By Steve Sexton
In recently working with a major software company, it became apparent that this organization was a great example of the scenario many captive services businesses face as the high-tech industry continues to evolve. Experiencing declining revenue and margin, this organization is introducing significant changes to align and execute against new go-to-market strategies. Still, the organization’s operational maturity and supporting infrastructure will have to rapidly progress to support performance goals and its ability to invest in developing strategic capabilities.
The issue at hand? Budgetary pressures require productivity and profit increases across all lines of business. Without them, the company cannot invest in its needed capabilities to drive growth. So stated: Do more with what you have to afford strategic investments. The challenge? The organization needs to improve visibility and core processes to forecast revenues, resource utilization predictably, and margins to unlock profit and investment dollars.
Like many product companies, this business acquired numerous technologies over the past ten years to gain market share and provide its target customers with an array of complementary products and services encompassing “ERP-like” administration, collaboration, and analytics.
To stimulate growth, a shift in go-to-market strategy -including reorganization and transition from product to solutions strategy – is only the beginning of a multiyear transformation journey. During this journey, the firm will consolidate business product and service lines, organize sales around market segments, build multiproduct solutions, grow unattached services, and revise partner strategy. And the list grows as managed services and more advanced B4B (business for business) model concepts come into the picture.
While consolidating multiple lines of business provides a significant opportunity to leverage resources better, it requires considerable management attention to strengthen operational focus, establish standard operating methods, and consolidate core business applications.
As is often the case of tech services organizations being the shoemaker’s children, the existing application footprint does not provide the capabilities necessary for the organization to execute at a higher level of maturity. It is impossible to become data-driven without having the data.
So while reorganizing, the services organization needs to take on a significant internal program that will introduce more change and disruption for services and other dependent functions, including sales, finance, and IT. This will require a well-choreographed, multi-phased implementation that aligns strategy, new process and system deployments, and organizational change. A significant undertaking while ensuring demand levels remain constant.
The benefits can be significant if executed well. In the short term, visibility to drive performance improvements in utilization, project delivery, and margin will give the organization confidence in what it can achieve. In addition, with greater productivity and visibility to manage the business, strategic investments can be committed and measured to support longer-term strategic objectives. With this comes the more excellent ability to evolve solutions, test and learn with customers, and fully develop the capabilities necessary to sell and deliver new offers and scale.
Suppose there is one guiding principle to take away from this example. In that case, leadership must marry what is required to operate better today with the evolution of the capabilities needed to execute a chosen long-term strategy. As an organization looks to evolve its sales, product, and service delivery capabilities, it must equally invest in its operational capabilities to have the most excellent chance to execute with the consistency and predictability necessary to meet short-term performance goals and invest in future growth.
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