Let Knowledge Cash Power Your Business

While you're constantly creating value for your customers, have you also put in place a way to capture some of that value?

Customers always want more — it's simply human nature — and your competitors are already standing by to meet those demands. You've probably done plenty of things right: cutting costs wherever you can, staying focused on your core business, and making smart use of the internet to grow. With operating costs falling year after year, you're now delivering more value to customers than ever before and rolling out better new services. You're also partnering with suppliers in new ways and breaking into entirely new lines of business…

Yet, frustratingly, you still can't generate enough profit growth.

Capturing the value you create is one of the biggest challenges businesses face today — and it's exactly what you'll need to stand out in tomorrow's competitive marketplace.

The problem is that the very ability to create value also drives the source of that value — knowledge and information — toward being essentially free. It mirrors Adam Smith's observation about water: water is everywhere and can be had at almost zero cost, so even though it's absolutely essential, it's free. Today, whether a business operates in a mature industry or an emerging one, it faces a widening chasm between "creating value" and "capturing value."

Within this "value gap," you'll find quite a few surprising — even counterintuitive — conclusions.

First, plenty of online marketplaces, internet companies, and biotech firms believe they can strike it rich simply by selling information or knowledge. Sell your shares in those companies.

Second, assess the new economy's "bottled-water businesses" — the companies trying to sell their own branded information — and ask whether they can scale their operations enough to justify their share prices.

Third, be wary of established companies pouring heavy investment into bundling information or knowledge with their products and services. Why? Because they're unlikely to earn a sufficient return on that investment.

That said, keep an eye on the mature industries that manage to accelerate their revenue growth through "Knowledge Cash."

The most successful companies focus on capturing value, not just creating it. It may seem counterintuitive, but the most effective strategy is for a business to use its knowledge to take on greater responsibility for ensuring its customers' success. These companies build a range of operating models that let customers choose different combinations of how much they're willing to pay and how much responsibility they want the company to shoulder.

Today's online shoppers are savvy and demanding, so it's no surprise that businesses find selling services and products online so challenging. That's why, from day one, a business must recognize that a customer-centric operating strategy is indispensable. Customers are the single most important pillar of the modern enterprise, and if a business wants to survive the competition in online retail, it needs to build genuine relationships with them.

Building Knowledge Cash can be broken down into four levels:

Level One
Suppliers sell products and services, then leave it to customers to use their own existing knowledge to assemble and apply what they need.

Level Two
Beyond selling products and services, suppliers deliver value-added information — integrating data and offering solutions — but customers still have to decide which pieces of information to combine to make it useful.

Level Three
The supplier takes responsibility for delivering benefits to the customer.

Level Four
The supplier actively helps and drives the customer's success.

Climbing this value ladder brings a business closer to what its customers actually need. As problems get solved one by one, more and more customers come to appreciate the convenience these companies provide — and through word of mouth, that ultimately strengthens the company's reputation, wins more customers, and grows the business bigger and bigger.