ITSMA E-ZINE	June 2006

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Editor's Note: Driving Value: Marketing's Emerging Role

Marketing's role in driving value to company stakeholders is more important today than ever before. Faced with skeptical customers, less loyal employees, a changing media landscape, and more potential partners than they know what to do with, technology companies are turning to marketing to keep key internal and external constituencies happy by identifying, articulating, and driving value to each group.

In light of marketing's emerging role as a key provider of value to stakeholders at all levels of the organization, ITSMA is pleased to announce that we will explore the intricacies of this topic at our 12th Annual Marketing Conference, which is coming up on November 15-16 in Cambridge, MA. We'll unveil new research, hear case study presentations from great speakers like Don Friedman, EVP and CMO at CA, and celebrate the winners of the 2006 Marketing Excellence Awards.

To learn more about the theme of this year's conference, see: http://www.itsma.com/Events/event_desc/06AC11N31.htm. If you would like to nominate a speaker for the conference, please contact me at the e-mail address below.

—Rob Leavitt

Don't forget about ITSMA's Marketing Excellence Awards program! The deadline for submissions is Friday, June 16. Program overview and award categories Submission guidelines Questions?

What's Hot: Account-Based Marketing: Moving from Pilot to Scale

As more companies see the potential payoff of investing in account-based marketing programs—customized marketing programs for individual accounts—marketing and sales leaders are trying to figure out how best to scale the programs from one or a few accounts to dozens or even more. The challenge, of course, is that account-based marketing is labor-intensive and expensive. Participants in a recent ITSMA working group discussion on ABM suggested that a marketing manager could typically handle only 2-5 accounts if they want to give them the individualized attention that ABM deserves.

That same discussion with representatives from a number of companies actively engaged in ABM programs, however, did identify several areas in which companies might be able to achieve economies of scale. Using ITSMA's six-step approach to ABM, the group assessed the scaling opportunities as follows:

1. Selecting target accounts. This might seem like a relatively easy area to scale, but really thinking through the different dimensions of potential target accounts for ABM requires an in-depth, case-by-case approach. Some companies are using account prioritization models or tools to help ranks potential targets in relation to company strengths and priorities. This can be quite useful in selecting the right accounts, but may not actually save much time as you move from a few accounts to larger numbers.
2. Understanding and analyzing the target accounts. The goal here is to get beyond the basic data to truly understand the target accounts' business operations, priorities, and success factors. It may be tempting to create some shortcuts in this step, such as assuming that all retail banks, for example, have the same business imperatives, but that could seriously undercut the potential of subsequent ABM activities. There should be some opportunities, though, to scale the secondary, background research effort across multiple accounts, even if you conduct the more important in-depth review and analysis account by account.
3. Mapping value. This step entails mapping your company's capabilities to the business imperatives of the target accounts (rather than the more usual approach of starting with an agenda of promoting specific products or services), and then developing new offers to support the clients' needs. Again, this is mainly a case-by-case process, so little opportunity for efficiencies are possible without sacrificing the specificity that makes ABM so powerful.
4. Developing the tactical plan. Here, finally, we get to an area that can indeed show some economies of scale. Indeed, the more accounts brought into an ABM program, the more justification there can be to build a shared services approach that supports multiple ABM campaigns and activities. With a menu of potential ABM activities in place, it should become easier and quicker for individual ABM managers to put together an appropriate plan for each account.
5. Implementing the plan. As with developing the plan, there should be some opportunity, especially via shared services as well as contractors and agencies, to create some savings here with greater numbers of accounts. It is always critical to avoid the temptation to fall into cookie-cutter tactics and campaigns, though, which can easily undo all the good work in the earlier steps.
6. Measuring results. Once appropriate metrics are defined—and they may well be different for different accounts—there should be some ability to automate or at least routinize the data collection and basic analysis for a larger ABM program. However, it is important to remember that different programs will require different metrics; steer clear of blanket metrics and be sure to evaluate which measurements are most useful for each individual account.

