Recently in Service Chains Category

As we explained in an earlier blog post on service chains, a service chain is a pre-planned set of offerings that have an entry offering with linkages and methods that pull-through the
other offerings. Service chains formalize implied client value
propositions by providing a framework to aid in the transformation from
an opportunistic selling approach to a pre-planned, deliberate selling
approach that delivers to clients the total value proposition offered by your company.

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Linkages are pre-planned connections from one offering that pulls through the next offering. The connections are made by carefully pre-planned and executed sales activities. Of course in reality, linkages do not begin at the end of one project and end at the beginning of the next. Linkages are positioning activities that take place during the initial sales process and during projects. The positioning may not only be related to the next project in the chain, but also can be made with regard to the entire chain.

For example, a business development or account manager might choose to paint the entire service chain picture in their first meeting with a client. The purpose would not be to begin closing deals for all projects in the chain. Rather, the purpose would simply be to position the entire value proposition up front and condition the client for future possibilities.

Linkages provide excellent integration points to other service chains. In fact, such linkages should be pre-planned in the service chain if it is likely that one chain could link to another.

In our experience, we see three types of linkages:

Organic Linkages
Organic linkages link natural follow-on projects. They are typically dictated by the methodology used in delivery of the work. These linkages serve as checkpoints for client review and approval before proceeding to the next project. The linkage is organic because it will naturally happen assuming good results are achieved in the prior project. Examples of organic linkages are architecture leading to design and design leading to implementation.

Proof Linkages
Proof linkages position the next project by proving a benefit or other projected result in the preceding project. The fact that a hypothesis is proven to be true creates a logical linkage to the next project to act on those results. Examples of these are assessments and feasibility studies. If an assessment proves out a weakness, there is an obvious linkage to a next project to fix the weakness.

Facilitated Linkages
These linkages should be designed into the service chain when it is believed the client will have difficulty understanding the linkage to the next project. In such cases, there is a need to educate the client on the merits of the following project. A classic example of a facilitated linkage is the creation of a Steering Committee. The official purpose of the Committee is to oversee the current project. The linkage purpose is to provide a forum to educate the client on the rationale for the next project in the service chain. This approach might be useful, for example, when a client is changing their go-to-market strategy to include partnerships, and needs to be educated on the benefits in an ongoing way.

I can't emphasize this point enough: service chains are opportunities to build long-term relationships with clients. They're the key ingredient in your Customer Intimacy Engine™ that will allow your services organizations to scale and gain the critical mass they need to become dominant leaders in the industry.

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.

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:

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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.
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.

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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.
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.

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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.

When developing Service Chains™ it is important to evaluate their business value and your ability to implement them in the market. At McMann & Ransford, we recommend tracking the following criteria to help foster customer intimacy:

  1. Strategic Importance
  2. Financial Importance
  3. Market Attractiveness
  4. Demand & Delivery Potential
Please keep in mind that each criteria directly relates to the overall portfolio. As your business grows you will want a portfolio of True Solutions™ that a) builds intimacy with key executives above the safety line, and b) builds critical mass of the solution business, and pulls through product directly.

1. Strategic Importance 
The Breadth of Revenue Stream reflects the size of deals and or ability to directly pull through significant product deals. If this was an "intimacy-only" offer, by definition it would rate low on breadth of revenue but would still be strategic if it added new intimacy needed. But it might not be strategic if the intimacy it drove was accomplished elsewhere in the portfolio. Further, the breadth of revenue could be high if it drove large solution deals or outsourcing but these may or may not be strategic depending upon other offers in the portfolio that might achieve a duplicate effect. Note that offers that drive significant product deals are almost always strategic even if duplicated in portfolio - because by definition large product deals are the primary reason for having a solution business

Client Relationship Impact deals with the intimacy delivered and the importance of the service chain. If it deals with an issue that is "jugular" for a key executive or client it produces a high factor on client relationship impact. Also, if the deal is large and causes the client to change its business practices - think outsourcing - it probably has high client relationship impact.  
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The two factors together provide indications of the strategic impact of the Idea and its related service chain. 

