There’s one word to remember above all others as you consider building a Services Practice - the word is ALIGNMENT. The potential benefits are huge, but selling, delivering, and managing Services engagements has implications across the organization, so you had better make sure to ask yourself the following seven questions before you begin: (By the way, I am going to refer frequently here to Consulting Services. Elsewhere in this blog I have categorized the different types of Services into three categories and I provide a description of each).
1) Is this initiative aligned with our overall business strategy? How do you want your organization to be perceived by the market – as a Training company, a Consulting company, a hybrid? Are you going to lead with Consulting-type services and hope that training opportunities will come out of that, or are you going to lead with Training and provide “wrap-around” services to round-out your Training offerings and/or help to make sure that the training you deliver sticks?
2) Do we have the right People? Are the Salespeople you currently have both willing and able to sell Services? My experience is that most salespeople who are used to selling tangible off-the-shelf (or slightly customized) Training offerings, struggle when it comes to selling intangible Services. Unfortunately some types of Services – Implementation-type services for example – must be sold from the start as part of your solution, otherwise it can be really tough to go back in after the Training sale and try to explain why it is important for the customer to buy these additional services. “If these things are so important, then why didn’t you tell me that before now?” is the question you will hear from your customers. All of this means that you may have to consider changing the profile of your salespeople, or creating the new role of “Services salesperson”, which has implications of its own that we will talk about later. You had better examine your Delivery organization too. How many of your Training Instructors / Facilitators are capable of deliver high-quality Consulting engagements? This requires a very different set of competencies and experience, which typically you are going to have to pay more to get, irrespective of whether you use a W2 or 1099 model for these people. Finally, as you look at your Management Team, who has the experience of developing, managing, and leading a Services Practice? So be aware that your cost structure will change and your overheads are likely to increase when you move into this arena.
3) What Processes do we need to change? My experience is that selling Services will touch most of your existing processes. Your Sales process will certainly be impacted because the sales stages may be different, plus other people will now be involved in the sale and their roles and responsibilities will need to be mapped-out clearly to everyone. Implemented correctly, your sales cycle should not increase in length, but you should see your average deal size increase by the value of the Services content. In addition, processes such as Product Management, Account Management, Project Management, Performance Management, Bid Reviews, Proposals, Order to Cash, etc. may each be affected to some degree. I would therefore recommend a Process Review to examine your internal processes and to identify the impact of the Services business on each of them.
4) What new Systems, Tools and/or Technology are we going to have to change or add to support and enable a Services Model? Yes, potential changes here too. Your CRM software will most like have to be tweaked to reflect changes to the Sales process, new Management Dashboards created, etc. Because of the higher risk of project over-runs, scope-creep, etc, with Consulting engagements, you are also going to need a Time Billing system to closely monitor actual vs. estimated hours spent on each project. This is critical if you are using 1099s who bill you for every hour they work on the project, and is an easy way to lose money on projects. Such a system will also enable you to monitor Realization and Utilization rates of your salaried Consultants. You are almost certainly also going to need to alter your Master Services Agreement and Statements of Work. Most Services Agreements are written to protect the Training Company’s Intellectual Property, and provide the client with a Licence to Use the content. In most Consulting engagements however, the client expects a Works-for-Hire type Agreement where the client owns whatever is developed for them during the engagement. Carefully-written Statements of Work which clearly and unambiguously define scope, deliverables, days of effort and whether projects are Fixed-Price or Time & Materials also become really important. As a result, Proposals and the above Legal Agreements will typically need to be approved at higher authority levels than previously.
5) Do we have the right Organization Structure in place to enable the sale and delivery of Services? An Organization Structure should represent the physical manifestation of your business strategy. In this case decisions have to be made around who “owns” the Consulting sales and delivery resources – who provides direction to them, sets their goals/objectives, measures their performance, does their salary reviews (W2s), is responsible for their development, and their hiring/firing. My experience is, at least in the Training Company environment) that Services Consultants should be able to both sell and deliver their Service offerings, very much as overlay resources, working closely alongside the Client Account Managers who ultimately “own” the client relationship.
6) How do we need to change the way we Measure and Reward our people? This is a complex subject to deal with in a blog, but suffice to say R&M systems, of which Compensation Plans are just one component, will definitely need to be reviewed and adjusted. Obvious questions are around the R&M system for Services Consultants, i.e. how and what are they rewarded for selling Services, and how and what for delivering the Services? More complex questions include should Services Revenue be included in the Training salespeoples’ quotas (yes – so quotas will be higher!), should these people get paid an override on Services Revenue (yes – Client Account Managers should be measured/rewarded on ALL revenue from the account), should there be Team-based Compensation Plans (quite possibly).
7) How should our Channel Partners, particularly VARs and Resellers, be aligned with our new Services offerings? Point #7 assumes you sell your Training offerings not only through your own Direct sales force but also through Resellers or VARs, and once again, it is a complex blog subject. Most resellers of someone elses Training content, (at least all of those I know) assume within their business model that the Services they sell and the margins they make on those Services are theirs. They are happy to pay the content provider a per head royalty fee for books or licences sold, and they will make a reasonable margin on that component of the sale, but income from Services, even those that “wrap-around” the supplier’s content (see Implementation Services) are 100% theirs. Without getting into a philosophical debate on this point, I will say that from a practical perspective, unless you can totally ”productize” or “shrink-wrap” your Services, it is very difficult to convince a Reseller what it is they are paying you for, especially if they have developed their own set of value-added services that compete with your new Service offerings. It is also virtually impossible, unless you exercise the right to audit their books, to know how much or how many of these Services they are selling. The alternative is therefore to implement a Reseller model where you collect a % Royalty on the total product and services revenues that the Reseller bills for anything associated with your IP, and once again, that is difficult to monitor accurately.