In all, the good news is that there can be some areas ripe for savings (per account) as you move from ABM pilot programs to larger scale initiatives. As with the pilots, though, the biggest internal challenge will be investing enough time and creative energy in the earlier steps of the process. The greatest potential with ABM comes from taking the time to pick the right accounts, gaining truly deep insight into their issues, and producing customized and compelling offers for each individual account. Skipping or shortcutting those steps make the later steps far less effective.

—Rob Leavitt

For more on how to build your company's ABM program, consider attending ITSMA's ABM Workshop at the end of June. For details, see: http://www.itsma.com/events/event_desc/06WS03N07.htm

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The Interview: CIOs on "Skin in the Game"

According to some, venture capitalists are loath to invest in companies where the founders haven't sunk a lot of their own money into the start-up's success. Do IT customers feel the same way? Are they hoping that their providers will pony up and put something on the line to ensure project success? Three representatives from the CIO Executive Council joined ITSMA at our 2006 Marketing Leadership Forum to discuss how they really feel about the concept of "skin in the game."

Mark Hall, general manager of the CIO Executive Council, moderated the panel, which featured:

• Larry Frazier, CIO, Chevron Phillips Chemical
• Babak Aghevli, CIO, DataPath
• Jeff O'Hare, SVP, Enterprise Information Technology, West Corporation

Hall: According to one CIO who participated in our recent survey, “What the vendors mean by strategic partner is actually a captive customer. For a partnership, you need to have skin in the game, and very few are willing to do that.” How do you feel about the notion of “skin in the game,” and what constitutes a true partnership?

Aghevli: From my perspective, “skin in the game” is a lot easier to do and manage in certain instances like outsourcing or consulting services than it is with products or solutions. In those cases, the vendor obviously needs assurance that our staff is dedicated, that we have the right people and enough time to make the initiative successful. Personally, I think that asking a vendor to put in the skin in the game in a solutions situation isn’t conducive to partnership or good business relationships. Now, that being said, it doesn't mean I'm not going to ask you to put 25% or 30% at risk, because that's a way for me to judge your confidence in your offering and your delivery team. But ultimately, I will say that it’s not a very effective means for managing the relationship in the solutions area.

Frazier: I don't believe in skin in the game. As IT professionals, CIOs need to understand the business and judge whether a project can be done or not and whether the promises a vendor makes are realistic or not. We have processes in place to evaluate risk. If you're asking the vendor to put skin in the game, then there's a disconnect. Skin in the game is success at what you're doing. If you don’t execute successfully, I probably won't hire you again.

If you're making me successful, if you're getting me good pricing, why wouldn't I want to continue giving you business? The relationship is being built, the partnership is being built, and I don't see why I would go out looking for someone else. With the consulting or integration business, we tend to stay with a vendor until they start migrating away from us. Now we're always looking for the company that will take us farther than anybody else, but on the other hand, we're not just going to look for the cheapest price. The cost of switching vendors is just too high for us to do that.

O’Hare: I'm probably the odd guy out here as far my views on skin in the game. It’s not that I don't want strategic partnerships—clearly, I do. But it comes down to the hard, cold reality of business. Business is business. We have a job to do. We want you to be part of that success. But one of the challenges I see with some vendors and suppliers is a feeling of entitlement. I have this deal with you. I've been doing this work with you, so because I've been doing it with you for three years or five years, you should just keep doing business with me. When I was with a vendor, our mindset was: Earn the business, earn the right to win the business every time out. That's what I expect from my suppliers and my vendors. I'll give you a fair break and I'll give you a fair price, but I don't want entitlement. Partnership is a way for us both to stay sharp. If you think we're trying to take you to the cleaners, you need to be straightforward and tell us that. If we think you're not doing your job, then we need to communicate to you and set those appropriate expectations.

