Introduction:
In a global business world from service provider’s perspective, lot of importance is given to the acquisition of a business from new client. This cycle of acquisition of any client is generally very long which is not solely due to contractual and legal implications but many times clients will take decisions of awarding the work based on “what value organization will gain” on a long term basis by bringing in the service provider (or vendor) to the organization. Working with newly acquired client or existing client is proving enormous challenges to the service provider community in existing business scenario because of economic slowdown, ramp down business, stiff competition, impact on pricing and increased cost of operation and maintenance etc. Hence the search for getting better from service provider at a lesser cost is inevitable option for them.
On the other hand, once the business is acquired, the service provider tend to get bit relaxed with the mindset that, client will stay and business can be handled as it comes to. At times the relations between the service provider and the client sometimes gets strained once both of them starts getting in to each other’s known and unknown area of weaknesses and it can start developing crack if the focus on building relationships do not go in positive way.
Today clients are looking at service providers as a not just someone who could be hired and fired but as a business partner and he is ready to share his business eco system to help service provider understand the way business is performed by him. It should just look like a business marriage and strengthening of each other core competencies rather than taking a view of one time partners. Clients are increasingly looking for focusing on building long terms relationships with their service providers and developing a common platform which can exchange the business needs for common goal.
The service provider of today’s business world needs to look at improving the client’s business experience for his organization, customers, and competitors. What type of service, product or tool proposition and its implementation can provide edge over to the client among his competitors? From client’s perspective, his state of mind reads as how drastically he can improve his bottom line or top line and how client can improve his customer base as well as revenue targets or it could be how he can minimize the operational, technical or service related issues which are impacting the business or how best he can bring down the operation and maintenance cost of his IT services.
Most of the professionally managed global organizations who embark upon vendor management and outsourcing their product or services or both have their short, medium and long terms business plans to derive significant business benefits from the service providers and measure them as a part of BLA, SLA or OLA. Such types of agreements are well designed at the start of contractual relationship and then are typically reviewed at fix periodicity with the service provider.
Those days are over, where services of service providers (vendors) are justified at the cost of dollars which is paid to them per hour and they can show as per contractual terms what has been accomplished to claim the payments. Clients are expecting much more cream, than just a dollar value as a freebee in terms of value ads. Clients expect service providers to create positive impact on their business in many ways. Hence the need of hour for service provider is to plan for it and demonstrate on a continuous basis the value they are creating for their clients. It became essential for service providers to come up with value added proposals for business growth of client and plan for is capability demonstration to show greater confidence which can really make a difference
For a service provider, experience with newly acquired client shall be similar to the sports tournament where first few minutes of game is very important and if you show professional game with winning spirit and confidence in achieving results then your chances of winning new client are very high. Further even if you are a seasoned player, you need to win every game to prove your credibility.
Today the service providers need to follow a mantra of “Win the customer every day”. Every small step taken by the service provider need to be translated in to benefit which his client is looking for. It calls for interacting with the client in a business centric way and managing the customer experience more rigorously. Couple of survey’s done by service providers may show a higher percentage of customer centric approach however the reality is how many clients will agree to them.
Session highlight: In a game changing business environment as a service provider, it is absolutely essential to adapt to the changes in the business environment of your client and quickly align yourself to demonstrate that clients changed goals are your goals moving forward. For example if client is looking at overall cost cutting by 10% then as a service provider what will be your proposition to client in optimizing and consolidating services. You need to make your client feel that you are part of his mission.
Need for value creation:
In engineering terminology there is a concept of “perpetual motion machine” which works on the principal of providing more output as compare to the inputs, similar philosophy is adopted by the business community who expects more output per dollar.
Need for value creation is felt by client organization, globally due to multiple reasons,
o Clients are looking for differentiators which can influence their business outcome in a positive way.
o It is a tendency of business to get more by spending less as a part of business philosophy.
o Market pressure, stiff competition, business complexities and growth trajectories are pushing them hard to do more for less.
o Managers from client organization are required to impress their management for their survival by getting these additional values from their service providers.
o It is possible to compare and choose the service providers on the basis of additional value provided by them to the business.
o Client expects service provider to be a business partner in his growth.
What is value creation?
By intent, the definition of value creation could be different for every client depending upon his business goals and pains, however in a simplistic term it may be the act of a service provider which delights client (it may be while creating, implementing, or managing of a service or product) because it provides returns, over and above the investments made by the client or cost paid for the services. Sometimes it is termed as freebee because it comes free along with the service or product rendered as per contractual requirement.
