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Solution business model – how to secure profitability?


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1. Understand your customer’s business and the customers customer’s business
2. Drive for outside-in solution approach, solution for you might not be the solution for your customer
3. Establish strong, globally aligned product management as foundation for solution business

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Solution business model – how to secure profitability?

  1. 1. Solution businessmodel–how to secureprofitability?Managing Consultant Antti Sääksvuori© Talent Vectia 1
  2. 2. Why Solution businessis hard?
  3. 3. Concept of a solution3 Source: ITSMAWhat is solution for suppliers vs. customers in IT business?An example - how suppliers think and howtheir customers perceive the same issue –solution business modelArea Supplier View Customer viewRequirement analysisand definition7% 76%Integration 73% 86%Deployment 4% 86%Post deploymentsupport4% 92%© Talent Vectia
  4. 4. Why Solution Business is hard? –#1 Outside-in view is hard to set-up1. Understanding customer needs• Business related needs• Lifecycle needs• Customer’s business process needs2. Understanding the needs of the customer’scustomer• what is important andwhy for your customer3. Transferring this understanding to functions and features in products andsolution modules and to commercial terms, conditions and pricing4. Understanding the impact and true value of:• New functions and features in products and solution modules• Commercial terms, conditions and pricing amongst the customersgathering and managing individual requirements is easy, but its very hard tounderstand the value impact of these requirements4© Talent Vectia
  5. 5. Why Solution Business is hard? –#2 Internal profit barriers destroy the margin• Organizational silos - solutioncustomer is NOT interested in:• Supplier organizational set-up, silos,responsibilities• Supplier Internal / transfer pricing• Supplier Score cards, conflicting bonusmodels• IT-platform inconsistency –manual fix work, non valueadding copy paste and errorgeneration• Operating procedure / processmismatches – ”we do this way,you that way, some one fixes allfor this case”But the individuals in your organization are! Minimize the implications ofthese in order to secureyour capability to deliver with profit5© Talent Vectia
  6. 6. Why Solution Business is hard? –#3 Different types of products / organizationsdo NOT match6CustomerHardware /Organization 1Software /Organization 3Services /Organization 2Solutions business /Organization 4Fact corner:• Products are by nature different (they do NOT match withoutextensive design effort to make them match)• Organizations (organic or acquired have different histories)• Business models are different / earning logic, costing models etc.HarmonizationInterfaces Harmonize products or buildinterfaces betweenbusinesses© Talent Vectia
  7. 7. Securing profitabilityin solution business
  8. 8. Securing profitability in solution businessThe product (independent of the type: HW, SW, service etc.) is the key here when this is every day operation - products coming from various corners of the organization canbe sold, delivered and maintained in together as one entity creating an optimal solution from thecustomers perspective• with excellent quality, minimal time & effort, using same processes, IT-platforms andmanagement modelsDetailed product definition exists throughout the portfolio1Product design - all products in the solution are designed to be:1. Sold2. Delivered3. Integrated4. Maintained  TOGETHER as one solution3Product definition – all products in the solution share the same definitionmethodology2Product architecture - all products in the solution share the common productto product interface and logic1. Use of modules / elements4Product management - all products in the solution have:1. Common cost allocation model2. Compatible Pricing logic3. Same management approach58© Talent Vectia
  9. 9. Service is the keyprofitability challengein solution business
  10. 10. General • Service intangibility how to define a service in afirm and standardized wayService specific solution challenges© Talent Vectia 10Pure services• Customer lock in – customers have ongoing-onlinerelationship with the service supplier for years• Service suppliers have multimillion customerinstances (telcos, banking & insurance, managed ITetc.) using services continuously without anyintervalsportfolio management, new service introduction,product change management is extremely importantHardware<> serviceconvergence -Solution businessmodel• Solution creation, delivery and maintenancecombines tangible products, software and pureservices in a challenging way.• These entities, very different by nature, need to bedesigned and managed together.
  11. 11. Services and PLM - Product LifecycleManagement Companies delivering services need to start building carefully defined, (modular, configurable)and easily repeatable service products Service companies need precise service definition through standardized definition and documentationmethodology1. In the manufacturing industry highly structural product development has been standardpractice close to 100 years – roughly since the time of Ford T-model2. In service industry many companies have long suffered from more or less haphazardapproaches to innovation, product development, product definition and product renewal3. The challenges in applying the discipline of formal product processes to services areapparent. Services are intangible, hard to define, design and test.4. Due to this most service companies have not established precise and well defined productdevelopment and product management processes.11© Talent Vectia
  12. 12. Summary
  13. 13. Summary & take aways13• Drive for outside-in solution approach, solution foryou might not be the solution for your customer• Establish strong, globally aligned productmanagement as foundation for solution business• Build your products to be sold, delivered,maintained, priced, costed together• Base product management on solid and scalable,flexible product architectures• Understand your customer’s business and thecustomers customer’s business• Stop managing individual requirements only123© Talent Vectia