Aghevli: As far as giving a lot of business to a trusted advisor, there’s no reason why I wouldn’t do that. That would be like me having the opportunity to hire a superstar as a staff member and saying, “No, I don't want you.” I'd never do that. But the flip side of that equation is that vendors need to stop representing themselves as being able to be all things and all solutions to me. You need to be able to say no; you need to be able to push back. I’m sure everyone in this room has been in the executive suite or the boardroom and been forced to push back on projects, on dollars, on time frames. I know very few vendors that will answer honestly when I say I need this project implemented in six months—that are willing to tell me I’m nuts and it can't be done in less than a year. I have those kinds of conversations with my boss, but very few vendors will have that conversation with me. You need to know which areas you're strong in and deliver in those areas. In areas where you’re weaker or in situations where you think we're being too aggressive, you need to set that expectation up front. You need to give us the opportunity to go defend it or figure out where we're wrong, because if I think I can do it in six months and you think it can be done in a year, then I don't see how we make that project successful at the end of the day. Our expectations are misaligned.

For more from these CIOs, see ITSMA's latest Viewpoint: http://www.itsma.com/research/abstracts/v0028.htm

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On the Job: Lucent Europe: Planning for Long-Term Growth

Many marketing organizations struggle to find the right balance between investments for near-term sales and longer-term opportunities. Resources are finite, and with constant pressure to make this quarter's numbers, marketers often find themselves focusing more on short-term sales support than on more strategic growth initiatives. Yet a new ANA/Booz Allen study highlights the fact that companies with more strategic marketing departments are 20% more likely to exhibit superior revenue growth and profitability than companies at which marketing is in a more tactical support role.

In October 2005, Lucent Europe got serious about focusing on its longer-term growth strategy. Recognizing a need to establish a more structured process for growing the business, the company brought together the services, product sales, business intelligence, and business planning divisions to reassess the market and rethink where to allocate resources to maximize sustainable growth and outperform the market.

The first step for the "growth team," according to Per Kristiansson, director of service marketing and business development for Lucent Europe, was to gain a deeper understanding of the market. Lucent's customers are telecommunications service providers, so the team interviewed a slew of service providers and industry analysts, as well as Lucent’s own account executives, to identify trends that would have an impact on that market, such as changing business models, new regulatory requirements, and new entrants.

Next, they determined the kinds of opportunities that would open up for the service providers as a result. As the Lucent team mapped out more than 80 opportunities on a detailed "spaghetti chart," they found that each was connected to one of seven main market trends, such as next-generation consumer, alternative networks, and low-cost voice. They were also able to classify the opportunities into three different groups:

• Horizon 1: Current "cash cow" areas of service provider business
• Horizon 2: Growing areas of business
• Horizon 3: Pilot areas of business

"Over time," said Kristiansson, "and as the market evolves, we know that the providers' Horizon 1 business will begin to fall off, with Horizon 2 business picking up to replace it. Horizon 3 represents the next wave of growth after that, so it is important for us to start planning for it now."

The next step for the Lucent team was to take the seven identified market trends and develop a matrix (Figure 1) for each one. The matrices all had two axes: one for market attractiveness, and one for Lucent's ability to address the opportunity. By plotting each specific opportunity as a circle—color coded by horizon and sized according to the size of the opportunity—the team was able to get a better sense of which opportunities were both attractive and addressable for Lucent.

Having mapped the opportunities, the team then produced detailed briefing sheets about each of 40 to 50 addressable and attractive ones. Using the briefing sheets, they conducted a workshop with the entire senior management team in Europe to select the highest-growth opportunities to focus on. Horizon 1 opportunities became areas of focus for the sales force in 2006; opportunities in Horizons 2 and 3 became planning priorities for the business development and solutions marketing teams, with the goal of moving them into the selling phase in 2007.

However, the team did not just look at the growth horizons when making these decisions. They also took deal types into consideration, choosing to place more emphasis on and investment in big, "world-changing" opportunities as well as ones that would yield recurring revenue.

Thanks to this initiative, all Lucent's regions in Europe now adhere to the same scenario-planning structure, and the alignment between corporate marketing, service marketing, sales, and the lines of business has never been better. The whole initiative, said Kristiansson, "has enabled us to allocate our resources in the most effective manner for growing the business over time. At Lucent Europe, marketing is now playing an integral role in guiding business strategy, and the company has already begun benefiting from our efforts so far."

