We’ve all been in settings over the years, from locker rooms to auto plants in China, in which motivational signs were prominently displayed to ensure that key lessons were not forgotten. Even while watching Pawn Stars on television recently, an episode showed signs featuring the Old Man’s aphorisms like “Do something for God and country and get back to work.” For firms looking to elevate their position with customers through a solutions offer, a useful sign in the conference room might be drawn from an observation once made by Malcolm Forbes: “It's so much easier to suggest solutions when you don't know too much about the problem.”
The importance of understanding the problem could not have been more clearly emphasized by customers describing successful – and unsuccessful – attempts on the part of their suppliers to create value through a solutions offer. Comments made during interviews on this topic ranged from the good (“Sometimes I think they understand our company and our problems better than we do ourselves”) to the bad (“Maybe some engineer thought this was a good idea, but they could have saved a lot of money had they asked us first”) to the ugly (“After I listened to that presentation, I decided it was time to look for a new supplier”).
This message is of considerable importance, since in recent years, “solutions” have become a core element of the strategy through which firms create value and differentiate themselves from competitors. Many firms, finding little headroom for growth with their current business model, look to move into a larger available market space by expanding their offering to include more products (typically adjacent ones) and services (typically complementing and/or connecting those products).
In addition, it is frequently the case that the migration to a solutions offering allows a supplier to escape from the process of commoditization – a situation that many manufacturers have faced as global competitors become increasingly able to deliver similar-quality products at lower and lower prices. Complementary services may be the element of many projects that can’t suffer the same fate, and a solutions strategy that brings higher value to the customer can protect the legacy product base and allow expansion in adjacent service businesses.
The first element of a sound solutions strategy is the need to understand your customer and its business environment, perhaps even better than they understand it themselves, as the first comment above suggested. After all, if the value creation opportunity associated with the solutions offer was obvious, the customer would have either implemented it themselves or put out an RFP to attract a supplier capable of doing so. The most significant solutions success stories are ones that involved a supplier seeing a new and different way of doing things. But if a solutions concept demonstrates that you don’t understand the problem in the way that it is seen by the customer, it is going to fall flat on its face.
One supplier in the telecommunications industry had a very strong position with its equipment products, and looked to expand into life-cycle services associated with maintenance and repair, an offering that had historically been provided by independent contractors without any real connection to this equipment manufacturer. This firm recognized that it would take innovative thinking to win in the services business, requiring an approach that in some way was “better and faster” without too much of a compromise in terms of the cost of those services. It revisited its product strategy, and identified ways in which it could incorporate monitoring capabilities into the equipment that would both signal exactly what maintenance was needed and also shift some instances of corrective maintenance to a less-disruptive and less-costly preventive mode. This solutions offer thus integrated product and service elements in a meaningful way, one that yielded value for customers along “better and faster” dimensions that were important to its customers. And, in the end, this innovative solution allowed this supplier to make a case that their approach was in fact cheaper from an all-in life-cycle cost perspective.
This firm’s familiarity with their customers and their operating environment enabled them to spot the elements of a solutions offer that would resonate. They understood service challenges, particularly those that existed in remote areas where second visits were very costly, and they understood the enormous cost of downtime caused by product failures or delayed repairs. Their solutions offer enabled them to succeed in the service business because it addressed two real problems faced by their customers.
An executive from a packaging industry firm returned from a customer visit reflecting on the fact that the customer operated two entirely separate packaging processes in the factory that he had visited. One process involved the primary packaging that was associated with the eventual use of the product. The second process involved the packaging associated with merchandising and shelf display. He returned from that visit with the vision of a solution that might yield significant cost savings for this customer if the two processes could be combined into one. His firm’s design team subsequently developed packaging that allowed the merchandising challenges could be met by an evolved version of the primary packaging, thereby eliminating the need for secondary packaging entirely. In a subsequent interview with an executive in the customer organization, I heard the following comment: “Sometimes you don’t look at your own operations and see the potential for change. We had always done it the way we were doing it, and it took [the visit from the supplier’s executive] to see that there was an alternative.”
Both of these success stories involved a supplier that brought a solution to a problem (or opportunity) that customers didn’t know that they had – but recognized when it was brought to their attention. The litmus test of whether a solutions concept will be recognized and accepted is whether it creates previously undetected opportunities for value creation for your customer. If it does, it has the potential for acceptance. And it takes a serious investment in the customer relationship to build the knowledge base from which a supplier can identify unspotted opportunities for value creation.
Such insights don’t just happen. They are typically the product of a carefully planned set of interactions between a supplier and its customers, involving ongoing investments in these relationships. Efforts are made to ensure that discussions are future-focused, oriented to ensure that the supplier learns what is keeping the customer’s executive awake at night. Attention is given to changes taking place in the customer’s business environment, along dimensions that range from regulation to technology to competition. Such interactions aren’t limited to the account team working with the customer. Rather, they involve functional experts in the many specialties relevant to the relationship. Suppliers that are successful in knowing their customers better than they know themselves are proactive, often reaching out to customers with an idea or an insight gained in another part of their business. Being future-focused, emphasizing what is new, involving numerous people and business functions in the relationship, and being proactive are signs of a firm that has the potential to successfully spot solutions opportunities.
There was a second message about solutions that also deserves a sign in the conference room, perhaps drawn from the observation by Woodrow Wilson that “If you want to make enemies, try to change something.” In reflecting on solutions concepts that their suppliers had brought to them, many executives made remarks such as “It was a good idea, but not a good idea for my company” and “We have too much on our plate to buy into another major change, even if the idea has merit on its own”.
Most businesses in recent years have become acutely aware of the challenges of making changes to their business model or to their operations. Change itself is costly, and demanding upon a firm’s leadership and resources. One executive with whom I’ve worked recently decreed a “one change at a time” philosophy, requiring that other good ideas be put on the shelf if they were going to compete for attention with a change already approved and underway. Whether one change is the right limit probably depends on the organization, but almost everyone would agree that too many changes going on at once is a prescription for failure.
This second message defines another dimension along which understanding customers and their business environment is critical. Some solutions are going to fit in naturally, without disruption. The telecommunications firm that implemented a services solution did not impose much in the way of change on its customers. From the customers’ perspective, it was close to business as usual, with the benefits of streamlined service and fewer disruptions. On the other hand, the customer of the packaging firm described above viewed the change as a major one, and in fact delayed implementation while it went through a process of validating that the supplier had the right competencies to work with them on merchandising and display.
While the challenge of understanding customers better than they understand themselves is a major one, there are very good reasons for considering solutions strategies. If a solutions strategy can move a firm from a narrow product or service niche to a position of relevance for much or all of the overall customer spend, that can lead to significant growth in both the size of the available market and margins. And if a solutions strategy can enable a firm to stand out from its competitors in terms of the value that is delivered, the payoff not only involves current sales and profits, but also long-term relationships. Remembering the signs that customers use to point the way to a successful solutions strategy can become the route to solutions success stories.