Tuesday, April 05, 2016

Iterative Service Offering

In the world of statistics we use the word iterative to mean a process or sub-routine that repeats. For example, we can measure the effect of an action that occurs once vs. the effect of that action occurring over and over again. With each iteration we see the compound effect.

In business, we sometimes talk as if the planning process is stagnant. In other words, we talk as if we're going to do something once and be done with it. In fact, that is almost never the case.

Two very clear examples of this are business plans and new service offerings. In large corporations, it is common to have 1-year, 2-year, and even 5-year plans. After all, you almost have to make plans like that in order to try to make rational choices for spending millions of dollars and maximizing the return. Small businesses should do something similar - but should never be wedded to these plans.

The reason is simple. Small businesses must be flexible. They have to respond much more quickly to the environment. Flexibility is both their greatest asset in competition and their greatest savior when something unexpected happens.

Big businesses and small businesses are analogous to large ships and small boats. Large ships are less affected by waves and winds. They can ride out some adverse weather much more easily than can small boats. But when it comes to changing directions, large ships take a lot more time and space. Small boats can zig and zag as needed.

When it comes to business plans, I recommend that small business owners develop a very lean document. If you Google "One Page Business Plan" you'll find lots of resources, including a web page and book with that exact title.

I don't think you necessarily have to stick to one page, but please don't get mired down in a 50-page or 100-page business plan. That might be useful for a bank when you're trying to raise some money, but it's not very useful when you're trying to figure out what you want to do and how you want to get there.

I think a small business plan should cover the very basics. What are you? What do you want to accomplish? What do you sell (products and services)? Who do you sell it to? And what special terms, if any, apply to that relationship? That's it.

Note: I DO absolutely think you should budget at least twelve months in advance, and have some idea of what the three year and five year financial plan looks like. But again, these are rough numbers and you should be flexible about them.

A much better example of the need for flexibility in the SMB space is the definition of our service offerings. Here we see that an iterative process is not only useful but required. You cannot be stagnant with service offerings.

An iterative service offering is one that accepts the premise of an ever-changing environment. There is a tendency to think about "our offering" as something stable. But we all know that can't be. All the variables in our world are changing all the time. Large companies can ignore trends and the whims of the economy for a long we. We cannot, or our businesses will die.

The key variables here are: The underlying technology, our clients and their demographics, our skills/knowledge, and the economy.

The underlying technology is changing all the time. One of the absolute strongest advantages of a small company is that we can adopt new technologies very quickly. One of the reasons that there is constant turn-over on the Fortune 500 list is that large companies cling to the past. Very few of them are good at innovation. In fact, those who are good at innovation are those who have figured out that they need to create isolated silos for innovation so that internal advocates of their their old "successful" products and services cannot kill the new ideas.

Invariably, new product concepts are rejected by the people who are making money (and getting bonuses for selling) the old products and services. So, for example, Polaroid abandoned their research on digital cameras because they had a total cash cow with their film cameras. Until that suddenly died. Most newspapers dramatically under-funded their Internet editions until their paper circulation all but disappeared. Then they played catch-up with new Internet-only news sources.

These are great examples of how change takes place. You won't be put out of business by your competition: You'll be put out of business by a new technology you do not provide.

The examples go on forever.

The point is, we all know that technology changes all the time. We need to be constantly evaluating new technologies and new ways of delivering it. I'll never forget when the latest version of Small Business Server was released. I asked another consultant whether they had sold it yet and he responded that his clients weren't asking for it. Of course they're not asking for it! They don't know it exists. They didn't ask for the Internet either, but you sold it to them!

He didn't sell them cloud services either. And now he does something else for a living.

Our clients and their demographics also change constantly. This change might be slower and more predictable, but it's still there. At a minimum, your clients will age at the rate of one year per year. Their products, their services, and their company will also age at that rate. They will be affected by their economy, their industry, and their competitive environment. You have no control over these elements. But that doesn't mean you can ignore them. You have to tune into this.

No matter what your clients do, their business is affected by technology and economic shifts. That's one of the primary reasons I recommend Technology Roadmap meetings or quarterly business reviews. These are meetings with client to sit down and discuss where they're going and what they expect in the months and years ahead. In addition to helping you serve them better by making good choices about technology, these meetings also help you figure out what will happen within your own business.

Our Skills and Knowledge are completely within our control. But we cannot gain infinite knowledge. We have to make choices. And since technology expands all the time, we cannot know everything or educate ourselves about everything. So we have to decide what we want to be experts at and what we need to outsource. If nothing else, we need to have a philosophy about how we approach the world of expanding knowledge.

One of the changes I've noticed in the last ten years is that many small business owners have stopped educating themselves on new technology. I do not understand this. It's one thing to say you're old and retiring and you don't want to take on more changes before you retire. But if you're NOT retiring in the next twelve months, then you have to stay committed to learning!!! You have to figure out what you're going to sell and who you're going to sell it to.

Finally, there's the Economy. You have no way to control the economy. But you also don't have to freak out about it. Remember, you can't affect the global economy or the national economy. You can't really affect the local economy. There's only ONE economy you have to worry about: Your personal economy. How are YOU doing? How is your business doing? Not in relation to the world, the nation, or the state.

How are you doing in relation to how you want to do? That's your economy. That's the only thing you can affect and it's the only place you should spend your time worrying (if you spend any time worrying).

Take all this together. Consider the underlying technology, your clients and their demographics, Your skills/knowledge, and your personal economy. All of these together are constantly moving. It's like a Newtonian model of the universe. All of these things are in motion and they all affect one another.

Now Consider Your Service Offering

Let's say you developed a service offering five years ago. Since then, all these major variables have changed. Technologies have come and gone. Clients have evolved. You have evolved. Your business has evolved. To be successful, you need to constantly look at your service offering. Tweak it. Fine tune it. And then do it again.

Here's an example from my company: My cloud service offering. Like most people, we started out with a variety of unrelated cloud-based offerings. We started hosting web sites in the 1990's. We started offering hosted spam filtering in the early 2000's. Then hosted Exchange mailboxes and hosted backup.

Eventually, in 2008, we started offering a bundle. It included all that plus cloud-based remote monitoring and patch management. Over time we added features/services based on what people actually used. This now includes a basic Office license via Intermedia.

We revisit this offering at least once a year. Our goal is to provide a bundle that gives the client "all the technology you need." So whatever fits into that promise is open for discussion. The pricing, add-ons, and core bundle are always open for discussion. We want to have a "standard" offering. But we're dedicated to changing that offering as needed.

The concept of an Iterative Service Offering is simple: Start with something. Where you are right now is fine. Then begin a process of evaluating, fine-tuning, and changing it. Never stop that process. Think of it as a never-ending conversation about what you should be offering your clients.

Consider the changing variables around you, your offering, the technology, your clients, the economy, and everything else in your Newtonian universe. All of these things are changing all the time.

But remember: Do this with intention. Haphazardly responding to every request is not the same as systematically re-evaluating your offering. Create a process - and work it.

What's your philosophy about revisiting your service offering?

If you don't have one, today's a great day to start.


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