Alliance Strategies – Part 3 – Specialist

June 29, 2009

Services – Specialist

Specialists differentiate their services offerings by positioning themselves as the market expert, rather than a market generalist. In doing so, these companies limit opportunities to that niche but can better focus their business development efforts and often charge a premium for their services. To effectively market your specialty, you must track your customer’s market forces and watch for evaporation. Here is a hint – simply stating that you are a National Instruments LabVIEW expert is not enough. Even calling yourself an expert with the NI LabVIEW Real-Time Module or other specific NI products is not sufficient. Think in terms of your customers. Identify your expertise in their terms, not National Instruments terms.

In many respects, business development for a specialist is the same as a generalist. Both are service-oriented business and require appropriate sales and marketing techniques. However, specialists do have something more specific to align your marketing and sales efforts around. You can network within your niche through customer references, vertical publications, and vertical trade shows. You then can better sell your unique value to a known customer list. Hiring salespeople is still difficult, but at least it is a differentiated expertise.

Working with NI

NI customers and NI salespeople often consult our online directory to identify companies with particular specialties. Therefore, it is imperative that your Alliance Partner profile includes specific information about your services. Please note that you can create separate service descriptions for each of your specialty areas. Be sure to include keywords for your specialty to increase your search relevancy.

Additionally, figure out the product marketing manager who has the most to gain from your special expertise. You can produce unique technical content; NI is always looking for success stories, particularly with newer products, that it can turn into technical articles for the Web, trade publications, and more.

As a specialist, you also have more opportunity to network with NI salespeople outside of your geography. Through your efforts with NI marketing, you can build your reputation in other geographic areas. You can also ask your local NI sponsor to introduce you to other NI salespeople in regions you would like to conduct business.

You might even consider partnering with other integrators. By differentiating your niche expertise, you can position yourself as complementary. Let them know you can subcontract your expertise as part of a larger project.

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Alliance Strategies – Part 2 – Generalist

June 24, 2009

Services – Generalist

Marketing a service is difficult because the offering is intangible; there is not a specific product with a set of features and benefits you can readily market. Instead, you need to develop and market your service brand. This is largely your identity and reputation, but you can make it more tangible by developing a consistent look and feel for not only your marketing material, but also for your documentation, quotes, customer communication, software user interfaces, system enclosures, and more. Even your project methodology and the way you conduct business can help develop a marketable brand. Once this becomes more tangible, you have something to market to the local community through local trade shows, events, and more.

Sales for a services business is all about relationships. You must constantly network with vendors, customers, and the community. Most generalists heavily rely on their entrepreneurs to lead sales efforts. Hiring traditional sales people is difficult because there is not a tangible product to sell. Therefore, it often takes the credibility of the entrepreneur to convince the customer that he or she can commit the organization to complete the project. However, in a services company, it is the entire staff’s job to sell the company. Everyone who interfaces with a customer should be able to give the ‘elevator speech’ on his or her company’s capabilities.

Working with NI

Because marketing intangible services is quite different than the vast majority of typical NI product marketing, most engagement happens at the local, not corporate level. Undoubtedly, the biggest marketing benefit at the corporate level is the Alliance Partner directory on ni.com. With more than a million Web site visits each month, it is critical to keep your Alliance Partner profile complete and accurate. If a customer is looking for a local consultant or integrator, it is likely that he or she consults the Alliance Partner directory.

At the local level, NI provides numerous opportunities to network at its local events, user group meetings, seminars, and more. Attendees meet local NI regional marcom, find out what is going on, and learn how to get involved. In addition, you should stay in regular contact with the local NI sales organization. Keep sales posted on your opportunity and project status. What is the status of your project proposals? How are your current projects going (both good and bad)? When does your next project begin? Overall, it never hurts to keep the sales organization informed, so sales employees can keep their eyes open.


Alliance Partner Business Strategies

June 22, 2009

I was going through the Alliance Resource Center the other day and saw a section that I composed a couple of years ago. But, I think it is still pretty applicable, so I thought it would make a good addition to this blog.

 What type of Alliance Partner are you?

As the National Instruments Alliance Partner Program Manager, companies often ask me for sales and marketing advice as well as best methods for working with NI. To which, my reply is always, “Well, what kind of Alliance Partner are you?” Based on your company type and the way you sell and market, much less the way you work with NI, answers to this question can be dramatically different. In this article, I discuss the most common company types and offer suggestions on how to best market, sell, and work with NI.

Alliance Business Type

As shown in the above image, you can segment typical Alliance Partner businesses into four different categories. On the left side, product businesses sell a tangible component(s) (which we often refer to as a tool) or a complete solution (which we often refer to as a system). On the right side, services businesses sell a consulting or integration service in a geographic region (which we often refer to as a generalist) or in a vertical industry (which we refer to as specialist). For instance, National Instruments is a tools-level product business while most Alliance Partners are service-oriented businesses.

The business models of a product business and a services business are quite different. A product business has something tangible to develop, market, and sell in a transactional manner. To the contrary, services are intangible and require custom development and a relationship-oriented sales and marketing effort. There also are more subtle differences, from top to bottom of the figure. That is, the way you sell and market a tools-level product is different from the way you sell and market a system-level product. Similarly, the business approach for a generalist is slightly different than that of a specialist.

In my next few blogs, we talk about each of these business ‘types’ and how it can affect working with National Instruments.


Performance Management

June 17, 2009

Since hiring doesn’t seem to be the biggest issue right now, I thought I’d jump to managing the performance of your existing employees.

Setting goals

In First Break all the Rules, the authors challenge some of the conventional wisdom with respect to management. General philosophy is that people don’t change much. So, don’t waste time trying to put in what is not present. Instead, try to leverage what is already in. That is hard enough

For instance, when selecting the ‘right person’ for a job, you might think that finding someone with the prior experience, the right level of intelligence, and the necessary willpower would be most important. But, the book asserts that talent is more important.

