Sales and Sales Management Blog

February 3, 2008

Book Review: What Your Customer Wants You to Know by Ram Charan


We live in an increasing commoditized world.  Almost any product or service you can think of has been or is in the process of being turned into a simple commodity.  And the heart of commodization is, of course, price.  Who can produce the best at the cheapest price becomes the driving question for consumer decisions—and the supplier’s decisions as well.

Ram Charan’s central question in What The Customer Wants You to Know (Penguin Group, 2007) is how can a company break out of the commodization spiral and set themselves apart as a premium supplier with premium pricing—and thrive.

Charan’s solution is a sales process he calls Value Creation Selling (VCS).  A distinctly business-to-business sales process, VCS in essence takes Solution Selling a new level—and adds layers at the same time.

Selling as currently practiced, says Charan, is broken, outdated, and ultimately a losing proposition for companies using any traditional sales model.  The solution is, naturally, VCS.

Rather than focusing on discovering a customer need and creating a solution to the need, VCS seeks to discover not only the customer’s problem but also how that problem affects the customer’s revenue and profitability and then seeks to create a solution that adds revenue to the client company.  In other words, the supplier becomes a partner with the client to help the client increase sales, increase revenue and increase profitability.  By thus showing the prospect how your solution not only resolves a need but also adds value to the company’s bottom-line by helping to increase revenue, you become not only the preferred vendor, but the preferred vendor with a premium price.

The crux of VCS selling is a team approach with the salesperson as the team leader.  The team will consist of individuals from a number of departments, from marketing to finance to legal, all working together to gather a great deal of detailed information about the prospect, the way the prospect currently does business, the prospect’s financial situation, and even the prospect’s customers.  The goal is to understand the prospect’s business so well that a solution can be tailored for the prospect that impacts the prospect’s bottom-line by not only possibly decreasing costs associated with their current need—but that actually adds revenue in some manner.

This team approach requires the salesperson to take on new roles, learn new skills and develop keen analytical and diagnostic abilities.  It requires developing multi-layered relationships within the prospect company where the salesperson and team members not only identify decision makers but also influencers—and develop relationships based on trust with them all.  It requires a new view of what selling is, what a solution is, what a prospect’s needs are.
Charan’s process is long-term.  According to his experience in helping companies convert to a VCS sales process, the conversion will take about three years from start to a fully functioning VCS company.  In addition he warns, the conversion process not only takes dedication and patience, it’s expensive.

And the sales process itself takes much longer than most company’s current sales cycle.  If you currently have a long cycle—it will get longer.  If you currently have a relatively short cycle, it will become much, much longer.

The value of VCS according to Charan is threefold:
•  Higher pricing and profitability
•  More loyal and committed clients
•  Implementing a process that is difficult, long-term and costly means few competitors will have the patience and dedication to compete on the same level

Again, being upfront, Charan readily admits the process isn’t for every company or every market.  Only after careful evaluation can companies make an informed decision as to whether they want to travel down this road.  But his promise is that if the process has been well thought-out, the commitment unwavering, and the buy-in to the program universal from the CEO down, the process will change not only the focus of the company, it will change the fortunes of the company like no other process can.

Even though the above may make it sound like What The Customer Wants You To Knowis another book for the complex sale, Charan gives examples of the use of the process from a number of industries, from complex sale industries to mass marketed consumer product suppliers. 

In the end, Charan’s process is interesting.  Not only will it only be implemented by a few companies, in reality it can only be implemented by a few.  The commitment, costs and patience needed to implement the process and wait for the payoff will prove to be too costly for many, too unwieldy for others, and too complex for most.  In reality, CVS is a process that is probably suited for smaller companies engaged in highly complex sales.  Trying to rebuild a large corporation would more than likely prove to be a nightmare, and seeking to convert a company in a short cycle, highly commoditized industry would probably prove to be more costly than its worth. 

 The question is, ultimately, is it a process that will work and produce the desired results.  According to Charan, it already has for numerous companies.  And, yes, it does appear to be a viable process–yet again, one with limited application as a fully implemented process.  Few companies no matter the size or industry will rebuild their company from the ground up.

Yet even with these limitations, the book is worth reading.  Although the process may not be adopted, many of Charan’s observations about the current state of sales and prospect interaction are worth the price of the book alone.  And those who choose not to implement the process can still find some strategies worth adopting within their existing selling model. 

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3 Comments »

  1. I’ve read a few of Ram’s books in the past – I like his down-to-earth style. His current book is good, but the content has been known for years – nothing new here. Solution Selling, for example, has been around for 20 or so years. IBM, Microsoft and numerous other companies have trained all their sales reps on it … from 5-10 years ago. The central premise is to diagnose before you prescribe and truly understand the customer’s full problem footprint and their vision for solving. The real challenge is not about the content, per se, but the alignment and execution – the cadence, the metrics, and reporting, the incentives, etc. If it’s not intertwined into the fabric of the org, it’s unlikely to stick. If the accountabilities are not aligned and enforced, it’s unlikely to take root. CVS is great thinking and content, but that’s not the main hurdle. The content is all homogenous at this point. The real work is integration.

    Comment by MP — February 3, 2008 @ 2:57 pm | Reply

  2. You’re right–integration is the issue.

    With Charan’s vision of moving beyond selling a solution to a problem to creating a solution that solves the problem while adding positive revenue, not just saving money, the integration becomes much more complex and involved than the original solution selling process.

    Again, VCS is a viable process for a select few with the patience and money to fully implement it. Still, I think many of his observations about the current selling environment and customer attitudes alone are worth the price of the book.

    Comment by pmccord — February 3, 2008 @ 4:31 pm | Reply

  3. Hi Paul,

    This sounds a lot like the “Building a Market Focused Organization” (BMFO) methodology published in HBR in the early 90s. It revolved around working with your customers to really understand what drove profitability for them, figuring out how your product could help with that (or tailoring the product so it could) and then delivering on that. Except in thaose days it was positioned as a marketing orientation rather than a sales strategy.

    It is a “level above” solution selling in that you’re no just solving the immediate problem, you’re looking deeper to see how you can jointly figure out ways to improve revenue/profitability. In that way it’s the mirror immage of a lot of supplier partnering or supplier relationship management that’s initiated from the customer end nowadays.

    As you say though, it’s not always suitable. When I was doing BMFO type work in the 90s we identified that it was only certain types of supplier that customers were interested in working this way with. For example, suppliers of indirect materials sch as office paper or photocopiers to a car company are unlikely to be able to add strategic value in this sense (I guess it’s possible – but unlikely). Whereas suppliers of core components like the transmission system or the on-board computer are.

    Rgds

    Ian

    Comment by Ian Brodie — February 7, 2008 @ 2:38 pm | Reply


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