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The Guide to Moving the Business from Capabilities to Outcomes: Clarify Objectives

Make Sure They’re In This With You

As we covered in “Setting the Stage,” innovation no longer drives success. Therefore, B2B companies are changing their business models to become more entangled with their key customers, and savvy companies are looking for Professional Services (PS) to play a pivotal role in that transformation.  We use the phrase “moving from Capability-based business” to “Customer Outcome-based business,” which we discuss more in-depth in the first blog of this series.

There are other ways to make a PS business more valuable to the B2B company in transition. For example:

  • PS could focus on solutions that align with the strategic plan of key customers. In healthcare, PS might work on an issue of acquisition strategy as the customers’ industry consolidates; or
  • PS could focus on intimacy offers that deal with executive-level concerns: With product-centered customers, PS might solve for sales efficacy.

These approaches are equally valuable as they both allow the PS business to drive measurable customer outcomes.  This is a positive event and its success hopefully encourages the customer to leverage PS more and more in their effort to renew themselves.

One of the first steps in moving to the outcomes-based model is to clarify the goal(s) and parameters for this effort.  We have all worked on jobs where the complex nature of the assignment not well understood by the requester or the broader organization. Just like PS professes to its customers, it’s important to have an Initiative Charter that:

  1. Identifies objectives,
  2. Ensures organizational understanding and executive support, and
  3. Clarifies timeframes and financial boundaries.

As part of the Initiative Charter, ideally, the following would be explored:

  1. Determine if there are business outcomes that might be addressed that are directly or indirectly correlated to the product set.
  2. Validate that the current PS organization can effectively drive a business outcome.
  3. Understand the challenges PS might have in performing in this new way.
  4. Determine if the sales organization can sell an outcome-based program without extensive enablement.
  5. Assess markets receptivity to PS as an advice provider as opposed to an implementation provider.
  6. Gather enough experience to develop a business plan around driving outcomes.

As with any new way of doing business, planning is important. Who does what and when?  Often, those who are not involved underestimate the time to become market ready with the new offer. But also, and just as dangerous, PS groups can greatly overstate the time and complexity of the effort.  This “too slow” process affects PS internally and hinders executives’ motivation to undertake the effort.

In summary, like any important endeavor, the effort to have an outcome-based offer, or entire practice, must be organized, must have assured support, and must have a clearly defined vision of what constitutes success.

 

Written by: Dean McMann

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About the Author: Dean McMann is a Founding Partner at McMann & Ransford with 35+ years of experience in consulting and professional services.  He is a sought-after expert and speaker on topics of: B2B differentiation, professional services best practices, and overcoming commoditization.  In addition to his extensive experience in the Professional Services space, Dean also serves on the board of various non-profit organizations.

 

Hardware as a Service to Drive Growth and Margin

There are several fundamental changes going on in the B2B world today.  Established B2B companies are feeling both the real pinch of commoditization and the natural market pressures of competitors that are disrupting markets and driving significant valuations. In response, companies are trying to determine where they can go to move their businesses forward and drive growth and margin.

Continuing to do things as they have always done is no longer an option.  Most, if not all, avenues that will significantly improve a company’s performance will require that they change many, if not all, of their current business practices. In other whitepapers, we discuss the challenges inherent in a business model transformation. In short, a company must be dedicated, focused, and disciplined to successfully execute on a business model transformation, as these efforts can be very difficult.

One of the emerging options that companies are considering is Hardware as a Service.  We believe this will become a significant wave for hardware product markets –medical, industrial, office products, etc.  While there has been significant discussion around HaaS, we believe it is still early in evaluation, and therefore adoption.

Why is this option gaining so much consideration?  To be clear, in this post, we are not discussing SaaS or even new companies disrupting markets.  We are considering the challenges of established B2B companies that make a complex product(s). We have discussed HaaS with many leaders in high-tech B2B companies and have received several answers to the question: why evaluate HaaS?

  1. Stock Valuation – the most frequent response we have received is that there is pressure to move the business to subscription-based revenue and gain the valuation benefits that come with moving to this type of model. For this reason, HaaS provides a meaningful direction for the company and the cost of transition is expected and therefore “forgiven” as the company undertakes the change.
  2. Defensive Action – Another reason we often hear is that either 1) a competitor is currently shifting to HaaS or 2) they fear that competitors will soon bring HaaS to their markets. While HaaS is not yet widespread, the concern of being caught off guard and quickly losing market share is a tangible fear for many companies.
  3. Offensive Action – Similar to the defensive market point of view, offensive action assumes that the particular market that the companies play in can be disrupted by HaaS. This strategy allows companies to gain first or early mover advantage and quickly capture market share.  There are always risks to taking a lead position in a market transformation, but if successful, it can provide years of differentiation.

