Recently in Idea-Selling Category

Since it's so important to success, let's talk about messaging and the sales force. You must differentiate your business with clear messaging attributes which include:

  • An Idea Sellingstoryboard
  • Answers to key questions like:
    - "Why" they should do this
    - "How" they can do this
    - "With whom" should they do this
The Idea Sellingstoryboard must be complete.  Glean out a 2-3 minute explanation of why examining the Idea is so important for the customer group.  If the story takes 15 minutes to explain, it is by definition not messaged well or too complex for this stage of your journey. 

The early stage of the journey and the early stage of the portfolio are different from later stages of your journey, and later stages of your portfolio.  Also, what you take to market and what you pull through is different from your solution set.  Again, you must boil the message down into something that is clear, well defined and easy to talk about in 3 minutes.  The rest of the messaging for the Idea Meetings and the Stakeholder Meetings can be created off the initial messaging, but the primary mistake is never getting a clear, concise message to begin with.

Now, let's discuss enabling the sales force. Please remember that by nature, salespeople live in a different world than everyone else.  They have the need to be successful to support their families and much of their compensation is leveraged on success.  They spend much of their effort minimizing the chances of failure by working internally in their organization and out to their customers.  Over time, the tendency in the sales organization is to encourage the sales rep to do what he/she is good at, to stay with products and services they know really well, and to deal with those accounts and people they already have relationships with. 

Therefore, to change that - i.e. to call on different accounts or different levels in the organization - will work against all their risk aversion habits.  Thus equipping and enabling the sales force so they can be successful is a significant effort, and should be looked on as such. This begins with a game plan that fully explains the sales cycle for the offer.  This will include: the storyboard; how the Service Chain™ will work; how the Idea Meetings will work; how the Stakeholder Meetings will work; what they're going to draw; and how they will communicate.  The game plan must be complete, easy to understand, and supported with visuals and videos that can be repeatedly watched as they begin to learn the offer.  The next step in the journey is to provide education on the offer.  They will need direct educational support that is intellectual, including role playing opportunities, coaching, and probably someone to go to market with them to show them how it works by example.

In summary, I cannot stress enough the things that are necessary to create meaningful True Solutions™. If you do not pick the right offer and you cannot differentiate well, it is relatively difficult to make up for that without really good positioning documents and sales enablement.  If you do not invest heavily and do everything right in getting the positioning correct, and you do not invest heavily in getting the sales force successful, then you run the risk of being unsuccessful and not knowing why.

In the end, you have to remember that customer intimacy is about business model transformation, and the sales team is a key part of this change.

MORE INFO >> Download: Customer Intimacy as a Business Model by Dean McMann

I wanted to take some time to discuss something I get asked a lot about - is the Intimacy Engine viable for software businesses, regardless of the Software-as-a-Service journey everyone is on and the Cloud impact?

The real issue they're worrying about is that a large consulting business will negatively impact the great margin that software has, thereby negatively impacting valuation.  It does not work that way when done properly.  Further, software-based businesses also have the problem of "where do I go from here", once the current product has been somewhat commoditized- i.e. other firms have moved above and below offering more or less price.
 
Traditionally software firms' options are to do a shift and become a suite of things, an infrastructure play, or find a new fresh home unrelated to the current space.  All these require additional product, and more importantly, selling to new buyers higher up in the organization - this is where a strong Intimacy Engine comes into play. 

It's much easier to go up the organization with your products if you have the ability to work with the executives on issues they care about.

Let's take the diluted factor of services to licenses sales.  It's just not true that you should be selling more licenses. Let me provide a picture to assist.  The buying cycle is as follows:

buycycle.jpg

The challenge for a traditional sales only approach is that if you meet a customer in steps 1 or 2, you have little control and a long sales cycle, and the drivers often become features and price.  However, if you lead with True Solutions™ during these steps, you can get paid for effort, control the process, and shorten time to product sales.  Most importantly, you get more product sales! 

Therefore the argument is null and void; you get more license-sales faster, and the magical break-down of 1/3 license sales, 1/3 service, and 1/3 maintenance is maintained.

