Archives For business consulting

When the guy comes by to cut my lawn, he’s a vendor.  If he suddenly becomes an expert on soil conditions, timing of treatments, pros and cons of various products (including organic options that build the soil over time), he’s on his way to a bigger payday; he’s becoming an advisor.  A few years ago I contracted with a national lawn care company.  My lawn was a disaster.  Full of weeds, large patches of dirt, erosion on the hill beside my driveway, and generally out of control.  Now, I don’t mind telling you, I am not big on outdoor landscaping projects.  There are other things I’d rather spend my time on, and between homeschooling seven children alongside my wife and running a business, I don’t have much free time.  But for some reason, the lawn care company wasn’t making the kinds of improvements I would expect.  When I had questions, they were short on answers.

Then one day I received a call from a guy who used to work for a lawn care company, but now runs his own.  He was familiar with my lawn and recommended I take a different course.  He claimed the company I was using only uses chemicals and by continuing with my current program I would never actually improve my yard, I would just keep pouring in chemicals to make up for the bad soil conditions.   Instead, he recommended a series of treatments that would over  time, create looser soil, build nutrients back into the soil, and hold water so that the grass would have a chance to get established before the hot summer weather roles in.  Lawn care companies that act like vendors are selling seed, fertilizer, weed killer, and other soil products.  The advisor is selling me a green lawn.  Which do you sell?

© 2010, David Stelzl

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What allows a company or individual to command higher fees?  I’ve written various posts over the past few weeks on fees, and yesterday, I commented on setting higher fixed fees vs. totaling your projected hours and presenting a fixed amount (this generally leads to underestimating and a decrease in project GP).  But what allows a company to propose higher fees without the competition coming in to win the deal on lower pricing?  Commodity sales compete on price…high-value sales don’t.  Here is a list of category offerings I use when considering how to go to market.

1. Product

2. Staffing

3. Projects

4. Strategy

5. Vision

The order builds from pure commodity to greater intellectual capital.  On the low end, companies like Dell are selling low priced desktop systems online.  Nothing unique here, but they are fulfilling a market demand; consumers want inexpensive computers, in fact they demand them.  Dell can fulfill this market demand by finding more efficient ways in manufacturing and distribution.  What was once a $5000 entry point in the early 80’s (and 5K back then was something to talk about), is now a few hundred dollars.  Netbooks and IPads may further change the game here.

Staffing follows with various skills that set apart individuals.  Projects help companies move forward with initiatives that change the business.  This is where value pricing really starts to make sense.

An interesting question arises with my model at this point.  What about a utility such as SaaS like Salesforce.com?  Cloud computing should fit in here somewhere…but we’ll come back to that another day.

As we move up, start thinking about Accenture or PWC.  Strategy commands big dollars.  In a prior life I referred to our growing company as, The Andersen Alternative (Back before the days of the Accenture brand).  The message was clear; we were consultants, working up the model toward higher value consulting, while selling the technology to implement those things we recommended doing.

Finally we have people who create vision.  People like Geoffrey Moore (Author of Inside the Tornado) come to mind.  Consultants working at the top with large high-tech companies, helping them figure out where to go next.

Most resellers are not built to reach vision creation; their sweet spot is probably in the project area.  Larger integrators are beginning to build business process, ITIL consulting, and other forms of business consulting into their model to offset the commoditization of product.  If you don’t start thinking about this now, you may find yourself without profits next year, and perhaps out of business in the near future.  But let me point out, the problem is not with the area you play in, rather it is in the model you’ve built.  Resellers are built to sell projects, Dell was built to sell hardware.  Both have high profit potential…but building one model and selling another is destined for failure.

© 2010, David Stelzl