The Needed shift to the WORLD of PROFIT2 Oct, 2006 By: Darrell Amy imageSource
The Needed shift to the WORLD of PROFIT
Management guru Tom Peters offers insightful perspectives that are relevant
to our rapidly evolving industry in his recent best seller, Re-imagine—Business
Excellence in a Disruptive Age.
Farewell to the Old World:
On 9/11 we awoke to the fact that we live in a different world. We used to be
able to locate our enemies on a map. The strategy was simple: build up a large
military and move it to the right place on the map when threatened.
Now, embedded in virtual organizations and armed with communication
technologies, terrorists lurk in networked organizations that are much harder to
locate and immune to traditional military strategies. Essentially what has
worked for over 200 years is now highly ineffective. As a result, the military
must evolve in order to be effective. Tasked with changing the direction of the
US military to confront the new terror threat, General Shinseki, then US Army
Chief of Staff, remarked often, “If you don’t like change, you are going to like
irrelevance even less.”
Just as old geo-political and military assumptions forever changed the day
the terrorists attacked on 9/11, assumptions about how to be successful in our
business are rapidly changing too. Without question, our industry is going
through fundamental changes. Clients perceive less and less value in simply
delivering office equipment and the related service. Changes in how people buy
products based on information, pricing and purchasing available on the Internet
also threaten old business models.
As hardware offerings become more commoditized, it is up to incumbent
resellers to re-imagine new ways to add value for their clients, and profit to
their/our bottom line. Peters recommends several strategies to make this shift.
Become a Professional Services Firm
Years ago the computer industry was in the same place we stand today.
Decreasing hardware margins threatened the very survival of the world’s most
successful hardware giant, IBM. In a now famous turnaround, Lou Gerstner, the
former CEO of IBM, moved the company’s focus to providing solutions to clients’
business problems. He launched a solutions division whose goal was to identify
and solve client’s business problems around business processes and information
management. Then, a team of professionals is deployed to implement and manage
the technology recommended.
Gerstner quickly built a $20 billion division of IBM. And the services
organization also pulled through an incredible amount of hardware. Today, IBM
has taken professional services to the next level, allowing companies to
outsource entire functions like HR or accounting. Gerstner was quoted as saying,
“You are headed for commodity hell if you don’t have services.”
We can learn a lot from IBM. In reality, many copier dealerships are starting
to emulate IBM by offering professional services in print management and
document management. While IBM’s focus was on the Fortune 1000 client, we use
the same model to help our mid-market clients leverage technology to improve
their business processes.
In the book Re-imagine, Peters cites dozens of companies across multiple
industries that have made the shift from products to solutions:
|HP||Computer and Integrated IT Services|
|Home Depot|| Building Supplies and Integrated
|UPS|| Shipping and Logistics/Supply Chain
What is a PSF (and why should I care)?
A PSF (Professional Services Firm) is a company that provides outstanding
service in their area of specialty.
Think of your dealership. Chances are you use PSF’s every day. Years ago you
may have had a janitor on staff. Now you pay a nominal monthly fee and get even
better service. Maybe you used to manage your own payroll but now you outsource
it to a payroll firm. You probably outsource dozens of things to PSF’s
including vehicle maintenance, vending machine service, landscaping, building
maintenance, HVAC service, etc.
I have built my company, Dealer Marketing Systems, on providing outsourced
marketing and training services. That means dealers don’t have to manage a full
time marketing or training department to take advantage of the value of these
The bottom line is this: PSF’s usually do a better job than having employees
do it, and often at a lower cost.
Dell + IBM + Harley Davidson = Success
To win as a PSF, Peters says you need three key “ingredients”:
Peters says to act like Dell and “cut all the crap.” Focus on being the
absolute best at what you are good at and outsource the rest. Demand excellence
from your business partners.
Add overwhelming value in soft services. Hardware and software is just a
tool. The job is to improve your client’s business. Lead with identifying the
business problem and prescribing a turnkey solution.
