Services in Project firms
There are two (quasi) independent variables that can be focussed on while discussing Services in Consulting Firms. I will try to get to those after I make the objective of Services firms/organizations clear. Product centric orgs deliver goods primarily, or the equivalent of goods (such as License Sales of a software of an IT company), whereas the Customer centric orgs deliver primarily the business models and tools which the client can use (such as implementation of a software of an IT company). There is also a contradiction that must be highlighted right at the onset… For most clients, the project/service being purchased is the means to do their core business, whereas for the Services firms the project or the service that they are rendering is in itself their core business. Having laid the groundwork for what is to follow, let me revert to the first sentence and now introduce the very natural variables around which a Consulting Manager’s life revolves.
The complexity of the core project delivery reflects the product-centric view.
The firm’s degree of maturity in delivering services reflects the emphasis on service provision.
| Impact type | Description of the impact |
|---|---|
| Customer entry | Customer entry refers to the desired effect of the service representing an entry point to a specific customer or other customers in the market segment, for additional services or projects in the future |
| Customer value | Customer value refers to the effect of creating additional value to the customer with the service, which obviously has a favorable impact on the supplier firm’s margins and profitability in the delivery of a single solution or in the overall business |
| Competitive advantage | Competitive advantage refers to the increase in the competitiveness of the company’s offerings with a specific customer or in the market segment by making the company’s offering more attractive than competitors’ offerings for the customer, or by making the company’s offering more difficult to imitate: this leads to sustainable competitive advantage |
| Delivery efficiency | Delivery efficiency refers to the service’s impact on delivery activities making them more lean and costeffective |
| Service business | Service business refers to the fact that the delivered service itself is justified as part of a profitable business by creating for itself a steady and predictable revenue stream |
| Innovation and learning | Innovation and learning refers to the service deliveries’ impact on creating new knowledge, or creating of new solutions and capabilities, which improves either the specific project or service delivery at hand, or future deliveries and the overall business of the project-based firm |
The above table shows the six types of impacts of services on the business performance of a projectized firm. These are highly theoretical in nature, but we see their applications (or some combination thereof) in almost all projects.
Customers are more prepared to request expert services from consultants, engineering firms and contractors when the project is extremely complex. Interestingly, the customer’s perception of project complexity, not the supplier’s, determine its contractual behavior. This is a marvellous selling opportunity, and a prudent Consulting Manager would galvanize, gauge and influence the complexity perception of their client to see how high or low they can go when entering the contracting phase. Keep in mind that customers are more likely to involve themselves with projects that they find novel or complex rather than with financially large projects.
Complete offerings include bundling of products and services and that a more complete offering usually includes more service components and customer-specific solutions that also meet customers’ needs better. The supplier can change its business logic from being an equipment manufacturer to becoming an integrated solutions provider by either first moving towards a closer relationship with the customer or by first moving towards greater product bundling. Greater product bundling would in many cases lead to increased complexity. For understanding the “Project Capability” model, the Service provider needs to have a relationship with the customer where they understand their integrated business needs. The Project-Capability model has three stages in the transition from exploratory to exploitative phases in project business:
(1) learning from vanguard projects | Usually firms note down the lessons learned per project to initiate a “playbook”
(2) learning from project to project | Iterative learnings from multiple projects lead to a standardized approach
(3) learning from project to organization | The playbooks across Services are then amalgamated into a generic structure which helps the services provider deliver and keep track of their projectized business
This model draws attention from the project-service dichotomy towards an organizational perspective on the degree of maturity when delivering projects with increasingly larger scopes.
This last “Project Capability” model is highly business line specific. Imagine that your firm has multiple lines of business, with each at a different stage of its maturity and capability. The task of the PMO becomes to advance the learnings, and share with the management to attempt a cohesive product specific approach which helps the PMs deliver. PMOs often make the mistake of assuming that their business logic is uniform across all lines of business. This rudimentary error, I have personally seen (and remedied) across multi-billion dollar firms which ultimately leads to Hypercare Escalation services (which I have lead). I explain below the three business logics that I have personally dealt with from Pre-Sales to Continued Customer Engagement. This will give a framework to think with respect to Services maturity.
For the lines of business characterized by a product driven business logic, the most important drivers for including services relate to technological novelty and the degree of customization of the final system. To increase the degree ofmaturity in delivering services the firms need to change from product focus to customer focus in the offering and the organizational setup should change to customer segments. One of the firms benefited significantly from legislation requirements that were a driver for extensive service offering. Services and License sales need to work in tandem for this scenario to be successful.
The innovation and technology driven business logic is related to the fact that complexity of the core project content provides an even greater opportunity for service-enhanced project deliveries. For example, the intensity of regulatory involvement was a strong driver for including services in the early phase of the deliveries as the complexity of product technology required input from the supplier itself. Topics related to technology, such as choice of system architecture, extent of embedded software and customization of final system, were the strongest drivers. Innovation rarely happens at the established status quo space, it happens at the frontiers of the known vs the unknown, and as such divergence and convergence is a core phenomenon (as explained in another blog post)… Service providers therefore need to have a strictly Time and Materials type of contractual agreement in this scenario.
Business driven logic is related to the development of an industry specific logic in the services sold. Oftentimes we deal with the industry experts, and as such the Service provider needs not just to have a stronghold on their own offerings, but need to have a solid grasp of the environment in which the customer lives, their business specifics. Large consulting firms often work in this domain. Obviously this rewards them with certain credibility and certain capabilities to participate in the early phases of the investment. This in combination with their dominant positions on the supply market also further provided them with certain bargaining power to pursue true win–win contracts that may finally dictate the evolution of the industrial logic in the respective industries.
In the end, I would like to say that all of this is philosophizing can ultimately be unnecessary from a Service Manager’s viewpoint. Just do your job well, and deliver. I have seen spectacular failures occurring frequently in highly “theorized” and highly “organized” firms who claim to have all sorts of business acumen applied. I have also seen services delivered in such a formidable way that at the end of my audit, I had no improvements to suggest despite the firm just “winging it”… If I must distill it all down, then I can say that none of these are technology projects. These are still people driven projects, and if your employees have the killer instinct to win, and you incentivize them to finish a good delivery, then things to happen. Incentivizing is extremely important, and choosing the right people and retaining them is a big win in itself. Services fails when the firms management concentrates too much on models versus keeping their workforce motivated. You will be surprised at how often that happens :-)
