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Executive Alignment and the SAR Factor

In Figure 2, the support services and education services blocks illustrate the traditional service opportunities on which a product company would focus—both are closely related to the core product of the company. But now, product companies are exploring new service opportunities that seem very attractive. Implementation services are more complex than standard support services, but still closely related to the products of the company. Implementation services are also typically delivered by support service personnel who have downtime between support calls, so these services don't represent an investment in incremental staff to deliver the services. Professional services are consulting services that may or may not be directly related to the product (represented by the gap between the professional services box and the other boxes in the diagram). Professional services also represent an incremental investment in new skill types. Because these services are complex to deliver, there's a business risk in providing professional services—one that many product companies don't fully assess. If the new professional service offerings are not aligned and somehow anchored to the product company, the services may be both unprofitable and counter-productive to the objectives of the product company. We refer to this risk as the Services Alignment Risk (SAR) factor.

Figure 2 Types of services.

One alignment technique that can be used to reduce the SAR factor and anchor professional services to the rest of the company is the discussion of the mission of the new professional services business unit. The executive team of the product company needs to openly and formally discuss the mission of their new professional services unit. Before finalizing the mission statement, the executive management team needs to agree on one key point: the overarching purpose of this new business unit. What is the main purpose of this function—the purpose that overrides all other objectives? What is the fundamental reason this business unit has been created at the company?

Let's look at some potential answers. The overarching purpose of the new professional services organization might consist of any one of these objectives:

  • Drive/sell the product and service portfolio of the company

  • Ensure high customer satisfaction

  • Maximize profits (for its own P&L)

  • Assist in developing leading-edge solutions for key customers

In reality, the executive team may want to see the professional services fulfill the entire above list. But, what is the primary objective? The executive team must call this out at the beginning. If not, conflicts will occur. In his book Living on the Fault Line, quoted earlier in this article, Geoffrey Moore addresses this issue of mission directly:

"True, they (professional services) are also expected to generate revenue, and true, this revenue does count on the bottom line, but that is not their primary value-creating function. It is, instead, to contribute to the greater good...The challenge facing this organization's management team is to charter it correctly, to make absolutely clear what is core and what is context. For independent consulting firms, revenue is core; for professional services organizations (that are part of a product company), revenue is context!"

Let's review a simple example to drive the point home. A key customer is using your professional services team to implement a new solution. During implementation, the customer determines that they're better off using a competitor's product in the solution, rather than yours. What should your services unit do? If the prime mission of the services unit is to maximize its own profits, it should probably continue with implementation to get the service revenue. If the prime mission is to ensure customer satisfaction, the service staff should not disengage. But what if the primary mission is to maximize the company portfolio? Why then would the services unit deploy a solution on someone else's platform? They wouldn't.

Another quick example. What if your second-largest customer wants to engage the services team—but at a hefty discount? Does services comply or find more profitable pastures? Again, the primary mission would help guide that decision.

In general, the executive management team of the product company must recognize that professional services offerings, unlike other service offerings, have the very real potential to drift away from the core purpose of the company. The management must use touchpoints such as "mission" to aggressively anchor professional services to the rest of the company.

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