Monday, November 28, 2016
Making buying decisions based only on cost is mostly a bad idea
A new CEO came on board from one of the worthy competitors; he was hired to scale up and scale out in a market that was beginning to adopt the services offered by the company. His earlier stint was with a global mature enterprise in the same industry where he had grown the business as sales head and was now ready to take on the role of a CEO. The young industry required large teams to deliver onsite services to customers; technology did provide a differentiator where early adopters had seen the value.
The CEOs newly adopted company had grown organically beating market growth but lagging behind on profitability, partly due to continuous expansion and rest attributable to operational efficiency which required technology interventions. To the CEO it was quickly evident that inducting new solutions would bring in the requisite process compliance and reduce exceptions which mostly led to costs going out of control; reduced dependence on individual performers would lead to the desired consistency and profitability.
In the initial assessment he realized that corporate overheads were low and did not lend themselves to further reduction; he therefore focused his attention on investments required to bring in requisite technology solutions and thus tasked a small team of veterans to evaluate named solutions which largely comprised the universe of available options. The team rejuvenated with the new ideas from the newbie leader jumped into the evaluation process; industry research also pointed back to the same set of vendors.
The solution providers – local and global – offered varied functionality that allowed for extension of services to be offered to customers; at the core, all offered basic process automation and customer management. The choice thus depended on technology stack, value added features, ease of use, customer and employee self-service, mobile deployment, analytics, and ability to deploy across the cloud as well as on premise. Flexible and conventional licensing models rounded up the full stack of evaluation criteria.
Within the stipulated time, the team reverted with their evaluation and recommendation; they had done a fairly good job of mapping the existing business processes and identifying the best option for their company. They had also taken into consideration the company culture and primary decision drivers – low risk and cost; in the past the management had been hesitant to explore high capital investments instead preferring to work on low cost operating model where the plug can be pulled quickly to reduce losses.
In the next Board meeting the CEO scheduled the proposal while the evaluation team stayed in the back of the room for any clarifications. The meeting started a bit late, and dragged on with the discussion on financial numbers taking up a large part of the day; by the time the item on the agenda representing the technology solution came up, the Board members declared exhaustion and to the dismay of the team present deferred it and other remaining items to the next meeting planned after a gap of 3 months.
In the next meeting the Board did manage to discuss the project and asked the CEO to rework the risk return model as they found the outflow high. A Board member was assigned the responsibility to validate the final proposal and approve. Between the CEO and the Board member they kept at it for a while attempting to get the numbers down while increasing the scope of deliverables. In the interim business continued to grow and new customer acquisitions took away the CEO’s attention from the project.
A short economic instability and the business saw a blip in performance diverting everyone’s attention to bringing revenue numbers back on track. The company continued the growth trajectory and the project was now on the backburner with all attention on further cost cutting to deliver Board mandated margins. The CEO attempted to revive the discussion on the value proposition and market competitiveness the company stood to gain with automation and technology solutions, only to be chastised for proposing spends in a lean period.
Nimbler and technology driven competition overtook the company in market standing; the Board brought in consultants to create a business strategy that would help the company regain lost glory. Months later the Chief Consultant presented the business strategy for the next 3-5 years to full attendance from Management and the Board. The plan looked familiar and so did the steps they outlined for business efficiency and profitability; by the time the meeting ended, everyone looked at the CEO as an awkward silence prevailed.
The plan and strategy was what the CEO had outlined with his favorite project that had quietly died in the hemming and hawing over the last few years !