All three of these reasons are meaningful, but we think there is an additional and compelling reason to examine the opportunity for HaaS: Customer Intimacy.  To be effective, HaaS  must address outcomes in the customer’s business – for industries where significant change is occurring, such as banking, HaaS might be used as the advisory guide for the customer, therefore de-risking investment. HaaS is much more than a cost-cutting strategy to provide cost differentiation. It creates a route to engage the customer across the product lifecycle with services and solutions that create intimacy and lead to strategic partnership. Done correctly, HaaS provides a clear pathway to greater Customer Intimacy.

 

 

 

Written by: Dean McMann

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About the Author: Dean McMann is a Founding Partner at McMann & Ransford with 35+ years of experience in consulting and professional services.  He is a sought-after expert and speaker on topics of: B2B differentiation, professional services best practices, and overcoming commoditization.  In addition to his extensive experience in the Professional Services space, Dean also serves on the board of various non-profit organizations.

 

Portfolio Perspectives

Often, companies organize their portfolios from an internal point of view based on their organizational structure – i.e., which part of the organization created, manages, or delivers on the offer. This can result in operating redundancies and inefficiencies, inability to tap into best practices across business units, and in extreme cases, even competition between business units in the market.

Portfolio Perspectives

Stepping back to view your portfolio from a market perspective can drive internal efficiencies and leverage, as well as market success by:

        • Understanding natural linkages between offers based on the needs of a specific account or market segment
        • Creating more value with key buyers and decision makers by understanding the full array of solutions that the company can bring to bear on their specific challenges and opportunities
        • Tapping into the full breadth of expertise available on specific or related topics
        • Improving the clarity and relevance of messaging on important topics
        • Highlighting opportunities to collaborate across business units to enhance value for customers and growth for the business

The following market-back perspectives will shed light on opportunities to improve selling resource leverage, identify delivery best practices, drive pricing and margin consistency, expand cross-sell and upsell, and develop and execute account plans for greater growth.

Topical Index:  Arranges the offers across all business units or brands according to the topics they address, problems they solve, and/or opportunities they capture for clients.  It will provide visibility to potential opportunities to:

        • Share best practices across business units/brands
        • Enhance client options during the sales cycle
        • Improve delivery resource leverage
        • Standardize and improve pricing and margin
        • Simplify and clarify the portfolio and related messaging

Buyer Persona Map: Arranges the offers across all business units and brands according to the likely economic buyer/primary decision maker at the client or customer. It will provide visibility to potential opportunities to:

        • Cross-sell based on existing relationships
        • Enhance client options during the sales cycle
        • Hone and target sales messages and value propositions
        • Simplify and clarify the portfolio
        • Identify portfolio gaps with existing buyers or new buyers to engage

Account Plans:  Sequence the offers in a logical buyer journey based on the circumstances and needs of an individual account in order to:

        • Develop action plans for sales and account management activities
        • Deploy commercial and delivery resources that will best enable execution of the plan for both client objectives and business growth objectives
        • Set selling goals and targets
        • Provide input and context for business planning

Account Pathways: “Standardized account plans” built for specific market segments or groups of like clients that can serve as a starting point to customize and/or benchmark for a specific account.  It sequences the offers in a logical buyer journey based on the expected or known circumstances and needs of that market segment in order to:

        • Simplify and accelerate account planning
        • Improve likelihood of winning deals
        • Achieve greater, more impactful client results by bringing a broader suite of solutions to bear for the client
        • Set selling goals and targets
        • Provide input and context for business planning

Written by: Doug Long

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About the Author: Doug Long is a Partner with McMann & Ransford and has more than 26 years of experience in consulting across various industries, topics, and client challenges. Prior firms include Deloitte and GE. He currently leads our Healthcare Practice.

 

 

The Guide to Moving the Business from Capabilities to Outcomes

Setting the Stage

It is a very tumultuous time in the B2B world.  Companies are having to challenge the status quo on how they do business.  Most companies built their business around a product line or small group of product lines.  As these product lines mature, companies undergo commoditization.  This often manifests as price pressure.