Distinction between value creation and paid services:
There is always confusion with many professionals in terms of differentiating value creation from paid services. For instance, client organization may feel no more wonder if you deliver services and or products as per contractual payment terms and conditions, however value created for same client could be over and above the dollar value paid and in terms of tangible or in tangible benefits such as ROI, improved customer delight of client organization, reduction in overall number of business issues or Problems or increase in customer base.
Value creation details are not quantified in contractual terms in SOW or purchase order but they are defacto and many times unwritten client expectations and in some cases service provider has to discover them and bring it to the notice of client stakeholders to win his confidence.
Session highlight: Value creation generates long lasting effect on the overall business climate of client organization.
Strategy for value creation:
Why strategy?
On account of explosion in IT services demand, service provider organizations have recently started stating in their core principles of working towards client that they believe in creating a business strategy for their clients which can deliver greater value. Such strategies can provide a better confidence to the client, aligning with his business objectives or concern and provide them required comfort.
The strategy of value creation for client in a way is a continuous process and need to be revamped along with the changes to the business objectives or concern of client based on his business environment.
Session highlight: The business strategy which service provider need to create for his client shall be aimed at creating minimum 2X value over and above the size of the contract value which he receives from his client.
Levels of value creation:
Value creation for client happens in a various ways and it really requires thorough understanding of client’s stakeholders, business, technology and operations as a whole. Client Organization has various stakeholders such as staff, senior management, end users, customers, other vendors etc. Value perceived by each one of they could be different depending upon their problems, issues, concerns and business objectives. It is important for service provider to consider all of them while serving such organization.
The value created by service provider has different flavors and it is opportunity based. It is a continuous process although it gets created at instance level. For the sake of convenience it can be broadly classified at 2 levels.
Strategic or Business Level: At business level the value creation is aggregated effect on business environment due to the service or product supplied by the service provider and is measured in a tangible manner in terms of numbers, percentage or factors etc… The calculation and arriving at business value is tricky and sometimes it could be misleading. On few occasions the measurement of value creation is intangible.
The good examples of service provider’s value creation in a tangible manner are No of new customers added by client due to outstanding services given by service provider, Growth in revenue in percentage or percentage Improvement in revenue.
Intangible values are difficult to measure hence they could be stated such as service provider can help client in consistently implementing the regulatory standard, or maintaining the compliance or providing ease of operation or sourcing the difficult skills when it is critically needed for the business.
Operation Level: At operation level value creation could be tangible or in tangible depending upon the business environment of client organization. Operational level value creation may or may not have overall effect on business environment. It is more local in nature.
The good examples of service provider’s value creation in a tangible manner are SLA based improvements, High availability of system, % Reduction in down time, improved response time in percentage and intangible value measures could be highest level of collaboration, outstanding team work, process compliance.
Session highlight: Value created for every stakeholder of client organization is broadly classified at business and operation level
Value creation framework:
Every service provider needed to create a client specific value creation framework aligned to client’s business environment which can be used on a continual basis to create value added instances. The framework brings lot of consistency and unique understanding among the team members of service provider organization. Such framework should work as value creation engine and is back -up with set of tools and processes to capture the pulse of customer on the ongoing basis. Service provider may need to do investments in this regard keeping in mind growth of business and relationship with his client.
Understand the value propositions and create plan:
The value creation proposition typically starts from the day engagement with your client begin. There is concerted effort required from service provider and his team to systematically plan every activity that enhances value for his client. When new service requests are raised by client service provider shall focus more on providing additional value rather than providing low cost services. Many times client may not be clear or vocal in telling his service provider what can really make a difference to his business, in such cases service provider need to validate his understanding about the value client organization could gain by doing certain tasks. This can be done through various discussions forums and by looking at the scope of work.
Here are few inputs which can help in creating a structured plan for value creation.
o Find out what client value in it,
o Distinguish between technology and business aspects of client engagement
o What features and services, client gives top importance
o What are the top most challenges, issues, unique constraints or problems client is facing
o Talk to client stakeholders such as technical team leads, end users, customers, senior management to understand business imperatives and impacts
o Understand the client environment, market, customers, location,industry,culture
o Understand how customer intimacy and collaboration can be enhanced
o Establish common understanding and definition of value in consensus with client
Implement value creation plan:
Implementing the value creation plan requires focus and common understanding with in service provider’s organization. Every resource engaged in providing services to the client should understand clearly the value needs to be delivered to the client in the course of time as well as the process by which this can be reported to management of client organization as well as service provider organization.
