From Software to Services:
What can you learn from your favorite restaurant?
December, 2004
Joel Whitman
Everyone is thinking about recurring
revenue and services are the way to get there – Your favorite
restaurant just might know the way?
As impressive as selling services may look on a spread sheet the
reality of tending customers around the clock may be more than you are
prepared for.
Craig Bailey, CEO of Customer Centricity and long time
Customer Care executive puts it this way, “For a company to effectively
respond to 24 hour customer services challenges, it must evolve from a
product/technology focus to a solutions/services focus. To do so,
requires rethinking ALL aspects of the company.”
Spend lots of time at
a great restaurant and you can see what ALL really means.
A great restaurant is ready when you are
Rather than a high pressure sell,
a great restaurant will suggest what
you might enjoy.
Technology companies ranging from Software and Hardware to Networking
and Telecom are all racing to “add-value” and “move up the stack” as
they try to avoid the rapid advancement of commoditization and
competitive downward pricing spirals. However, the sales guy who made
President’s club last year selling Software licenses, circuits or
routing boxes is not going to experience the same success when given
the task of becoming a “solutions seller.” In fact, it is not at all
uncommon for he lifecycle of entire sales forces in high tech to be
less than 18 months – barely enough time to train, build pipeline and
close deals.
Sales is not the only area of concern.
A great restaurant knows who they are
Fine wine at a diner?
Midnight breakfast at a five star?
Don’t think
so.
Marketing is now faced with the challenge of transforming brands which
are well established nuts and bolts product companies – into services
brands. In many cases this may be an impossible challenge. You don’t
need an MBA to know that once a brand identity in imprinted in a
persons mind it is really hard to change. For example, would you expect
fast food from Tavern on the Green? Or maybe a Prime rib from McDonalds? Hard sell
right – well it is no different asking your loyal customers who have
bought packaged software from you for years, or your customers who
think of you as a hardware manufacturer to now accept you as a 24 hour
service. Marketing certainly has its work cut out for it.
A great restaurant serves what you want from, soup to nuts
At the risk of belaboring an obvious point, It is important to also
consider Product Development in this important light. Traditionally in
high tech, product development was largely an engineering function –
with business cases focused on features and functions, unit price
points, competitive bake-offs, and expensive, high level support – all
targeted at really sophisticated, tech savvy buyers. In the services
model, additional costs for 24 hour customer support at all levels of
sophistication, long term operations costs for both people and
technology are now core components of the product itself – no longer a
generic operating cost center.
A great restaurant charges a fair price, and still makes
money
As the technology under your services ages and needs replacement, your
ability to charge your services customers to cover these types of costs
is limited – very limited. In fact, When contract re-negotiation time
arrives, they are going to demand a price drop – and you are going to
need a price increase simply to cover the increasing maintenance costs
of aging technology. To put it mildly, this makes for very difficult
negotiations - especially if you developed s “customized” service for
this customer to get the original contract. Ouch!
This process can be overwhelming and there are many crucial points to
consider
Here are Three points to get you started:
1. Evolve from a transactional to a relationship focus
Evolve all
processes such as product development, sales,
implementation, and support.
Your success will now depend on metrics important to the customer
- Order-to-implementation cycle-time
- Time to respond to a problem
- Time to problem resolution
- Service uptime
- Long-term customer satisfaction
- Pro-active customer maintenance
- High Touch account support
2. Deliver “whole” services
Rather than features and functions your
success will depend almost
exclusively on how your customer feels they
have been served.
Services costs which are now part of your P&L:
-
performance level commitments
- 24 hour personnel support
- facilities/operations upgrades
- managing customer expectations
- (getting Sales out of the customer support business)
3. Always demonstrate your value
Services that operate well get forgotten,
When was the
last time you thought about your electricity?
When it went
out right?
You will also be forgotten if you don’t proactively
communicate the
value you are providing to your services customer:
-
Continuously tell your customer “what you have done for them lately?”
-
Monthly service review
- Proactive “business friendly” reporting
-
Running a tab of the dollars you have saved a customer
- Suggesting
complimentary services which align with their business goals
Transforming a technology
company from a products company into a services business – is a great
way to build up a business –and with the advent of almost universal
high speed internet access – the window of opportunity Is definitely
now. However, underestimating the necessary change to an existing
organization can put both your existing and future revenue at risk.
Remember, great service is a close as your favorite restaurant.
Use
their example and take the time now to plan carefully - you will be
giving yourself a great chance to succeed!
For more information:
Craig Bailey can be reached at:
office : 603-491-7948
Joel Whitman can be reached at :
office : 978-468-1180