3. Harley Davidson
Harley is all about experience. Even a cubicle-chained financial analyst can
feel like the coolest person on earth when he rides his Harley (in his Harley
clothes, towed by his Harley branded truck). The company doesn’t just sell
motorcycles, they sell experiences. What experience does your dealership sell?
So now, how do you build a PSF?
In reality, a copier dealership is already a PSF. Essentially, clients
outsource the management and maintenance of their copiers to you for a small
amount per page.
With the emergence of new business needs and new enabling technologies, it is
possible for a copier dealer to expand PSF offerings. Peters proposes four steps
to creating a professional services firm:
1. Turn services into products
Take what you are good at and package it into a sellable product. Copier
dealerships excel at excellent onsite service. What other services could you
provide? Printers? Document management? PC and network support?
All of these services can be natural extensions of your core competency of
excellent onsite service. Years ago, forward thinkers in our industry figured
out how to sell copier services for a cost-per-copy. This unique marketing spin
ignited a firestorm of residual revenue and renewable contracts that we still
live off of today. The CPC print management strategy is obvious. Selling network
support contracts or service blocks is another neat packaging.
Another strategy could be providing document management services as an
Application Service Provider (ASP) model or a full Facilities Management (FM)
model where you could profit from the entire task of converting, managing and
storing documents. The winner in this market will be the person that comes up
with the right way to package and charge for this service.
Once a solution is packaged into a product, it is ready to sell. Until then
your sales reps and potential clients will not be able to get their mind around
exactly what is being offered, and thus won’t sell much.
The Internet adds a whole new dimension of possibilities for delivering
professional services. The key to a successful PSF is “systematizing” your
Innovative print management companies continue to release web-based utilities
that monitor, track and bill print output, effectively enabling printer
management agreements. Document management companies are retooling their
software to run on web-services platforms. Network support appliances enable
remote monitoring of a client’s network over the Internet.
It is important to remember that the product is not the web offering. The
product is the professional service. The Internet is just a tool to enable your
professional service. In the example of print management, the product is not the
web-interface that enables print management. The product is the print management
service package with the value proposition of lower costs, one invoice,
increased productivity, emergency service and freed-up IT staffs.
Similarly the web-interface on your document management system is not the
product. The product is document management with the value proposition of
streamlined business processes, improved customer satisfaction, disaster
recovery and regulatory compliance.
Successful PSF’s have good partners. If your dealership’s core competency is
excellent on-site business-to-business service, you need partners for areas
where you don’t specialize.
Go to an industry show like ITEX (held in March in Las Vegas) and you’ll find
acres of potential partners to help you deliver professional services in print
management and document management. You can also leverage the growing solutions
competencies of your hardware vendors. Similarly, dealers are partnering with
other companies to provide marketing and training services.
Essentially, all of these companies are their own PSF’s. They just happen to
specialize in print management, document management, training or marketing. As
your dealership becomes more of a PSF, you’ll realize the importance and value
of partnering with other PSFs.
Perhaps the most important component of becoming a PSFis leadership. In a
transition of this magnitude, every manager becomes a cheerleader. Leadership is
essential to build momentum, and successes in new PSF ventures must be
celebrated, compensated and communicated:
a. Celebrate: Make sure everyone in the company knows
about successes in your solutions ventures. Talk about it at your
meetings—sales, service and administrative. Use the most important word in
b. Compensate: A dealer summed it up, “Salespeople are
coin-operated machines.” Therefore, make sure that compensation plans include
incentives and gates for solution sales. Treat these people special - they are
building the future of your dealership.
c. Communicate: Write a case study on every new solutions
sale. Talk about them in your newsletters, commercials, websites and consider
creating your own custom magazine to inform your clients.
Tom Peter’s book Re-imagine will challenge your thinking. I guarantee it’s
like no business book you have ever read before. Pick up a copy of this book
today and get ready to be challenged.