When I was about six years old, I returned from a trip to the beach with a bag full of beautiful sea shells. So I did what most normal six year olds do – I set up a “store” to sell them. (You did that, right?)

I got up early the next morning, pulled out a little fold-up table and set it up on the sidewalk in front of my house. I neatly arranged all of the shells in the perfect way to highlight their natural beauty. And I priced them accordingly. I then got dressed up in my “Sunday best” to ready for a busy day of selling.

The fact that I lived on a 6 house cul-de-sac at the end of a housing development – the kind of place where you only drove by if you got lost – didn’t quite factor into my six year-old mind. So I sat there, all dressed up, with a bunch of beautiful sea shells and waited. And waited. And waited.

Finally, a customer appeared on the horizon. But it wasn’t from the street as I had expected. She was coming down the front walk of my house. My grandmother appeared, dollar bills in hand, walking toward my store. She perused the selection and chose the biggest, most beautiful (and most expensive) sea shell I had available.

She was my only sale of the day.

It was a dismal “day at the office” and I walked away distraught by my lack of retail revenue – determined to figure out the changes needed to increase my foot traffic the next time I opened my shop. Uh, right. I was six years old! In truth, I am pretty sure that I merrily took my five dollars (I told you it was expensive) and bought myself a month’s supply of goodies, none the worse for wear.

But in this little story is a lesson for IT organizations.

In many ways, IT organizations are like me when I was that overly ambitious six year old. I was busily focused on “setting up shop” focused only on my “products.” I was oblivious to all other elements that were required to have a successful business – things like marketing, foot traffic and, most importantly, a full understanding of my potential customers and what they wanted from their experience with me.

IT organizations function much the same way. We focus all of our efforts internally on the products or services that we are providing, giving scant attention to understanding our customers and their unique needs. The reality is that my grandmother didn’t buy a sea shell. She bought the opportunity to make me happy. Had I understood who my customer really was and what they were really buying, how differently might I have approached my sales effort?

This is where the paradigm of looking at IT as a business is particularly helpful. Using the paradigm correctly, it can help us see past our innate “inner focus” and look at what we do from our customer’s perspective. Just as I failed to truly understand my “customer base” and what they were really buying on that summer day long ago, IT organizations that don’t use the “IT as a business” paradigm will fail to truly understand their business, their customers and their unique opportunity to meet their customers’ needs.

WHAT MARKETS DO YOU SERVE?

The first question that every business leader must ask themselves is: “What markets do I serve?” In much the same way, every IT leader must understand what businesses they are in. In the past, this was an academic question used only for the sake of the paradigm. Today, it is very real. IT organizations are, in fact, competing in several markets with specialized cloud providers who would love nothing more than to take that business away by selling directly to your customers. So, what businesses are you in? Have you ever thought about it in these terms?

In all likelihood, you are in at least 4 or 5 businesses. They might include:

  • Email and Communications Hosting
  • ERP and Financial Management Software
  • Customer Relationship Management and Sales Automation Services
  • Collaboration Services
  • Website Development and Management

In addition to these, you are almost certainly in 2 or 3 more businesses that are specific to your industry. In each of these markets, you have:

  • Competitors
  • Competitive Advantages
  • Market Vulnerabilities
  • A Unique Value Proposition

The question is: do you know who and what they are?

 

USING MARKETS TO UNDERSTAND YOUR BUSINESS

When you look at your IT organization through the paradigm of markets and customer segments, you are able to understand clearly how your customers see you. You can begin to evaluate exactly who you are competing with and on what basis. You can understand why your customers gain advantage from working with you – and where you may be driving them away.

This understanding of the markets you serve and compete in is really the first step in developing a comprehensive Service Portfolio and will help you truly understand your customers and their needs. Each of these markets represents a specific set of broad customer needs. By looking at your services through this paradigm, you will be able to package and organize your solutions in such a way that they are simple for your customers to understand, competitive in the real-world marketplace and will ultimately enable you to more effectively manage the delivery of your services.

UNDERSTANDING CUSTOMER SEGMENTS

It is important to understand the difference, however, between your markets and your customer segments. A market represents a broad segment in which you compete. But within each market you may have one or more customer segments which are all seeking to realize a unique value proposition from your offering. For example, you may be competing in the broad “Email and Communications Hosting” market. The majority of your customers require “normal” email and communication services. However, one small part of a business unit uses email for a business critical, highly regulated function and therefore requires significantly enhanced security and archiving features.

These two groups of customers would represent two distinct customer segments. While each is part of the broader market, the specific value proposition – and therefore the specific service solution that they may require – is very different. Likewise, you may provide an industry-specific application service to multiple business units within your organization. To the extent that each business unit has a specific and unique value proposition that they seek, they then represent multiple customer segments.

Having a clear definition of your customer segments is an extremely powerful advantage. Each customer segment can be translated into a “customer persona.” The customer persona is a mechanism which literally creates a narrative description of the customer represented by this segment in terms of their needs, expectations and what they value. It allows an abstract “customer segment” to come alive and allows the entire IT team to connect with the needs of their customers in a much more real and tangible manner.

DEFINING YOUR SERVICE PORTFOLIO

Understanding both your markets and your customer segments is critical because they will drive the development of your service portfolio and ultimately the development of specific product/service solutions. Together they will create a roadmap which will enable you to develop a meaningful set of service offerings that meet the specific needs of your identified customer segments.

It is important to recognize however that even if you have identified multiple customer segments, this does not necessarily translate into multiple service offerings. For instance, in the previous example of the two customer segments in the Email market it may be determined that the enhanced security and archiving capability is simply an “added feature” of the core service offering. Alternatively, it may be decided that it is less complex and expensive to simply enable enhanced security and archiving to all customers. In this case, the only product differences may be in how consumption, compliance or archiving details are reported.

The point is not to create a one-to-one relationship between each customer segment and a service offering. Instead, the concepts of “markets” and “customer segments” offer a structured way to understand and deconstruct specific customer needs and value drivers. Using this information, you can develop a well-conceived service portfolio that meets the specific needs of all of your customers.

FROM PORTFOLIO TO INTIMACY

Once you begin to look at your service portfolio in this way, a funny thing happens – your perspective changes. Many organizations have begun to embark on efforts to define their services. Inevitably, they become mired down in a laundry list of technical activities that IT is executing. Their service portfolios devolve into a list of internally-focused technical functions (e.g. “Server Administration”). In most cases, these are never going to be actual services from a business perspective, but IT organizations have difficulty seeing this in most cases.

A market-to-customer segments-to-services approach, however, changes this. When looked at in this way and in this order, it is almost impossible to view services from a technical perspective. The focus and language begins to shift. IT relationship managers begin to have conversations with their customers in terms that their customers actually understand.

This is one of the first (and potentially most important) steps in creating what we call “customer intimacy.” This term represents the idea that IT organizations must come alongside their customers to fully and deeply understand their business. In that understanding, they must then leverage technology-driven solutions to accelerate the realization of business objectives. A well-crafted service portfolio driven by well-established markets and customer segments enables this type of intimacy by creating an organizational posture that orients IT toward their customers.

The most well run organizations in the world are masters at defining and understanding their markets and customer segments. World class IT organizations should be no different. By clearly defining and understanding what markets you compete in, and by having a deep understanding of your customer segments and the unique value they seek, you will be able to create a service portfolio that is both relevant and designed to deliver optimal value to your customers.

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