These days it seems like everyone is talking about selling solutions. CEOs are telling their marketing organizations to build repeatable solutions that maximize revenue and operational efficiency. Customers are telling their vendors to bring solutions to their business problems, not just a menu of technologies. Yet, despite the high level of prioritization placed on solutions by customers and executives, very few technology marketing organizations have a good understanding of solutions success. Even fewer organizations are implementing solutions to achieve their maximum benefit. This article will explore some of the major challenges technology organizations confront as they transform from a product-orientation to a solutions-centric approach.
Solutions Success Defined
A solution is a combination of products that are packaged together in such a way that they help a customer solve a specific business problem. The individual products used in a solution must be technically and functionally interoperable. Furthermore the products should be complementary with one another so that the combination creates more value than the sum of its parts. In other words, 1+1 = 3. Solutions support the customer through every aspect of the lifecycle from purchasing and implementation to maintenance and upgrades. Success in the solutions model is measured not by a product’s performance to specifications, but instead by a customer’s business results. Consequently, vendors will need to change their mindset to share equal accountability for delivering the end result. This differs from the approach that many software vendors take today, in which benefits realization becomes the customer’s problem after the sale.
Benefits to Technology Vendors
Although solutions are principally designed to benefit the end customer, vendors can enjoy significant upside as well. Vendor benefits include:
- More revenue – A successful solution sale typically results in a customer buying multiple products rather than just one. Furthermore, solution sales include a complementary suite of services. Both of these factors contribute to bigger deals.
- Higher profitability – By selling a repeatable combination of products, a solution enables economies of scale in implementation, sales and support processes. Additional efficiencies can be gained by designing greater levels of interoperability between the solution components.
- Customer satisfaction – Customers perceive more value with a solution than an individual product. Instead of providing a technology, the vendor has helped to solve a business problem. Happier customers can be retained longer and are easier to grow.
- Competitive advantage – By offering to solve the end-to-end business problem, vendors can reduce the need for customers to solicit proposals from competitors. This contrasts with a product-oriented approach in which buyers are must seek out niche vendors to plug holes in another vendor’s offering.
The Growing Interest in Solutions
In both the consumer and business segments, examples of more solution-oriented sales techniques are emerging. Consider the consumer electronics sector which is booming as consumers flock to retailers in search of the latest high definition technology. Historically, consumers would visit different departments within the store to select their own components (TV, DVR, DVD-player, receiver and speakers). Retailers offered only a limited set of add-on services such as extended warranties, home delivery and financing options. The overall approach was very product-oriented with the consumer designing, implementing and maintaining the overall solution. Today, leading electronics retailers are redesigning their store configurations to sell complete home theatre solutions. Retailers have assembled complete packages of support services that complement the customer lifecycle including design, financing, delivery, installation, wiring, warranty and maintenance. The new solutions approach simplifies buying process for consumers considerably. Do-It-Yourself (DIY) retailers are becoming more solution-oriented as well. DIY retailers are now offering installation services for bathroom and kitchen remodeling as well as design centers with in-store sales consultants.
The business world also is growing more solution oriented. Manufacturers in various industries ranging from aerospace to automotive are taking more responsibility and accountability for the operation of their products after the initial sale. Rolls Royce offers a solution that bundles all the necessary maintenance repair and overhaul (MRO) activities throughout the lifecycle of aircraft engine products. Called “Power by the Hour,” Rolls offers a glimpse towards the future of manufacturing-based solutions. Even the software industry is demonstrating a trend towards solutions. The emergence of the Software-as-a-Service (SaaS) model is an example. With SaaS, the vendor is responsible for the entire customer experience from installation and training to hosting and upgrades. As such, the vendor has equal accountability in customer success. In fact, many SaaS vendors are only paid based upon the actual usage of the application.
Secrets to Solutions Success
As with many marketing concepts, the principles behind solutions seem obvious when presented, but, the execution is not as straightforward. However, marketing and product management organizations can play a significant role in the transition to a solutions model if they understand the key factors leading to solutions success. Let’s examine five best practices.
#1 – Avoid Inside-Out Thinking
By far, the most common challenge technology vendors confront when embracing a solutions methodology is inside-out thinking. Senior executives will often view solutions as means of bundling products together to meet the vendor’s financial goals. As a result, it is common to see combinations of products packaged together in a way that benefits the vendor more than it does the customer. An example is bundling best-selling products together with weaker offerings. The vendor’s proposition is “Instead of using just one of our products, use all three in the suite and we will offer you a discount.” However, the vendor’s real motivation is to improve profit margins or to recover costs of a bad product investment. These are examples are inside-out thinking, which should not be confused with customer-centric solutions approaches.
