From caterpillar to butterfly: how to transform your business model to turn into a solution provider

23-4-2012

From caterpillar to butterfly:
How to transform your business model to
turn into a solution provider
Marion Debruyne, Deva Rangarajan, Caroline Baert
Flanders DC Kenniscentrum

Flanders DC - Missie

Ondernemend Vlaanderen Creatief Vlaanderen
Creatiever maken Ondernemender maken


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23-4-2012

Flanders DC – Bedrijven


Flanders DC – Onderwijs

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Flanders DC – Algemeen Publiek

5

Why solutions?

Flanders DC Kenniscentrum | 19-1-2010 |

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23-4-2012

From caterpillar to butterfly…

What are solutions?
How solution-minded is Flanders?
The solution selling business model
Moving towards solutions in 10 steps

7| Flanders DC Kenniscentrum | 19-1-2010 |

What are
solutions?
8 Flanders DC Kenniscentrum

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Material Handling Automation Systems

9| Flanders DC Kenniscentrum

10 | Flanders DC Kenniscentrum | 19-1-2010 |

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Material Handling Automation Systems

Consultancy

Life Cycle Services

11 | Flanders DC Kenniscentrum


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What are solutions?



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23-4-2012

What are solutions?

Adds value
to the
customer's
activities

Customer
needs

Customi-
Integration
zation


What are solutions?

Although there are many kinds of solutions, they are all, in essence,
integrated combinations of products and/or services that are
unusually tailored to create outcomes desired by specific clients or
types of clients. Whereas products are mostly about functionality,
solutions are about outcomes that make life easier or better for the
client.

Miller et al (2002, p.3)


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What are solutions?

Systems Operational
integration services

Consultancy Financial
services services


Why move towards solutions?

Commoditization & mature core product markets
Outsourcing & demand for services
Vertical disintegration & disintermediation
Complex technologies & multivendor offerings

Servitization and the subsequent move downstream


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23-4-2012

What are the benefits of providing solutions?

Differentiation as a competitive strategy
Beating commodity magnet
Create more added value
Higher profit margins
Continuous revenue streams
Customer loyalty, retention and lock-in
Access to customers previously outside the supplier’s market
Market adoption


How solution-
minded is
Flanders?

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Importance of solutions

Sample description

23,60% 38,90%
0-50
50-500
37,50%
> 500


To what extent is offering solutions an item on the agenda of your company?

1%
7% 7% 3% 6% 13% 31% 11% 21%
1%
Not at all 2 3 4 5 6 7 8 9 Top priority

In what phase would you position your company in the development of solutions?

3% 11% 11% 8% 14% 29% 15% 3% 4%
1%

Not developed at all 2 3 4 5 6 7 8 9 Reached maturity


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The solution
selling business
model



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Moving towards
solutions
in 10 steps

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Identifying
burning
Moving the platform
entire Deciding on
company to organizational
solutions structure

Developing
and
Performance reinforcing a
management customer-
centric
mindset

Aligning the
back end and Segmentation
pulling it all of customers
together

Systematic
Engaging in
development
first projects
of front end
Developing with lead
and project
adequate customers
teams
value
propositions


More than paying lip service


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“It took 3-4 years before everybody understood
what we were trying to accomplish”


Identifying
burning
Moving the platform
entire Deciding on
solutions structure

Developing
and
centric
mindset

Aligning the
together

Systematic
Engaging in
development
first projects
of front end
and project
adequate customers
teams
value
propositions


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Integrate or separate?

Learn
Forget

Borrow


Identifying
burning
Moving the platform
Deciding on
entire organizational
company to structure
solutions

Developing
and
centric
mindset

Aligning the
together

Systematic
Engaging in
development
first projects
of front end
and project
adequate customers
teams
value
propositions


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23-4-2012


Identifying
burning
Moving the platform
entire Deciding on
company organizational
towards structure
solutions

Developing
and
centric
mindset

Aligning the
together

Systematic
Engaging in
development
first projects
of front end
and project
adequate customers
teams
value
propositions


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"I cannot give you a formula for success,
but I can give you a formula for failure, which is:
Try to please everybody.“
Mark Twain

© Vlerick Leuven Gent Management School

Step 4: Segmentation of customers

Need-based segmentation
Customers with similar needs
Focused approach

Customers ready for:
Longer-term engagement
Sharing of information


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Identifying
burning
Moving the platform
entire Deciding on
solutions structure

Developing
and
centric
mindset

Aligning the
together

Systematic
Engaging in
development
first projects
of front end
and project
adequate customers
teams
value
propositions


Step 5: Engage in lead projects

Provide the necessary resources to realize first projects
Partner up with a key customer in order to realize the first
integrated solution projects
Give leading managers the freedom to explore and gain from
experience
Rely on partners and third parties to fill the gaps in the
company’s capability portfolio
Systematically gather and share all knowledge related to the
implemented solution projects
Look for a signature project that will put the company on the
map as a solution provider
Share initial successes within the organization


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23-4-2012

Identifying
burning
Moving the platform
entire Deciding on
solutions structure

Developing
and
centric
mindset

Aligning the
together

Systematic
Engaging in
development
first projects
of front end
and project
adequate customers
teams
value
propositions



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23-4-2012

Identifying
burning
platform
Moving the Deciding on
entire firm to organizational
solutions structure

Developing
and
centric
mindset

Aligning the
together

Systematic
Engaging in
development
first projects
of front end
and project
adequate customers
teams
value
propositions


Step 7: Aligning the back end to support solution selling

Ensure effective communication channels between frontline
employees and back-office personnel
Link customer value creating activities to internal business
process maps by means of solution blueprints.
Empower the back-office employees to take more initiatives
Transfer “transactional customers” to more inexpensive
channels.