The value creation plan shall consider number of value add proposals at technology, process, tool, service or business level which can benefit to client,each one of them has to be weighed against the business environment of client. The service provider organization shall believe in open culture of working with client and shall have courage to point out ambiguity, blind spots, problem area in a formal manner which can minimize the impact on clients business in adverse manner.
Sometimes value added proposals may have short term and or long term benefits, every element of benefit which can add value to any stakeholder of client organization shall be considered.
While implementing value added proposal focus shall be on good resources that can really generate lot of value to client organization, such resources shall be retained.
Capture, Qualify and Quantify value creation instances:
Many times, teams of service provider’s organization probably do a lot of value added work for their client, however they lack in bringing visibility to the client as well as to the service provider organization management, hence it goes unnoticed. This poses the service provider team to a disadvantage since it loses opportunity to get recognized. The other disadvantage is that, senior management of service provider organization lacks the view and misses the opportunity to show case best practices to other prospective clients. Hence the value creation framework and its proliferation to the team in service provider organization provide right solution to this problem.
Value creation is a process of transforming the client business status in a positive way to enable him to be more competitive and meet his business goal in a time bound manner
Measurement of value creation requires instituting systematic process to ensure that all value added instances are captured, quantified, represented and endorsed by client. This helps in creating more convincing ground for strengthening and nurturing the relationship. Most of the time client themselves experience the impact of value added services they received from service providers.
Qualification of what constitutes a value added service for a particular client is very important and that happens through a strong collaboration and frequent consultation with client organization at all levels. The focus of qualifying a value added service obviously comes from his business environment and it is essential to pick-up those bottlenecks, hurdles, issues through continuous dialogue, review meetings and management presentations. Once you decide those attributes of qualifying value elements then it is possible to design a process and or tools to capture, quantify and measure them at intended periodicity. It is also important to check the qualifying criteria with client. For example for rolling out a new business process through the IT system, client faces change management issues with his staff and you are a service provider of IT system, you may want to offer him a change facilitator who can really address this issue to avoid deployment failures. Hence qualification of what will be really a value to client is of prime importance.
Quantification comes immediately after you decide on what has been a qualified value to your client.
Quantification of a value added element from its non existence or minimal state to the sizable state after you as a service provider work on that can show a clear difference in your achievement. Whether it is client or service provider, quantification of a value add in measurable terms always provides comparative reference indicator within organization and many times among the competitors. This quantification of value is done in many ways such as numbers, or percentage or in the scale of 0-5 or 0-10 etc… Accurate calculation of value adds measures in a timely manner at logical periodicity provides good trend to help service provider to work towards achieving more and simultaneously show casing such trend at periodic intervals, adds to the confidence level of your client.
Measurement of value creation:
Measurement of value creation requires clear understanding and definition of measures, timely capturing them and articulating in a way it is convincing to the client.Value creation happens in a various way and throughout the period till service provider works with client organization. Metrics created for this reason should also measure the performance of tools, processes and people to let you know whether they are showing value based results or not.
Some of the typical measures which can provide the proof that value creation is happening are given below.
Customer Delight Index (CDI):
This is one of the measures; service provider can use to capture the degree to which the client is delighted. This measure can be captured at regular periodicity. The rising trend in CDI and consistently maintaining that at highest level is one of indicator that client is happy with your valued services. One can decide which aspects of services can contribute most to the customer delight. Few examples of customer delight are consistently timely delivery of services throughout engagement or a period, or demonstrating service level performance better than agreed SLA, response time to the queries which can be much better than agreed time line.
Reducing system down time:
Use of innovative techniques and ideas while providing services to client can lead to better throughput. For example if you are undertaking maintenance of clients IT systems which use to have downtime of 4 to 6 hours per week and you have innovatively created better maintenance procedures and tools to bring down such down time drastically to just one or two hours. This constitutes a good example of value add to show case to your client.
Client endorsement:
When the value add measures are captured, it is necessary to represent them in appropriate forum. Service providers can use the opportunity of periodic management reviews, business reviews and progress reviews with client organization to share the results of the efforts taken towards creating value added services. Many times service providers select opportunity to discuss value additions with client during contract renewals or extension period to create conducive atmosphere and impress upon the fact that they are aligned to the business goals or concerns of client organization.
At team level such value added services are shared to the client in the form of case studies or best practices. One of the important aspects of knowing whether we have created value for our client or not can be addressed by getting outside perspective. Such perspective can be obtained by talking to analyst group, competitors, or surveying organization. This is bit tricky due to the confidentiality reasons and some time due to the ambiguity in value added measures. Service providers can takes 3rd party view to understand value creation for large size client organizations.
