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Archive for August, 2006

Partnering: Letting It Work

Tuesday, August 8th, 2006

PARTNERING TO CREATE WHOLE SOLUTIONS

Excerpted from SHAPING BUSINESS SOLUTIONS

Partnering: Letting It Work (Word document)
John Skibinski, Partner
LSI-LLC

When you decide to write about technology firms partnering to build whole solutions, it can be a daunting task. What hasn’t already been written on the processes and benefits? Is there anything to add that an audience of services and solutions experts doesn’t already know? Let’s see if we can make these couple of pages worth your while.

“Solutions” is one of the most misused words in the lexicon of technology markets. We all claim to have them as a necessity; all our competitors make the same claim! We may all succeed, to our own detriment, at commoditizing even this most strategic term. We’ve certainly used it to successfully confuse and scare off many decisions which would have put value in the market and created revenue and profits for our clients and for our businesses.

At a bare minimum, the definition of “solutions” must include the fact that our customers expect results and outcomes from the investments they make in our solutions. More revenue, lower process costs, entry into new market spaces and competitive advantage that can be quantified in dollars and cents….those are outcomes. Don’t take your prospects’ expectation of results lightly. They don’t. They want to be able to hold you responsible for delivering a “solution” which directly affects the top and bottom lines of their business. They want to move the risk of delivering these results from themselves to you, and your contracts no doubt reflect that shifting of risk.

I’ve always defined “solutions” as “the process of integrating assets around your software products and services offerings, including intangible core competencies such as intellectual property, methodologies and processes, the results of previous projects, customized content, and other components to produce a tangible, repeatable, branded, comprehensive offer which includes specific deliverables that address the target market segment’s business strategies. Solutions produce results and outcomes for your clients.”

Geoffrey Moore, who I most recently heard speak at the TPSA Summit in Sand Diego, has been kind enough to spend some time discussing this “solutions” dilemma with me since the conference. On his recommendation, I’ve started using the term “whole solutions” instead of “solutions” or “strategic solutions.” Moore’s definition of “whole product” is “the minimum set of products and services required to fulfill the target customer’s compelling reason to buy.“ Simple and straight to the point. I think we mean about the same thing. The distinction is that whole products provide a “compelling reason to buy”, while whole solutions go one step further and provide results or an outcome.

This concern about definitions and the proper use of terms is one of my central themes in my business. One of the main reasons our industry has not progressed further is that we’ve marketed definitions on which we have not fully delivered. You’ll see why I’m very careful with the words I use as the article develops.

Why would you be willing to accept this defined greater responsibility for results and the greater risk if your client….not your firm, but your client who you do not control…fails to get the outcomes you bargained for? Why, if you have a successful professional services and/or application software products business,
would you ever want to take on this additional complexity? Because it can be very much more profitable business, that’s why. And because your prospective
clients are demanding and getting “solutions.” If you have the specific assets including the ability to quickly and accurately understand the state of the critical business levers and indicators which are the “problem seeking a solution”, the intellectual property, expertise, experience, proven components, processes and project management capabilities, the results of prior projects, the ability to integrate and customize your “offering” to fit the particular situation and circumstances of each client, you may have the ability to minimize the risk involved in successfully implementing your “solution” and enabling the outcomes the clients bargain for. If you can manage the risk, you are also in a position to minimize the cost of delivery. You may also be in a position to propose the “solution” on a fixed price basis. And, we all know that a fixed cost project which delivers many times the cost in revenue and profit for the client is a good bet to turn into business. They are actually willing to pay a bit more for fixed price purchase options in order to know what to expect and not have to worry about additional costs later on….all that risk, and all the potential benefit, is yours. This can be very good for profitability if you really know what you are doing. Risk and revenue are directly linked.

My experience building whole solutions over the past almost 30 years has taught me a few very important rules I’d like to believe can benefit your businesses, the customers who buy your offerings, and our technology markets by producing more benefits along the entire value chain. It will cause the total size of the “solutions” marketplace to grow faster than it would otherwise, with more successes and fewer unmet expectations.

