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Medical Devices Commercial
Value discipline

In their excellent book “The Discipline of Market Leaders” (1995), written by Michael Treacy and Fred Wiersema, the authors argue (and prove) how companies who want to become leaders in certain markets or market segments need to choose how they wanted to excel, in the following generic value disciplines:

  • Operational excellence – superb operations and execution often based on providing a reasonable solution at a very low price.
  • Product leadership – very strong in innovation and brand marketing, in dynamic markets.
  • Customer intimacy – excel in customer attention and service, tailoring products to (almost) individual customers.

Treacy and Wiersema tell us that many companies want to achieve everything, they claim to want to excel at everything and this lack of focus leaves them with nothing recognizable in the perception of their customers, or at least it strips away valuable profit margins. The trick is to choose one discipline and to become the best in the eyes of the customers, while being “OK” in the other two disciplines.  OK meaning acceptable or on par with the major competitors.

 

I used this highly valuable tool  in more than one business environment and discovered at every occasion how it creates clarity and direction, allowing our teams and people to focus and our customers to recognize and value a “new” company. In one company, I found we had been selling our products in a very technical way, assuming we were (still) the product leaders and we just needed to educate our customers about how good our products were and they would buy them and pay a premium price.  Unfortunately for the company, competition had been catching up, the needs in the market segments had changed and we were no longer perceived as product leaders or the most innovative.  How we were perceived by now was “arrogant” and expensive. So after running several workshops with my teams, we chose to drop “product leadership” because it was not sustainable or believable and we adopted the value discipline of “customer intimacy”, as this was in line with our core competence – we had a strong application support capacity, highly skilled technical service engineers and a highly motivated and skilled customer service organisation.

By creating regional customer teams consisting of sales, application support, technical service and customer service, we could proactively spend more time on those customers that had the largest potential and existing business, and allow those customers to be in touch with the same people all the time, improving the experience of doing business with us. Choosing a different value discipline did not cost us anything, yet it supported solid business growth as I will show later.

 

Value proposition

The second strategic tool I have been using with various commercial teams and organisations is the  value proposition.  Another word which is used a lot and sometimes misused to just describe “a benefit”.  Stealing from Wikipedia, I will provide the definition:

A value proposition is a promise of value to be delivered, communicated and acknowledged. It is also a belief from the customer about how value (benefit) will be delivered, experienced and acquired. A value proposition can apply to an entire organization, or parts thereof, or customer accounts, or products or services. Creating a value proposition is a part of business strategy. Kaplan and Norton say “Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation”.

Developing a value proposition is based on a review and analysis of the benefits, costs, and value that an organisation can deliver to its customers, prospective customers, and other constituent groups within and outside the organization. It is also a positioning of value, where value = benefits – cost (cost includes economic risk).

I have to say, I like this simple equation: value = benefits – cost, as this is also how the customer (procurement included) will perceive the value it obtains from the supplier.

I highly recommend doing this review and analysis; there are various tools to be found on the Internet, or one can use a marketing consultant or company to help doing this.

 

Some time ago I was working for a relatively large company in medical devices selling what could be defined as “commodities”, and we were facing increased price pressure through the lack of differentiation and very little product innovation. We then purposely performed a thorough value proposition exercise through a series of workshops with the use of a so-called value proposition canvas. The outcome after a day or so of creative work, was a set of well defined value propositions for products or product groups and we also tailored them to the various market segments we were serving.  The next step was training the commercial teams in the various countries on the use of value propositions in qualifying opportunities, managing objections and closing deals. 

Expected benefits of using value propositions

What benefits did I find, in all of my work experiences?

  • Improved qualification during the sales process, ability to lose deals that would never materialize early in the process while increasing the chances of success of profitable deals.
  • Enhanced understanding in the organisation of the customer needs we can satisfy through our products and services.
  • Sharper positioning (another strategic tool) of our products and services.
  • Shorter sales cycle, with more focus on what truly matters to the customer.
  • Better acceptance of the customer(s) of a certain price (as it relates to more relevant value).
  • Better pricing (also lower discounts).

 

Overall benefits of using the 2 Strategic Tools: Value Discipline and Value Proposition.

Experiencing benefits in real life business situations is always much more impressive than just reading about them in a business case or article. I am happy to share that in my own experience of using these two , almost at the same time, in various commercial organisations in medical devices and life sciences, lead to some rather positive and surprising results.

  • 20% revenue growth and 45% EBIT growth over 3 years with biotechnology equipment and consumables in Western Europe, coming from low single digit growth.
  • 10% (profitable) revenue growth over 2 years with laboratory equipment and commodities used in research, applied science, molecular diagnostics and sample preparation, in Europe, also coming from very low single digit growth and dropping margins.
  • 43% revenue growth and 80% EBIT growth over 2 years with medical devices used in personal health care in Germany.

 

To be brutally honest, there were a few more changes we had to make, as I mentioned under “commercial excellence”, which helped to materialize these results. In cross-departmental efforts, improvements were made to leadership style, coaching skills, marketing knowledge and skills, strategic selling, logistic performance, customer service performance and complaint handling. 

 

Still, the new strategies were clearly perceived as the biggest game changers when compared to how we had been operating in the past. And I hope you agree with me, that perception is reality, so I am convinced we can safely assume this proper use of strategy was indeed the largest contributor to the success as mentioned.  Even if the strategies were only responsible for half of the result, it is not hard to understand that the cost-benefit analysis of getting strategy right is incredibly favorable.

 

I would like to encourage you, the reader, (if you are not doing this already), to aim high and truly strive for commercial excellence in your organisation.  I am convinced it is a necessity in todays’ business environments, to achieve the results we deserve.  Please consider using value discipline and value proposition in your strategy toolbox. You may be pleasantly surprised with the outcome.

 

Of course it requires some work and probably some change. To give you some courage, I can only repeat the wise words of the American general George S. Patton jr.:

 “Accept the challenges so you can feel the exhilaration of victory.”

 

>> Read the Part one

 

Article done in cooperation between Elyas Bozan, our Managing Director Germany and Rienk Keuning, one of our Experts in Healthcare

If you want to share ideas with our contact, please feel free to contact us: ebozan@morganphilips.com

Morgan Philips Executive Search – Healthcare & Life Science

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