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23-4-2012

Example of a Service Blueprint
Customer

Receive & Evaluate
Customer Request declined Proposal
Customer
Customer Center

Sales Engineer and multi-
skilled account teams Collect & Analyze Yes Present
Standard Discuss with
Customer customer Proposal to
Product(s) ?
Requirements Customer

No
Solution architects or
consultants Analyze and Create Analyze
Special Order or Solution
Request Proposal

Commercial
Marketing Input/Validation
Product Company

Engineering Technical
Input/Validation
No

Yes
Feasible Create Solution
Analyze request
? Proposal
Standard Production
Line/Core service
Standardised
products or
modules
Supplier

Input from
Supplier/Partner Partnerships


Identifying
burning
Moving the platform
entire Deciding on
solutions structure

Developing
and
centric
mindset

Aligning the
together

Systematic
Engaging in
development
first projects
of front end
and project
adequate customers
teams
value
propositions


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23-4-2012

Step 8: Pulling it all together

Align back and front end IT systems
Align back and front end rewards and incentives
Align back and front end business performance criteria to
reflect customer criteria
Stimulate the move towards modules, building blocks or
platforms
Facilitate knowledge sharing within a business unit and across
business units
Facilitate your salespeople to sell integrated solutions


AT&T’s Process Map for Measurements
Example of Aligning Metrics

Business Process Customer Need Internal Metric
Reliability (40%) % Repair Call
30% Product
Easy To Use (20%) % Calls for Help
Features / Functions (40%) Functional Performance Test

Knowledge (30%) Supervisor Observations
30% Sales % Proposal Made on Time
Responsive (25%)
Follow-Up (10%) % Follow Up Made
Solution
Delivery Interval Meets Needs (30%) Average Order Interval
Quality 10% Installation % Repair Reports
Does Not Break (25%)
Installed When Promised (10%) % Installed On Due Date

No Repeat Trouble (30%) % Repeat Reports
15% Repair Fixed Fast (25%) Average Speed Of Repair
Kept Informed (10%) % Customers Informed

Accuracy, No Surprise (45%) % Billing Inquiries
15% Billing Resolve On First Call (35%) % Resolved First Call
Easy To Understand (10%) % Billing Inquiries

Source: AT&T General Business Systems

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23-4-2012

Identifying
burning
Moving the platform
entire Deciding on
solutions structure

Developing
and
centric
mindset

Aligning the
together

Systematic
Engaging in
development
first projects
of front end
and project
adequate customers
teams
value
propositions


Step 9: Performance Management

Move towards Solutions

Company factors Environment
- R&D - Market growth
- Operations - Competition
Solution Effectiveness drivers - Finance - Consolidation
- Marketing - Government
- Product offering - Technology
- Pricing - Random Shocks
- Services
- Channel
Definers Shapers Exciters Enlighteners Controllers - Strategy

Segmentation, Blueprints, Incentives,
Solution structure Customer Company
Value Coaching
and Offerings Propositions results results
IT,CRM,EDI,KPIs

Implementation
Diagnosis
Source: « Sales Force Effectiveness : A Framework for researchers and practitioners » by Andris Zoltners,
Prabhakant Sinha and Sally Lorimer, Journal of Personal Selling and Sales Management, Spring 2008

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Set up a balance scorecard to prioritize

HIGH

Fix it. NOW. High five!

Impact of the
drivers on
performance

You can afford There are bigger
to procrastinate fish to fry

LOW
LOW HIGH
Current performance on the drivers

51 | Flanders DC Kenniscentrum | XX-XX-20XX |

Identifying
burning
Moving the platform
entire Deciding on
solutions structure

Developing
and
centric
mindset

Aligning the
together

Systematic
Engaging in
development
first projects
of front end
and project
adequate customers
teams
value
propositions


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23-4-2012

Step 10: Moving the entire company towards providing
solutions

Bust silo mentality by:
a) Co-ordination
b) Co-operation
c) Connections
d) Capability Building
e) Clout

Source: Silo Busting by Ranjay Gulati, Harvard Business Review, 2009


“The journey of a thousand miles
begins with a single step”
Ancient Asian Proverb

| 19-1-2010 |

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23-4-2012

Conclusion
End of the “better mousetrap model”
Segment the markets and choose the best segment to focus
Identify areas to create value to customers and differentiate
from competition
Identify potential partners to help deliver customer value
wherever appropriate
Develop value proposition and set prices to capture value
Coordinate activities between internal departments and
external partners to deliver better customer value
Foster cooperation both internally and externally
Build capabilities and connections to ensure flexibility to
meet customer needs
Constantly monitor customer metrics and use this to shape
internal/external partnerships

Caroline Baert
Research Associate at Vlerick Management School

Research cluster Marketing Strategy and Innovation
Research interests: strategic innovation, design as a
strategic resource in new product development, the
customer decision journey in financial services

Contact me:
Caroline.Baert@vlerick.com


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23-4-2012

Thank you!

Prof. dr. Marion Debruyne
Associate Professor & Partner Vlerick Management School
SWIFT chair in Market Driven Innovation
Program Director of the Master in Marketing Management

Contact me:
Marion.Debruyne@vlerick.com
For anything related to the strategic side of innovation and the innovative side of strategy

Follow me:
MarionDebruyne

© Vlerick Leuven Gent Management School

Deva Rangarajan
Associate Professor and Partner, at Vlerick
Management School

Research cluster Sales Excellence Center
Research interests: Sales force effectiveness drivers,
after-market strategies, Services Marketing,
Customer experience management.
Please visit our sales club website to see things we
are trying to achieve at Vlerick in the domain of
sales management: http://salesclub.vlerick.com

Contact me:
deva.rangarajan@vlerick.com


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From caterpillar to butterfly: how to transform your business model to turn into a solution provider

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