I also want to introduce a type of idea that does not directly relate to a service chain called an umbrella idea. Umbrella ideas are ideas that drive large decisions but might include several service chains. Think, for example, of moving a client into a new business model, or region. We are not going to have space in this note to cover them in detail, But, I wanted to introduce the thought that there isn't always a one-to-one relationship between a strategic idea and a service chain. 

2. Financial Importance 
Average revenue per account deals with both the revenue driven by the service chain (or group of service chains in an umbrella idea). Again, "intimacy-only" solutions may rate low on this measure, but might have financial importance because of their influence on the solutions portfolio. Another consideration: does the idea drive large product deals?  Is it driving significant revenue?
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Offer mix and portfolio fit. I have to mention here that although we appear to use the terms "offer/solution" and "service chain" interchangeably, they have subtle differences. This deals directly with the issue of rounding out your portfolio and assuring that you have customized, meaningful intimacy offers. Intimacy offers are often the most difficult to get our clients to create (especially meaningful ones) and embrace because they require deep vertical knowledge and often are far from their traditional business. This criteria should also drive interest in outsourcing offers which have long term contracts and force interest in direct product pull through offers.

3. Market Attractiveness 
Projected Market Size deals with number of transactions that can be reasonably expected from the market, specifically - number of potential clients that could buy the offer. These projections should take into account where the market is in the absorption bell curve. Is the offer creating a market? early in market? in the middle of the market? or late to market? 

I have experienced many clients that want to bring offers to market late in the cycle. I'm not sure why this is so prevalent, but it should not be done. Typically, these types of companies are also the least comfortable bringing an offer to market early in the curve. 

Potential Market Share deals with the issue of the number of people that could buy the offer what percent will buy yours. It is best to be conservative about this calculation. One thing to keep in mind is that some markets are so large compared to the penetration needed for success that performing detail calculations of this are not necessary. 
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One last thought: sometimes markets are relatively small - think aircraft components manufacturers, or telecom providers suppliers - for them, the value of the intimacy offers dominates the discussion of the idea.

4. Demand and Delivery Potential 
This criteria deals with your ability to get to market, get deals, and deliver the promise. Sales Capacity deals with number of resources that can perform idea-selling activities for the offer. This means they are trained and equipped to conduct idea and stakeholder meetings and perform the linkages throughout the service chain. This is no small feat. As we've discussed, idea selling is much more about advising the client rather than traditional selling. 

Delivery Capacity deals directly with number of trained resources available to deliver the dream and participate through the sales cycles. 

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Many companies short-change this investment in the misconception that these people are a cost item not a revenue item.

Putting it all together
In summary, once you have scored an idea you can apply weighted averages of the different criteria - driven by the gaps in your portfolio. This provides the mechanism for making idea in/out decision. The chart below serves as a simple example:

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Thanks to those of you who asked me to elaborate on how to get a company motivated to embark on the customer intimacy journey, especially if you are not the CEO or the executive with the authority to directly move the organization. 

I have discussed how to make the case for change earlier, but getting employee "buy-in" is just the beginning.

path2intimacy.gifI believe there are three things to consider:

  1. Determine where your company is in the journey,
  2. Identify your next specific steps in the journey, and
  3. Motivate the organization to take action.
I am not minimizing the effort to accomplish this by trying to discuss all three in one blog post.  Further, this discussion is not indented to be exhaustive, but I wanted to at least provide an introduction to the topics and  some guidelines to assist those of you who asked.

Where Are You on the Customer Intimacy Journey?
Of course you must understand where you are in the journey before you begin to motivate the organization.  As you know not all companies are starting the journey without some experimentation with the concepts - many have taken tentative steps even if they do not fully understand the journey.  As you know, companies have been struggling with the drug of innovation for a long time. 

The following are a few simple questions to assist in assessing your progress on the journey. The point of these questions is to help you understand the scope of the transformation.

