Value Propositions

Bovet: We define "super service" as a quantum leap in performance in areas deemed crucial by customers. Super service can take many forms, but its two most important features are rapid delivery and reliable delivery. Customers expect what we call "perfect orders." What's a perfect order? It's an order that gets shipped on time and complete: It arrives at a customer's desired location within a precise time window and in excellent, ready-to-use condition. Super service also means having the flexibility to handle last-minute customer changes while continuing to provide the same level of service.

Mexico-based Cemex, the world's third-largest cement company, is a great example of a company that provides super service and that delivers perfect orders. Until the late 1980s, Cemex's operations looked just as chaotic as every other company's did. The company set three-hour delivery windows -- a time frame that wreaked havoc on its customers' construction schedules. Over 10 years, though, Cemex invested $200 million in customer-service information systems. Now its delivery window is 20 minutes, and it makes that window 98% of the time. Customers can change orders at the last minute and still receive on-time shipments.

This "service wrap" is the differentiator here -- the thing that gives Cemex its brand strength. The market rewards super service by letting Cemex charge higher prices. The company's 1998 profits (before interest, taxes, and depreciation) were 35% of sales -- much higher than the industry average, which is 21%.

Martha: Go back to what Weyerhaeuser did with its door factory. Weyerhaeuser escaped the downward price spiral that usually comes with a commodity product. It was able to raise its prices and to command a premium in the marketplace because it wasn't just selling a door -- it was selling precise timing.

Many companies try to compete by offering products with different capabilities. When that approach falls apart, they try to compete by lowering their prices. They beat themselves up over features, or they cut prices like crazy to get month-end sales spikes. With value networks, you differentiate yourself not just on product attributes but also on service capability. That capability is based on a collaborative set of relationships, so it's more sustainable and harder to replicate. An effective value net creates a competitive advantage that's probably worth a lead of one to two years over your competitors.

Keith H. Hammonds (khammonds@fastcompany.com) is a Fast Company senior editor. Contact David Bovet (david.bovet@mercermc.com) and Joseph Martha (joseph.martha@mercermc.com) by email.