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How to Make Specialization Work.
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Make the trend your friend. If you follow Gartner, you know that as far back as 2005 they proclaimed "Through 2009, 75% of vendors that do not prioritize their vertical market initiatives will develop solutions that fail to meet revenue and profit projections." That was three years ago, and, sure enough, we're seeing firsthand that companies with a vertical or specialized business model are outpacing their horizontal brethren (e.g. the Stymied Company) by a large margin.
The corollary trend that seems to be fueling this migration to specialization is what we alluded to earlier, and that is increasing risk mitigation among end users. Quite simply, they don't have time to fail, to experiment, to learn the hard way, to do over. There is no "do over" allowance today. It was a luxury born of an earlier era, and woe be to those who think differently. They are looking for companies that know the drill. And, to further lessen their risk, they are implementing specific SLAs that put the onus of delivery squarely in your lap.
So, accept these trends as real and set your mind to charting a course that gets you swimming with the current.
Pick a tech and a vertical market. Remember the movie City Slickers with Billy Crystal and Jack Palance? Crystal and two friends take a vacation to a western ranch for a cattle drive. There's a scene where Crystal and Palance are riding together, and Palance is telling Crystal that he knows the secret of life. Eager to find direction for his own life, Crystal wants in on the secret. The secret, replies Palance, holding up his index finger, is "one thing." Curious to know what that "one thing" is, Crystal presses Palance for an answer. Palance replies, "That's what you have to figure out."
So it is with IT services executives. Find the one thing that you're passionate about, the one thing you're really good at, the one thing that end-users are crying out for, and make that your cause. We can help you discover your "one thing," and you don't even have to go messing around with cattle to find it.
Embrace the Full Lifecycle Services Model. One of the benefits of specialization is that it allows you to embrace a Full Lifecycle Services Model for your clients. You can think of this as a three-legged stool, consisting of:
- Advisory Service, the big picture strategy work,
- Technology Services, the nuts and bolts of application development and implementation, and
- Maintenance & Support delivered via a managed services model in both infrastructure and applications.
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It's the model that allows you to get deeper into your client's business with a broader range of services that ingratiates you to the point that you generate more recurring revenue and make it tougher for a competitor to get any traction. There is no reason why at least 40% of your revenue shouldn't be coming from these managed services going forward.
Create productized wedge-offerings. Now that you've decided to add a few more legs to your services model, your goal is to shorten the sales cycle for these services. After all, time is money, and there is a premium on both. The key is to create a branded identity for your new services that combines: 1) the functional benefits of your new product, 2) the service excellence of your consultancy, and 3) a hearty dose of the intellectual property that defines your IT philosophy. This branded entity then becomes what we call "wedge offerings" that give you a calling card with which to get your foot in the door with prospects. Once in, you work to expand your services portfolio from this base.
Elevate your sales process. In today's environment, it's not enough to simply hire some IT sales people and send them off pounding the pavement. The key to effective selling is having a well-defined, proven and repeatable sales process. Your sales team will only ever be as good as the ammunition you provide them for conquest. Everything we've discussed up to this point is designed for that purpose, and includes:
- Tightly-defined company mission and purpose that is trend friendly.
- Products and services that are well-positioned, differentiated and door opening.
- Focused group of prospect companies and relentless pursuit of them.
- Pricing strategy that justifies the premium of your added value.
- Repeatable, ongoing training process.
- The confidence that comes with knowing you are ready for the challenge.
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Go national. When you've fine-tuned your business to the point it's running on all cylinders that's the time to think about expanding to the next logical business centers. With a proven, repeatable business model that works, the challenge will be to identify the most opportune locales. With proper planning, an abundance of local intelligence and a good wind at your back, you should be able to identify a host of suitable cities with companies eager for your expertise.
Keep the competitive wolves at bay. The IT services industry is a breeding ground for entrants because the price-of-entry is low, the demand is great and the promise of fame and fortune alluring. Of course, the same breeding grounds that give rise to visionary companies with responsible, added-value cultures also give birth to companies whose "mouths are writing checks their bodies can't cash." I've often said that in this industry you're always going to be in competition with someone going out of business. These are what we often refer to as "generalist companies," companies, lacking in focus and resolve, whose new business weapon-of-choice is "sure, no problem, we can do whatever you want at whatever price you want."
IT services executives will be wise to heed the advice of Greg Frankenfield, CEO of Magenic, and guest commentator in our January newsletter, whose advice was: "Never, never, never, try to win on price. It's a sucker's game. Create value or get out of the game." The way to create value for your customers is to create value in your company, and specialization is the route to value.
Savor the fruits of your labor, because when you do the above, there will be a lot to enjoy for a long time:
- More profitable, recurring revenue.
- Higher billable rates and utilization rates.
- Enhanced market value.
- Greater demand for your services, regardless of location.
- More efficient sales and delivery apparatus.
- Competitive insulation.
- Magnet for talent.
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Announcements:
Andrew Fletcher speaks at the ITA conference in Atlanta.
Revenue Rocket Managing Partner Andrew Fletcher gave two presentations at the Information Technology Alliance conference in Atlanta April 7th. The first, entitled, "BI: Looking Forward," and the second, entitled, "M&A—It's More Than Just Numbers" are available by emailing Andrew.
Andrew Fletcher invited to speak at Microsoft '"Partner Day", Montreal, Canada
Fletcher gave a presentation to Canadian partners on April 22nd, entitled "Growth Acceleration—From Ordinary to Extraordinary." The focus of the talk was to help partners understand and identify barriers to growth in their own practices, and to provide useful tips on how to accelerate growth within their organizations. The presentation covered key steps in the evolution of the IT professional service consulting practice and how to break through the current plateau. Email Andrew for a copy of his presentation.
Jay Rosenfeld writes, "Why AFAB is a Four Letter Word."
The April 19, 2008 issue of PS Village carried an article by Revenue Rocket Managing Partner Jay Rosenfeld entitled, "Why AFAB is a Four Letter Word." The article speaks to the pitfalls of an "anything for a buck" business strategy and what lessons you can use to avoid falling prey to this potentially debilitating disease. Click HERE to download a PDF article.
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