  • Have we undertaken the effort to determine if the Intimacy Engine is the appropriate business model for the evolution of our company?
  • Are we (as a team) interested in the future state model and do we have consensus on a shared-vision going forward?
  • Do we know what the journey requires to be successful?
  • Are we are willing to undertake the effort (resources, time, commitment) required?
  • Have established a competent professional services group? 
  • Is the professional services group growing at a sustainable, expected level?
  • Is the professional services pulling through enough product revenue? 
  • Are we focused on the right industry segments?
  • Have we developed key insights to the level to drive ideas or Service Chains?
  • Have we added bundling and product-related solutions?
  • Have we moved up the impact/intimacy scale with our target clients?
  • Are we implementing some form of solution-selling and has it impacted the business in a significant way?
  • Is our product "pull-through" strategy predictable and repeatable?
  • Are we still working in two different business models?

The Next, Specific Steps
This is much more difficult than determining where you are in the journey. It is not simply the effort of determining which phase you're in; this is a much more specific activity.  Remember this will be used to motivate the company to take action - therefore it must be specific, actionable, and important enough to capture the attention of the organization.

Examples of these are:

  • Evaluating and deciding upon potential move to Intimacy Engine model
  • Trying different customer relationship in key market
  • Leveraging our professional services group to pull through product 
  • Determining the segments that should be in the Intimacy Engine model
  • Develop detailed plans for the "Form" phase of the effort
  • Embark on pilot
  • Leverage pilot milestones for educating the rest of the organization
  • Determine post pilot next stage roll out - verticals, markets, etc.
  • Integrate the sales force into new business model
  • Reorganize the go to market business units 

Motivating the Organization to Take Action
Let's assume you have a clear objective - for the next phase of your company's journey - and you want to get the organization on board.  Either the change-champion is the key executive with the authority to take action or more commonly the champion is someone who must influence the organization to take an interest in the idea. 

The champion may be a key executive but not necessarily the one with the authority to make the decision, or she might be the staff executive that sees the organization more broadly and knows what must be done, or the champion might one of several roles but knows in their hearts that the Intimacy Engine must be evaluated as a possible road map for the company.  

I believe the process of getting the organization moving is in stages:

1. The viral stage - This is educational and interactive.  Others you respect must begin to share your views.  This can be accomplished by getting them into the discussion - reading what's being said about the Journey and its benefits, or conducting knowledge-sharing events (see earlier blog entry). 
2. The pro-draft stage - This is about getting the executive audience - usually the few key executives that can affect the organization into the discussion and turned on to your view.  This is accomplished by getting them into discussion and educating them about what you all are thinking, then commissioning a quick what would it look like benefits analysis.  By asking them to let you undertake an action you are gaining an understanding of their motivation,
3. Get the organization behind you stage - Get the broader audience - spread the discussion liberally through the broader organization - use all means available - discussion boards, new letters, blogs, wikis, etc  This makes again makes the effort more real and prepares the organization for action.
4. Draft a strategy stage - Get the key executives to entertain a proposal of drafting a strategy, planning document on the benefits, risks, etc of the idea. The specifics of the document must align with the way your company examines opportunities.
5. Executive focus stage - get the executive team focused on the idea in an in-depth way.  The best approach is to get them away for a couple of days - to first fully understand the idea of  Intimacy Engine, then present your findings, then do a working session selecting where to pilot the concept.  This provides them a detailed understanding - strategically, tactically and the work session allows them to guide the pilot and buy-in.
6. Get agreement to proceed to the pilot planning phase - Close stage 6 with the direct proposal of planning the pilot - budget, time-frame etc.

As product-based companies embark on the customer intimacy journey, their success largely depends on how attractive the value propositions for their services are and how well they are presented to clients to convince them to buy. Unfortunately, far too many companies remain relatively opportunistic in their approach to the marketplace.

Service chains are a key building block to becoming less opportunistic and more deliberate in your go-to-market approach.

Let's examine what we mean by the term service chain.

A service chain is a pre-planned set of offerings that have an entry offering with linkages and methods that pull-through the other offerings. Service chains formalize implied client value propositions by providing a framework to aid in the transformation from an opportunistic selling approach to a pre-planned, deliberate selling approach that delivers to clients the total value proposition offered by your company.

