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McMann & Ransford’s Christopher Fox explains how your company should approach the Customer Intimacy Journey™:

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


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

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

The following guest post is by Mark Slotnik of McMann & Ransford.

If you have been following Dean's blog, by now you know how we feel about the importance of True Solutions. Typically in the Form phase of building a Customer Intimacy Engine™ , you will develop the initial True Solutions™ sets and take them to market. Like product development, a framework and process exists to define, develop and take your Solutions to market in a deliberate and defined manner. This building block is key to your Intimacy Engine™ success, so it is important to recognize early on what is different about developing True Solutions™ compared to typical product development.

So what is different?

Let's answer this from two points of view: The Market, or external view and the Company, or internal view.

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Buyers of True Solutions™ progress through a series of business decisions before deciding and committing to spend large sums of money to implement significant change to their business. I call this the customer journey and it is your job to provide everything they need along the way. Therefore, from the Market/Customer Point of View, solution development is driven by the following actions:

  1. Interacting with the market (customers) quickly and spending less time defining it up front. In other words, define and validate the Customer Journey early in the process. To me, this is often the most difficult brick wall to break through for those companies in the Form Phase.
  2. Understanding that your customer's Solution inspection is on the significance of the problem or opportunity, not what the product will or will not do (i.e. feature and functionality).
  3. Designing Solution components to be modular to meet the needs of your customer's specific and unique problem/situation.
  4. Designing Solution components to help your company understand the customer environment to better scope, design and cost the solution implementation and manage customer expectations.
Solution development process phases and activities are the same and repeatable, but the final output and who builds it is different per solution. Therefore, from the Internal/Company View - Solution development is driven by:

  1. Cross functional teams that possess customer, industry, product, business management, and marketing/sales expertise. The intensity of resource involvement varies throughout different phases of development.
  2. Piloting Solutions prior to a broader launch is the norm. The speed to pilot must be fast to get to market quickly to learn and make changes. Note that you might even "kill" the effort at this point, which takes discipline but is crucial so you are not wasting scarce, valuable resources.
  3. Launch activities are primarily focused on training and coaching the specific solution aspects (e.g. who is the target buyer and what/how we communicate the specific Idea) to sales and delivery resources. Note this is not a "check the box" process of completing documents then throwing the book over the fence to sales.
  4. True Solutions™ typically include products and services, but both are not always required.
In summary, a well crafted and defined solution development process allows for continuous improvement, incorporating both inward facing and market based criteria to ensure alignment with the target customer's buying decision process, your customer engagement model and solution delivery. It is repeatable and has objective toll gates along the way.

Lastly, speed and momentum matter - the window of opportunity for both you and your customers only stays open for so long. It's critical to instill a sense of urgency in the teams involved.

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:

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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
A recent post on the Economist blog suggests that despite high labor costs and a strong euro, Germany is the world's largest goods exporter after China. This engine is being driven by durable, focused businesses defined as Mittelstand.

Business Week tells us these are "family-owned companies with fewer than 500 employees and annual sales of less than 50 million euros"-- and, get this -- they employ over 70 percent of German workers and contribute nearly half of the country's GDP. And in the field of clean technology - in which Germany is a leader - more than 75 percent of German cleantech companies fall under this category.

The Germans themselves have been studying these Hidden Champions for years. Academicians Bernd Venohr and Klaus Meyer point out that while the same approach has been observed in a handful of other firms around the world, including the US, it is most pronounced in Germany.

How do they do it? Again, the Economist:

Mittelstandler have not only focused on sophisticated niches that are hard to enter. They have thrown their energies into building up ever more powerful defences. They constantly innovate to stay ahead of potential rivals. They are relentless about customer service. Their salespeople are passionate about their products, however prosaic, and dogged in their determination to open up new markets ... [They] typically have subsidiaries in 24 foreign countries, offering service and advice. Many get the bulk of their revenues from service rather than products. Hako, which makes cleaning equipment, generates only 20% of its revenue from sales of its machines.

In short, many of these companies are focused, service driven, customer intimacy businesses.

My belief is that future growth for the U.S. lies in pursuing true customer intimacy led by services or solutions. Yes, I do agree that we do need to build back a level of manufacturing here at home, but it is customer intimacy which will drive performance.

If you look at the remarkable successes of IBM Global Services or GE Health Care, you'll see they follow a customer intimacy model for service.  I'd like to see our mid-sized companies follow this proven path to growth and profitability. It's a sustainable edge.

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.

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

Service Chains is the previous category.

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