Next, let's take the ability to move to expand the product offerings to maintain or re-gain momentum for a software business. The beauty of the software model is the margin it achieves on product sales.  By the way, this is true of SaaS also, it just elongates the revenue and eventually increases the product value (people end up paying more over time, but it is accomplished a period at a time- think salesforce.com).  

Every product market gets saturated eventually.  Everybody has made their decision on who to play with, or the market is crowded and price pressures force looking at new virgin territory.  Further, over half of all new product launches do not succeed in the time to market to get the revenue needed. This is almost always because companies must sell into a new environment and all their current abilities - marketing, messaging, sales - are used to the old environment.

The Customer Intimacy Engine™ business model does not have this problem.  The Intimacy Engine sells by examining ideas, and ideas can easily (by adding new True Solutions™ to the solutions portfolio) move up the organization.  

Let's say your current software works at the department level and you are going to increase your value by adding products that make your offering a suite of offerings that follow a life cycle - could be the supply chain, the product launch or other life cycles within your target customers.  The ability to quickly move to and above above a new safety line is enabled by the Intimacy Engine, thereby eliminating the risk of being unable to change the entire business model to reach these new buying environments. 

Let's say you are moving to a whole new space. Even more difficult! The same truth applies. You can add True Solutions for the new space and pull through your new products and minimize your risk of failure. 

The real challenge is one faced by every business - how do I build an Intimacy Engine for my specific business? 

In summary, the Intimacy Engine can enhance the current financials (within the model you wish to have) and can positively impact the largest issue facing a software business today (whether it is a standalone business or embedded in a larger company), which is how to move and grow into new marketspace.

MORE INFO >> Download: Customer Intimacy as a Business Model by Dean McMann

I now want to discuss how to acquire small firms from a transaction point of view. 

One of the real problems for small firms is that there is no way out for the founders.  The firms usually cannot continue without them, and cannot afford to provide them a retirement.  Therefore, they must work until they can no longer sustain their activities and close the firm upon their retirement. 

On the negative side - small firms rarely are worth (as a cash deal) what the partners need to retire.  Moreover, they do not want to sell into a situation where they must exert all the effort to pay for their retirement, i.e. they will not take a great deal of risk in the sale.  I'll come back to this topic at the end of this entry.

So how do we make them successful if we should decide to acquire such a firm?

As stated in the previous entry on this topic, you as the acquiring company, will have to build your Customer Intimacy capabilities and assure its success if the acquisition is to provide you unique IP and offers for your portfolio in order to provide stronger execution and differentiation.  Therefore, you must have your operational processes and procedures in place and working to take advantage of these acquisitions, and make them successful quickly. 

Here's how to accelerate the "time to value":

Focus on True Solutions™ Creation - you must be able to quickly (within a few weeks, and this effort can start during the acquisition process) create the Service Chains for the new acquisition.  This will assure that the new IP and/or differential is positioned correctly within your portfolio, and that the new deals drive the account impact you want. Furthermore, this will assure that your methods for up-selling, managing the account for Trusted Advisor actions and harvesting (pulling through products) are being used effectively. Finally, it will assure that the talent your already have can work more seamlessly with the new offer(s).

Develop a Comprehensive Go to Market Strategy  - You must have your "getting into meet executives", Idea Selling, and selling talent trained and ready to take on the new offers.  As we have discussed before, selling True Solutions in the Intimacy Engine business model is a specialized set of activities, and these must be working effectively and able to take on the new offer(s) immediately.

Accelerate Talent Development  - You must take the new employees through your methods that support the Intimacy Engine immediately. They must quickly become part of the well oiled machine that you have. Remember, Intimacy Engine is more like the Army, where the boots on the ground make the decisions and these newbies must do it your way, or you will lose the advantages the acquisition provides.

Deploy Account Management for Building Partnerships, Trusted Advisor and Harvesting Ability - You must have your integrated account management model working to again take advantage of the new differential you have, or it will not be the multiplier that you want.

Integrate Talent Management and Review Processes - As people are added to the organization through acquisitions (or any new talent for that matter), you must be able to put them into your talent management, career paths and review process if you are going to get the most out of them, and they are going to be a good fit within the organization.