Innovation alone will no longer provide the growth and margin necessary for companies to sustain or increase their market valuations. As commoditization occurs, companies start to make a series of adjustments, including focusing on their service contract value, to maintain their growth and margin. But eventually, it becomes clear that more holistic changes are required to continue to progress.

In this age of change in the business model, the key to success is a different kind of interdependency with your valued customers.  We term this Entanglement – a more permanent and valuable relationship for both parties.

B2B companies may follow different near-term paths to address the business model changes, focusing on XaaS, Customer Success, Intimacy, and/or Renewable Differentiation. One thing is consistent — these businesses want to change their relationships with their customers to become more than vendors. This is such a big change: to move from inside the company pushed out to the customer, to become at-the-customer.

The road to accomplishing this move travels straight through the Professional Services organization.  Why does this historically tag-along business become central to the new way of doing business?  It is an interesting confluence of two things.

  1. PS is at the customer. Think about it. Sales is pushed out to the customer and is very episodic. Product development and R&D is far from the customer. Marketing is gathering data, but not often with the customer.  The rest of the company – Finance, Operations, Executive Leadership, and HR – are far from the day-to-day life of the customer.  By contrast, PS is working in the trenches, day in and day out, helping the customer implement and use products. This provides PS a different relationship with the customer and a unique point of view on how to get results at the customer.  Finally, PS also sees first-hand the effectiveness or ineffectiveness of product and marketing messaging, product readiness and capabilities, sales efforts and commitments, quality and flexibility of contracts, etc.
  2. PS is solution driven – The PS role is to solve problems.  They are the solution people.  PS works in chaotic environments with people who are not necessarily motivated to change the way they work to accommodate the products their companies have purchased. In addition, each customer has different levels of capability and willingness to dedicate staff to do their part in an implementation.  Further, PS reports out to customer managers or executives who are challenging them all the time on progress and expense.  These factors combine to make PS the best-suited part of a B2B company to work with the customer on broader, higher value issues.

Transforming PS from a capability focus (e.g., implementation of a specific product, user training, or workflow design and optimization) to an outcome focus (i.e., driving a business result such as simplifying customer interface, driving down costs, or meeting a government mandate) has benefits for the PS business itself in selling, talent development, delivery quality, and other areas.  But more strategically important to a complex B2B company, this shift will lead the broader company to focus on the changes required on the journey to becoming entangled with its high-value customers.

This is not a simple process — there is much to accomplish for PS to seamlessly play this role. In upcoming blogs, we will discuss the challenges PS faces in fulfilling this mission and how to overcome them.  In addition, we will deal with the issue of how to help manage the rest of the company as PS undertakes and eventually accomplishes it mission.

 

 

 

 

 

Written by: Dean McMann

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About the Author: Dean McMann is a Founding Partner at McMann & Ransford with 35+ years of experience in consulting and professional services.  He is a sought-after expert and speaker on topics of: B2B differentiation, professional services best practices, and overcoming commoditization.  In addition to his extensive experience in the Professional Services space, Dean also serves on the board of various non-profit organizations.

 

The Role of PS from the Customer’s Perspective: Capability-Based vs. Outcome-Based

The difference between a capability-based Professional Services (PS) business and an outcomes-based business from a customer’s point of view is quite stark.  We have interviewed several hundred technology buyers over the last few years including software, hardware, high-tech and near-tech firms.  We have also been involved in designing hundreds of “Outcome Based Solutions”.  In this discussion, we want to reveal how the relationship and responsibility of PS with the customer evolves as a company moves to becoming more outcomes-centric. The distinction is demonstrated through the following two scenarios:

Scenarios

In both scenarios, the typical product buying/implementation cycle in no way ignores the impact or the valuable work performed by PS to support a product implementation.  As a general principle, PS allows companies to overcome product limitations, customer misunderstandings, customer problems, etc.  Also, PS facilitates the relationship building within the functional end users of a customer.

However, in these scenarios, we want to highlight how the customer leadership team (product buyers above the line of safety) interacts with and views PS:

Scenario #1: Customer is buying a product and its capabilities.

  1. A company determines it wants to buy a technology-based product. This might be because of:
    1. a business need,
    2. a replacement or upgrade, or
    3. just the psychological need to be part of a tech wave – cloud, etc.