1. Go Narrow and Right to the Top
The first rule I recommend to clients is to define your target market segment as narrowly as possible and then go convince the segment’s biggest and most respected firms they need to implement your offering to maintain their leadership, revenue and profit growth. You have to define the target segment very narrowly to ensure there is maximum commonality among the firms in the segment, part of the necessary precondition for obtaining for clients as well as for your firm to obtain and provide the benefits of repeatability and increasingly efficient implementation of your offering. Too wide a spectrum of prospect requirements means too much customization across all the components of your whole solutions, and the economics quickly go negative for all involved. You want the target segment big enough to allow for a growing and successful business, but just big enough to ensure you will have to make one or two changes to you standardized offering with each implementation. More on that in a moment.

Go after the biggest and best firms first!?!?!? You gotta be nuts. They’re more demanding, less likely to take my offering without changes, and I’ll face my toughest competitors if I go after these accounts. My answer is, you bet you will! And you must. The deal with whole solutions is that you have to capture disproportionately more revenue and profit from each implementation as a byproduct of delivering disproportionately more value and results for your customer. This math works with only the market segment leader firms who are best at establishing the return on investment from the best possible utilization of your offering to produce results. Along with all the additional value and assumption of risk you’ve included in your offering have come costs that you must recoup starting with your first sale. After a certain number of implementations and when you are on your way to market space ownership, you can productize your whole solution to a greater extend, even to the point of having different levels of functionality in different offers for different levels of sophistication among the members of your target segment. This deflection point changes the “gearing” in your business, and how you market, position and price you offerings.

2. Demanding Clients Will Pace Your Enhancements
One of the most undervalued benefits of working with the largest and smartest businesses in your target market segment is their insistence that you do things their way if you want their business. They are unique, they let you know it, and they probably let you know that they are much smarter than you when it comes to their business. One of the key facets of the real future for whole solutions providers is that we will all proactively solicit greater involvement by our prospective clients in our business, shaping our offerings, and working with us to predict the market segment’s future requirements and opportunities. The collaboration of the future will involve prospective clients and customers working as one with our firms to shape our offerings and enhancement plans.

We’ve worked with many technology firm clients to develop strategy and tactics around teaming with their clients to create offering plan roadmaps. If you are dealing with the biggest and best in you target market segment, you want their involvement and you want them to be happy with what you are producing. Part of our strategy advice, particularly for whole solutions providers in vertical segments, is to seek out an enhancement requirement in every prospect selling process. Suggest, listen, discuss capabilities they’d like to see in an offering like yours. This becomes a “shaping the sale” tactic…..you’ll change the playing field during the selling process by finding these additional requirements. Chris Formant, head of BearingPoint’s global financial services practice, calls this “creating mismatches in the marketplace.” And these enhancements, demanded by the best and brightest, will become the general requirements for your target segment in the future. If you ensure each implementation involves at least one enhancement which can then be provided to every one of your clients…..you have a built-in pacing system which constantly captures more value for your offering, keeps you ahead of the target market, and keeps competition at a functional disadvantage and off-balance. If you win and satisfy the market leaders, you’ll own the market.

3. Whole Solutions Require Partnering
It’s a fact that no single firm in our technology markets has all the best components to build a whole solution. By definition, no single firm can be best at everything. It would require infinite scale, and probably be impossible to manage. So, to make your whole solution whole, you’ll need to partner with firms which can provide best components that make your offering as comprehensive and valuable as possible. It’s also important to realize that more comprehensive solutions rise higher in the prospect’s organization.

They are more strategic, affect more aspects of the prospect’s business, and have more impact on the top and bottom lines of their business. So, components you can add to your offering to make it optimally comprehensive will also get you in front of CEOs and CFOs talking about the value of revenue and profit increases and cost reductions.

One of the additional benefits of partnering when it comes time to take your whole solution to the executives who must decide to buy, is that your partners many have existing access, credibility, relationships, even trusted-adviser status with the executives you are trying to see. That’s a fair reason to pick a partner to be part of your whole solution, but they must have best components to contribute as well as executive access.

