The High Cost of Sitting on Your Assets

For many companies today, preserving cash, reductions in force and hunkering down for the rest of the recession is job one. For some, this strategy may be fatal as competitors use this time to re-tool, re-build, and re-conceptualize their products and business models for the recovery and growth stage of the next business cycle.

If we are about one year into the recession as economists estimate, then information technology firms, strategic consultancies and other firms who profit from the leverage use of software, data, intellectual property and expertise have already wasted half their lead time for such retooling for the future.

I know it seems counter intuitive to suggest that companies should be stepping up R&D today to focus on build the next generation of products, but time is not an ally when the pay-off is competitive advantage for the recovery markets ahead.Just as pulling out of the stock market now that you have ridden it down makes little sense, so does sitting on your assets when you could be developing new products, new strategies, new market-opening opportunities for the market ahead.

In my business, there is a sea change underway as traditional energy analytics software firms face growing pressure from competitors offering the functional equivalent of software as a service solutions to customers who do not want to incur the costs or risk the vulnerability of bringing a complex solution in-house. I made a good living building products just like this  turning common uses of our company’s software into independent, consistent, transparent, and reliable advisory products that offered better value, higher quality, and a more accepted independent starting point for energy market analysis–at a lower total cost of ownership–than anything the customer could do themselves using a traditional software license business model. This is the product wave of the future in this space.

So what should a strategic consulting firm do to prepare for this disruptive future?

  1. Talk to your customers about the business horizon. Now is the time to put your best people in front of clients talking about where they see the business going and what they believe the coming recovery ahead will require. This is both motivating and liberating. It shifts the focus to gaining strategic advantage and unlocks the insight and time required to map a work plan to get there. It also bonds your relationship with customers who are more likely to stick with you if they believe your interests are aligned with their own.
  2. Match your intellectual property with customers business needs. With a steady stream of customer contacts you will begin to see the patterns of feedback. Use it to match your core competencies and intellectual property assets to set priorities for your product future.
  3. ‘Build it Once, Use it Often, Sell it Many Times’.Now the tough part for most consulting firms that have used a traditional bespoke approach to delivering consulting services.Do you hear footsteps?You should.People just like me are sneaking up on you focused on using the simple, but deadly effective formula of “build it once, use it often, sell it many times” recurring revenue model to take your market share.

Look at my software company example once more, despite having the leading market share for energy analytics software why did a growing share of clients buy my advisory products? Because they needed an independent starting point for enterprise-wide analysis that state public utility regulators, investment banks and credit rating agencies would accept. Because they saw more risk in bringing a solution in house and being dependent on one or two key users doing their analytics a two or three times each year than they did outsourcing it to a skilled, experienced team doing those repeatable solutions hundreds of times each year. And because when you added up all the costs of software license, data fees, installation, equipment, internal staff and management time—the total cost of ownership was less buying the software as an advisory product or outsourcing analytics to a skilled contractor was less.

So what does this mean to you? Now is the time to focus on your business future and look for ways to unlock the economic advantage of the intellectual property assets you have and put them to work. Look for the common patterns of business needs from your customers. Develop repeatable solutions. Create high quality starting points for add-on value added consulting services. Target new products, new solutions and new core competencies to fit the needs of your customers’ future now while you still have time to beat your competitors to the business.