other tactics. As a provider of legal information and solutions, my business had some print products that were regularly delivered to law offices, and these needed to be moved online to accommodate remote work. If there had been no way for our customers to use the service because of its point of access, no amount of negotiation would change that.

Getting Back To Basics

When customers no longer perceive value, the business must rethink how value is performed. This means going back to the basics to answer the fundamental questions of “What is the customer trying to do?” and “What jobs does my product or service do for the customer?” If we think in terms of a grocery store, a customer is trying to get goods like food or toiletries. Ostensibly the customer also wants a certain degree of quality, a fair price and a decent selection of goods. These are the metrics of value for the customer, and the store performs against those metrics by providing a place to inspect and purchase goods.

If we shift from a traditional shopping environment to an online grocery store or marketplace, the customer is still trying to do the same thing, but the access mechanism has changed. Now the customer browses online, compares prices and has a much greater selection. The customer can also order at any time in almost any quantity, so goods are replaced as supplies get lower, and perhaps best of all, the customer doesn’t have to wait in any lines. There are, of course, trade-offs – food picked up from the store is instantly available, while food delivered is delayed. Produce or other goods can’t be inspected remotely, so quality could be an issue.

When the value drivers of a new service exceed those of the existing service, customers change buying behavior. In the case of online grocery shopping, services like Amazon Fresh have pulled purchases – in whole or in part – away from traditional grocery stores, and no amount of traditional tactics (e.g., marketing, price promotion, etc.) will pull those customers back. The business must rethink how value is performed.

Once you have an understanding of the way in which the perception of value has changed, the next step is to take a look at your existing product and/or service to assess how the service can be adapted to meet the new measurement of value. In some cases, this is a straightforward extension of the existing service, potentially using a partner. Think grocery stores and delivery services such as Peapod.

In other cases, it’s a bit more difficult. Netflix’s move to streaming was a gamble that required large capital investments. Their stock price famously tanked immediately after they announced the strategy. In those cases, competitors can follow, but there will be an unavoidable delay – which may carry dire consequences for them.

Changing Offerings

As a leader at a legal content and solutions provider, I made changes to how my business delivers our existing service, but increasingly, we’ve tried to change the value story for our products to pull attorneys over to a digital experience. We realized that attorneys often need to understand the evolution of the law or regulations over several years in order to formulate a legal strategy. This led to changes in the offering.

Your change in offerings may look different, but you should still use understanding and assessment to determine what customers are trying to do with your products. This helps reframe the jobs that your products actually perform for your customer and helps future-proof your business through value changes – including the one we are living through now.

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Senior Vice President and General Manager of Wolters Kluwer Legal & Regulatory U.S. Read Dean Sonderegger’s full executive profile here.

 

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