We’ve spent a great deal of time with many clients figuring out where these strategic whole solution partnering opportunities might be, and developing them. It’s very rewarding getting two or more businesses together which have complementary (and probably some duplicate) capabilities with a potential client or two, forming a joint value proposition that leverages, extends and enhances each firm’s value proposition, and crafting a joint go to market plan to get them huddling with prospective clients to shape requirement and whole solutions.

4. Leave Your Ego at the Door
Most partnerships fail. They fail for reasons completely unrelated to the ability of their technology component contributions to be integrated into a whole solution, and unrelated to the tremendous incremental value, revenue, profit and market share benefits. They fail because egos and desire to control the situation get in the way of common sense and good business. Most of our firms, your and mine, do not have primary positions of access, credibility, relationship, trust, and input to innovative whole solutions thinking. Either we don’t realize we’re not really in control, or our emotions kick in and we try to control the situation to ensure our best outcome…..even though we never had control, and certainly won’t control a whole solution concept development and decision process.

We’ve found in our work with customers and with their clients and prospects, that most firms in our industry don’t have an accurate perception of their positioning on a Value Pyramid relative to their contributions to whole solutions, and don’t realize they are disconnected from the whole solutions decision maker. We work with them through the whole solutions they can be a contributor to, who else ought to be part of that whole solution, and how the joint value proposition may be directly connected to the ultimate decision maker, while generating revenue, profit and market wins for them which would not occur otherwise. We help them realize they must partner to be a part of the decision, and their best interests are served by contributing to the best possible whole solution, and collaborating with partners who do have the access, credibility, relationship, trust and respect of the decision maker. There’s an old Polish saying that’s very appropriate here: Part of something is better than all of nothing.”

Whole solutions are today’s price of entry to compete for the biggest and best prospects, win in the market, and most rapidly increase revenues and profits. Our firms have to partner to be “in the market.” On a global basis this all seems fine; it most often breaks down when a particular account situation is in play. And the bad blood management allows over even a single situation can color the water for entire sales forces and companies that would otherwise benefit tremendously. Whole solutions are strategic. Partnering is strategic. Management must take the initiative and require collaboration with client partners as well as prospect partners be a core competency of each of our businesses.

5. Own Market Spaces Not Market Segments
A great deal has been written about customer activity cycles (CAC) and value gaps. The former is the sequence of steps a prospective client goes through to accomplish an activity from inception to consideration of how to do it better next time. Somewhere in this CAC is the problem, inefficiency, etc. that is the problem you have to find in order to have a problem for your whole solution to address. These problems, inefficiencies and gaps are the value gaps. Some CAC steps create value, others use or deplete value. Your whole solution must first directly address the value-loss problem created by one of these gaps…its value is in replacing value drain with value creation.

Secondly, your whole solution must address a market space not a market segments. Segments are retrospective; they depict how the market is today. But it won’t be that way tomorrow and further into the future. Market requirements and capabilities will change as customers get smarter and technology is adapted to be useful in the market. You want to be aiming for your whole offering to be meeting the future needs of your chosen market.

That is a point in space in the future, a market space. How do you do this, how do you predict when the market’s requirements will be 12-24 months in the future? First, you practice the pacing strategy I described above to ensure that you add at least one new capability to your whole solution each time you implement it for a market leader…..they’ll be the first ones to think of
the next great idea, and will help you keep them and your offering at the very front of the market and ahead of the general demand for the functionality they want to have first. Then, go back and spend even more time with your industry leader and other partners and find out what they are thinking about, what they wish they had the ability to do. And to be in the whole solutions business, you’d better have outstanding industry and process knowledge, which will lead you to form your opinions of future requirements for the market space to which you have dedicated your business.

In our next article, we’ll discuss some specific customer examples of partnering to create whole solutions. I hope it will prove informative and helpful to those of you who have decided the future for your business is in whole solutions. I am always interested in your perspectives and experiences. You can contribute them to LSI’s the Roundtable discussion forum at our Web site, www.lsi-llc.com, or e-mail me at john@lsi-llc.com.