The customer team performs research, selects vendors, evaluates products, and works with sales teams, and eventually purchases a product.  PS might make a cameo appearance in the sales cycle but is not strategic to the decision.  Unfortunately, often the customer is unaware of what the implementation will require from them.

  1. The implementation begins. The PS organization pushes the customer to get organized and allocate staff for their part of the team. Although PS is heavily involved at this point, the customer executive leadership is relatively uninterested in what PS is doing and does not build an intimate relationship with them.
  2. The product is implemented, and the customer accepts the product limitations. This is an important nuance about customers and products – customers are predisposed to accept that the product may not live up the hype. Post-implementation, PS exits, and they are often forgotten by customer leadership.
  3. The Product sales team wants to sell more, and this process starts again, and may be even more difficult if the previous steps were difficult and not frictionless.

Scenario 2: Customer is buying an outcome.

  1. Customer is looking for one of two things (depending on the maturity of the idea for the outcome):
    1. A partner who understands the idea better and more clearly and can therefore transmit that understanding into the customer organization, and/or
    2. A partner who can best demonstrate how to make the idea work in the customer’s organization.

Either way, the customer is looking for a partner who leverages their PS business as the key to achieve the outcome. 

  1. The customer selects a partner based on their differentiation of the offer and perceived ability to create the Outcome (interestingly price rarely impacts the final decision). PS is heavily involved and must be both the mouth-piece of the offer and the partner that the customer is choosing.
  2. The program begins. The PS business is front and center, interacting with buying executives. The PS team is viewed as “the experts,” and the customer relies on them to get them through the program.  Usually, there is an effort to validate the solution – pilot, or one of several other methods.  This is a paid-for effort and is important to tailor the solution to this unique customer business situation and adjust/plan for customer shortcomings.  This information will be the input for developing a detailed and informed implementation plan.  In an outcome-based practice, it’s important to build the implementation plan and validate the solution.  Because unlike a product purchase where the implementation is somewhat assumed away by the customer, the effort to achieve the outcome is strategic and the reason for the initiative.
  3. During implementation, there will be problems and challenges. Maybe the customer talent is not as efficient as expected, or customer anti-bodies to change exist. Leveraging their consulting abilities and customer-management skills, the PS organization serves as the ‘interrupter of the issues’ and the ‘creator of work-arounds’. These issues often increase scope with the appropriate increase in fees.  The PS team is not a peripheral player to the executive team, but rather the central authority on how the executive team can achieve their desired outcomes.
  4. Once implementation is complete, it is time to evaluate the value received. The PS team is central in this evaluation and explains where the customer is on the outcome value journey and what needs to be done to increase the value or continue the transformation.
    1. Rather than starting a new sales cycle, PS has been able to position the next product/service pull-through during the course of achieving the first outcome.

As you can see from these scenarios, the customer moves from, hardly interested in the PS organization during a technology product purchase to dependent on the PS organization in an Outcome Journey.

 

Written by: Dean McMann

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About the Author: Dean McMann is a Founding Partner at McMann & Ransford with 35+ years of experience in consulting and professional services.  He is a sought-after expert and speaker on topics of: B2B differentiation, professional services best practices, and overcoming commoditization.  In addition to his extensive experience in the Professional Services space, Dean also serves on the board of various non-profit organizations.

 

The Shift from Market Share to Share of Wallet – Professional Services’ Role

Many B2B companies are experiencing a shift in the way they view their markets and customers.  Historically, these organizations viewed their markets and customers through the lens of the ability to win market share for a suite of products.  Today, many of these organizations have refocused on or are beginning to pay greater attention to the total share-of-wallet that can be captured at an account. Changing their objective towards the market causes businesses to behave differently and for these organizations to successfully begin capturing a greater total share-of-wallet, several key business model shifts are required.

One key shift involves orienting the Professional Services (PS) business around account journeys.  First, let’s introduce account journeys.  We define account journeys as encompassing the specific account strategies, plans, and playbooks that lead accounts through an increasingly expanded relationship with you and your organization. When successfully implemented, account journeys facilitate effective account management and account planning, allowing companies to grow the value of the account and an intimate relationship with the customer.

