Pick your service offerings |
Everything that can be invented has been invented.
Charles H. Duell, Commissioner, US Office of Patents, 1899.
In the previous chapter I listed some of the more obvious avenues of IT consulting and suggested how you might focus on a particular competence or even a couple of competencies that you will offer to the market. Once you have chosen the field in which you believe you are most competent then you need to structure service offerings in that field. This means selecting an activity and pricing it – in fact sorting out all the terms and conditions.
5.1 Generally don't do the same as everybody else
You will have noticed from Chapter 4 that there are a wide range of opportunities available. I listed only 30 but in reality there are probably over a hundred. However, the real challenge that all start-up IT consultancies face is to come up with a new service or a new angle to offer the market. It is very hard to make a success of any business if you start trying to do the same as everybody else. You have just got to find some way of differentiating yourself from all the other operators out there. You have to create a compelling reason why people will buy from you and if at all possible your offering should be in some way or another unique.
Finding a unique or new angle can be very difficult indeed and it is easy to feel daunted by this task. There is no easy route to finding this new angle on the type of service you intend to offer. It is a question of relentlessly looking for opportunities and then discussing these with people who you believe will be able to give you an objective view and some good advice. It is just not possible to know in advance what will actually work. Some apparently good ideas that have been really well researched turn out to be failures and ideas that have been thought of as ‘crackpot’ have actually been financial winners. It is just not possible to foresee the future. To emphasize this point:
5.2 Even world famous experts get it wrong!
I list here a number of comments made by experts who either accepted traditional orthodox views which could have stood in the way of really great projects or who just rejected new ideas out of hand. Thus in 1943 Thomas Watson Sr, the then chairman of IBM, rejected the notion of the company become involved in computers. His historic comment was ‘I think there is a world market for maybe five computers.’ Of course it is only fair to say that at that particular time computers were involved in doing only large and tedious calculations for the military. Nonetheless visionaries like Alan Turning had already noted what computers could potentially offer as far back as the 1930s.
In a similar vein to Thomas Watson Sr, Popular Mechanics, the best selling American magazine for technical boffins, said in an article entitled ‘Forecasting the Relentless March of Science in 1949’, ‘Computers in the future may weigh no more than 1.5 tons.’ Of course by this stage the transistor had not been developed and computers where still running on vacuum tubes. We had to go through the transistor age before we could get to the integrated circuit.
Nearly 10 years later in 1957 the editor in charge of business books for Prentice Hall was reputed to have rather pompously announced that, ‘I have travelled the length and breadth of this country [the USA of course] and talked with the best people, and I can assure you that data processing is a fad that won't last out the year.’ It is hard to know who he included in his category of the ‘best people’! And again just over a decade later in 1968 an engineer at the Advanced Computing Systems Division of IBM is said to have exclaimed when looking at an early microchip, ‘But what … is it good for anyway?’
THERE IS NO REASON ANYONE WOULD WANT A COMPUTER IN THEIR HOME
To this collection of miscalculations it is certainly necessary to add Ken Olson, president, chairman and founder of Digital Equipment Corp., who went on public record in 1977 as saying that ‘there is no reason anyone would want a computer in their home’. It is difficult to understand how Olson, who played such an important role in the migration of the computed industry towards mini-computers, was so incapable of comprehending the importance of the next logical step and seeing that it would impact people's lives in a much broader way than computing had before – right into the home.
And of course this list would be woefully incomplete without the comment from the richest man in the world, Bill Gates, uttered in 1981, who will always be remembered for the insightful comment about the need for computer memory, ‘640K ought to be enough for anybody’.
Being flexible
A few years ago a well-known IT director from a large plc packed in his job to become an IT consultant specializing in helping IT departments develop technological visions for their organization. He was a well-known and well-liked individual who had an extensive personal network. During the first three months of his new business life he had several offers from acquaintances to help their organizations set up IT architectures and implement project management controls, etc. He refused all of these on the grounds that he was only interested in technological vision type work. Within six months these offers dried up. But he was able to attract only a trickle of technological vision type work and thus one year after he set out on his own he was in the market for a full-time permanent job.
