7 Steps to Transform Your Service Provider Business
The process described isn't easy, but it’s worth it. If you want to build long-term value in your organization, you need to pursue these initiatives.
May 11, 2018
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Where are you? Every journey begins somewhere. Where are you starting? As a service provider, it’s important to understand where your business is today. How do you compare with your peers — the other businesses and competitors fighting for the same customers, private equity, and investment dollars? Whether you provide traditional, managed or cloud-based solutions for your customers, accurately identifying your business model is the best way to start planning how to get to where you want to be.
The journey of transformation is not an easy one. It is fraught with delays, roadblocks and detours — but the journey is always worth it. Just make sure you know where you are starting from. Prepare a solid plan that will get your business to the desired destination; you need to be honest about where you are. We’ll look at the destination next — in the meantime, you can make a start by working on your business rather than working in your business.
Ideally, transforming your business would be as easy as summoning an Uber to take you to where you want to go. But getting to your business destination depends more on the kind of trust you place in calculating your best route, based on how things are going for others. For most service business owners, there are just a handful of potential destinations in play.
First and foremost, you want to create “enterprise value” by building a valuable company, irrespective of what destination you have chosen. Running your business as if you want to sell it is rarely the best option because that invites short-term decision making rather than building for the long term. How, then, do you create enterprise value? You need to take your top-line revenue and categorize it by type; a typical category scheme might be “resale,” “professional services,” and “recurring revenue.” Then, you need to allocate your costs effectively across these lines of business.
According to the old football cliché, one of the hallmarks of a successful season is that you “play to your strengths.” This classic coaching strategy is easily applied to your service-provider business. You have served your customers in many unique and interesting ways that differentiate you from your competitors, but have you ever taken a step back and thought strategically about the solutions that you’re uniquely equipped to deliver? What about solutions you’ve implemented that solved a customer-specific problem in a creative way? Look at the points of differentiation; once identified, you know you have set yourself apart from the competition, and you can build on that solution. From there, you can look to “productize” by taking a unique solution and turning it into a product for other customers.
When you start thinking about productizing your offering, you have to detail all the components of your solution. From there, look at which elements need to be standardized for reliable-at-scale delivery and which ones can remain customized without compromising the supportability of the overall solution.
A great starting point is analyzing your customers’ support tickets. Take a look at the support history of the customer that received the original disaster-recovery solution, and you may notice that certain aspects created higher ticket volumes. These are things that should be standardized, so look for ways to preventively mitigate these in rolling out the productized version.
Sales teams are no longer just selling to the IT department; in fact, research from top analysts tells us that IT department spending is on the decline, while overall spending on technology is up. Who is spending that money? The answer is line of business (LOB) executives — marketing, accounting and sales leadership are investing in on-demand services and SaaS-based platforms.
The answer lies in transforming the structure and outlook of your sales team. This type of change is hard, but as it so often happens, it’s the only real way forward.
Hire different people: Find individuals who can communicate effectively and challenge the customer’s viewpoint, who are comfortable discussing money and who understand the customer’s business and the drivers of that business.
Have different conversations: Train current sales team members to have different conversations; force them to tear up the PO and instead have a discussion about consuming technology within a recurring consumption model.
Structure your team differently: Hire people with the right skills for the right roles; you need to separate those roles as distinct functions. Some members of your team – those that are best equipped to do so – should be hunting for new opportunities. Others should be farming existing accounts for growth opportunities.
Have a story to tell: When talking to customers, nothing beats being able to say, “This is what some of our other customers are doing.” This is a powerful way of connecting customers with their peers and offering insights into how other companies are addressing similar challenges.
Take the time to review how your sales team functions.
The managed service provider market is packed with many players; you will need to find ways to steal market share from others by outperforming them. Once you’ve productized multiple offerings, it’s time to consider the makeup of your product suite.
Think in terms of two seemingly competing issues: Where do I fit in? And how do I stand out? Do your research on competitors and ask new customers good questions. This will help define where you fit and how you can stand out, with offerings that are unique to your business.
The struggle for any business is to figure out how to break through the noise and get the message out. You can improve your approach to marketing by remaining consistent and applying a few basic principles.
Let your customers tell your story.
Get social, both literally and technologically.
Give something of value for free.
Start with your customer’s needs first.
We want to be the hero of our own story, but the customer should be the real hero. Your company has done some great things, and it’s understandable that you want to focus on those things. However, the key point here is that your services helped the customer to accomplish some business goal, and your story should focus on that.
Similarly, great service providers aren’t built overnight; they require continual improvement and commitment to doing the hard things well. At some point, you simply have to get started. It may be challenging, but the results will be worth it. You never enjoy the congestion caused by all that construction, but you love the quicker journey when it’s done.
The process described isn’t easy, but it’s worth it. If you want to build long-term value in your organization, you need to pursue these initiatives. There is typically little enthusiasm for big infrastructure projects when first proposed — too expensive, too ambitious, too disruptive. But when the construction work is done and the traffic is flowing smoothly or the light rail system runs on time, we can’t conceive of NOT doing a project that yields these results. In the same way, your team will wonder why you are putting them through this process of improvement, but I promise you, they’ll enjoy the results once it’s done.
By LogicMonitor's David Powell
Worldwide, enterprises are racing to digitally reinvent themselves. In fact, 85 percent of enterprise decision makers believe they have a time frame of two years to make significant inroads on their digital transformation before suffering financially and/or falling behind their competitors. This presents an opportunity for services providers. But to fully take advantage, service providers need to focus and transform their businesses.
David Powell is the general manager of service provider business at LogicMonitor.
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