We all know that we need skills and knowledge to do any job well. The real question is, is that enough? This question is particularly pertinent when choosing an offshore vendor as the issues that crop up are not related to skills and knowledge.
Today, many vendors are technically capable. Yet, the results can be significantly different with different partners with the underlying technical and process competence. So what really differentiates one from the other?
We think the real differentiator is the answer to the question “What are they passionate about?” Are they passionate about creating long term value for their clients business or are they passionate about their own short term growth or profits.
All of us grew up hearing the parable of the “The Chicken That Lays The Golden Eggs” and still we are not able to create the customer partnerships that create lasting value and not just short term profits. Why is that?
The answer is “Short Term profits mentality versus Value Chain focus”. There are essentially two kinds of mindset when it comes to working with clients. One focuses on “billing more” and the other focuses on “delivering good value”.
Many times the scope of client work cannot be easily estimated so many software companies engage with the client using the Billing model. In this model, the client pays the company based on number of hours spent by their team on a project. This model has created an inherent conflict of interest and that is
- The longer a project drags more money a software company makes
- There is no direct motivation for Software Company to be more productive and perform the task in less amount of time or find more cost effective means of accomplishing the task.
Upon seeing the functionality he was shocked to see how much time and effort spent in reinventing the wheel with project. He showed that the functionality they wanted was readily available to a significant degree in a few open source CMS systems.
They had trusted the software company to do the best job for them but of course they erred by not realizing that the software company would not find a solution that would cost less money as it would mean less revenue for them.
They learnt their lesson and made a decision never to work with that software company or anyone who would have what is called a “billing mentality”.
In another scenario, a company had engaged a software company to develop a .NET application and provided them the software specification including the screen flow and the information to be collected on each screen. The vendor had agreed on a fixed fee for the project.
The vendor came to demo the first version of the software. The company realized that there were some aspects that were not on the mark as the developers had made some assumptions without asking them clarifying questions. When they brought that to light, the developers were defensive and said that it would take “x” hours of rework to get that fixed and that would be an extra charge.
The company’s position was that they expected the developers to know when to ask questions and what questions to ask but the developers simply stuck to their guns about them following the specifications. Essentially there were issues because of lack of proactive communication. The developers had acted as order takers without applying more thought to the issue.
Lesson two in the scenario is that there was no motivation from the vendor’s side to ensure that the software was delivering the best value. They were happy coding and not going beyond that in client engagement. They were essentially selling coding skills and hours and not the results.
Needless to say the company never worked with this vendor again.
An alternate approach of relating to clients is to have a Value Focus. Understand that a person or an organization buys a product or service because of the “value” it creates for the “end consumer”, everything else in the middle is simply a means to that end and cannot be justified except for the “value” it adds in the end.
Understanding the importance of Value creation ensures that your “eye” is on the ball at all times. Matters of billing and fees, while needed to be dealt with are incidental and not a measure of value creation.In this approach the entire team is focused on what end result is to be created. The visualization of the end result becomes the guide to many decisions and all the actions taken. Using this approach creates better results and higher value for the same amount of effort and the net result is that there is more revenue and profit for all concerned in the value chain. Simply put it expands the pie and there is more to share for all.
Hope that with these examples you can see the connection with the “chicken that lays golden egg” story. Yes, in the long run business growth are built on partnerships that go beyond short term profit and focus on “value maximization” for the end customer.
The Value Focus approach makes your relationship with your client one of a trusted partner and not a vendor.