Leveraging a Solutions Approach to Guarantee Product Impact

June 19, 2009

Presented at:

Art & Science of Services Conference Bentley College

Presented by:

Stephen Hurley Managing Director Solutions Insights, Inc.

Solutions

What is it??!!

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Even Dilbert is talking about solutions!

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Even Dilbert is talking about solutions!

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Even Dilbert is talking about solutions!

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These are more typical of the solutions that exist in the B2B world.

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Much of the breakthrough research on technology-based solutions has been developed by ITSMA...

Agilent Technologies Alcatel-Lucent AT&T Avanade Avaya BEA Systems BearingPoint BT CA Capgemini CGI Cisco Systems Cognizant CompuCom Systems CSC Diebold EDS, an HP Company EMC Ericsson Fujitsu Services General Dynamics Information Technology HCL Technologies HERMES Softlab Hewlett-Packard IBM Global Services Infosys Technologies Iron Mountain Juniper Networks Keane KPMG Kumaran Systems Lenovo Logica Microsoft NCR NetApp Nokia Siemens Networks Northrop Grumman Information Systems Oracle Orange Business Services Patni Pitney Bowes Polycom Raya Integration Satyam SBS Group Siemens Enterprise Communications Steria Stratus Technologies Sun Microsystems Symantec Talent Partners Tata Consultancy Services Tellabs Tiger Lily TriZetto Utimaco Safeware VMware Wood Mackenzie Xerox

ITSMA provides research and consulting insights on how to sell and market services to the world’s leading technology companies.

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Solutions are real—at least in the eyes of the technology vendors.

Q. How important is the solutions business to your company?

% of Respondents (N=41) Extremely Important 5 4 14,6 73,2 3 9,8

Mean Rating = 4.6

2 Not at All Important 1 0 2,4 Source: ITSMA © 2009 Solutions Insights. All Rights Reserved. 9

So…what is a solution? ITSMA’s Solutions Council came together and agreed upon the following definition.

A solution is a combination of products and/or services with intellectual capital, focused on a particular customer problem, which drives measurable business value.

Source: ITSMA Solutions Council 2006 Source: ITSMA © 2009 Solutions Insights. All Rights Reserved. 10

Here’s another way to look at it…

A Solution is… Understanding Customer Needs Technology Process Resources Source: ITSMA The Solution Delivering Measurable Business Value © 2009 Solutions Insights. All Rights Reserved. 11

Solutions-related terms are hierarchical and discrete.

A Particular Customer Customers with Common Problems Targeted Segments Targeted Functions Generic Customers Source: ITSMA © 2009 Solutions Insights. All Rights Reserved. 12

Solutions appear to be an important part of a company’s overall portfolio.

Sponsors & Approach Executive Summary Methodology & Demographics

Detailed Findings

Q: What percentage of your company’s total revenue would you attribute to your solutions business, or to integrated business solutions, vs. discrete products or services?

Mean % of Total Revenue (N=31) Discrete product and services revenue (59.4%) Solutions revenue (40.6%) Median: 30% Range: 0-100% Source: Solutions Insights/ITSMA Survey: Selling Solutions, March 2009 © 2009 Solutions Insights. All Rights Reserved. 13

Let’s give this a bit of a historical perspective…

We noticed a significant shift in how ITSMA’s members were marketing shortly after “The Great Bust” in 2000… Reasons for the shift:    Dissatisfied customers Continuation of product commoditization and margin squeeze A screeching halt to industry growth; a scramble for a more meaningful value equation © 2009 Solutions Insights. All Rights Reserved. 14

So ITSMA’s members definitely made the move, and cited the following reasons…

The Big Three

Increase company revenue (net new) Increase overall profitability Respond to customer demand

Others Mentioned

      Increase value delivered to the customer Increase product or services revenue (pull-through) Increase share of wallet Increase customer loyalty Increase sales productivity Increase control over customer satisfaction Source: ITSMA © 2009 Solutions Insights. All Rights Reserved. 15

Let’s look at solutions in the context of other strategic planning models.

COMPARISON OF STRATEGIC PLANNING METHODS Method or Tool

Porter’s Five Forces PEST SWOT BCG Matrix

Solutions

Purpose

Understand all of the external forces that can influence strategic direction Understand how a range of external forces impact a company Analyze how a company compares against a competitive set

Key Elements

Buyer Power, Supplier Power, Substitutes, Government Regulations, and Competitive Pressures Political, Economic, Social, and Technology influences Strengths, Weaknesses, Opportunities, and Threats Determine how to allocate investments across a range of products, services, Business Units, or subsidiaries

Understand how to optimize all of the company’s resources — products, services, and IP —to best meet customer needs and deliver value

Cash Cow, Rising Star, Dogs, and Question Marks

Cross-Organizational Collaboration, Solutions Council, Integrated Financial Models, Buyer Behavior Predictive Modeling, Consultative Selling

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Here are some examples of companies that have moved from products to solutions.

Company Home Depot Toro Corporation GE Medical Systems EMC Corporation Starting Point End Point

Products sold to handymen and contractors Large lawn mowers sold to maintenance departments for golf courses Medical devices and related services sold separately Data storage units sold to IT departments

Motivator

Installation services for wide range of products Outsourcing of golf course maintenance Integrated products and services to address broader business problems Integrated storage, networking, and virtualization products and services sold to address broader business problems Customer demand; dissatisfied handymen Revenue generation; offering extension Customer demand and revenue generation Customer demand, revenue generation, and competitive threats © 2009 Solutions Insights. All Rights Reserved. 17

ITSMA developed a Solutions Roadmap in collaboration with its Solutions Council.