If you do this correctly (and again, we see all the above abilities as R&D investment, like those for a new product line), you will be able to quickly take advantage of the new differential and talent and start driving value creation activities to generate substantial revenues with the acquisition right away.  In that you are getting small acquisitions, it is important that you greatly increase their revenues within the first months of having them.
 
Now let's address the question of how to structure a deal with these particular entities that are really looking for way to retire (not right away, but they need to know they can get out of the house at some point).   As we stated, they need more than they are worth today, but cannot take all the risk of the growth for the pay out.  We suggest that it is a continuum of growth risk that drives valuation and payout ability. As you get more comfortable with your ability to grow them quickly, you will be more willing to take the risk of growth upon yourself.  This will allow them to be able to put together deals that will lead to actually receiving more than their company was worth at time of deal. Isn't that why you acquired them in the first place? So what becomes important is getting the first few deals done.  One way we have seen is for the acquirer to guarantee (this is again is a continuum) the payout over a number of years.  Let's say the firm is worth on paper $10 million today, but the partners will need $17 million to retire. Then the issue becomes how much risk will you take for the difference as it is paid out of time.  Of course, your size helps with the guarantee.  Remember, they will not take a great amount of the risk; therefore you must have the above abilities to enable you to take the risk (at least enough to get them comfortable).

This is a key sticking point in negotiations, especially in small firm acquisitions, and I hope we've shed some light on how to make such an acquisition successful.

The concept of global account management is not a new one. What is distressing however, is that so many companies think that they can build global account management processes without customer intimacy.  In fact, in our experience, the principal reason global account management initiatives fail is because of underinvestment in customer intimacy.

Let's start by asking the standard questions:

  • What are the key drivers of global account management for customer intimacy?
  • How are global accounts identified and selected for customer intimacy?
  • How are these programs initiated, developed and sustained?
  • What organizational structures should be adopted?
  • How global/local issues are best addressed?
  • What is the role of the customer intimacy global account manager?
While we have addressed many of these issues earlier, here, here, and here, we have not discussed the complex processes customer intimacy in global account management requires.

Targeting the Accounts - The targeting of accounts (segments) to build Intimacy Engine™ relationships is just as important as the effort of building and leveraging the intimacy. The proper selection of global accounts has a significant impact on the success of your global account management program.

As we have discussed before, we have interviewed thousands of executives.  They greatly desire partners that bring expertise and insight into their unique situation (be it growth or cost reduction), and stay with them to implement and achieve the benefits.  Therefore, most accounts and segments will be open to your Intimacy Engine™efforts, but not all segments or accounts warrant the effort.

Ask:

  • Are we targeting taking accounts from our competition?
  • Are we attacking segments that are new to us?
  • Are we protecting existing turf? 
It's critically important to be clear about the expectations from these targets once you have achieved the intimacy you envision.

Building a True Partnership - The beauty of the Intimacy Engine™  is that you can start an account where they want to start - solving their true problems (see the blog entry on True Solutions). 

Please remember this is not just providing consulting services, this is a focused portfolio of offerings that a segment of customers need and value.  Also, this requires empowering your global sales teams with the ability to perform Idea Selling.  These efforts, sales and delivery, will immediately change the account's opinion of your company and the relationship.  This can be done with both existing accounts and target accounts.  It builds your legitimacy and credibility, which in turn provides the launching pad for having trusted advisors in the account.

Building Trusted Advisors - The hallmark of trusted advisors is that they are invited to discuss a broad variety of issues at their accounts and are not seen as sales assets - they are seen as part of the accounts ecosystem and are a positive influence, not an irritant.

How is this achieved? First you must be deliberate about selecting and enabling the people who are going to play the role.  They will leverage the partnership being developed with the account through providing True Solutions, but they will also separate themselves from the effort.  They gain access to executives through the great work the teams are doing, but they must add separate value to the executives they deal with.  This is very important - you must select those that have good business acumen in the global business issues you deal with and broad business understanding. 

