Guru World

How to Think About the Value Hierarchy

The value your clients need from you is part of a hierarchy—a ranking of things. Your role in consulting your clients includes understanding their version of the value hierarchy, as well as knowing how and when to modify it to help them produce better results.

Some clients will have a strong perspective on what they value most and why it’s critical to them now. Others will describe their problem as something lower on the hierarchy, sharing with you the presenting problem but not the root cause. In that case, they often don’t yet realize the implications of their presenting problem or why it should move up the hierarchy. Similarly, different stakeholders will often have different views of what’s most valuable and why. Among other things, you might hear them talk about greater profitability, greater revenue, lower cost structure, increased market share, a strategic competitive advantage, net promoter score, client acquisition, wallet share, retention, speed to market, efficiency, effectiveness, turnaround time, and throughput.

A List of Value

In the list above, most solutions focus on two main value propositions: 1) greater profitability and 2) greater revenue (top-line and bottom-line improvement). When you believe that a strong ROI will convince your client to buy from you, these metrics are the easiest to use to make your case. They’re straightforward and easy to calculate, so you may be tempted into believing that all clients want these outcomes at all times and in all places.

However, the highest level of value on the hierarchy for one client may not be compelling to another client who views the hierarchy through a different set of priorities, initiatives, and goals. And then there’s the question of incentives, the rewards that accrue to different individuals, which are sometimes misaligned.

alt image text of stacked shelves on a wall representing hierarchy

Imagine that Client A is going to go public, and their primary need right now is to increase their revenue, since that will increase the size of the company and potentially raise the price of their IPO. Meanwhile, Client B is exploiting a first-mover advantage in a new market and needs to speed up their land grab, before they are forced to compete with others and lose their opportunity. Both stakeholders have a strong idea of what tops their value hierarchy, even though they may have radically different values.

Shaping the Value Hierarchy

In other cases, you will have to modify your client’s beliefs about value. Say you have a client who wants to lower their cost structure. The real value there is increasing their profitability, even if it is not stated. You recognize that by allowing them to take money out of their solution, they will increase their overall costs, since their real problem is that their output is too low— they aren’t efficient or effective enough with their assets. You can offer to shave a couple pennies off their solution, but not only is that not going to lower their costs, it isn’t going to help them improve their profitability.

When you looked at the value list at the start of this post, you may not have thought much of the last choice, throughput, since it isn’t nearly as sexy from a business perspective as things like speed to market and greater market share. The reason you need to shape the value hierarchy in this not-so-hypothetical situation is because the perception of value presupposes a certain solution. In B2B sales, clients nearly universally frame their highest value as cost reduction, as if that is the only way to improve results.

The reason you need business acumen, situational knowledge, deep insights, a great deal of diplomacy, and a modern sales approach is so you can shape your client’s view of their value hierarchy, to get at their problems in the most effective way and to produce the greatest outcome.

alt image text of universe to represent that values are not universal

Values Are Not Universal

In most companies, you will find that different people have wildly different ideas about the value hierarchy. The higher up people are on the organizational chart, the more likely they are to value more strategic outcomes, solutions that translate to improvements to their financial metrics, and resources that provide a strategic advantage. At lower levels, though, many of the people you encounter need help solving the day-to-day challenges in their business.

It can be challenging to translate the lower-ranked values on my hierarchy (e.g., greater profitability, greater revenue, and lower cost structure) to the more strategic and more critical challenges being addressed by executives and other senior leaders. But it’s important: if your contact can’t convert a problem in execution to something higher on the value hierarchy, they’ll often fail to acquire executive support and sponsorship.

The value hierarchy is likewise not universal within a given company or even a given department, creating conflicts over priorities and making it more difficult to reach consensus. Nor is value the same for the same company at different times in its life cycle. Even the hardest-charging executive you know will change from “revenue and growth” to “contribution to the future,” given a long enough timeline. Because value isn’t universal, you have to elicit it through your discovery process, to determine what the right solution might look like. You might also have to help your client reimagine their hierarchy, changing their priorities when it is necessary to create greater value for them and to provide them with your best advice. You need multiple theories of what is most important to your prospective clients now—what they currently view as the pinnacle of the value hierarchy—and how they are likely to see things in the future.

What’s most important to your clients is also what’s most compelling. When they hold assumptions that cause them to make mistakes about what they should value most and why, you have your best chance of helping them achieve transformational change and better results.

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