—Meghann Grandy, info@itsma.com

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Moving to Solutions: Cultural Preferences for Solutions

With data from ITSMA’s recent survey about how European buyers choose solutions hot off the shelf, we took a look at the different buying preferences between customers in France, Germany, the United Kingdom, and North America and saw some noteworthy trends. Here are a few of them:

1. Overall, Europeans are more inclined than North Americans to purchase complex solutions from one-stop shop vendors, with 52.7% of European respondents indicating that they'd buy from a one-stop shop and only 40.0% of North American buyers indicating the same.
2. However, when we cut the European data by country, it became clear that cultural differences heavily influence the buying decision. Eighty-eight percent of German buyers would buy from a one-stop shop, whereas only 24% of French buyers would do the same. Respondents from the U.K. fell in the middle of the two extremes, with 46% indicating that they prefer to buy from one-stop shops.
3. When asked which type of firm is most credible as a solutions provider, software companies came out ahead in Europe, with 44% of German buyers, 32% of French customers, and 32% of U.K. customers choosing them. Meanwhile, in North America, systems integrators were seen as most credible, garnering 32% of the vote; software companies received the nod from only 13% of the North Americans surveyed.

These are just a few of the interesting trends we saw in the data; send me a note to learn more about the differences between German, French, and U.K. buyers.

—Bev Burgess, info@itsma.com

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Research Desk

Improving Portfolio Management

Executed well, portfolio management can be a powerful tool to maximize revenue growth and profitability as well as support the strategic goals of the organization. But for the large enterprise, portfolio management is an incredibly complex job. Keeping track of hundreds—even thousands—of offers, making sure they all align with the company's current strategy, and managing them at multiple levels (capabilities, offerings, services, solutions, clusters, categories, service lines, and so on) are just a few of the challenges ITSMA members face.

Unfortunately, traditional portfolio management techniques are failing to deliver the insights necessary to manage the increasingly diverse and complex portfolios of services and solutions. Rooted in the product world, these techniques treat the portfolio as a set of discrete and unrelated items. Services, however, are shaped from a vast array of available capabilities, services, and offerings that the firm and/or the firm’s partners can provide.

A new approach to services portfolio management that eliminates the requirement for a mutually exclusive and collectively exhaustive offerings and aligns three “layers” of the portfolio (a capability layer, a commercial model layer, and a market opportunity layer) gives services providers a better way to communicate their wares, make investment decisions, and evolve to stay competitive.

For more on this new approach to services portfolio management, please see ITSMA's latest Update at: http://www.itsma.com/research/abstracts/u0051.htm

—Philip Oliver, poliver@itsma.com

Upcoming Events

Marketing Excellence Awards
June 16 Submission Deadline
http://www.itsma.com/news/mea

CXOs Are Different: Building Relationships through Councils and Community
June 20 Web Briefing
http://www.itsma.com/Events/event_desc/06OB06G18.htm

Strengthening Business Relationships and Results with Key Accounts
June 20 Roundtable (Stockholm, Sweden)
http://www.itsma.com/Events/event_desc/06RT06E19.htm

Designing and Delivering Account-Based Marketing
June 27-28 Workshop (Boston, MA)
http://www.itsma.com/Events/event_desc/06WS03N07.htm

Enabling Consultative Selling: Marketing's Role in Accelerating the Sales Cycle
July 18 Breakfast Briefing (Boston, MA)
http://www.itsma.com/Events/event_desc/06BB07N20.htm

Meeting the Differentiation Challenge: Competitive Positioning in a Converging World
July 27 Web Briefing
http://www.itsma.com/Events/event_desc/06OB07G22.htm

ITSMA's 2006 Marketing Conference
Driving Value: Marketing's Emerging Role
November 15-16 Conference
http://www.itsma.com/Events/event_desc/06AC11N31.htm

Complete Events Calendar

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About ITSMA
ITSMA specializes in helping companies market and sell services and solutions more effectively. As a membership organization, we provide research, consulting, and training to the world's leading technology, communications, and professional services providers to generate increased demand, strengthen customer relationships, and improve brand differentiation. ITSMA is based near Boston, and has offices in London and Tokyo. Learn more at www.itsma.com.