Wednesday, May 23, 2012

Business Value is the Key to IT Value Delivery

Alignment with business customers is an incredibly hot objective for technology strategists and one that is supported by powerful long-term market trends. A recent survey by Forrester Group of strategy professionals found that 91% of respondents say that increasing their business focus is a strategic priority for their organizations over the next three years beating out other hot topics in the technology industry such as innovation, investment in social emerging technologies, mergers and acquisitions (M&A) activity, and geographic expansion. Despite the strong interest, however,  I find far too many technology companies see this objective as primarily a responsibility to be handled by marketing organizations. To prepare for the long- term evolution of the technology industry with the business, technology firms will need to take a much more robust approach one that incorporates the needs of business customers into product development, strategy, marketing, and sales.

I often hear from technology companies that say that they want to improve the way they are aligning their technology products and services with the needs of business customers. These companies have realized that fundamental shifts are taking place within traditional IT departments: IT decision-makers are no longer the sole owners and drivers of technology purchasing decisions, and business leaders increasingly expect vendors to highlight the business issues that technology can solve. This interest is consistent with two key trends we see at Noetic Labs that will be critical to the success of strategists in 2010 and beyond:
The economic downturn has changed the way technology purchases are made.
In the past year, many tech companies have tried to become more business-focused as a way to counter the effects of the recession. With more stakeholders weighing in on technology purchasing decisions and longer purchasing processes existing, tech vendors are selling to business stakeholders as a way to cut through red tape and quickly close deals.
The technology industry is becoming embedded in the business process.
Increasing technology alignment with business needs is consistent with the long-term evolution of the IT industry. As technology becomes a more integral part of business process, IT organizations are under greater pressure than ever to keep pace with the challenges their business customers face. In the long term, this trend is shaping what technology vendors sell, who they sell it to, and how they sell it.
The problem for most technology vendors, however, is that when it comes to business focus, everyone talks about being good at it, but few are really executing. Although virtually all tell us that business focus is their priority, ask them what they are doing to execute on that priority, and responses vary significantly. Some vendors have adjusted their strategic plans and market outlooks drastically, others have just made adjustments to their marketing messages, and still others have difficulty explaining what their "business focus" means at all. For most part, it seems that the tech industry is still rooted in its heritage of serving IT customers. Noetic Labs has instilled in their service model a process to determine if a vendor actually is executing business focus.

In previous Noetic Labs research, we have identified how several companies are investing in business-focused messaging strategies at the corporate level but the marketing of individual product and service offerings lag behind corporate ambitions. This disconnect can be symbolic of serious gaps within organizations: When corporate leaders move faster than the sales and marketing professionals, customers may be left with mixed messages. Noetic Labs believes that technology vendors need to do more to incorporate their business focus at all levels of their organization.
We found it concerning that the most top-rated tactics of focusing on the business customer are all generally related to marketing and sales, while the lower-rated tactics relate to products, services, and evaluation metrics. While this could reflect the marketing focus of many of our direct partners, it also highlights a trend we see at Noetic Labs: For many technology companies, interest in business focus is largely perceived as a marketing tactic, rather than an area for complete strategic alignment. In this regard, companies that differentiate themselves are the ones stressing the importance of business alignment in their product development, strategy, marketing, and sales.
It's also noteworthy that use of metrics often ranks relatively low on this list of tactics. This highlights the fairly common difficulties that companies have when seeking to provide something as vague as business value, without having a fully developed understanding of what it means. Although we often hear from vendors that say that providing business value to their customers is best highlighted in the cost savings they provide, reduction of IT costs is a metric that is rooted in an IT-centric view of the world. Business leaders care about costs, but they also care about diverse factors such as improved customer satisfaction, levels of innovation, and time-to-market. This highlights an opportunity for vendors to get closer to their customers by identifying their success metrics and working with them to achieve those metrics.

When we asked our customers about the business roles they are targeting, we found that line-of- business managers are being targeted as the primary business customer. Next in line were C- level executives such as chief executive officers (CEOs) and chief financial officers (CFOs), followed by chief marketing officers (CMOs) and individual contributors.
It's not surprising that line-of-business managers are the most popular target. They are much easier to access than C-level professionals and often have the budget authority to push technology decisions. Just as importantly, these are the stakeholders with the most immediate business technology needs. For vendors, this data point highlights a major opportunity: Business professionals are increasingly aware of the strategic value of technology, but their IT organizations are not meeting their needs. Vendors that want to improve their strategic relationship with their customers need to do more to identify and meet these needs, even if it means making fundamental changes in traditional marketing and sales channels.
The focus on CFOs is also interesting given the increasing alignment between IT and finance. As IT organizations face greater operational scrutiny, it's not uncommon to see CFOs making

Unfortunately, many technology companies don't know what they are up against when they say that they are going to target business customers with their technology solutions. Companies that have traditionally sold to the IT organization will find it extremely difficult to make the jump into selling to the business audience because the core needs of these audiences differ so significantly from those of a traditional IT buyer. Although we agree that tech firms need to carefully incorporate the needs of business professionals into their marketing and strategy, technology firms need to manage these efforts carefully, invest in the right areas, and be prepared to make their efforts part of a long-term endeavor. At a high level, companies should consider how they align in three areas other than marketing:

Strategic support. Targeting business customers’ needs to be part of a broader strategy that brings in the right people with the right business skills. Companies usually do no develop their base of C-level relationships overnight they invested heavily in a partner-driven approach that is supported by robust thought leadership and fundamentally linked to the way they do business.

Product value proposition. Targeting a C-level executive may make sense but must be relevant to the stakeholder in question. Noetic Labs has identified ways to evaluate the needs of IT buyers, line-of-business buyers, and senior management. If you expect your technology solution to resonate with the business buyer, the core value proposition should be aligned with his or her needs.

Sales alignment. The effectiveness of a business focus in marketing efforts must also be supported by a robust sales strategy. Making a shift from an IT-focused sales approach to a business-focused sales approach does not happen overnight. The content used has to be compelling and relevant to a specific business need, greater emphasis must be placed on the business objectives achieved, and measurable objectives must be outlined. Just as important, the sales force needs to be sufficiently supported to cope with the added time and effort required to invest in business-level relationships.
These three areas should highlight the challenge that many companies will face as they try to transform their technology companies from IT-focused to business-focused. Despite the time and investment required, however, there is tremendous opportunity for companies that can do this well. As noted, business alignment is consistent with near-term and long-term market trends meaning it should increasingly be viewed as a key component of strategic planning. 

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