The first step in building the business around account journeys is deciding the types of accounts it wants. The company may look at characteristics such as size (revenue, # of employees, etc.), what the account buys, and organizational personality. In conjunction with these decisions, B2B companies should examine how they will build intimacy and differentiation for their desired account types. This leads them to two key thoughts:

  1. What do we want the account to buy over time? For example, do we want them to buy hardware, software-as-a-service, and/or outsource key aspects of their business to us?
  2. What journey will lead the customer to these outcomes and the relationships needed? This is where PS comes into play.

For example, let’s use a goal of driving accounts to purchase hardware-as-a-service.  With hardware-as-a-service, the customer depends on the product vision and the company’s ability to meet more aggressive business outcomes. Therefore, achieving this goal requires building and sustaining a much closer relationship with the customer. The journey for those customers likely involves more than buying hardware. The key steps and decisions the customer will need to take before committing to purchasing hardware-as-a-service include:

  1. Decide whether to undertake or consider the Idea. By nature, this is a consultative decision process, and PS can play the role of facilitating this decision-making process, which provides the credibility and elevates the relationship in order to support the account goals.
  2. Determine how to undertake the effort. This decision should not be left for the customer to make on their own, and it should not be expected that it can be made simply through the sales process. Often, supporting a customer with this decision includes a PS project like an evaluation of the customers’ situation and a validation that the value of the change is worth it and can be achieved in their environment.
  3. Pilot the Idea and agree with reasonable evaluation that the value will materialize. Again, this step should be expected and built into the account journey. It likely includes a larger PS project, in which the products are implemented, and value is either driven or the path to value is demonstrated.

Now, this B2B company would focus the offers of the PS business to play these key roles.  It is important that the PS business:

  • Knows how to accomplish these projects,
  • Staffs and trains its people for these projects, and
  • Is integrated into the selling, delivery, and upselling to ensure that everything goes as planned.

While incorporating PS into the sales and account expansion process on its own doesn’t create immediate success, if done deliberately, it is a critical part of facilitating an account journey and can play a material role in the expansion of share-of-wallet at key and strategic customers.

 

Written by: Dean McMann

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About the Author: Dean McMann is a Founding Partner at McMann & Ransford with 35+ years of experience in consulting and professional services.  He is a sought-after expert and speaker on topics of: B2B differentiation, professional services best practices, and overcoming commoditization.  In addition to his extensive experience in the Professional Services space, Dean also serves on the board of various non-profit organizations.

 

Freeing Yourself from the Hero Trap

Nearly every good story has a hero. They are made into role models. They protect others, save lives, or win big games. They carry others to victory and are idolized by those around them. Studies suggest that heroes in the traditional sense embody charisma, make bold moves, and attract attention.

Often embedded Professional Services (PS) groups have people they look to as heroes – those experts in the products and how to make them work.  In the early days of a PS organization, heroes may be critical to grow and sustain the business.  They consistently are able to make unhappy customers happy or come in at the eleventh hour and get it done. They often become the names customers want back again and again.

However, what makes a hero an asset in the early stages of your business can prove to be a detriment to your business as it matures. The business becomes reliant on the few experts and it interferes with how the PS business optimally operates.

Unlike most businesses that perform through functional organizations where the organization chart drives the business– specialists in different organizations – sales, R&D, etc., the PS business is a much more integrated business that adapts itself to different customer situations and projects.  Therefore, it drives its business through what’s called the staffing model.  PS success requires a strict protocol of how work is done and the ability to assemble and deploy teams of different levels of expertise at times of need.

Reliance on heroes distorts the staffing model. The target leverage model for any PS business is a pyramid.   The benefits of this model include:

  • Margin Enhancement: In a pyramid staffing model, leverage is created by having lower-cost employees doing more of the work that is led and reviewed by more senior talent who can then be more available to support higher-level customer relationships, issues, topics, etc.  Further, it allows senior resources to work on more customer accounts.  This drives greater margins for the business.
  • Scalable: Subject Matter Experts (SMEs) — think heroes –  serve as adjunct guides, sharing their insights with project teams. In addition, the pyramid facilitates (and requires) coaching people as they move up through the pyramid – the following example levels are for explanation only:
    1. Level 1 – Learning how to meet the rigors of work in a PS organization.  This includes quality and timeliness.  Also, learning the interplay inherent in the business – how to take assignments, how to keep others apprised, how to get help, and when not to get help.  Finally, developing knowledge of the practice, offers, and products.
    2. Level 2– Running a project and coaching less experienced people.  Also, developing a leverageable expertise in one or more offers and/or products.
    3. Level 3 – Managing multi-projects or a program.  Coaching those managing projects – providing forest through the trees perspective and other experience and advice.  Also, assisting leaders at the customer to understand what is important – dealing with issues, leading customers to understanding the future vision and outcomes of the effort, getting buy-in, and maintaining commitment and momentum.
    4. Level 4 – Driving Customer success. Managing service line or practice P/Ls.  Dealing with senior members of Customer organizations.
  • Risk Reduction: Because knowledge and skills are transferred throughout the organization, the business reduces the risk of “being held hostage” by any individuals; individual knowledge becomes team knowledge.
  • Enabling High-Quality Work– The nature of the pyramid forces improvement and expansion of ability to move up in the organization by dispersing expertise and building experience throughout the team.  Thereby, naturally enabling an ever-improving organization. Historically this was referred to as “up or out.”

