Need Effective Customer Insights? Use These 5 Factors for Competitive Advantage
When detailing the value of software for a prospect, I often run up against the objection: "That's not hard value. We don't count soft dollars."
We've identified how software could enable savings, but the prospect doesn't believe the benefits equate to clear changes in operating costs. They can't justify the investment.
What they really want is a hard benefit that they can defend to management without hassle. Common examples of "hard value" savings or benefits include: headcount reductions, facility closings, product line rationalizations, or the elimination of future expenditures.
Maybe you've encountered the same problem in your own software sales pursuits and gotten stuck. You know your solution will deliver real value to the client's business but you've got to get over the hard value hurdle before they'll consider your proposal.
Between a Rock and a Hard Value Place
Hard value has the benefit of being easy to understand and apply. But it has a big weakness too: it is too common and easy for competitors to duplicate.
In other words, proposing simple solutions that are painless for prospective clients to justify does not provide YOU with an unassailable advantage in your software sales pursuit. It's requires almost no effort for your competitors to copy you and just undercut your prices.
But here's the good news: in this way, you and your customer actually want the same thing.
If you can offer the customer a strategic business advantage, then you will differentiate yourself from other vendors and be rewarded with a competitive advantage of your own.
Your software sales proposal must provide your client with critical business improvements that they cannot get anywhere else. So how do you do that?
There are lots opinions, but Dr. Allan Afuah, author of Strategic Innovation: New Game Strategies for Competitive Advantage, devised a test you can use to evaluate all the essential elements of competitive advantage. He calls it the VRISA test.
Dr. Affuah finds that true competitive advantage belongs to those assets, resources, and capabilities that pass the VRISA test. A VRISA-approved asset is one that is:
- VALUABLE- the resource generates financial value
- RARE- the resource is uncommon
- NON-IMITABLE - the resource can't be copied
- NON-SUBSTITUTABLE - the resource can't be replaced
- APPROPRIABLE - you can capture the value generated by the resource ahead of competitors/customers
To get your head in the right place, think about what your client is trying to accomplish in their business from the standpoint of the capabilities, assets, and resources they have available to them both BEFORE and AFTER they have implemented your enterprise software solution.
Chasing Sustainable Competitive Advantage
The table below is an example of how a manufacturing company used the VRISA test to evaluate their assets, find advantages, and choose those in which they would make further investments.
TABLE: An example company assessed its resources against the VRISA test to identify competitive advantages.
Do you see how they used the VRISA test to identify sustainable competitive advantages that their competitors could not duplicate? Look at the table again and you might notice that most of those advantages are "soft" capabilities like "Stellar Reputation."
All businesses want soft benefits like that. They just don't know how to get them. That's where you come in. Your software sales campaigns must demonstrate how your customers will achieve these benefits.
Start by helping the customer realize that hard benefits -- although valuable, non-substitutable, and appropriable -- ARE NOT rare or non-imitable.
This goes against conventional practice. We encounter the "hard value" mindset so often that most companies have made it standard procedure to justify IT investments by considering only hard savings / benefits in their technology business cases.
But these benefits provide little more than competitive parity with everybody else. Seen in this light, few so-called hard benefits provide a sustainable competitive advantage for customers... or an advantage in your software sales campaign.
There is no getting around it: for organizations that want to lead their industry, soft value is the path to success.
Soft Value is the New Hard Value
Soft value can't be applied as a line item adjustment on an income statement. Before a soft benefit can be accounted for financially, the organization must undergo some transformation to appropriate a new capability, resource, or asset.
But building an information system that provides sustainable competitive advantage is not easy. This transformation will most-likely be complicated, difficult to explain, impact multiple stakeholders, and take years to grow to fruition.
And that's good news. Remember that your software sales campaign is designed to differentiate your solution from every other vendor.
If you do it correctly, the new "soft" capabilities you help implement will shine in the VRISA test. Competitors will not be able to follow the organization's lead or steal its advantage.
To win you must build the business case to explain how these benefits will improve the client's business performance and enable them to widen the competitive gap. That's leverage only "soft" value can provide.
NOTE: Don't forget to qualify your opportunities. Before performing the VRISA test, be sure you are employing the right sales strategy for the customer before committing your sales team resources.
Where are your customers balking at considering "soft value" in their business justification? What are their arguments against it? What would be possible for you in your software sales campaigns if you could powerfully and convincingly communicate "soft value" to anyone?