Concerned about your competitors leapfrogging you and destroying your value?  You shouldn’t be.  You and your organization do a much better job than they ever will.

If you doubt that, consider this quote from the late Og Mandino’s book, The Greatest Salesman in the World, Part II:

“Nothing is so easy as to deceive oneself since what we wish is always easy to believe.  No one, in my life, has deceived me as much as I have.”

That bit of wisdom from a man whose value continues well beyond his time on this earth.  Now let’s get back to the discussion of value.

Value Erosion

Before we get into the ways that you and your organization destroy value, let’s acknowledge that value erodes over time.  This reality stems from the fact that we, as human beings, quickly take for granted things that once amazed us.  So no matter how big a splash your new product or service makes initially, it’s value declines as customers grow accustomed to that level of quality, service or combination of the two.  That’s why innovation is so essential for every company.

Value Destruction

Now that we recognize the oft-overlooked, yet inevitable, value erosion that occurs naturally, let’s consider the ways in which we destroy value in our own companies.  Here are a few of the more common ways (certainly not an all-inclusive list) in which we destroy value:

  • Pursuing market share.
  • Problem-solving ‘policy’ decisions.
  • Stifling work environment.
  • Ill-conceived compensation programs.
  • Focusing on costs.
  • Ill-conceived pricing practices.

As I said this is far from an all-inclusive list, but it’s adequate to get you thinking about how your organization may be destroying its value.  Let’s explore each in more detail.

Pursuing market share

The decision to pursue market share instantaneously shifts a company’s focus from its customers to itself.  You will no longer be thinking about how you can serve your customers better.  Instead you’ll be crafting clever ways to take business away from your competitors.  During this focus shift your customers experience less satisfaction because you’re not paying attention to their needs, thus your offerings become less valuable in their eyes.

‘Policy’ decisions

How do you respond when something in your operation goes awry?  In most companies policies are established to prevent recurrence of the problem.

The sales force is spending too much money entertaining clients so we establish a limit on the spending.  That may solve the spending problem, but how do you think your sales force is going to explain their less-lavish spending to their customers?  It won’t be flattering to the company and certainly won’t make your customers feel valued.

Stifling work environment

Fortune magazine has been highlighting the ‘100 Best Companies to Work for’ for quite some time now.  Choose any issue and you’ll find that the thing employees in those companies say consistently is that they have the opportunity to make a difference, to add real value with what they do.

How many ideas can you, as a leader in the company, dismiss offhandedly or postpone while you “think about it” before your employees stop looking for ways to add value?  3? 5?  Or will those employees leave quietly and find a more conducive environment for their creative energies?

These practices not only destroy value that already exists, they preempt value that would have been created in a more encouraging environment.

Ill-conceived compensation programs

I’ve seen companies limit stellar performers’ income potential because it would put them outside the ‘normal’ pay range for that job.  I’ve seen more than a few companies reward sales people on the basis of revenues – an approach wholly incongruent with the company’s profit goals.  I’ve had employees tell me that they know the solution to a problem the company is facing, but they aren’t addressing it because “it’s not how we’re compensated.”

How are your compensation programs impacting your value?

Focus on costs

Like market share, when most companies focus on costs they lose sight of their customers’ needs and desires.  The manufacturing sector is notorious for making significant inroads in reducing costs using Lean, Six Sigma and other continuous improvement tools, but failing to stay abreast of customers’ changing needs.  It’s the cost focus that has shifted all of their creative energies to cost control making them egocentric instead of customer centric.  In the process they destroy a lot of value, existing and future value.

Ill-conceived pricing

Then there’s always my favorite, creating something new and exciting for your customers only to price that WOW effect at, or below, industry pricing.  Or discounting during peak selling season.  Or during the off-season.  Why not both?  Why in the world would we want the customer to get a consistent sense of our value?

I think I bit my tongue on that one, it was so firmly embedded in my cheek I couldn’t miss it.  Seriously folks, we destroy a lot of the value before we even launch the offering.  And we’re worried about competitors?

This whole idea of destroying value does raise one interesting question “Is there ever a time to destroy value?”

Creative Destruction

Indeed, there is.  The most successful companies begin obsoleting a product or service as soon as it’s launched.  That was the key to Intel’s success with the ‘Intel Inside’ program when it would announce a new chip as soon as their competitors arrived on the scene with a competing offering for Intel’s existing chip.  HP did the same in its printer division for years.

This kind of creative destruction is admittedly difficult to achieve on long-term basis, but pursuit of this goal is one, that even when a company falls short of the goal, allows it to maintain a high degree of customer loyalty and extended periods of highly-profitable growth.  Well beyond that of their competitors.

Takeaway

Stop worrying about what your competitors are doing and focus your company’s time, energy and resources on identifying ways in which it’s destroying value and eliminating them.  Your customers will be thrilled enough to pay you premiums over the market and become even more loyal in the process.  Now that’s value creation!