Further, they must be equipped with intellectual property (IP) and mini-offers that are targeted to help individual executives.  These include studies, position papers, and related IP,  as well as tips and techniques every executive needs - how to run effective meetings, how to manage difficult subordinates, how to mange a group through change, etc.   It is not enough to just solve the account problems, they must have personal intimacy with your company also.  [I'll cover this subject in more detail in future blog entries.]

Harvesting the Account - The reason you invest in the Intimacy Engine is to increase your footprint in accounts, achieve better pricing, and lower the cost of getting product deals.  Now that you have both company-to-company intimacy by working on the things they care about (True Solutions) and you have person-to-person intimacy (trusted advisors), you can begin to move the account toward the deals you want to have and that are best for your customer.  It is crucial that you have both the legitimacy and credibility of True Solutionsand trusted advisor relationships together - one alone will not work. 

This takes many forms and is somewhat dependent upon your portfolio of True Solutions (how close they are to your product line).  Sometimes it is as straight forward as the trusted advisor informing her contacts that you really want X deal, or it can be a natural outgrowth of your True Solutions.  Often times you create opportunities that never existed before, but the outcome will be deals coming to you through the Intimacy Engine.
 
The Cycle - Even with the Intimacy Engine , after a large deal the customer will consciously or subconsciously think about the value of the business relationship.  Therefore, it is important (very important) to immediately find an opportunity to bring additional True Solutions to the account so that you reinforce the importance of the partnership you are in.  In essence, this starts the journey again.

The customer journey of the Intimacy Engine is very different from traditional customer relations or traditional global account management. It is much more valuable for both the customer and you. It drives both intimacy and value for both organizations.

In the previous entry we discussed solution development as a process and shed some light on the intricacies needed to create a winning portfolio. Now let's look at the design of the portfolio itself:

portfolio_chart.jpg

Think about the portfolio from a holistic point of view.  What are we offering that is truly important to the executives we need to have intimacy with (above the safety line), what offering can we bring to bear that directly pull through our products or outsourcing, and what large offerings can we bring to bear that give us critical mass in our business and in our accounts.   It is important to strive to be as complete as possible, and this effort might send you back to you market reality effort.  This point of view will drive much of the portfolio work you will do (think product R&D).  It is important to get it right because it is expensive to be wrong - in real money, market opportunity, and momentum of journey.  Also, remember you will not be creating all these True Solutions at the same time, so you do not need to hinder your broad thinking.  The mistakes made at this stage are slipping into wanting to do things that you like (because you're good at it) but do not meet the market reality or opportunities, or letting the organization (which often does not really understand a market from its needs point of view) deflate the True Solutions portfolio.

The portfolio strategy can now be validated with the market.  This includes discussing the importance of the True Solutions with key potential buyers.  This usually not only sharpens the portfolio and assists with prioritizing which True Solutions will be early offers, but also begins the process of creating meaningful messages that will be needed when the offers are taken to market.
The next activity is to prioritize which True Solutions will be created first.  This is an important decision.  It not only drives resource allocations (investment), but also drives the business model and financial plans.  You cannot go to market without something above the Safety Line, and you cannot go to market without something that pulls through products.  You must be able to put a meaningful group of True Solutions in the market at the same time (within a reasonable time of each other -weeks/months).  Further, as you look at the account life-cycles, you must decide which True Solutions you lead with and which ones are introduced as you have intimacy built with the client. 

Let's develop the solutions.  I have written some about Service Chains and the process of creating the solutions, so I will not add additional thoughts here, but would like to spend some time discussing market validation.  As soon as you have roughed out the service chain, know the implementation projects, laid out in detail the entry project and developed the messaging for Idea Selling - idea meetings and stakeholder meetings - it is time to take the messaging to some virgin accounts as a validation of both the messaging and the True Solution. It is important to quickly get in front of several potential buyers and walk through the Idea Selling process.  The messaging can be altered to elicit their views of the value of the idea and its importance (as opposed to actually selling the deal, although you will probably sell some deals in this process).  These meetings cannot be with lower level people currently known by the company, they must be the executives who can buy. They should not friends or friends of friends - that kind of data is always suspect.  There are approaches for getting these appointments that we will cover when we discuss Idea Selling in more detail. 

