Dick Lee, the CEO and Chief Innovation Officer at Value Innovations based in Castle Pines, Colorado. Dick is also the co-author of the book, “Value Innovation Works.” The driving force to everything that they do at Value Innovation is to help C-level executives address critical issues within their organization using their 10-step value innovation process.
What does value innovation mean?
It’s delivering exceptional value to the most important customer in the value chain all the time, every time. And I’m going to highlight a couple of things.
- The first one is for a company in the B2B space that value chain is fairly long and your direct customer is probably not your most important customer.
- The second thing is, and I’m a scientist by training so I tend to think that value comes from new products and new technologies, nothing could be further from the truth. It can be a new business model, it could be work process, it could be workflow, it could be packaging, it could be services. It comes in many, many different forms.
- The great thing about this business model is you can change overnight and you can be value innovating within six months with this new business model.
FoldedPak (Case Study)
- We’ve been looking for, a green material to replace bubble wrap and peanuts.” And they invested in the company.
- Five years later they put in $7 million and nothing has happened. And they called an individual, his name is Brad Finn who’s now the CEO of FoldedPak. He happens to sit on our advisory board and said, “Brad, we need your help. We have to do one of two things, we either close the doors on this mess that we’ve got or we fundamentally change what we do and how we do it. Can you help us?”
- He said, “Well, I think I can. Let me come in and take a look.” And he sat down with the people who are running the company and said, “Who is your most important customer?”
Amazon and FoldedPak
- I’m going back now to 2013 Amazon came to FoldedPak. How they found out about FoldedPak, I don’t know. And said, “We want to change the way we ship our television sets from our distribution centers.
- It was a simple value chain. FoldedPak was selling to distributors. Distributors were selling to manufacturers, a simple value chain. But, under the manufacturing organization, it is not that it is Amazon or that it is HP. Who within HP and Amazon is the most important customer within that manufacturing organization?
- In order to answer that question, we ask three questions.
- If there’s a problem with your product service of offering who stands to lose the most financially?
- Who sees the value? And in the case of FoldedPak, it was very, very simple. It is the VP of operations or logistics has to fix the problem if there is a problem. They lose financially because they got to replace the television set in Amazon’s case and they see the value.
What keeps you awake at night?
- Typically, when we’re working with clients, we’ve identified the value chain, we’ve identified the most important customer. We now want to know what are the unmet needs, unarticulated unmet needs or the problems that these people have. And that leads us into a series of interviews, three in all. One hour each. We’ll recruit 12 most important customers, we’ll interview them over the phone, and we will ask them six questions. And this is what the questions typically looked like.
Output of analysis
- This is like the output of our analysis, they haven’t seen any of this and that leads us now into a second interview. We go back to the same six pairs and we share with them, “This is what we thought we learned from you in that first interview. We now want you to critique what we’ve concluded because we may be wrong.”
A vetted validated value curve
- We show them the 12 or the 15 attributes or what we call elements of performance.
- We define them for them and we say, “Have we captured the correct attributes, are they right? Have we defined them correctly, and if we haven’t, what should we change? When we heard you, we heard you talk about this more than anything else, so we rank ordered these attributes on the basis of citation count how many times did you talk about these things, and this is the rank order that we got. Is that correct? And if it isn’t, what should we move down in order of importance and what should we move up?
- And the last question is, what is the value being delivered to you today on each one of those attributes on this one to nine scale where one is low and nine is high? And now if you could go up with a magic wand and turn the value needle to the right, what should we be doing in terms of delivering value to you tomorrow?” That takes about an hour to go through that interview.
- What you have at the end now is a vetted validated value curve now from these 12 most important customers. So you transition from what you thought was the case now to what the real case is.
- So now the next step is brainstorming. We now have an ““as is”” and a ““to be”” value curve. We have these attributes rank ordered, so we’ve got two curves, a red curve, and a blue curve.
- It tells us what we have to do to deliver this exceptional value but it doesn’t show us how we do that. So how do we do that? We go into a brainstorming session with the team, typically a team that works on these things and figure out what are our options on how we can move the needle in terms of value to deliver greater value to them.
- The company decides what they’re going to do. Do we think we can now make some reasonable revenue from doing this?
- They now take this and develop that new product or service or business model.
- Get the CEO is fully bought in.
- Define the overall goal and the project objectives.
- Develop the value chain and identify the most important customer in the value chain.
- Develop the value curve for this product or service that you’re talking about.
- Contextual interviews, we’re going to recruit 12 of these most important customers and ask these six “go for the throat questions”, open-ended questions.
- Develop a ““to be”” value curve and modify the ““as is”” value curve. So looking at the “to be” value curve that we’ve put together, we now think we know what we have to do to deliver this exceptional value to the most important.
- Go back and interview those same six pairs and share. “This is what we thought we learned from talking to you in those first six interviews.” And you share with them what you learned. “Now, what we’d like you to do is to critique the following. We identified the following attributes were the most important to you. Is that correct? And if not, what should we take out and what should we add in? This is how we defined those attributes based on what we’ve heard from you. Are those definitions correct? And if not, what should we change? We heard from you that this one was the most important, this was the second most important, the third most important and so on. So you rank ordered them, we did it on the citation count. is that rank order correct.
- Deliver exceptional value, the team now looks at, “Okay, we know what we’ve got to do to deliver this exceptional value. How are we going to do that?
- What’s the typical size of company that might engage your firm?
- Ideally, it’s between $100 million revenues and $2 billion in revenues.
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