This is part seven of my presentation “Making money from the cloud”. You can find the full slides at:
and the previous parts are at:
The problem with those delivering IT services, especially in the SMB market, has been the constant growth of offerings. This has been driven by the commoditisation of the IT market in general. The prevailing belief is that to add more to the bottom line you need to offer more services to more people. That is playing a game you can never win. That is playing a game that can never scale for small providers. That is playing a game with the rules set by the largest players. That is playing the game dumb!
You simply cannot be everything to everyone the smaller you are. Trying to be everything to everybody means you end up being nothing to nobody. That is simply a path to mediocrity and ruination. You need to focus on providing tailored products and services.
There are plenty of examples of this in operation today in the business sphere. A great example is business frequent flyer programs. The more you fly the more benefits you get but unless you fly enough, you don’t qualify. Airlines typically generate far more revenue from their business frequent flyers and importantly, they lock them into their own brand. Their programs don’t attempt to qualify for all, they target a specific demographic and reward that handsomely. This is the model smaller IT providers should be aspiring to.
The important thing therefore, in a market that is restricted to a certain set of customers, is what provides value in their mind? If you simply migrate email from on premises to the cloud and do no more, what value have you added? The customer sees no difference at all. They had email before, now they have email again? Why did you charge them so much? Is what is really going through their mind. Why? Because you haven’t added value to the equation, in their minds.
Likewise, if you simply move files and folders data from on premises into something like SharePoint, in exactly the same structure, what real value have you added? Zero! No added value means you are a commodity and the smaller you are the more likely you are to be squeezed out. Also importantly, you have left value on the table that a competitor can take advantage of. You have in fact made it easier for a competitor to gazump you by doing after doing the hard migration work for them and failing to take the high value offerings such as automation, enhanced security, training, consulting, etc..
The key point here is to provide value in the customers mind not your own. That could be something as simple as automating a time consuming process of the customer or providing more flexibility. It doesn’t have to be solving a difficult technical problem. Again, it is important not to confuse value in the customers mind versus your own.
Many would claim that customers want the same thing. If they did, why are we all driving different cars? Why isn’t there a single functional car on the road that everyone has? Why? Because people want different things when it comes to driving experience. Some simple want a functional devices to move them from point A to B. Others want something that is more an experience or a statement of who they believe they are. In today’s market, why do people buy luxury cars like Aston Martin’s, Lamborghini's, etc? Because they provide value in their minds.
Sure, the number of people actually buying up market sports cars is small, however those marques are targeted at a specific market segment and aim to provide value there. If they didn’t then they wouldn’t still be in business now would they? Recent stats show that most high end luxury goods providers do very well no matter what the economic conditions. Why? Because they know their market and focus on value not price. Here’s the key. No matter what, customers buy on value not price.
Another piece of the puzzle here is that luxury good have an aspirational value don’t they? Few can actually afford that level of luxury but most still aspire to having it right? That is how you need to look at building your products and services in the tailored market space. They need to be inspirational. They need to move to the point where price isn’t even a consideration. They need to move to a ‘must have’.
One of the most common complaints I hear out there from resellers is that their customers complain about the cost of technology. You know what? If any customer ever complains to you about the cost of your goods or services I would contend that it’s your fault! It’s your fault because you’ve failed to have then understand the value of that item. It is you who have failed to take price out of the equation and make the offering something they aspire to, not just pay for. It is your problem to fix, not theirs.
This value concept is so key to success in the smaller space. It is something that requires time and effort to develop and understand, however the benefits reaped are enormous. Success in the smaller business space is define by becoming more specialised, having a deep understanding of that customer demographic and providing value beyond expectation. And that is all doable by a business of any size, yet few actually do it. Why? Because it requires the discipline to actually sit down and make it happen. The discipline to sit down and actually change from the way things are today to a more focused and streamlined business model. In short, in means saying “No” far more than “Yes”.
So, in summary, another key investment businesses need to make to remain competitive in the future, especially when it comes to technology, is to get focused. To tailor specific services to specific customers and solve their specific pain points. The only players who can remain generalists are the largest of the large. Don’t play a game you can’t win. Stay small, stay focused and crush your competition by providing unbelieve value for your customers with outstanding offerings that no one can compete with.