The cowboy song by Rhett Akins, “That Ain’t My Truck,” where he discovers his girl has left him for another guy, reminds me of the anti-incumbency bias occurring in today’s global services marketplace. What’s causing clients’ infidelity to their incumbent providers?
I believe many incumbent service providers find themselves displaced today because of three factors.
- Services that clients once viewed as value are now just a commodity. Almost all services commoditize over time. And at that point a service that was once a differentiation of the provider no longer is different from other providers’ offerings.
- Client and provider interests become unaligned. When interests aren’t aligned, the client comes to believe the provider delivers services in a manner that benefits itself rather than working for the client’s benefit.
- The service provider takes the relationship for granted and the customer sees it increasingly as day-to-day business. Figuratively speaking, the provider forgets to bring roses. I’ve blogged before about this relationship phenomenon where clients tell Everest Group they get no innovation (continual added value) from their providers.
Incumbent providers should keep in mind that Taco Bell is not fine dining and a trip to Galveston is not the same as a trip the south of France. Just as with relationships between men and women, commercial relationships also need forward momentum. Without making an effort to build a deeper relationship, it will go stale or even go backward. Management changes and employee turnover in the provider organization aggravate this situation.
Clients now have a variety of options when it comes to service providers. Incumbent providers that don’t want to find their clients with another provider’s “truck” are wise to focus on the above three factors.
Also see our complimentary viewpoint, Rising Anti-Incumbency in Outsourcing: Breaking Up Is Not Hard to Do.
Photo credit: Don O’Brien
There is increasing skepticism and cynicism in the customer ranks in the hyper-competitive environment of the services world. As a customer commented to me, “Providers are like snowflakes. They all think they are unique, but they look just like everybody else. And if you put them under pressure, they all become the same thing.”
The customer was referring to being bombarded with providers’ offers in PowerPoint presentations and the fact that many of the presentations are “paper thin and aspirational.”
Providers come in with the latest hot topic (especially digital, cloud or cloud orchestration) or what they’ve heard at a conference, spinning that into a PowerPoint presentation. But, as the customer explained, it very quickly becomes apparent that the provider has no real experience or only limited experience in the service touted in the presentation. At best there are one or two examples of having done something similar. The offer is more PowerPoint than reality.
There is another problem with these thin PowerPoint offers. These presentations are all about the provider — how smart it is, how capable it is and the complications involved in the provider delivering the service. But this information is of limited interest to the customer, who wants to talk about their own business issues.
The offer overload showing thin experience results in customers’ increasing cynicism. And the focus on the provider creates further barriers for good conversations. Adding to the negative impression, providers usually offer these aspirational PowerPoint multiple times; but essentially, this accomplishes only one outcome: it reduces the customer’s willingness to entertain new offers.
Photo credit: Andrew Magill
American country music artist Toby Keith’s hit song “I Want to talk about me” reminds me of a phenomenon in today’s services world — too many providers’ conversations with customers are unproductive.
Service providers are very eager to grow their revenue in their existing accounts. As the market matures, this is clearly the fastest, less costly way to grow. Customers often ask their providers to demonstrate that they can bring innovation. The problem is the provider comes back with products. That approach doesn’t align with the customer’s expectations. Clients think: “Let’s talk about me and my issues, not you and your products. Help me with my issues.”
As anyone in a marriage knows, you have to listen to the spouse’s whole day to understand what the issues are. Clients typically are not able or willing to succinctly articulate their needs. They will talk to providers about what they’re struggling with and what’s going on in their business. Out of that knowledge come issues they’re working on or potential issues they want to work on.
It’s rare that customers will have thought something through to the extent that they will say: “I want to do this” or “here’s how I want to do that.” A clear articulation of the customer’s needs and issues is particularly rare for the empowered, senior individuals.
Service providers need to engage their customers in broad discussions and at multiple levels (junior, mid-level management and senior management). And out of those discussions comes a picture of the issues and needs that they are working on or need to work on. Then the provider can talk to the client about those issues.
That talk-about-me conversation will be productive and may lead to work. And the client will feel satisfied that the provider did not “sell” something to them but, rather, helped them on their agenda.
Photo credit: Marc Wathieu
Many service providers are busy organizing along vertical industries and going to market with vertical solutions. As the services industry matures, it’s very clear that customers want to do business with companies that understand their industry. However, many providers find that verticalization doesn’t give them the growth acceleration they anticipated. So there are limits to this strategy; just knowing about a customer’s industry is not enough. What’s missing?
Customers want providers to know more about their industry but also to know more about their business and how they operate. Providers that succeed in putting these two aspects together enjoy faster growth.
Cognizant is an example of how to be effective in this strategy. They have organized by industry and built industry expertise, but they also invest a great deal in understanding their clients and leaving the teams or key players in place for clients (particularly the in-country teams).
Customers express a lot of frustration to us. They don’t like providers’ churn. They have to train new people every six months, and the churn is debilitating. They want providers whose people get to know them, build relationships with them and understand who they are and how they work. Those kinds of relationships allow both parties to cut through the noise and get things done.
Despite what the customers are looking for, we see many providers responding in one dimension — the industry knowledge.
My advice to providers: don’t overlook how important relationships are. It doesn’t matter how clever you are or how much vertical knowledge you have. The relationship activates the opportunity.
Photo credit: Curtis Perry
In a recent blog I noted that there is a new wave of shared services activity. But don’t dismiss that news with an assumption that new starts in shared services just means taking a slice of business away from third-party service providers. Here are my tips for shifting this potential business loss to a new revenue stream.
Tip #1: Be patient
If a company has decided to go down the shared services path, your trying to convince them to use purely outsourcing is not likely to succeed. However, we know that over time companies that decide to embark on a shared services journey later decide to use third-party providers in their shared services mix, to a lesser or larger degree. So be patient. These activities take years to develop.
Tip #2: Be an ally
Don’t be an enemy of their decision to take the shared services path. Instead, be an ally and assist them on their journey. You can help them build out their shared services approach and use that relationship to identify where they could use a third party for part of of the services.
Tip #3: Cede control
At some point a shared services unit probably will adopt a hybrid approach to services. Even so, companies moving to shared services inherently favor maintaining control; so the types of services you offer them should be designed to allow them to exercise control.
Much of the outsourcing model is about giving the provider control so the provider can operate in an efficient manner and give the customer a low price. That approach won’t work in a hybrid shared services model. Instead, take an approach along the lines of “Let us help you craft control” so you can participate going forward.