The Transformation Needed for CCM: Part 2
- Part 1: Transformation is a Necessity
- Part 2: The Centrality of Value
- Part 3: Value Management – the Missing Piece
- Part 4: How to do it
Everything we do is under the banner of “Value Management”. It’s what’s needed to truly achieve the transformation needed for the CCM role – and the relationships it’s responsible for – to not only survive, but thrive, in today’s complex world.
But why is transformation needed? And why is “Value Management” the answer?
In this second part, we start to uncover why Value Management is the answer to the challenges we looked at in Part 1 – beginning with the centrality of value.
Value is certainly talked about everywhere – perhaps especially “value for money”.
But we don’t ever really ask the question “what is value?”
And, as a result, it’s significantly misunderstood.
Indeed, we’ve asked people what they most associate with the word “value”:
Immediately, you’ll see there are very different understandings – people are misaligned – but three of the top four results were around more objective value: efficiency; tangible outcomes; price and cost.
And this reflects that, whilst “value” is both a noun and a verb, it’s the objective noun form of “value” that dominates how we consider and talk about value: value as a “noun”; as a “thing”.
And this really matters, because it’s at the heart of most misunderstandings here.
“Value” as a noun
“Things” are largely fixed. They’re static. They can be pinned-down and controlled.
And so “value” as a noun – as a “thing” – becomes seen as something that can be known and defined in advance; something we then create and supply for customers to “receive”.
But this all distorts our focus.
We tend to see what we do – and how we do it (our capabilities, best practice, etc) – as either value itself or as the inevitable route to value.
And “value” also gets mostly limited, at least in practice, to what’s objective – especially price and cost.
We lose sight of how value flows back from the end customer; not forward from us.
After all, if what we do and how we do it isn’t of value to the customer, there isn’t any value!
We also forget that value is primarily subjective: even with “objective” price and cost, whether the customer wants to pay them is subjective, and what’s valued is also increasingly subjective – services over products, softer forms of “value” like sustainability, and so on.
And then, finally, what customers value changes, often rapidly: it depends on a constant, dynamic and fluid valuing process – “value” as a verb.
In the terms we used in Part 1, value is therefore “emergent”: driven by Complexity, it’s significantly unpredictable.
And when we misunderstand value, it really matters.
Because value is all that matters.
Value is all that matters
Value being all that matters seems obvious on some level.
Why would we want to do anything that isn’t valuable?
But what’s not so obvious is that value leads the effective response to complexity.
We’ve seen that complexity can’t be controlled: it’s bottom-up and unpredictable.
But when we understand complexity, we can put in place conditions that guide and harness it to our advantage, and the key condition is being clear and aligned around value:
- Value is what motivates and engages people.
- Clarity here is the ultimate tool for prioritization and decision-making.
- It’s a catalyst for innovation: whilst complexity makes change inevitable, a focus on value harnesses and channels that change as innovation instead of just disruption.
And value then also reinvigorates and realigns organizations.
Value reinvigorates and realigns organizations
Organizations typically grow to operate mostly like this:
The Alignment perspective is at the top, making decisions about strategy and resources; the Resilience perspective reflects horizontal functions (best practice, processes, etc); Coherence is where this all comes together at the front line, in different divisions or business units…
But, in practice, each of these perspectives develops its own significantly distinct priorities, fragmenting the original focus on value and – increasingly – leaving responsibility for it to senior management:
Indeed, we’ve asked people where responsibility for value lies in their organizations, and senior management was way out in front:
But senior management are increasingly removed from the “front line” by levels of hierarchy, and so the organization slowly loses touch, as our logo helps illustrate.
It shows all the “levels” that define an organization, summarized as inspiration through to execution, and all the levels are critical:
However, over time, as the organization grows – and as execution and capability, as we’ve said, take over – the upper “inspiration” levels get taken for granted, and fade from focus:
Something needs to reinvigorate them.
And that something is value:
Value forces attention back up to the higher levels in a focused way, and it guides emergence at each level to feed back up – connecting and reinvigorating all the levels.
But we can also get more “personal”.
Because value then also empowers people.
Value empowers people
This becomes clearer when we add in what each organizational level “deals” in – people being what (and who!) “does” the operating throughout organizations:
We can see where machines and AI increasingly have the advantage: data, information, and of course we have large “language” models.
But with the higher levels, only people have – and will ever have – inspiration, vision and understanding.
So, by re-awakening these higher levels, we help reimagine roles alongside AI – harnessing it; not threatened by it:
Next, clarity and focus around value is the root of collaboration.
Value is the root of collaboration
Value is what seeds empathy, “…the ability to take on another’s perspective, to understand, feel, share and respond to their experience.”
Empathy based on value helps you truly understand what matters to the other party, meaning you can achieve alignment (which of course includes managing differences).
This is where collaboration naturally emerges, and then trust:
However, as WorldCC data shows, empathy is severely lacking in our business relationships:
There’s huge misalignment in these statements: claims that subjective value is what matters, but in practice that bias towards objective value.
So (subjective) value isn’t properly in focus.
Value isn’t properly in focus
If we look at the familiar Kraljic matrix, we can see how this bias towards objective value plays out:
Objective and subjective value broadly pull in these different directions, and this means two things.
Firstly, for the most part, our Q1 and Q2 relationships are in good shape.
Secondly, though, there are then obvious consequences in our strategic and bottleneck relationships (as we saw in Part 1 with the relationship curve graphic):
So value isn’t properly in focus across our relationships, and it’s the same within relationships, too.
When asked, not even 10% were “very confident” that those involved in these relationships were clear and aligned on what matters (and the majority of the rest were either “not too confident” or “not at all confident”):
We’ll return to this central theme of misalignment later in this series.
But this lack of proper focus on value finally becomes even clearer when we look at current approaches to relationship management, mapped here on a spectrum of how they’re typically used:
So, to the left: formal, more top-down, execution-focused approaches, tending toward rigidity.
To the right: more organic approaches, bottom-up, inspiration-focused, tending toward flexibility.
And there are some real challenges here, especially if we consider relative adoption:
That gap when it comes to value becomes even more obvious.
And also note from that horizontal black line above the circles that these approaches mostly focus on how we do things – coming from outside – when, as we saw in Part 1, value primarily flows back within relationships from the customer; not forward from us.
Now, to be clear, these tools and approaches all contain lots of amazing stuff.
But there remains that gap in clearly establishing value and in staying focused on it.
And this is where Value Management comes in.
We’ll look at precisely how next time.
