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Ken Keller: It’s time to start capturing value

Brain Food for Business Owners

Posted: October 21, 2012 2:00 a.m.
Updated: October 21, 2012 2:00 a.m.
 

I had the pleasure of spending three days recently in an Executive Education course. One of the first concepts covered was that the role of leadership in the organization is not only the obligation to create value, but to capture it.

Owners are usually pretty solid when it comes to creating new value for clients doing business with someone else; that is how they launch the business. And, most of the time, this is how they continue to build the business, by adding more and more value to the offering.

Sometimes a business starts with a strong value proposition, creating considerable value for clients and to some extent the company, only to falter. This happens when leadership fails to recognize and adapt to change.

The change can come from the external side: buyers, suppliers, the competition, potential competitors, product or service substitutes, or the impact of economic, cultural, demographic trends and government regulation. Sometimes, the change is forced from within: financial,
generational and so forth.

Many employees in a company are pretty good at creating value as well. I don’t say this to be facetious, but one owner told me that “every employee on my payroll thinks they have a license to spend.” He meant that it is easy to spend someone else’s money under the guise of helping the company that employs them.

Employees at any level might argue that money spent can be justified under the heading of “creating value.” The salesperson spending money on clients at a very expensive dinner (help closing the deal); the assistant sending documents overnight when regular mail would suffice (letting the recipient know how important the documents are); printing color copies of an internal report (easier to read) are but a few examples.

Let’s be clear, creating value costs time, talent and treasure. These resources aren’t always readily visible on the profit and loss statement, the balance sheet or on the cash flow report. But the resources are expended and it is often nebulous that value is captured.

I am also not saying that owners should sit around, list all the value added things provided to clients and ask, “How can we make money on this thing we are now giving away for free?”

I am suggesting that there are ways to capture value that works for both clients and companies; supply chain partners as well.

More than a few years ago, when I was in the consumer products world, we were approached by Sam’s Club with an interesting proposition.

Sometimes cases are damaged in shipment. What Sam’s Club asked was if it could set the damaged cases aside along with damaged cases from other manufacturers, and provide the products to the local food bank; rather than save up the returned cases to ship a pallet-full back to our warehouse for repackaging.

Sam’s Club provided us with its estimate of anticipated damaged cases based on previous experience with all its suppliers, and in return, we would provide it with a “damaged case off invoice allowance” on each case sold to cover the expense.

It took us about three minutes to make the calculation. We would save on return shipping, incoming handling, issuing return stock documents, rework, issuing credits on previous invoices, and space in the warehouse, not counting labor, printing, postage, and all the tracking required through the system.

We jumped on the opportunity, started saving money quickly and did our best to bring this value capturing idea to other clients in other segments.

Capturing value can’t be a once in a while thing for an organization that constantly tries to create value, it needs to be an all the time thing. Don’t discount the source of the idea; that idea from Sam’s Club was from an employee working on a loading dock.

Ken Keller is CEO of STAR Business Consulting Inc., a company that works with companies interested in growing top line revenue. He can be reached at KenKeller@SBCglobal.net. Keller’s column reflects his own views and not necessarily those of The Signal.

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