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The service chain framework consists of the following sequence:

Entry Offering:
a compelling idea that should apply to the client is presented,

Project 1: Proof that the idea impacts the client is developed and quantified,

Project 2,3...: The client's problem is fixed,

Managed Services: Ongoing support to manage the fix.

Service chains provide for greater client intimacy resulting in long-term, trusted advisor relationships. They maximize the pull-through of streams of work and minimize the sales investment, thereby enabling the sales team with pre-planned outcomes and predictable client revenue.

Here are some considerations based on our service chain framework:

General

  • It's in the client's best interest for us to provide our services over a long period of time.
  • It's the only way for the client to realize our total value proposition.
  • Clients buy based on industry. Therefore, service chains must always be industry focused, even though the actual services provided may well be 80-90% horizontal in nature.
  • One exception to the previous point regarding industry focus is pure technology services sold to the CIO organization (example - certain Microsoft services).
  • Initial projects in the chain, including the entry offering, should start relatively small and lead to very large "fix it" and deep "support it" engagements.
  • As a going in position, all service chains should lead to managed services engagements if that is the company's strategy.
Idea - Entry Offering

  • Ideas must be expressed in business terms, not technology terms. They must address a key business problem.
  • Ideas must be industry specific.
  • Results of the idea must "scream" for the client to take action.
  • The entry points into the client must be at the highest level, preferably the C-level, and the idea must speak to what they will be interested in - again, not technology.
  • Entry offerings do not need to be projects in a traditional sense. They can be white papersexecutive briefings, seminars, etc. Consideration should be given to what forum best fits the particular industry.
  • As a going in position, entry offerings should be paid for by the client. If their interest is peaked by a great idea, they will be willing to pay.
  • Thought should be given to legitimizing your idea by having an independent, recognized name in the field speak or comment on the idea.
Proof - Project 1

  • The proof must not only prove that the idea applies to the client, but it must quantify the results he/she will realize as a result of the fix. This serves as the linkage to the next, much bigger project.
  • Assessments are often very good proof projects. However, unless the idea is extremely unique and revolutionary, the proof project should not be named an assessment.
  • Assessments have been popular for over a decade and the business world is tired of being assessed. Think of unique, idea-specific names for proof projects.
Fix It - Projects 2,3..x

  • Fix it projects are often defined based on the methodology used to deliver the solution. Example - Architecture leads to design leads to construction leads to implementation.
  • Within the parameters for managing risk on large projects, it is usually best to minimize the number of fix it projects as the client often gets weary of too many phases.
  • Pilot projects are often excellent ways to deliver solutions, not only from a methodology standpoint but also from a service chain linkage standpoint. Value demonstrated in a pilot naturally links to much larger rollouts.
  • Additionally, pilots open up the opportunity to link to a managed services opportunity. Often, pilot projects are disruptive to a client's normal business infrastructure. If this is the case, you can offer to host the pilot for the client. This gives you the entrée to link to hosting the full rollout.
Support - Managed Services

  • Managed services is a logical extension to the fix it projects for companies with a managed services strategy.
  • In such companies, for every service chain the Practice Principal must challenge himself/herself to find a way to link to a managed services offering.
In summation, the service chain is a key driver of go-to-market activity for customer intimacy. It represents the best way to sell and deliver your company's value propositions to clients. When the model is properly executed, the results are:

  • increased pull-through revenue;
  • larger, repeatable deals;
  • reduced sales costs;
  • more profitable operations; and many more
Once again, service chains are opportunities to build long-term relationships with clients. They are the ingredient that will allow services organizations to scale and gain the critical mass they need to become dominant leaders in the industry.
path2intimacy.gifDuring the first stage of the Customer Intimacy Journey it is important to create and deliver solutions that have a visible impact with your clients

As you know, terms like "solutions" and "customer intimacy" are overused in the management consulting industry, and I believe often mean too little.  In this blog, we'll try to distinguish our thoughts with not-so-clever use of the terms True Solutions™ and Intimacy Engine™.  I want to talk about what True Solutions™ are and how it is crucial to the building of the Intimacy Engine™ business model.

truesolutions.gifAs you can see by the chart as you move up and to the right you are both making a greater impact on your client and requiring greater intimacy ability to get them to buy and implement solutions.

