- Managing Embedded Service Organizations for Growth
What is best practice when a professional services organization is embedded in a technology firm?
By Mark Robinson, CMO and Co-Founder, Kimble Applications
What is an embedded PSO?
Usually, professional services organizations (PSOs) simply provide services to clients. Everyone in the company is either billable or focused on getting people billable. But embedded PSOs (ESOs) work inside of a product company – selling technology software or hardware.
What does success look like?
A regular PSO is focused towards growth through sales of its services. It is looking for long and repeat engagements, increasing backlog and margin.
But when you start working as a professional services team within a product company, you have to begin to commoditize your own service. You need to deliver it faster so that the product can have more value to the customer more quickly.
You are not worried about how much margin you can eke out of every single deal. Whilst margin is still something to be aware of, you are not necessarily trying to return as much money as you can to the business because what you are after is product growth.
An ESO is first and foremost the key to happy customers who get their products live more quickly. Speed to value is probably the key metric to measure the success of an ESO team.
A high-performance ESO team will also help to win more deals – they will be a key differentiator for the firm; allowing customers to have confidence in the process. ESO people build trust so that the buyer feels there is no better place to go. The prospective customer needs to know they will have a reliable guide throughout the journey.
What is the best strategy to create a high-performance ESO?
It is important to take into account which part of its life cycle the product company that is embedding the team has reached.
The ESO will be out in the field, making the product work. The product is immature and it needs expert handling. Essentially, ESO team members will be doing field engineering, tweaking the product so that customers can be successful. it is vital not to lose them and to bring in that first revenue.
The work that the ESO team does is a loss leader. They will have to make up for teething problems in the product. The most important thing for the company at this stage is references and proving the product can work.
Fast growth stage:
At the fast growing phase which generally follows a successful start-up, implementations will become larger and more complex.
There will likely be a lag with hiring and training new staff quickly enough, especially as the product becomes more complex. The ESO team needs to be made up of clear and positive advocates for the product.
There will be an issue over managing backlog because too much backlog means that you can’t get to your new customers fast enough.
The ESO will try to reduce its own workflow, delivering the same service faster and more efficiently over time.
Established player/scaling up
At this stage, the ESO will start to build a channel for service delivery with partners. But it will have to do that in a way that ensures the ESO team stays involved, to stamp its authority on the process and make sure the customers are happy.
There will be a growing separation between the sales, services and support functions. This will need to be well-managed so that all of the departments work harmoniously.
Existing customers grow and mature and their needs change. This creates new opportunities for the ESO to productize services, offering upgrades and add-ons. These will enable established customers to make better use of the product.
Commoditize the service you offer today to allow room to build tomorrow’s service offerings.
The ESO prioritizes working in a way that fosters the scalability of the firm.
What is best practice for managing an ESO?
Recognize that the ESO plays an important role in sales
Both the ESO and the sales team must be clear that it’s the service expertise that is the market differentiator. The firm should clearly use the ESO people to help close deals, to help build trust and guide customers from wanting to do something with the product to achieve their goal.
Senior executives throughout the firm should acknowledge and celebrate the ESO contribution to sales so that the ESO team doesn’t become isolated. This recognition should be reflected in compensation packages.
There should be a target of hours ESOs spend in pre-sales efforts to ensure that the time is respected and used effectively.
Salespeople should have an idea of how much service they should be selling as part of a deal. They should then be made aware of how that is actualized so that they can develop greater accuracy and insight over time.
Share data: make sure that ESO capacity and availability is open to the sales team, and the sales pipeline is available to the ESO.
ESOs should be made aware of risks
As the company grows, there is a greater distance between sales and services. Where this goes wrong, the two departments can get out of step and become “promise makers and promise breakers.” Sales teams can be perceived as “throwing things over the fence” into another team’s patch.
If ESOs are to get happy customers live quickly, they need to understand what has been committed to during the sales process.
Salespeople should be clear about what promises they make. If the consultants get blindsided by a bad misalignment, there is a chance the product may never be adopted by the customer. A failure to adopt means you have lost that customer forever. But ESO consultants should know that the sales process is flawed and challenging and that it is inevitable that there will be misalignments. There is no perfect kickoff.
Consultants should focus on what they can control rather than what they can’t, and feel that they are empowered to deal with misalignments as far as possible without unnecessary escalation. Consultants should come in with the expectation that some readjustment is inevitable and that it should happen as swiftly and painlessly as possible.
Be the expert. Truly master the product and the behaviors that will enable your customer to get the best out of it. Know their likely limitations before they do. Show them the path to success. Put the customer first but in a way that works for everyone
If you are the expert and you put your knowledge and expertise to the forefront of the relationship, then when the customer wants to make a decision that impacts their ability to be successful or your ability to finish the project on time, you do have a lot of power to intervene.
If a customer is doing something or not doing something, which negatively impacts the project, the consultant should recommend against this approach, and warn the customer that if they continue there will be an escalation, and they will need to speak to a more senior member of the team. If a member of the customer organization makes decisions that are not the right ones for a successful implementation, there should be very strong signaling that they will then need to own that risk.
Just as most people don’t like to go against medical advice, most customers will understand that they should listen to the expert on this. The more you can become the expert in your engagement and bring your knowledge and your collective wisdom to the the the forefront, then the more you can prescribe success. The more happy customers you create, the more product deals you will close.