Every service provider is looking for the one, simple thing they need to do to change their growth trajectory. They think they may need to change their messaging or perhaps they should incorporate automation into their finance and accounting offering. Or they think moving from FTE-based pricing to transaction-based pricing will grow their business. If a silver-bullet answer existed for the question of how to grow a service business, it would be a wonderful thing. But here’s the sad truth: none of these actions will change the game.
Insanity is doing the same thing again and again and expecting a different result. Are service providers going insane? It appears so, since they keep looking for simple, one-dimensional answers over and over again. I think by now they should be willing to step back and realize that their growth problems are much bigger than getting their messaging right or delivering the right combination of offshore and onshore resources or even adding a host of new service offerings in cloud, as-a-service, digital and automation platforms.
We talk with providers that are very enthusiastic about their new offerings and say they’ve signed dozens of new deals. But when we ask how much revenue comes from the new deals, the answer paints a very different picture. Often these are small sales, pilot situations and small revenue with the hope that they will grow into something larger. That may be where the market is heading, though not always.
Does a provider’s future success depend on moving to new technologies, new offerings? Providers need to recognize they can drive bigger sales by focusing on well-established areas that customers are already buying. For example, businesses will spend small amounts of money experimenting with cloud and social media, but they will spend huge amounts of money extending their CRM system so it supports the provider’s new offering. Evolving established technologies drives much larger revenue than experimenting with new technologies or new business models. That said, this still won’t change the game.
I believe providers need to stop their insane search for silver bullets and look, instead, at the fundamental tenets of how their customers perceive them and then change the nature of those relationships.
Providers that want to change the trajectory or the nature of their customer relationships and move into a deeper relationship on a larger scale likely need to change how they treat customers. Today’s customers want deeper, more intimate relationships.
But when we at Everest Group talk to providers about this reality, we find very few service providers are willing to step back and do that. Providers tell us they can’t afford to allocate more resources to customer relationship development and customer care functions because their cost of sales will rise too fast. So they just keep treating customers the same way but expecting a different outcome.
The dilemma for service providers is that they have a shareholder mandate to drive growth today. Sure, they get rewarded for growth in the current quarter, but their future ability to drive growth depends on their ability to position themselves should new technologies catch hold. When that happens, having already established deep, intimate relationships with customers will drive growth.