Based on this philosophy of hiring people for their talents then drives how you set their goals and objectives. You should focus on the right outcomes and let your talented people define their own path. But, this does not mean let them do anything that they want, still follow required steps.

Motivating people

Also based on the revelation that people don’t fundamentally change, you are better off finding out what motivates an employee rather than pestering them about their shortcomings. Position them to use their strength to their advantage and adjust, as necessary, to compensate for their weaknesses. This defies the ‘golden rule’ of treating everyone as you would have them treat you. The manager is challenges to customize their style to elicit the maximum performance from the individual employees. Also, a bit counter-intuitive is the strategy of spending time with your top performers rather than fixating your attention and time on others.

Climbing the ladderThis perspective also then shapes how you develop your organization. You can’t simply assume that it is best to promote people to the next rung of management. You’ll end up putting employees into roles that they don’t want and in which they won’t succeed. Instead, find positions in which individuals can be successful and ‘create heroes’ by recognizing them for excelling at what they are good at. Also, create ‘safety nets’ that allow people to try new responsibilities without fear of failure.


The People Advantage

June 15, 2009

First break all the rulesFrom First Break All the Rules, a required text in the NI Supervisory Development Series, the value of an organization lies in its people. So, the only way to generate enduring profits is to attract, focus, and keep talented employees.

At National Instruments, we say that our greatest and most sustainable long-term competitive advantage is our culture and our employees who directly influence the continued success of our stakeholders. It seem like our partners agree. When surveyed about the value of the NI relationship, the top response (42%)is that we have great people to work with.Alliance - NI People Greatest Value

If possible, having great people may even be more important in a labor-intensive business like consulting and integration. So, finding and developing good people is just as important as finding and developing good projects.

The People Process

Beyond, the administrative details of HR management, there are several key steps in effective people management.

  1.  Hiring the right people
  2. Providing the necessary training and skills development
  3. Setting expectations and goals
  4. Providing feedback and performing reviews
  5. Recognizing achievement and handling performance issues.
  6. Demonstrating leadership and establishing culture.

As with any other process in your company, you can work to define and improve each element. If you agree that your employees are your most important asset, then why wouldn’t you?


Managing Cash Flow

June 10, 2009

Effective project cost accounting ties directly into cash-flow management – perhaps, the most important financial practice. This is particularly true for smaller system integration companies that often operate business that are fairly low-margin and a large payroll. You can actually have a profitable business with significant revenue, still run out of the cash required to operate the business. And, that’s not to mention the cash needed to finance the growth of the business.

Managing cash-flow requires the proper mindset:

  1. Think of your business as a collection of projects, each with their own cash flow – rather than just a pool of developers that must stay busy and get paid by the end of the month. A more granular view will give you more visibility and more control over the cash flow required to operate the business.
  2. Also, have the discipline to manage cash, even when it is not a problem. Doing so, will not only give you the tools when cash is tight, but it might just improve your cash position (so that doesn’t happen).

Improving Cash-flow

Cash flowCritical to effective cash management is the ability to forecast cash-flow based on current and future requirements. Alliance Partners should have a 3 month forecast of pending payments versus expenditures. This forecast should be reviewed regularly – at least monthly, ideally weekly.

There are a number of ways to improve your cash flow.

  1. First and foremost, getting down payments to secure the materials (and labor) to commence a project. Agreeing to milestones for additional payments is also common practices. Your customer should not expect you to finance the project – unless they are willing to pay for the cost of that money.
  2. Moving your customers from 90 to 30 days can also improve your cash flow – by reducing the amount of time that you have to ‘float’ the project. If that’s not possible, you can at least establish the aforementioned billing/escalation process to ensure that they meet the agreed terms.
  3. Then, of course, you can also look at extending the terms with your vendors. Just not NI. 😉

Project Cost Accounting

June 8, 2009

Project tracking ultimately leads to individual project cost accounting. And, this is a vital step in an integrator’s ability to maximize the profitability. It becomes impossible to run the business from macro-level – simply tracking overall receivables and payables versus the total labor cost. You must be able to account for your finances on a project-by-project basis.

Quoted versus Budgeted

The first step in the process is to understand that there is a difference between the quote for a project versus the budget for a projects. The quoted price is simply what you were able to sell the project for; the budget is what you have allotted to actually get the project done. In some cases that may be the same. But, in others, you may expect to complete project for less than the quoted price. Or, you may even expect it to take more (and therefore less profit). But, don’t make a habit of it.

Getting the Complete Picture

Next, ensure that your project accounting system includes all labor, not just developer time. Be sure to accounts for management costs, project support, customer engagements, sub-contracting, …. To get a complete picture, your project cost accounting system should include hardware and equipment utilization. For instance, you may be able to save labor by using better tools.

Eventually, some integrators will go so far as to include sales, marketing, and other overhead to the projects. At first this may be a simple percentage calculation, but eventually you may find that it is worth noting which projects require more upfront marketing and sales costs.

Don’t forget about non-billable projects. These may include internal projects or lost opportunities. For some, these are just tracked as ‘negative’ projects which the other projects must counter-balance. But others figure out ways to ‘charge’ their projects for use of these non-billable activities.

Project reviews and audits

Once you have your project cost accounting system in place, it becomes easier to incorporate into your project reviews. You can look at total project cost and profitability rather than just labor costs and schedules. Issues can be raised and addressed as they occur rather than at the end.

In addition, you can perform financial audits of your projects. Take a look at the real costs and where you are actually making money. You may be able to improve your budgeting process, and even identify customers that you may want to ‘fire’.