A hero-led model, however, is a diamond-shaped staffing model.  Hero dependence limits growth because a proper project structure has not been created – when heroes are the center of project structure by nature, they limit how much can be done.  Other limitations of the diamond-shaped model include:

  • High Cost: Due to heroes’ niche expertise, they command high salaries, but you need more of them to create a well-rounded team.  Typically, the heroes will also end up taking on work that is not at the “top of their license,” further increasing costs.
  • Hard to Scale: Hiring more individual contributor SMEs does not readily allow for transferring specialized skillsets to other less experienced employees, thereby constraining team leverage across more customers.
  • High-risk: Lack of knowledge transfer may result in experienced SMEs holding the business “hostage,” as they independently possess unique skills and knowledge integral to the business’s operations.

Breaking the Model

How can you shift out of this hero-dominated culture? The following six key activities will help you break the cycle:

  1. Break out of the “hero ecosystems” – Rather than having projects revolve around the heroes, position them as adjuncts and diffuse their expertise to the rest of the teams.
  2. Emphasize repeatability – Standardize your portfolio by creating boundaries around the things you sell, the scope of your offers, and the skills and capabilities required for each offer. Create a central knowledge management repository and build consistent training programs to ensure that all employees have access to the information and training they need to carry out each offer repeatedly and consistently.
  3. Track and measure project success – If you are rewarding people or teams based on pieces of the big picture, you’re likely sub-optimizing the project as a whole. Therefore, it’s important to monitor key indicators like realization, margin, customer satisfaction, utilization, etc. that present a holistic view of the project. Tracking the performance of individuals and project types (against standardized expectations) will allow you to hold your team accountable for consistency and repeatability. This will enable you to anticipate challenges and coach and guide your projects proactively.
  4. Set Expectations Early in the Deal Cycle– Don’t get yourself in trouble by taking on risky, unapproved deals. Instate a regular deal review process to ensure that people are selling only the standardized deals, or that exceptions are appropriate for firm growth and sustainability objectives.
  5. Reward your unsung heroes– In this new model, it’s critical to look past acts of heroism and reward teams and individuals for collaboration, standardization, development of others, and managing to PS norms. This entails promoting those who exhibit these behaviors and redesigning the incentive program to reward these behaviors.
  6. Train and develop your people – Cement a culture of encouraging and enabling others. Limit your reliance on heroes and focus the development on the skillsets of other employees. Build out robust technical, domain, and intimacy (PS) skillsets that yield well-rounded personnel.

In summary, a PS business that strives to be truly meaningful to the broader company must break out of the “hero” model and move to the pyramid staffing model.  This may seem difficult and even a little dangerous, but with deliberate steps and perseverance, it can be achieved.

 

Written by: Dean McMann

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About the Author: Dean McMann is a Founding Partner at McMann & Ransford with 35+ years of experience in consulting and professional services.  He is a sought-after expert and speaker on topics of: B2B differentiation, professional services best practices, and overcoming commoditization.  In addition to his extensive experience in the Professional Services space, Dean also serves on the board of various non-profit organizations.

 

Professional Services’ Role in Increasing Time-to-Outcome of a New Product

As their current product market matures, many B2B companies look to broaden the product line and move toward offering more complete solutions. For example, a company might move from providing lighting for the operating room to improving operating room effectiveness through lights that slow bacterial growth.

We have seen this move from products to solutions many times with our clients. They develop a stellar Idea that could make them more important to their customers by repositioning them as a solution provider (rather than just a product vendor). However, despite having a strong Idea and good intentions, many companies fall short in gaining market adoption.