This data will immediately help in several ways - clarify messaging (very important) and continue the education for the go to market teams on how to have idea based executive conversations.  In addition, the True Solution itself will be validated or invalidated and better plans can be created from it.

Once the market validation is complete, the Service Chain for the True Solutioncan move forward into its next step of development and go to market. The initial portfolio can be hardened and leveraged both internally and externally.
beacheadnormandy44.jpg

Today I want to discuss the importance of establishing a beachhead - a successful safe place to expand into a market. 

This is important for an early solution business and for any new market/customer segment you go after.  You must focus early offers on the market exclusively - it is so easy to ignore the needs of the executives in your market - we call this getting above the safety line - and focus on the products or abilities you have now.  We've seen firms struggle in the first year of their Customer Intimacy Journey because they did not create anything meaningful for the market. 

The Customer Intimacy Engine business model can take into account that your customer facing people are not used to selling to the executives, it can take into account your brand does not give you legitimacy in the executive-suite solving real problems, but it cannot make up for poorly planned offers - those with no real value to the executive.

The beachhead begins the process of establishing your legitimacy and proves to your organization that you can do it.  The early focus should be on getting reference-able accounts that believe in what you offer.  By the way you must be able to implement the new idea also - please see the blog entry on staffing and talent

How do you select the first offers for a new market ?

You need to do a thorough review of what leading thinking for the market is focused upon.  This would include:

1.    Reviewing current thinking by consulting firms - this can be accomplished by reviewing their info in the market place and meeting with representatives from large and specialty firms.
2.    Meeting with executives in the industry that are solving key new issues - these discussions must be done differently than market research and require market experts in the room on your behalf to interpret the comments.
3.    Diagram the business - this should include org charts, supply chains, major processes, etc.

Once this exercise is complete and a diagram of potential opportunities is created,  I suggest you meet with people who represent best practices for these areas within the market segment - these will usually be lower level people and or people who have left the industry and are working on these problems as adjuncts to the industry. Also, see what the associations are doing on these issues.

Now you should have a reasonable list of opportunities and enough information to begin the offer evaluation process.

The challenge with establishing a beachhead is that companies usually don't have the patience for spending time doing this and they want meaningful revenue now - this is usually because they look at Customer Intimacy Engine as "solution selling" - a go to market issue only. I suggest that you talk about this phase of the journey as R&D spend.  A True Solutions™ portfolio is not that different from bringing a new product to market, similar phases are involved and similar investment is required, although the way in which the evaluation and creation activities are accomplished differ.

So how do you go about leveraging the beachhead?  Once several accounts have purchased the new offer(s), you can trumpet the release of the offer, increase the staff involved and move towards leveraging the beachhead.  This will include creating those offers that more directly pull through your products or outsourcing.  This begins with building a strategy (portfolio document) of where you plan to take the market, which includes identifying how each offer area impact the safety line and/or builds critical mass, and/or drives solution revenue/profits, and/or pulls through products. This document in turn becomes the vision that drives the market activities you undertake for the business.  It also provides a communication document for educating and discussing the business with your company on broader basis.

In summary, focus first on establishing a firm beachhead and then on the broader business offerings that expand your influence.
Eighty-eight percent of all CEOs say getting closer to the customer is the most important dimension to realize their strategy in the next five years.  According to an IBM study, "The most successful organizations co-create products and services with customers, and integrate customers into core processes. They are adopting new channels to engage and stay in tune with customers. By drawing more insight from the available data, successful CEOs make customer intimacy their number-one priority."

This is not news for anyone who views customer intimacy as a business model and not just a sales technique. One of the key tenets of a superior customer intimacy practice is to constantly maintain a tight linkage between service delivery and value creation.  In fact, by definition, you can't have real customer intimacy if you're not solving your customer's most strategic issues.

customer-value-diagram.gif

The diagram above makes the following point: there must exist an optimal balance between your promise and your delivery, i.e., you gotta walk the talk.  Further, the value proposition you bring to your client must impact your customer's value drivers in a perceptible way.  Once you have convinced the customer that your idea will in fact deliver value (idea selling), then you must in fact deliver what you promised.  In our case, we say that you must offer True Solutions™ and be an intimate partner in solving problems and bringing new ideas to your clients. Of course, you also have to keep in mind that your ideas or propositions must be screened to ensure they meet your criteria for fostering customer intimacy.