True Solutions™ - represented on this chart as business solutions - must address a true important business opportunity or correct a business problem for your client.

It is not the bundling of your product and services, it is not adding professional services to implement your service or even assist in product selection (although all these are valuable and will be part of your portfolio).   Further, a True Solution™ should be focused above the Line of Safety in the clients business:

lineofsafety.gif
The problem or opportunity that the True Solution™ addresses must add something that is crucial to someone (hopefully more than one) above this line.  Also, you'll require their support and purchasing power to engage you on the problem.  Fall below the line of safety and you're easily replaced - by technology, price, or salesmanship. Stand above the line of safety and competitors will find it difficult to dislodge you.
 
This means developing True Solutions™ requires deep understanding of the business sector your clients occupy, and profound knowledge of the unique issues in that sector - not how they use your product! 

Over the last decade we have spoken to literally hundreds of senior executives on behalf of our clients, from all industries: Food and Beverage, Retail, Pharma, Insurance, Healthcare, Financial Services, Heavy Manufacturing, etc. - and the common requirement from this broad group is that they want to partner with experts in their industry who bring them new ideas and the staff to help them through the realization of the benefits of those ideas.
 
Too many companies think they understand their clients' business but in reality their investments tell the story. They are heavily invested in product-driven R&D, and their interactions are far too shallow to uncover real value. They invest in product focus groups, product user meetings, and low-level interactions with transactional salespeople.  The few executive interactions ave mainly "dog-and-pony shows" to show support and get feedback about what is irritating customers.   I'm not saying these are not important, but I am saying that this sort of engagement does not build a deep understanding of your customers' business - or the drivers, challenges and methods to solve key business issues. 

A case in point: I was once meeting with the CEO of one of the largest companies in the world and he stated that he had intimacy with his customers - he could meet with any of them for dinner at any time - it was just that others would not follow up on the promises he made.  This statement told me everything; he was not intimate at all; rather, they were being polite and leveraging the meeting for concessions.  Intimacy means actual daily presence in the trenches, solving real client problems.
 
Think through your own experience: who is your trusted advisor to you? Who do you reach out to for advice and help? Usually it is someone that understands your problems and issues and has proved themselves by providing impactful solutions in the past.  Remember, our goal is to become an extension of our clients' organization - to be treated as part of the body with no anti-bodies seeking us out and trying to exterminate us.

Let me tell you about a personal experience which illustrates my point:

I live outside of Houston, Texas and have large tract of land. I was building a house on the land and wanted to add some flower beds - nothing unusual.  I contacted three companies to come out and talk to me about it.
 
  • The first company spoke to me for about 30 minutes and focused on where you want the beds and how they were the best buy in town.
  • The second company came out and showed me some pictures of other work they had done and suggested different plants that would look good and a little work qualifying my willingness to invest.
  • The third company sent two people - one a land architect and one water architect and they brought a custom layout with pictures and video of what my land should be.  They took the approach that I had an opportunity to make this into something to be proud of and that it was important for me to understand and be educated about the many options and what they would say about me and my view of the land. They encouraged me to think of the native positives of the land and how the acres of trees need to be brought work in harmony with new meadows.  They encouraged me to build a natural looking acre pond for birds, etc.
The three companies saw the problem differently - I met with someone trying to solve a cost problem, someone trying to solve a color problem, and someone trying to get me to take advantage of an opportunity.  I chose the third company and have had a long (expensive) but rewarding relationship with them.  But, I must add, had they not used the proper approach to educating me and bringing me along, it could have appeared that I was being manipulated. I call that putting the client first: they genuinely wanted to show me what was possible for my family and were passionate about it.

