In order for a business to succeed it must have a clearly defined strategic value that it provides to shareholders, stakeholders (e.g., customers, suppliers, employees,) and the market place at large. It is important to clearly define strategic value since it is the precursor to developing a value proposition and mission statement. Furthermore, it forms the basis for the strategies, tactics, and programs that a business puts into place.
Nowhere is strategic value more important than in the High-Tech Service Industry. All too often, service providers, especially those that are divisions of product companies (e.g., OEMs, VARs, Distributors) fail to clearly define their strategic value. As a result, they fail to make any impact in reaching their business goals and objectives. They are like a ship on an ocean without a sail, drifting aimlessly in whatever direction the winds blow.
We have found that there are at least three (3) common strategic values that High Tech Service & Support organization might chose to pursue/adopt. These include:
- Directly influencing the sale and adding value – A company who adopts this strategic value recognizes that service is very critical to the customer in their final selection to purchase a product. In other words, it’s a value-added feature influencing the purchase decision. Dell is a great example of a company who uses service as a way of directly influencing the sale of products.
- Generating revenue and profits directly – This applies to any company that operates their service business as a profit center or strategic line of business. These companies recognize that customers are willing to pay for service independently from purchasing equipment. More importantly, their willingness to pay is based on the value-in-use of the service not it terms of the perceived cost. Much of IBM’s success in the 1990s was due to their ability to generate revenue and profits from directly selling services.
- Providing market control – Companies who embrace this value driver provide a broad array of services in order to gain account control. In essence, they engulf their customers with an extensive portfolio of basic and value added services in attempt to establish a trusted advisor position and influence future sales. GE is a prime example of a company that has achieved this result by offering its customers technology assessments, strategic planning, and other types of professional and value added services.
When establishing your strategic value it is important to select one and only one value driver. Otherwise, it will lead to inconsistent performance and confusion in the market place. Strategic value cannot be defined in a vacuum, it must take into account the needs and requirements of your key stakeholders and align with your overall corporate strategy. For example, a company focused on generating services revenues and profits directly may find this goal at odds with its objective to increase market share in its product market. Basically, the service division would be competing with the products line of business for resources and investments. More importantly, your definition of strategic value will determine where you focus in terms of Key Performance Indicators (KPIs), such as investment considerations, business constraints you must optimize, and possible market outcomes.
Strategic value when set into motion is difficult to alter since your entire service program and corporate objectives are based on this. It often takes a commitment from the C-suite and/or board of directors as well as persistent and consistent follow through from management to successfully redefine your strategic value in terms of measurable outcomes. This change should not be pursued lightly. Those who succeed at redefining their strategic value often do so after very serious consideration, typically involving strategic market analysis, risk assessment, and scenario planning.
Strategic value is the DNA of your service business. If defined poorly, your strategic value maybe a liability and bankrupt your company. If designed optimally and implemented effectively it can lead to unlimited upside potential.