If your solutions don't deliver on your value proposition, you're guilty of marketing hype.  This can be a fatal mistake.  Far too many companies believe their own marketing propaganda, and don't know how to deliver on their marketing promises.  90% of the time, this is why customer intimacy gets a bad rap.

Now, a few words about customer value drivers. We're all indebted to the academician Jag Sheth's theoretical model that explains the five values that drive customer choice:

  1. Functional value: the perceived utility that derives from a product's physical, utilitarian, or functional attributes.
  2. Social value: derived from an alternatives association with an identified demographic, socioeconomic, cultural, or ethnic group.
  3. Emotional value: derived from the ability of an alternative to arouse an emotional or affective state.
  4. Epistemic value: acquired by an alternative as the result of its ability to arouse curiosity, provide novelty, and/or satisfy a desire for knowledge.
  5. Conditional value: derived from the specific situation or context of the purchase decision. 
At McMann & Ransford, we help our clients build True Solutions™ that meet all five customer values.  Unfortunately, far too many companies are focused on functional value alone, a classic symptom of the product-driven company.  In our next post, we'll look at an industry which is addicted to innovation and examine the consequences of this behavior.

Today I want to examine the HP Let’s Do Amazing campaign:

First I want to congratulate HP on the campaign. They highlight the power of solutions - to differentiate themselves with a powerful, substantiated message, and keep the commercials interesting and novel.  From a practical point of view, this is an excellent example of explaining to the world the power of  True Solutions™ that pull through HP hardware and software. 

Although we have all seen companies produce ad-campaigns that place their company’s solutions ability ahead of their reality - in this case HP created, sold and implemented the solution.

Let’s first discuss the power of the ad campaign. What does it do?

  • Differentiation. The campaign places them above many other technology providers - Dell, Sony, Toshiba etc. as having more to offer.  So many conversations in the major-account technology sector that HP plays in are about price/discounts etc.  HP is stating that for its major B2B accounts it is something different.  They offer True Solutions™ and are an intimate partner in solving problems and bringing new ideas to the accounts.
  • Intimacy. Reveals a level of intimacy with clients - they solved a true issue or provided a new opportunity.  The ad shows that HP is working with the account to solve real problems not just selling existing products to the account.  You get the feel of a partnership facing the world of competition together.  
  • Vertical/customer-centric business model. Shows that HP has industry expertise in business and can provide concrete ideas to solve real problems.  Further, it shows an outside-in strategy.  Finally, the success was driven not by great sales but by great account intimacy (trust us we know and care), consulting (finding the answer) and delivery (making it work).
  • Repositioning. Places HP’s B2B business offerings as a worthy IBM, Accenture competitor.  Once you are successful in the Intimacy EngineTM and have a successful portfolio of solutions you want to reposition your company away from old competitors towards the people you want to be compared to.  Get prospects to think: “We should consider HP.”
  • Credibility. Provides a halo-effect for other vertical account discussions, an intro for further solution discussions across industries. It gives credibility to HP’s solution business.
What does it tell us about HPs journey to the Customer Intimacy Engine™ Business Model?


path2intimacy.gifAgain, we do not suggest any firm build an ad campaign ahead of its ability to deliver on the True

Solutions™ promise. But if we take the HP ad and determine their position we might find things that help you on your journey.
 
Are they in the Form stage?  The Form stage is all about early success.  Getting your company comfortable with the new model (getting out of its way if you will), producing success in getting market participation strategy, selecting an initial portfolio and offer, taking it to market and getting some success to build upon - a pilot if you will.  Clearly HP has chosen key or major accounts within verticals to focus upon. Further, they have successes to show case and the broader company must understand the Customer

Intimacy Engine™ business model or the idea of the ad campaign would never have got momentum within the company.  So we can easily determine that they are not in the Form Phase.