Moving from product to solution presents a significant change in selling motion as solutions are targeted at new buyers and involve more complicated discussions. Often, when companies struggle to gain market adoption, it’s because they fail to make the sales motion change or update their messaging, targeting, and offer design. It’s crucial to pinpoint and solve the issue or issues so that the new solution can drive market success.

Leveraging Professional Services (PS) as an integrated part of the go-to-market strategy for the new solution can improve its chances of success. PS can enable companies to more quickly correct issues with the solution’s go-to-market program.  How does PS help with this?  First, consider the mindset the executive is in when making decisions. They progress through the three phases:

  1. Whether to Act – is this Idea worth pursuing?
  2. How to Act – how can we go about evaluating and adopting the new Idea?
  3. With Whom to Act – who do I trust to help me with this change of process and enablement to gain the value?

Many traditional sales efforts emphasize Step 3.  However, sales should focus on all three phases and become comfortable with creating demand (rather than just reacting to it).  Though not as experienced in commercial transactions, PS talent is familiar with the steps of helping customers evaluate decisions.  Therefore, the new solution should be converted into a buying journey that matches the way executives buy.  This might need to entail a series of projects, or steps, rather than just one.  These steps, which should naturally build upon each other to deliver the complete solution, include:

  1. A project to evaluate the customer’s situation in relation to the Idea – does it truly apply?
  2. A project to verify the impact of the implementation of the Idea – think pilot or mock-up.
  3. A project that is a complete implementation or roll-0ut.
  4. A project to maintain relevance in the client’s business and seek new opportunities to bring to the table.

Although the delivery, and perhaps contracting, of the solution, has been broken up into steps, the sales process should not be focused on the parts. The initial sales effort should be focused on the complete Idea, examining its importance and relevance to the customer’s business. The first exploratory project is just the first step to them realizing the solution and is broken off separately so that it can be priced at a level that is easy for the executive to buy. Throughout the process, PS should play the role of solution expert, explaining how the solution works, why it works, and the steps necessary for success.

This change in the overall approach will accomplish several things quickly:

  1. Make it easier to get into deals with customers. Additionally, although it does not seem like it, this approach shortens the sales cycle to the big deal.
  2. Provide more data back to the organization about the positioning or the solution. This will lead to better explanations and more information shared between the customer and the seller throughout the initial projects.
  3. Identify changes needed in the overall solution by working through the initial project with customers.
  4. Lower risk on pricing the big deal by making the customer aware of their issues and needs in the initial projects. Better pricing is a result of customer awareness.
  5. Allow sales representatives to focus on the Idea early in the sales effort and lower the risk of new sales motions.

 

 

Written by: Dean McMann

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About the Author: Dean McMann is a Founding Partner at McMann & Ransford with 35+ years of experience in consulting and professional services.  He is a sought-after expert and speaker on topics of B2B differentiation, professional services best practices, and overcoming commoditization.  In addition to his extensive experience in the Professional Services space, Dean also serves on the board of various non-profit organizations.

 

Top 9 Challenges Faced by PS Organizations

A story that has grown increasingly familiar – a product company, caught in the commoditization cycle, seeks a more attractive business model built around Professional Services. Embedded advisory services rose in popularity following the widely-publicized service transformation of IBM in the 90’s and Xerox in the early 2000s.  Now they have are a staple in product-centric companies, glorified as a path to strategic differentiation. When highly-functioning and integrated properly, embedded PS serves as an engine for growth in three key ways:

  1. Provides an additional revenue stream through stand-alone services,
  2. Optimizes existing products and services to increase value delivered and establish a halo effect to power pull-through revenue and margin, and
  3. Builds customer intimacy and differentiation for a brand and product lines.

While some companies have effectively leveraged PS to achieve their desired outcomes, many organizations are still looking to unlock the greater opportunity provided by their PS businesses.  Though in some cases, PS struggles stem from a lack of commitment from the greater business, we have found that there are many challenges that PS businesses can and should address independently to move to their desired future state.

