The Cistek Group Newsletter 200702

The Cistek Report

Sizing Up Your Competition

Is it enough to quantify the value of your offering relative to your head-to-head competition? Head-to-head competitors are generally well known and visible. There is a whole other class of competition that can be silent but deadly. <more>.

Value Creation Tip
Studies consistently show that less than 70% of the potential value of IT investments is realized by over half of industries. This is consistent with the experience of Cistek consultants. The source of the problem is not with the IT offerings but with the provider’s ability to execute sustainability programs and the readiness of the buyer’s organization. Cistek’s top five causes for the potential vs. realized value gap:

Lack of change management (Buyer).
Ineffectual training (Provider).
Lack of willingness to change existing business processes to leverage the value of the IT investment (Buyer).
Lack of and/or ineffective ongoing business consulting and training support (Provider).
Weak executive sponsorship. (Buyer)

Many times the most effective way to increase the value of an offering is to not change the product but instead improve execution, support, and ensure buy-in and readiness of the customer.

CISTEK Q&A
Question: What is the best financial metric to use in a value proposition?
Answer: The one your prospect prefers. Most CFOs would agree that if you could only use one financial metric to evaluate and compare initiatives, net present value or NPV is the one they would choose. (See Cistek Newsletter Article: "Why CFOs Prefer NPV"). However, internal rate of return (IRR) is an important financial metric for evaluating investments requiring large upfront capital investments. Payback and simple ROI is frequently used to evaluate R&D investments. Consider also medium sized businesses such as local or regional IT providers that do not have a finance department or a CFO. They might need a cost benefit analysis in order to evaluate an investment. So, the right answer depends on the type and size of company you are dealing with.

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Editor: Amy Boland