Are they in the Commercialize phase?  This phase is all about proving that the model makes commercial sense for the company - building a critical mass of solution creation, delivery, and account management resources to drive meaningful revenue (at least in sections of the business) and pull through their other products - the ones they push to market today.  Clearly HP can pull through hardware and software; the ads show this explicitly. Also, they have the critical mass for the vertical and the key accounts but they have more - they have accepted the business model as the way they do business for at least the major accounts of HP.  Therefore they are further along than the Commercialization phase.

Are they in the Scale phase?  The scale phase is about making this the way you do business (at least for the appropriate segments of your business).  The account management, R&D, business management, go to market, HR, Finance functions have all aligned in the business model and there is no more internal fighting about should we do this and will this work and why is this different etc.   Further, it is about fast growth of the model to be the driver of traditional product sales throughout the segments that are affected.  HP appears to be on top of these issues and has made the decision about business model and is confident enough to reposition its B2B business accordingly.  Therefore I think they are firmly in the Scale phase and are trying to move to the Dominate phase.

Again, I believe HP has put together a very impactful way to announce to the world in clear and interesting fashion where they are and where they are going.   Also, you should look at your company to see where you are and determine if you can move faster to the safe and profitable ground the HP appears to have found.

I've shared some thoughts on how marketing executives should ensure the Customer Intimacy Engine™ is as integral part of their company strategy.

Now, I'd like to delve deeper into "why?"

Specifically, we'll look at the Customer Intimacy Engine™ from the perspective of the CFO or VP of Finance. I sometimes think of this role as the reality role - the CFO sees the next year plans as related to strategy clearly and is responsible for their ability-to-reach factor and is looking closely at this year's are-we-get-getting-there reality.

The CFO is the key advisor and early warning system of the P&L leader of a business. They know when things are not and will not work and that trying the same thing year after year without fundamental change is perilous. Over the years I have found their insights to be clear and sound and they almost always can clearly see the value of the Intimacy Engine™.

Recent surveys show that CFOs are focused on four types of growth:

Core growth: Increasing market share within existing or related segments. This contributes approximately 45 percent on average to a company's growth.

Customer or markets growth: Entering new markets or customer segments that are unrelated to existing ones. This contributes 23 percent to growth.

Product and service growth: Growing an existing customer base and identifying its needs to develop new products and services, especially in new sectors. This contributes 26 percent to growth.

Value chain expansion and/or new business: Vertically integrating the value chain or expanding into a brand new business opportunity that is only loosely related to the core. This represents about 8 percent of growth.

To achieve this growth, most enterprises will leverage a multi-year investment planning mechanism in their planning calendar. This is the tool that several CFOs have used to introduce the topic of  Intimacy Engine™ into the planning process. They do this because they have been through too many underperforming strategies, strategies that did not fundamentally alter the price compression that the product portfolio inevitably experiences as it is commoditized. Acquisitions that expand the product list (SKUs) but do not provide better profitability are just more options for making sales quotas. The same can be said for expensive product enhancements, announced with great fan fare but which only make a blip in the revenue numbers and sometimes reduce margin (R&D and go to market expenses related to new enhancements).

The list goes on and on.

Let's accept that it is very difficult to use the old business model to fundamentally change market forces of commoditization of a product line when others can catch up to anything new in a matter of months (or get ahead of us in same time frame) and often offer their products below your price point.

The very nature of a Customer Intimacy business model is based on value-creating activities. Here are some typical characteristics of an effective Customer Intimacy practice:

Strategic Partnerships
Customer Intimacy implies that you are working on solving your customers' most strategic problems. Your solutions create true partnerships.

Brand Equity
Customer Intimacy creates a sense that your organization is branded as a trusted advisor. Earlier, we mentioned that Customer Intimacy means actual daily presence in the trenches, solving real client problems. Remember, customer Intimacy means your organization  becomes an extension of your clients' organization.

Larger Deal Sizes
Customer Intimacy drives large deals - because they are more strategic and focus on solving critical business problems for your client.  You are not selling point-products.

Product Pull Through
Customer Intimacy enables product pull in these large deals. Your products are not competing on features and function any more. Rather, they become part of the larger solution.

