NEW SERVICE PRODUCT/BUSINESS
DEVELOPMENT©
By Al Hahn
Late last year, before I began writing this series of columns, I wrote an article for the January, 1998 edition of The Professional Journal that discussed several trends my company had identified in our Best Practices of World Class Service Marketing Organizations study. Because of different deadlines between the magazine and the publication of the study, the study was still being completed as I wrote the article. As a consequence, there were additional trends identified after the article was finished. New service product/business development was one of them.
Who’s Responsible?
In addition to the fact that 2 of our 11 case studies featured entirely different processes for new product/business development, I run into these issues constantly. I’d like to share some of my observations on this obviously important topic. First of all, service marketing organizations are increasingly being asked to perform this task. Before we had such organizations, service executives did it themselves or appointed champions to spearhead specific developments on a project basis. Those without marketing groups as part of their services organization may be still doing it the same way. Larger service marketing organizations often have a separate group for new service product/business development as shown in Figure 1 . This is because new products and businesses often require a lot of focused attention during their formative stages. Having dedicated staff increases the chances of success for new ventures and allows for fewer rough edges.
Figure 1
Some service marketing organizations will assign this
task to the service product marketing managers, also visible on Figure 1.
This is particularly true for smaller groups. Hewlett Packard’s Medical
Products Group develops their new service products this way in the
Americas. This works fine for them. If they had a larger staff, they might
go to dedicated new product/business development people, but they don’t.
One of their techniques to help their product managers cope is to matrix
help from the field and from their Worldwide services organization staff.
This avoids product managers being overloaded and provides resources to
speed up the process.
Realistic Expectations
It is important to be realistic about how much work is being expected of
people. I find that many companies have totally unrealistic expectations.
When managers are not honest in their appraisal of what can reasonably be
expected, they get exhausted workers and poor quality of work. Here At
Hahn Consulting it is against our policy to work nights and weekends or to
travel on weekends. We make exceptions, but they are truly exceptions.
Marketing work is often strategic and often detailed. You can calibrate
risks and make forecasts. You can explore "What if...."
scenarios and even create spreadsheet models that perform sensitivity
analysis or explore the cost of downtime. Our clients expect this from us
and more. They would like to get it from their own staff, but often do not
because they pile on so many projects that staff are in survival mode. It
takes time to perform quality work.
Pardon my soapbox, but I am only describing what I observe in most
companies. People that I visit have 50 or more emails waiting for them,
their voicemail is full and their day is filled with scheduled meetings. I
raise this in the context of developing new service products and
businesses because it is a very relevant issue. Development is a
painstaking process and new products and businesses will die if they are
not properly cared for. My first word of advice then, is to be realistic
in your expectations and to try to organize and assign development tasks
in a way that has a chance of success. My preference is for dedicated
individuals that are very familiar with the development process. If that
is what you do each day, you will get better at it. If it is only one of
many responsibilities, the everyday rush may crowd out some critical
development steps with predictable results. If it is not possible to
dedicate anyone to development, then whoever has the responsibility has to
either have few other responsibilities or lots of help.
Which Direction To Take?
Since the space for this column is limited, I will not walk you through a
step-by-step development process, although I might in a future column.
What I will do now is point you in a direction and mention some things to
avoid. There is a standard marketing matrix that we often use in examining
possible directions for new business development. It is shown in Figure 2.
Figure 2
The lower left quadrant is where we are when we start, with existing
customers and existing services. The temptation is to jump to the top
right hand quadrant of new customers and services. This is the highest
risk quadrant. Many are drawn to this because they know the problems they
are facing now and they want to get as far away from them as possible.
There are probably just as many problems in this new/new quadrant, they
are just not apparent to us yet. So we are drawn to the new, unexplored
(for us) territory with stars in our eyes and great expectations. Don’t
do it! Chances for success are slim. The great majority of these efforts,
80% or more, fail in any type of business. Failure rates for this chancy
move are even worse for service providers, often 90 or worse
No, that is not the way to go. I have an alternative, however. The top
left quadrant, new service sold to existing customers is the natural
extension for service providers and has the highest probability of success
for us. We can also go to the bottom right quadrant by taking our existing
services to new customers, but it a less natural fit for services. Why is
one better? Well actually, they are both OK, but developing new services
is something that service providers typically have more experience with,
so it is easier and less risky. Most service organizations are filled with
experienced service operations people. Frankly, we have more knowledge and
staff to develop new services than new customers. Few service
organizations are full of experienced marketers that know exactly how to
approach and capture new customers. It is just not our historical strength
and most of us are still struggling to develop our marketing resources.
Plan To Balance Your Capabilities
This doesn’t mean that we never go after new customers. I am only
suggesting that the first place to look for development is in the new
services direction. After we have successfully developed a new service
product, we then might want to take it to new customers. This discussion
also tells us about a skill set that we need to develop in our service
marketing groups. If we don’t have much expertise in penetrating new
markets, it is something to plan for in the future. Ultimately we need to
balance out our development skills to be adept at moving into both of the
"safe " expansion quadrants.
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