Sunday, November 9, 2008

Supersizing Your Business

By Mark Brousseau

Customers are a company’s most important asset, says Adam Osthed, president and CEO of metasource. And in challenging economic times, Osthed says companies can leverage their customer relationships to “supersize” their business – in other words, generate more revenue per transaction or customer relationship.

Osthed spoke during AIIM's 33rd Annual Document Management Service Providers Executive Forum in Austin last week.

“During a downturn in the economy, a frequently overlooked way of making more money is increasing the value-size of your customers,” Osthed says. “Supersizing is a model of specific inter-related activities through which a company can create a competitive advantage – a chain of value creating, or value-added, activities.”

The secret to supersizing a business, Osthed says, is to understand its role in the value system: who are its customers, what do they need, and why should they buy from your company. To help your company understand its role, Osthed suggests using needs audits, process mapping, and quarterly business reviews. “Figure out what your customer wants,” Osthed says. “Instead of trying to get them to fall in love with your solution, figure out what they are trying to build, and tailor a solution to these needs.”

Once your company understands its role, there are two ways that it can grow its revenues from the value system: expand its reach to new levels in the value system (vertical integration), or expand its activities within existing levels of the value system (horizontal integration).

Vertical integration, Osthed says, is the degree to which a firm owns its upstream suppliers and its downstream suppliers. Meantime, horizontal integration is the acquisition of additional business activities at the same level of the value chain (selling to the same decision-makers). While each of these approaches may appear straightforward, Osthed warns that the benefits of scale and scope are often easier said than done. Moreover, the benefits are not spontaneous; they require a commitment from the top of a company. “And you have to be careful that you don’t more too far from your company’s core competencies,” he adds.

Have you tried supersizing your business? Post your comment below.

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