Fast food restaurants offer an interesting study in “inside out” thinking. Food service operators have bundled products into value meals which offer a discounted pricing, simpler ordering and faster delivery. But who really benefits – the customer or the vendor? The real motivation is to improve the restaurant operator’s operational efficiencies. Order capture, food preparation, and procurement processes are all simplified by driving high volumes of repeatability in customer orders. While there are some consumer benefits, the value meal is more a product of vendor-led inside out thinking than it is a customer-centric solution. Contrast the value meal with the kid’s meal. The kid’s meal is designed not only to provide food, but also to provide entertainment such as a toy or game for the child to play with while dining. Combined with playgrounds located on-site, the kid’s meal offers a solution-oriented experience for younger customers. Packaging of products with price incentives can be an effective marketing strategy in a limited set of scenarios, but it should not be confused with solutions.
#2 – Base Solutions Success on Real Case Studies
So where do you find ideas for solutions? As with any good marketing strategy the best place to look is your customers. Some of the most compelling solution propositions can be obtained by studying how customers are using your products today. Start by looking at sales pipelines and implementation work schedules. Look for trends such as a series of customers buying combinations of products for similar reasons.
For the top solution candidates, interview the sales engineers and implementation managers deploying the customer solution to assess the level of effort required for deployment. Talk to the customers to better understand their business drivers and expected return on investment. Consult industry analysts and thought leaders for their perspectives on the size of the market opportunity. Narrow the potential options to a short list of candidates. Then assess each potential solution based upon two criteria: 1) the level of customization required and 2) the estimated market size.
The best solutions are those with a high market potential and low level of customization. You may uncover opportunities with a high market potential, but also a high level of customization. For such opportunities, consider further product development efforts to reduce the level of customization, rather than pursuing an immediate solutions strategy
#3 – Develop a Customer Orientation
To avoid “inside-out thinking,” solution designers should invest time to understand the customer’s definition of success and their criteria for measuring it. The customer’s perspective may often be different than the vendor’s. Consider the airline industry. One of the top metrics used by commercial air carriers to measure their performance against their peer group is on-time departure rates. However, travelers really don’t care as much about what time the flight leaves as they do what time it arrives at
their final destination. Technology vendors often make similar mistakes marketing value propositions and solutions to customers. For example, consider spend management applications, which are designed to reduce expenses for indirect materials such as office products. A vendor might define the solution as successful if the application is used to manage 80% of corporate spend. However, the customer will likely measure success, not by end-user participation, but by the dollar value of expense reduction they realize in their bottom line. Another example is e-marketing applications, which are designed to generate leads for the sales organization. A vendor might consider the product successful if the application generates a certain volume of new leads per month. However, the customer measures success by the dollar value of additional sales contracts they realize from the leads.
Interview your customers to ensure you understand their definition of success. Don’t be surprised if your proposed solution lacks some of the functionality the customer needs for business success. Unless you are in the business process outsourcing (BPO) sector, it will be difficult for you to assume the full responsibility for the customer’s business outcome. However, you may be able to leverage your services organizations to extend the value proposition in ways you had not thought of before.
#4 – Model the Customer Experience
Create a process flow diagram of the entire customer lifecycle. Then explore which services are required to ensure the customer is successful at each phase. During the purchasing phase customers may need business case tools to help justify the project to executive leadership. Projects often stall due to inadequate funding. By offering financing services such as leasing models or distributed payment plans, you can provide the added flexibility customers need to overcome budget constraints. Deployments delays can arise due to lack of readiness for production support activities. Consider offering hosted services in which you manage the application on behalf of the customer.
Be sure to accentuate the relevant aspects of your services portfolio when marketing a solution. If your customer’s goal is to rationalize systems following a merger, then you should market your strong project management and technology migration skills. If your customer’s business goal is to expand into new markets abroad, then you will need to emphasize your ability to provide local training and help desk support abroad. If your customer is deploying a solution to comply with local regulations, then you should emphasize your audit support, change control and documentation skills.
#5 – Don’t Go it Alone
Don’t limit your solution components to just your products. To solve a customer’s business problem you will need help. Success with solutions will require assembling a team of partners to fulfill the various technological and procedural gaps that may exist. Even IBM, who arguably has the broadest technology portfolio in the industry, partners for solutions.
Where do you look for potential partners? Once again, consider starting with the customers in production today. Identify which other vendors are supporting the overall solution. In some cases you may already be working with these vendors. In other cases you may not be aware of their existence. For solutions, your scope of partners will need to expand considerably. You have probably considered partnering with systems integrators for custom development, outsourcing providers for production support and international resellers for overseas implementations. However, you may need to consider partnering with banks to offer financing services or insurers to offload liability and risk.
Partnering efforts should not be limited to the solutions you take to market. You should also seek out opportunities become a component of another vendor’s solution set. An indirect approach to the market through a channel can lead to rapid revenue growth. Much as with traditional product management, success in solutions marketing will come from adherence to a methodology.
With the growing trend towards solution-oriented approaches such as BPO and SaaS in the technology sector, every vendor should begin to develop a strategy for solutions success. Start with a customer-oriented approach based upon real world examples that avoids inside out thinking. Partner and exploit your services organization to strive for an end-to-end business solution.