Is it a Big Opportunity? 4 Questions To Ask Yourself Before you Dive In.
Is it a Big Opportunity? 4 Questions To Ask Yourself Before you Dive In.
So why is is that we'll sacrifice our corporate goals, push the boundaries right to the brink of losing money on a deal (and jump right through the boundaries if it's exciting enough)? Just to get a big deal that we can thump our chests about? Sure it's a huge opportunity. The question is - is it an opportunity for success or failure?
In the High Performance or Supercomputing arena, they call these beastie deals 'Hero Systems'. Vendors fight over them with large investments in proposal teams,integrating and 'fixing' untested technologies and pricing that would make any CFO cringe. In the commercial space we talk about Proof of Concept (POCs) implementations. POCs are a great way to 'seed' the market with small, quickly deployable solutions that are highly repeatable and get a "foot in the door'.
Unfortunately, all too often POCs turn into large, resource intensive demonstrations of - yes - never before attempted uses of technology. POC just became a nice phrase for big losses. The justifications? Well, they range from things like "the publicity will keep us in a leadership position" to "we can use the deal revenue to fund continued development" to "it got us in the door". And then there's my favorite. "Everyone uses loss leaders - this is just bigger than most. We'll make it back over the lifetime of the customer's revenue."
Yeah right - and the check is in the mail.
Trust me when I say, taking these deals will not make you a hero - anything but. These deals are one of the single biggest causes of corporate stumbles. It doesn't matter how much you justify them, they are dangerous. I'm not saying you should never do a POC - or be a Hero to a customer.
What I am saying is that you need to approach these deals with discipline and with your eyes wide open. Ask yourself the following questions:
Just to be clear - I fully believe in POCs. But I also know that a company must be disciplined about using them. Focus the efforts on limited, highly defined and controlled opportunities to penetrate strategic, high value markets. If a specific POC isn't the right fit for you - have the courage to just say "No".
Stop being like the dog down the street that chases every shiny car that goes by.
Get picky, and get profitable.
Is it a Big Opportunity 4 Questions To Ask Yourself Before you Dive In - To learn more about this author, visit Rebel Brown's Website.
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I wish I had a dollar for every time I've heard this one. Seriously. Why is it that all you have to do is wave an RFP with a big dollar figure in front of a technology vendor and they follow you anywhere - even to the proverbial slaughter? I don't get it. We're all smart, well-versed business people, right? We understand the principles of revenue vs. margins, profit vs. loss.
So why is is that we'll sacrifice our corporate goals, push the boundaries right to the brink of losing money on a deal (and jump right through the boundaries if it's exciting enough)? Just to get a big deal that we can thump our chests about? Sure it's a huge opportunity. The question is - is it an opportunity for success or failure?
In the High Performance or Supercomputing arena, they call these beastie deals 'Hero Systems'. Vendors fight over them with large investments in proposal teams,integrating and 'fixing' untested technologies and pricing that would make any CFO cringe. In the commercial space we talk about Proof of Concept (POCs) implementations. POCs are a great way to 'seed' the market with small, quickly deployable solutions that are highly repeatable and get a "foot in the door'.
Unfortunately, all too often POCs turn into large, resource intensive demonstrations of - yes - never before attempted uses of technology. POC just became a nice phrase for big losses. The justifications? Well, they range from things like "the publicity will keep us in a leadership position" to "we can use the deal revenue to fund continued development" to "it got us in the door". And then there's my favorite. "Everyone uses loss leaders - this is just bigger than most. We'll make it back over the lifetime of the customer's revenue."
Yeah right - and the check is in the mail.
Trust me when I say, taking these deals will not make you a hero - anything but. These deals are one of the single biggest causes of corporate stumbles. It doesn't matter how much you justify them, they are dangerous. I'm not saying you should never do a POC - or be a Hero to a customer.
What I am saying is that you need to approach these deals with discipline and with your eyes wide open. Ask yourself the following questions:
- What's the REAL cost of this deal - not just the numbers above the line. What are the associated costs for custom engineering, integration and test ( a big one that often goes unstated), architecture refinements and ongoing service and support. Make sure you're being honest and not pulling the wool over your eyes just because of the lure of 'huge'.
- What's the opportunity cost of pursuing this deal. Deals like this aren't just about the direct costs. They're as much or more about the costs of what you can't do while you focus on the implementation. Is it worth giving up those engineers for 10 months so they can't work on the other projects on their plate. Is it worth sacrificing a Professional Services team for 4 months instead of focusing on those other 10 customers that are smaller, but are highly profitable and a better fit for the business?
- Is this deal really a fit? Is this POC focused on creating and demonstrating a solution that you can package and resell over and over again? Or is it a branch off of your main path, a distraction that your company probably can't afford? Often, I find these deals end up being one-timers that make the customer happy (until the next RFP, when they start all over again) but then never see the light of day again. And getting that customer happy - well, that takes twice the expected resources. So much for any profit - on paper or otherwise.
- Is there really a long-term play here? We all know that customers will dangle the promise of 'better' future deals, expanded deployment and even corporate standardization to get a vendor to bite off these deals and perform. And in some cases, will paint beautiful pictures of a rosy revenue stream that may or may not be real (not often, of course). Take a hard look at the true potential before you jump to the assumption of future revenue. You may just jump through the hoop and find yourself in a bottomless pit on the other side.
Just to be clear - I fully believe in POCs. But I also know that a company must be disciplined about using them. Focus the efforts on limited, highly defined and controlled opportunities to penetrate strategic, high value markets. If a specific POC isn't the right fit for you - have the courage to just say "No".
Stop being like the dog down the street that chases every shiny car that goes by.
Get picky, and get profitable.
Is it a Big Opportunity 4 Questions To Ask Yourself Before you Dive In - To learn more about this author, visit Rebel Brown's Website.
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