Product Lifecycle Extension
Because your products are embedded in your solutions, they are not subject to typical price-competition.  We have found that this significantly extends the lifecycle for most products. 

Scalability
Once you understand and solve the key problems facing your clients, your ability to solve that problem for others in the industry becomes a key selling point.  Your successes create further opportunities to grow.

Reduced Selling and Marketing Costs
Over time, your brand equity and reputation as a trusted advisor to the industry means you don't have to spend as much money marketing.  The cost of customer interaction is greatly reduced, because you are already being paid to interact with the customer. 

So where does the CFO turn to create business value?   We see that customer intimacy impacts enterprise value creation across numerous factors. Back in October 2004 Deloitte Consulting LLP surveyed 124 financial executives about the creation of value at their companies, and constructed eight value-creating behaviors.  The study led to the creation of Deloitte's Enterprise Value Map - a useful tool which we can use as a starting point to study the impact of Customer Intimacy on business value.

deloitte_ev_small.gif

Specifically, we can point how embracing a Customer Intimacy business model creates a new platform for growth by impacting Revenue Growth, Operating Margin and Expectations. Here's how:

  • Revenue Growth is driven by "volume" and "pricing." Customer Intimacy enhances your ability to attract new customers as well as retain and grow current customers. It also significantly improves your  understanding of business unit performance and market values. You tailor products and services to new customer segments - with service chains that solve your customers' fiercest problems. Your pricing is strengthened because it is optimized based on the value-impact you have on your client. 

  • Operating Margins are improved because your SG&A costs go way down, as does your COGS.  In fact there is evidence that when you co-create products and services with your client, the value creation potential is far higher at a far lower cost.

  • Expectations in the market are changed as well.  Your company is viewed as a thought-leader, with unique solutions and capabilities.  Your partners are viewed as key contributors. In fact you build an entire ecosystem of value-creators. 
Thus, we often find the CFO hosting workshops to help business leaders learn:

- What is the real impact of the Customer Intimacy Engine™ as a business model?
- How does it truly work?
- What does it take to be successful?
- What markets/segments are most conducive to this business model?

Out of these event - almost always - an understanding is reached that the Customer Intimacy Engine™ business model must be embraced and that the company must find a way to become proficient in the model. Usually an effort is kicked off to prioritize the market/segments and build a cost benefit analysis. This finds its way into the proper annual business plans for R&D investment for the new offers, solution practice creation, and go-to-market adjustments etc.

Another path we have seen is where the financial executive leads the company in an educational process. By this I mean the executive starts building a corporate understanding of the problems caused by innovation and need for the Customer Intimacy Engine™. This is a mindshift approach and allows a greater degree of flexibility for education of a leadership team and a longer period of time for analysis and planning before the effort is placed into the regular planning and budgeting cycles. You could think of this effort similar to a strategy effort where the current state is examined, options considered, education provided and then direction selected. The value of this approach is it can be begun immediately - not dependent on planning cycles and can be done at the pace and manner that enables a deeper understanding of the model and a stronger by in of the effort.

Again why is the Finance leader an appropriate leader of this effort?

- They can clearly see when the Innovation Curve is no longer working for the company. Quarter after quarter they see the company strategy is not panning out. The CFO hears these phrases echoing in the halls: "Market share is slipping. Losing key deals on price. New features don't drive the impact we expected. Bundling our products was copied by our competitors. The length of time that our new product stays differentiated is ever shorter. Our services are leveraged almost given away to get low-margin product deals..."

- They see the entire business and have the data to support their views. No other role spends the amount of time they do examining the Financials and seeing trends.

- They are trusted and unbiased - they just want success and they do not have a dog in the hunt on a given sales approach nor are they enamored with a given product or product line.

- They can readily understand the potential financial impact of the Customer Intimacy Engine

In closing, I encourage the Finance leaders to challenge their companies views of what is possible and take the strategic steps necessary to lead the transformation.  It is not easy, of course. But the payoff is immensely rewarding.

About this Archive

This page is an archive of recent entries in the Idea-Selling category.

Customer Intimacy is the previous category.

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