You've been hearing for years that your organization must be client-focused - but the Intimacy Engine™ is the business model that actually makes that possible.  A common reaction from many of our clients goes like this: "We get the concept, they say, "but we do not have the ability to deliver these True Solutions™, even if we could identify them." They often want to start where they are and slowly move towards solving the more important issues.  There is truth in these statements.  As stated earlier in the blog, getting and maintaining support for the revolution is paramount and never ending.  But, there are multiple truths here:

1) as solution provider, we must find the key ideas that impact the client above the safety line, and, 2) we should take into account what results ave achievable today. 

We'll take up that question in detail later on this blog.

The challenge for any significant change initiative is maintaining motivation and focus throughout the effort.

Most change initiatives fail because of this very issue. Both individuals and corporations suffer from this phenomenon - personal improvement (like weight loss) is difficult because the change in habit must be maintained for a long period of time without seeing results immediately.
 
A large enterprise has even more difficulty undergoing a significant change, particularly when the change is as radical as business model migration.

Business model change impacts more aspects of the business than any other change initiative, and therefore requires a longer period of time to accomplish. We all know that is extremely difficult to move a significant initiative forward because few are truly dedicated to effort and its success although in the company's interest does not easily align with individual's interest.


changethoughts.gifLet's look at the different constituencies:

  • First, you have individuals who will suffer the normal challenge in any type of change. They will have to be bought in to the reasons and be able to align it to their career and compensation.
  • Second, you have the leadership in charge of accomplishing this effort - they are naturally concerned about how this is going to affect their career and want to minimize whets expected of them. 
  • Third, you have the senior executive group - many times they are forced to live in an ADD type world which works against a continued focused effort. And, can sometimes force efforts to focus on outputs to early and skill key infrastructure or process steps.   
  • Finally, you have all the naysayers and the people not involved in the initiative.  They rarely see they value and because of their needs - staffing, funding and other support - they find themselves (sometimes inadvertently) undermining the effort.

Now let's look at the customer intimacy journey itself: 

proservmm.gifThere are many factors that must align in order for a company to build and operate their Intimacy Engine™.  This will be accomplished by examining the four phased journey - form, commercialize, scale and dominate.

Let's introduce them now and examine them in greater detail as we go.  I will say after assisting over 40 companies through the journey, the process is more art than science and the sooner we understand this the better. 

Form  - As the name implies this stage is about forming a new business.  This phase also includes getting the Companies head around the need for the new business model and selecting the leader of the effort.  Further, selecting the target focus - be it market, or product group, or customer segment. This includes building the initial True Solutions™ sets for the target, gaining initial talent and taking the solutions to market.   Much of this effort should be considered R&D - even though GAAP rules do not recognize it as such. Finally, this phase includes protecting the effort from the organization.

Commercialize - You know you are in this stage when you can predict outcomes from the business unit.  This phase includes expanding the initial offerings into a robust portfolio of solutions.  Further, this phase demonstrates the ability to pull through product and harvest accounts (explained later) - thereby fundamentally changing the relationship those accounts have with the Company. Additional targets can be added during this Phase.  Finally, this phase begins to change the market's perception of your brand and abilities.

Scale - This phase begins the re-integration with the broader business.  For this to be achieved the unit must develop critical mass and have completely adopted the skills necessary to be effective in the new business model - this cannot be over emphasized -  running an Intimacy Engine™ business is much like the military - everyone must know their role and be able to adjust to client situations.  Unlike traditional hierarchical businesses - the person at the client makes the call - there is little time to call corporate and gain approval.  Also, at this time the full extent of the Intimacy Engine™ for this business should be understood and all True Solutions™ sets should be either developed or being developed.

Dominate - This Is the Phase where the entire business operates in the new model.  This often requires reorganization and final adjustments to the staff organizations that support the business.  Marketing is dedicated to the new True Solutions™ sets and key executives come from the new business and management development comes through the new business model.

In the next set of entries, we'll dive into the details of each stage - the activities, key abilities etc. and we'll look at the broader perspectives in customer intimacy business model transition, including where to start, how to protect the initiative, how to guide the initiative, how to fund the initiative, leveraging an organic change model, and more.

About this Archive

This page is an archive of recent entries in the Service Chains category.

Professional Services is the previous category.

Service Creation is the next category.

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