Mastering A Winning Service Portfolio – Part 1
To run a successful professional service business, there are 3 key pillars that one should bear in mind. These 3 key pillars are Services, Revenues and Skills. In this blog, I will share the best practices for formulating a winning service portfolio.
In order to do that, we must first determine what type of services we should be marketing to our customers. To determine this, you must first answer all the following questions:
- What types of market are you going after?
- Who are your target customers?
- What services should you be offering?
- Are the services aligned to your overall business strategy?
- What channels will you use to sell your services?
- How will you position your services?
- How will you price your services?
Granted, these can quickly be overwhelming to you. To simply this challenge, the thoughts can be bounded by 3 critical variables which are paramount to the formulating a winning service portfolio:
- Service Offerings
Typically, markets could be segmented into 4 broad categories:
- Install base Market: This represents the existing customer base.
- New Vertical Market: This represents new customers that you would like to sell existing offerings to.
- New Solution Market: This defines target offerings that you intend to market to existing install base.
- Untapped Market: The most challenging market of all, this matches markets that have never been sold before.
When defining which markets to address, we should always consider each of these markets have different payback and risks in terms of market growth, revenue margin and contribution potential. If the target markets that are critical to the business success however, will not support the target revenue objectives , then the revenue objectives of the services should be adjusted downward to stay aligned.
For example, your company may be releasing a new solution that takes the company into new high growth market. To support this initiative, the management team tasked you to offer accompanying services that will accelerate the solution adoption by new customers. This is a great way to use service capabilities as a strategic weapon. However, if the services business unit is chartered to drive high margin revenue growth, this request may not align. You need to have a discussion with your management early to flag out this discrepancy.
Another point to remember, when you are targeting a new market(Untapped Market) that you have never sold to before. This take real costs and resources. For example, if you have never sold into the insurance industry, it will take effort to bring you there because your company has no brand recognition, nor experience in that industry, You will either need to hire new consultants that understand the industry , train existing consultants or subcontract to a 3rd party partners which comes with the danger of diluting your values.
You will also need to undertake the arduous process of convincing prospects that your company brings value to the them. All of this, take time, money as well as driving down your profitability. Executives cannot ask the business unit to aggressively settle new market territories and still show incredible profit. The number will not add up.
Once you have invested the time to succinctly defined what markets the service business unit should be targeting, the discussion can turn to the next 2 variables of the equation, service offerings and channels. These will be discussed in part 2 of the coming blog.