Where to Spend, Where to Cut

When we are faced with uncertain times, the most important decisions we must make are centered around resource allocation. It usually boils down to answering this 2-part question: Where should we continue to spend (maybe even increase spending) and where should we cut back?

Different companies take different approaches, some going as far as cutting programs and resources that they admit are necessary to grow and succeed once we emerge from the economic funk we are in.

Let me propose a customer-focused approach to making these decisions. A quick clarification first: customer-focused does not mean do whatever the customer wants for whatever they want to pay. We still have to balance the needs of our business and our shareholders with that of our customers. But an approach that considers the customer and recognizes that the best way to succeed is to help customers succeed is a customer-focused approach. Your customer listening programs should give you incredible help in these decisions.

The areas in which we should continue to invest and perhaps even increase resource levels during tough times are those areas that are valuable both internally and to customers. Innovation is one of these areas…our customers are looking for new solutions and we need new solutions to grow. Innovation benefits us both and should probably continue to get resources. Initiatives that help us to deliver more value to our customers and therefore continue to realize reliable revenue streams are mutually valuable and need continued investment.

By contrast, some areas are important or valuable to neither our customers nor our businesses. You cannot cut fast enough in these areas. (Blogger note to self: any example you give here is going to hack off someone because you will be calling their efforts low value. Be smart for once and don’t go there. Better yet, create some crazy example that no one would believe. Nah, don’t be lazy, think up a real life example that is a good one…). John Chambers, CEO of Cisco Systems didn’t just cut in a low value area, he turned a low-value resource eater into a mutually valuable one. Chambers dumped private plane travel (no value for the customer, very little if any value for the company, high convenience value for the traveler) in favor of more frequent communication via Cisco Telepresence, putting Cisco’s product line in plain view of strategic customers.Customer Focused Value Matrix Kudos to Chambers for true Customer Focused Leadership.

Spending that is high value to the customer but low value to the company should be maintained unless it is actually detrimental to the company. In other words, low value might be acceptable if it is important enough to customers, but no or negative value is not. Same goes for spending that is of high internal value but not that valuable for our customers; maintain these areas unless they are of negative value to your customers (there are many items of no value to our customers—quality control, forecasting, accounting, bureaucracy—but necessary for our business. These are ok to maintain as long as they don’t hamper customer success. ). (Blogger note to self: Yep, you just had to go there.) These areas are important. But from our customers’ point of view, they are not value-added. Take quality control. We must deliver quality products or services and need quality checking to make sure that happens. But, customers expect it done or produced right, there is no value to them in terms of how you get there.

This model only addresses resource allocation and not individual performance. We still must deal with performance issues and look to increase the competence of our teams. After all, those teams deliver the value to our customers.

Before you cut, consider how many degrees away from customer success you are cutting. Lowering the value you deliver will start a cycle that has only a bad ending. Focus on your customer, think about your business. Find the areas that neither of you need and redeploy those resources into areas that neither of you can do without.



Comments for: Where to Spend, Where to Cut

Leave a comment







Captcha