Below are the top 9 challenges that PS executives face. By overcoming these issues, they can materially grow their businesses to impact the broader organization. As you read through, identify whether any of these questions resonate with your business:

  1. Are your heroes and experts holding you hostage?
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  2. You are being pulled into risk-based engagements, but are they right for your strategy?
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  3. Is your PS team at odds with your corporate sales team?  Does sales not like to sell PS because it’s too hard and not big enough?
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  4. Do your leaders spend too much time working in the business instead of on the business?
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  5. Are you always being asked to give work away?
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  6. Do you feel misunderstood internally – is your ability to grow handcuffed by the corporate product business model?
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  7. Is your business’ growth too dependent on a select few- are you unable to control your own destiny?
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  8. Does your organization fully understand the financial levers of PS?
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  9. Is your offer structure standing in the way of account growth?
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Written by: Anthony Paluska

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About the Author: Anthony Paluska is a Partner at McMann & Ransford with experience helping organizations overcome commoditization by developing stronger, more intimate, relationships with their customers. He has leveraged his management consulting, problem solving, and change management skills to support 15+ Fortune 1000 organizations, across a multitude of industries.

Legitimizing Your Ability to Raise Your Prices

Every company wants to be able to charge more for their products and services. Today, with access to information at everyone’s fingertips, it has become more apparent that some organizations are able to charge more for the exact same product.  This is evident when comparing pricing for generic vs. brand name groceries, pharmaceuticals, etc. But time after time, people compare the ingredients and still pick up and pay more for the name-brand.  Why? Because that brand has established credibility and trust in the market.  This divide becomes more significant when comparing services or many of the more complex products that companies are buying for their organization since there isn’t a list of ingredients to directly compare.  If you aren’t the biggest and best-known company on the market, all is not lost – while brand status can greatly contribute to a company’s pricing freedom, it is not the only factor that enables companies to capture a price premium. Building up brand presence can take years, even decades, and requires significant exposure. Regardless of where a company is on that journey, it can enhance its legitimacy in the short-term to immediately bolster its pricing freedom.

 

 

How can companies increase their credibility and legitimacy when they’re not supported by a big brand name?

First, they can develop market legitimacy. Being viewed as a market expert provides an immediate sense of credibility, and therefore they can differentiate themselves in the market relative to seemingly similar competitors. This is primarily a marketing and thought-leadership effort and is accomplished by focusing on a niche or challenge and then highlighting specific experiences in the key segments they are seeking to legitimize themselves in. By coupling this with relevant customer references a company can speak to its expertise without needing the big brand name to support it.  The key here is picking those target markets and challenges that the company truly understands and focusing on them – it is difficult, if not impossible, to develop market legitimacy for all segments and all buyers on all topics. In addition to increasing pricing freedom, market legitimacy tends to help “get your foot in the door” at new accounts.

Second, companies can tap into buyer persona legitimacy. In this instance, a company is proving its knowledge of the market by appealing to specific buyer’s behaviors and priorities. By effectively addressing a target buyer’s challenges and opportunities, companies can differentiate themselves as experts. They can translate their value proposition to the specific pain-points of their buyer to demonstrate a deep understanding of the client’s situation. This exercise is jointly owned by marketing and sales, as marketing should provide insights into what target buyers care about, and sales needs to leverage that knowledge to convey expertise with the buyer. Developing buyer persona legitimacy helps reaffirm expertise during the sales meeting, which keeps the buyer’s attention and increases pricing freedom by extending the conversation and expanding the relationship.

The final, most effective way to increase pricing freedom without developing a big brand or overhauling the products & services the company is taking to market is through intimacy-based legitimacy. Here, the company can put both market and client knowledge to work to deliver results and develop a trusted advisor relationship with their customer. Over time, as a company proves its value, it naturally builds credibility, therefore enabling it to move into the top right quadrant and secure Strong Pricing Freedom. It is unlikely that intimacy-based legitimacy will impact the pricing on the first deal, since, unlike the other forms of legitimacy, establishing intimacy takes time working together with the customer. Intimacy-based legitimacy is founded on delivering on the promise – exceeding expectations from the initial sales conversations.  Once those table stakes are accounted for, intimacy is accelerated through activities such as providing advice, value, and guidance on topics that are interesting to the customer (particularly between or unaffiliated with sales meetings).  In essence, helping customers with their problems in a way that does not come across as self-serving will pay significant dividends, including immense pricing freedom on future pursuits.

 

Written by: Anthony Paluska

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About the Author: Anthony Paluska is a Partner at McMann & Ransford with experience helping organizations overcome commoditization by developing stronger, more intimate, relationships with their customers. He has leveraged his management consulting, problem solving, and change management skills to support 15+ Fortune 1000 organizations, across a multitude of industries.