Starting Point Phase 2 Phase 3 Phase 4 Phase 5 The Push and Pull Sell Only Discrete Offerings Pilot and Test Building the Foundation Leverage Opportunistic Solution Successes Enable the Organization Organizational Execution Operationalize the Plan Solutions Mastery Sustain Momentum and Growth Five Core Elements Organization Marketing Activities Portfolio Management Sales and Sales Enablement Culture and Behavior Source: ITSMA © 2009 Solutions Insights. All Rights Reserved. 18

Each Element must be managed as a company moves to a new Phase.

Portfolio Management

Starting Point Phase 2 Phase 3 Phase 4 Phase 5

The Push and Pull Pilot and Test Portfolio Management: Solutions Management Building the Foundation Organizational Execution Solutions Mastery        Products and services are bundled into packages for ease of selling Cost-plus or product-based pricing predominates Few or no external partners are involved There is little cross-BU coordination; services and products are developed independently New offering development is product- or practice area-led For product companies, services take a back seat to products For product and service companies, there is a limited view of solutions opportunities due to organizational silos        Products and/or services plus IP are combined to deliver an integrated solution; may also include partner-provided offerings Cost-plus or market pricing dominates The portfolio is composed primarily of offerings based on available supply/capabilities There is little sharing of cost information between partners Solutions development is primarily field-based; entrepreneurial New solutions development is both product- and services-led Solutions development processes are tested with beta solutions         The solutions portfolio becomes more demand driven, requiring deeper collaboration across BUs and with business partners More flexible pricing models based on value added and benefits delivered are introduced Partner costs are integrated into pricing models Solutions life-cycle management is not yet well developed The solution development process becomes increasingly standardized Offerings are combined with those of business partners to deliver a more complete solution Development costs are allocated separately to the BUs that control the offerings The “voice of the field”— opinions of sales and delivery staff—provides input to the development process      There is a portfolio of integrated, repeatable solutions, with seamless messaging and value propositions Business partner capabilities and offerings are more tightly integrated; however, pricing continues to be customized by particular opportunity There is more serious experimentation with results-based pricing models Appropriate systems, processes, and governance are used to develop solutions centrally, based on field experience Repeatability of solutions improves through mass customization        Solutions are managed as part of a portfolio to reduce complexity, maximize profit, and encourage innovation Value pricing is used extensively; results-based pricing becomes more frequent Information is shared with partners to enable joint offer development, pricing, marketing strategy, and sales Clients and influencers recognize firm expertise in a number of focused solution areas Clients take a larger role in solutions development A significant portion of development costs are centrally managed Fully integrated solutions packages are developed with partners Source: ITSMA © 2009 Solutions Insights. All Rights Reserved. 19

Member companies have made the changes required to move into the next phases of ITSMA’s Solutions Roadmap.

Starting Point The Push and Pull Sell Only Discrete Offerings Phase 2 Pilot and Test Leverage Opportunistic Solution Successes Phase 3 Building the Foundation Enable the Organization Phase 4 Organizational Execution Operationalize the Plan Phase 5 Solutions Mastery Sustain Momentum and Growth Source: ITSMA © 2009 Solutions Insights. All Rights Reserved. 20

Be careful about your strategy and tolerance for pain!

The Evolution of a Solutions Company—From Discovery to Commitment “Hey!! Look! Everyone’s pushing solutions… we better do it, too!!”

Technology-Based Solutions

“Hooray! We’ve done it!

Our website says we’re selling solutions…that means we are a solutions company!” “We’re making progress...

and it’s worth it!” “Hey…this is a lot of hard work.” “Wait a minute — What is a solution?” “Do we really want to sell solutions?” © 2009 Solutions Insights. All Rights Reserved. 21

There are a number of considerations as you develop your solutions strategy.

Custom Companywide Technology Infrastructure Supporting Role Overlay Structure Core Brand Positioning Turn Key Business Unit Business Process Primary Strategy Integrated Structure Sub-brand Positioning

Source: ITSMA © 2009 Solutions Insights. All Rights Reserved. 22

The trend appears to be towards “productizing” solutions.

Sponsors & Approach Executive Summary Methodology & Demographics

Detailed Findings

Q: Solutions can range from highly customized one-off deployments to highly packaged offers combining many “fixed” elements such as products or implementation services. Some firms strive for mass-customization—the right mix of off-the-shelf products/services with strong market or customer customization. In response to the current economic climate is your firm planning to:

% of Respondents (N=31) Build and deliver more customized solutions (16%) Build and deliver more mass-customizable solutions (48%) Build and deliver more highly-packaged solutions (36%) Source: Solutions Insights/ITSMA Survey: Selling Solutions, March 2009 © 2009 Solutions Insights. All Rights Reserved. 23

So…what are your 3 takeaways?

● ● ● Complex products require services in order to realize their benefits— the question is who will provide these services?

Product enablement into the customer’s business environment needs to be designed into the product from the beginning Product enablement requires that you transform your entire value chain—not just your marketing messages © 2009 Solutions Insights. All Rights Reserved. 24

Go Forth and Solve

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Questions

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