Judging client pulse and his endorsement on value creation for the work performed by the service provider also reflects on whether the stakeholders in client organization are happy or not and the relationship is in Win-Win situation or not
Session highlights:
Value creation framework is a sustainable asset for client organization to provide him confidence and visibility on what service provider can do to enhance his business value
Tools for value creation:
Service provider organizations may have specific tools created and in use for multiple clients and some of them could be similar for similar engagements. There may be a need to create specific tools looking at clients’ business environment which if used successfully can provide higher benefits and value to the client.
It is essential to think of those tools which can work and provide quick results to client organization. There is also a need of doing this before client starts feeling that he is no more getting the value by engaging service provider.
Following are some of the recommended tools
o ROI models: Return on Investment (ROI) models are invariably used by many service providers to show case the value coming out of engagements over a period of time. However ROI calculations are tricky in deciding the parameters for input and output
o Reusable components: This is one of the great asset service provide can en cash on because the reusable component can have a positive impact on deliverables and output of service provider organization which minimizes errors, reduces time and efforts and provides jump start for client engagements. If service provider do not have already created reusable component then he can create such components for his client who can be used by client organization on the ongoing basis without spending extra time and efforts. It becomes a value add asset. It is also relatively easy to calculate and show case the value added service or product to client organization which uses it in a recurring way. Typical examples of creating reusable components are set of requirement/use cases, test cases, templates, objects, and platforms, standard business process flows for a particular business process or product.
o Customer delight survey: Customer delight survey is one of the powerful tools used by almost every service provider to get to know the degree of value added services given to his client. Many service provider organizations have survey portals developed for their client to capture the inputs on value added services they provided to various stakeholders. The survey feedback has specific questions, ratings detailing what value added service /product they received from service providers.
o Idea generation and Innovation models: This is one of the top most and favorite expectation, client organization has from his service provider and many times the renewal contracts look at these aspects very particularly. Client organization would like to understand what framework, service provider has created, what are the demonstrable components, do resources really look at every problem and issues in an innovative manner etc. In fact all the roots for value added services come from innovative solutions. Many service provider organizations have portal, frameworks and drives for fostering innovation and ideas which can come from employees and are implemented for their clients to provide them benefits and value added services
o Value register: A simplistic attempt to capture all value added instances for your client throughout the engagements is to maintain a value register and keep recording all instances of value added services given to client in a timely manner.
o Motivational tools: Many service provider organizations have a practice of using motivational tools to foster generation of new, creative and innovative ideas coupled with incentives, rewards etc. Many time client organization also provide certificates and cash awards to service providers employees for their outstanding contribution and providing value added services.Some of the examples of these are, providing out of box solutions to client’s issues or problems which are really not part of day to day functions
o Best practices: Uses of best practices is similar to the using reusable components. Many service provider works under multiple client environments hence the best practices collected from other client accounts and engagements are stored as a repository and are used when similar situations for other clients are encountered. The uses of best practices are very effective in addressing client’s issues or problems when business environment and situations are same. This definitely provides good value add to the client organization.
o Client specific tools: In a larger client accounts, relationship management is very critical and visibility at management level is of top priority. Most of the service providers take efforts towards creating program dashboards, scorecards, SLA management dash board and reporting portals to show case the achievements, trends of improvements on various parameters to demonstrate health of client account. This is truly a value added service to the client organization.
o Escalations and issue management tools: These are very common however important tools especially when the client account is large. The obvious value add from such tools to client are significant reduction of time and efforts in processing escalations and issues. Sharing of information such as when issues cropped-up or escalations raised, who is handling and what is the resolution to the relevant stakeholders is critical when it impacts the business. You can build excellent work flow and end to end process with the help of these tools. Many service provider organizations populate the issue and escalation databases for future problem management. Even for smaller client account, a simple excel based issue/escalations register with requisite details forms a good repository and such historical events can be of some help to future problems of similar nature.
o Six sigma tools: Six sigma tools are very powerful and result oriented. They help the service provider teams to establish the Voice of Customer (VOC) which gets captured in definition phase. Measures such as Critical to Quality (CTQ) are identified and monitored through improvement cycle. Six sigma tools are quick enough for demonstrating values since the six sigma projects are typically of 2 to 3 months time frame. Since the tool is widely used and accepted, it is easy to convenience client on the merits of such tool usage to show case value additions.
Session highlights: Tools are those ammunitions which empowers service providers to do better for their clients consistently at lesser cost
In summary
Value creation for your client is not one time exercise of getting a smile on the face of your client but it is a continuous process of embedding a business strategy backed -up with innovative solutions and managing it throughout the client engagement to demonstrate measurable 2x returns for his investments.