The final quotation provided here is from Steve Jobs shortly after he and Steve Wozniak had understood what a microprocessor could actually do and before he started up the Apple Corporation. As Steve put it, ‘So we went to Atari and said, “Hey, we've got this amazing thing, even built with some of your parts, and what do you think about funding us? Or we'll give it to you. We just want to do it. Pay our salary, we'll come work for you.” And they said, “No.” So then we went to Hewlett-Packard, and they said, “Hey, we don't need you. You haven't got through college yet.” ‘
These stories have been provided to illustrate how easy it is to be wrong about new ideas and to help you not to become too depressed if your ideas are not at first recognized as being great.
5.3 There is no infallible way
Coming up with good business ideas is very hard indeed. If it weren't there would be far more rich people in the world.
Although there is no infallible way of producing sound business ideas there are a few steps that can be helpful in guiding you towards possible good ideas. These steps should be seen as a filter, which will hopefully pick out suggestions that are not likely to work. But do really remember there is no guarantee – great ideas have been know to fail and sometimes even the silliest ideas can actually be made to work.
The first issue that needs addressing is the novelty of the suggested service offerings. Not many of us will be able to think up totally unique schemes. There are just too many other consultants out there with active imaginations to be able to be unique. However, if you are to succeed your proposed service offerings need to be relatively novel. What this means is that you should not go into the market place and compete head on with the same offering from an already established firm.
Trying to be different and at the same time make money is not easy. Many of the Dot.Coms that went broke over the past few years seemed to me to have had only one strategy – to do things differently and they didn't seem to care at what cost. You always have to worry about the costs. If there is no profit in it then think very carefully about getting into the business. You may possibly have a loss leader for a short time but not for long as the cash resources will inevitably run out.
5.4 Differentiator versus cost leader
One useful way of thinking about the type of service offering you might pursue is to use the Porter generic strategy model. This model says that you will get clients either by offering a better quality service, this is called being a differentiator, or by proposing a less expensive price for a good service, this is called being a cost leader. If you choose a better quality service you can charge a price premium, which of course you are unable to do if you follow the other strategy. Every start-up IT consultant should think through which of these approaches he or she wants to take. Porter is not the only strategy guru with good ideas about how to direct your business and those who are interested should read the work of both Porter and Treacy.
Treacy does not offer two alternatives for your strategy but actually three. Two of these are quite similar to Porter's but Treacy also suggests that you could have a strategy of customer intimacy where you get to know your client(s) very well and you offer them a customized service. This is often quite an attractive strategy for a small start-up IT consultancy.
There are references to the thinking of both Porter and Treacy in the reading list in Appendix A.
5.5 Imagination is the key
Despite the various models there are available to help you think through your service offerings, at the end of the day by far the most important tool that you have at your disposal is your imagination. You have to be able to think as some of the American gurus would say ‘outside of the box’. If you can't do this you are probably at a disadvantage. There are two quite lovely quotations from Lewis Carroll's Alice in Wonderland which I find very helpful when I need to think out of the box. The first of these quotations is from Through the Looking Glass:
‘One can't believe impossible things,’ said Alice.
‘I dare say you haven't had much practice,’ said the Queen. ‘When I was your age, I always did it for half-an-hour a day. Why, sometimes I've believed as many as six impossible things before breakfast.’
Every would-be IT consultant needs to practise thinking and believing out of the box much like this.
The second quotation is also from Through the Looking Glass:
‘I don't think they play fairly, at all fairly,’ Alice began in a rather complaining tone. ‘… They don't seem to have any rules in particular. At least if there are, nobody attends to them.’
This also encourages me to think out of the box and to come up with new imaginative ways to present service offerings when starting up a business. However, don't be too worried if not everyone to whom you present your new ideas shows great enthusiasm.
Given the fact that you have come up with an idea for novel service offerings and that you can competitively price it, then you need to work out the detail of your marketing plan and your financial forecasts, etc. Chapter 10 discusses the various financial statements, which you will need to draw up. It is important to remember that the great e-bubble of 2000 and 2001 clearly demonstrated the crucial role of profit and cash in order for your IT consultancy business to survive. In short you need to balance your imaginative and creative side with the reality of the finances.
5.6 Summary and conclusion
You need to look hard for a new angle. If you can think of going into business with only a well used service offering and no distinctive features then you may have problems. Take advice from everyone but remember that the experts can be completely wrong. So don't give up too easily even if you are not being acclaimed for your wonderful ideas.