Consulting teams in product companies face several challenges.
- Your competitor’s strategy is to buy product market share by discounting services.
- Customers are stuck on product cost, not total life cycle value.
- The margin and staffing model allows you to service existing business or grow but not both.
- Corporate risk policy creates contracting bottlenecks.
- Product packaging or architecture is unsuited to selling high value-add services.
Here are some suggested strategies for success.
1. Make value mapping a core competence.
That is, tracking the flow of value to the customer. The auto industry developed value mapping. It leads to a deep understanding of life cycle costs for the customer. Map as many of your customers as you can. Sales teams find that value mapping improves perceived value of everything they sell. That is the best defense against competitor attacks based on discounted services. You can better focus your team’s scarce business development cycles. Value maps are also essential inputs to any review of corporate risk policy and legal forms. And these maps help product management steer development in directions that complement services sales.
2. Focus on your company’s processes as well as your customers’ processes.
Sooner or later, the best solutions to yesterdays problems become tomorrow’s headaches. For example, to align expenses and cash flow with revenue a company may cut travel and tighten credit. Financial statements improve. And customer complaints begin to rise because your company is difficult to do business with. If you can reduce or eliminate these roadblocks you create competitive advantage.
3. Think Lean.
Lean is the notion that manufacturing processes can be continuously improved. It emerged in Japan and is known there as kaizen. In the West it is known as Lean. When you couple the Lean mindset with tools like value mapping Lean can transform operational weaknesses in process efficiency into strengths and opportunities. To do so requires a culture change and that is a difficult aspect of an organization to change. Peter Drucker said it best: “culture eats strategy for breakfast.”
4. Build a business case for adjusting risk assessment and standard forms of agreements.
Because large companies have more to lose they tend to be more conservative about risk assessment. If you manage risk better you create competitive advantage. You can save yourself alot of internal selling cycles if you get your legal partner to work with you to develop and write the business case. If your team doesn’t have a legal partner, you need to get one.
5. Do less.
Choose a few actions that will make the biggest difference and execute really, really well. Coming from a small company, this discipline is a matter of survival. There are always more opportunities than cash to chase them and most of the competition is better funded than you are. It is somewhat comforting to learn that big organizations are just as resource-constrained as smaller companies.
Megawatts & Negawatts 