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 !

When buying software, buy shallow, buy deep, but buy anyway !

Case 1: He got a call from head of manufacturing to quickly meet to evaluate their solution; surprised, the sales head rushed to the meeting taking the next flight available. The caller represented a large enterprise that had invested in much IT and this was a new opportunity; the solution was used by other industries, but not this one. The solution was niche with limited competition, the sales head knew that competition had not yet got a whiff of this; he landed in front of the team that included staff from IT and operations.

The discussion unfolded with the articulation of the need and the business case around it. They acknowledged that the solution had traction in other industries, but they believed that as a pioneer much value could be captured if the project succeeded. Appreciating the forward thinking, technical resources were allotted to the customer to sketch out the detailed use case. Within identified constraints, the solution fit well though partially fulfilling the business case, the team pushed the vendor to provide a solution architecture.

Back and forth they went refining the solution, steps that exposed the superficial thought that conjured up the project; as the urgency died down and the timeline continued to shift, the sales head lost patience, getting the short end of the stick on sales conversion of a purported hot prospect that had consumed significant time, effort and sales budget. The functional teams much wiser through the discussions had begun to like the specific solution; they however were unable to push the timeline for decision making.

Months passed by, the aspirational go-live date came and went, the evaluation data exposed the shallow approach taken in their ignorance and lack of understanding of the complexity. They realized that they needed to revisit their assumptions, recast the timelines and budget to get it right first time. The smattering of smaller vendors who had engaged earlier had blinkered view of the elephant and solutions offered to address limited parts; unwilling to let go, the ally vendor demonstrated patience as the months stretched into a year.

Case 2: In a high growth industry, the company was beginning to feel the pinch with lower than benchmark profitability. They were growing faster than the industry and at times had to refuse business as they could not hire fast enough or deliver service to customer satisfaction. They knew that technology could help their business and thus started evaluating local and global solutions. The business head after meeting a few vendors was confused by the choices, so a cross-functional team was put together.

The team diligently evaluated options and as a starting point put in a part that appeared to be a low hanging fruit. The solution worked as designed but people ignored it citing operational hurdles. It was quickly parked in the technology orphanage and a consultant was approached to help in determining the best way to solve the problem. She recommended reassembling the cross-functional team to document processes, optimize and define the to-be process against which the solutions can be benchmarked.

Supported by the COO, the team worked to create the document which was reviewed along with IT to formulate the RFP. The Group CIO put his hat in the ring offering to run the process with his trusted lieutenant who at best was better than average.  The team would meet every fortnight to review progress made, tweak expectations and proclaim complexity larger than anticipated. The detailing of processes continued for the time period in which the consultant had proposed to complete the implementation !

As they approached the anniversary of project initiation, the team had evaluated multiple local and global solutions; the IT Head hired early in the evaluation had defocused from this critical project, now spend his hours in creating incremental technology solutions akin to Band-Aid. The business head wanting the best shot at the project continued to support the team which continued to refine the spreadsheet ad infinitum. The consultant occasionally followed up and realized that a decision was a moving target now.

In both cases different factors contributed to inaction or no decision in the timeline that mattered to the company and the business. The first did not know what and how, the second procrastinated on the decision refining their requirements, solution design, and future, in an ever changing world. Both had different drivers and contexts, both ended up disadvantaged, the first losing the pioneering opportunity, the latter experiencing slowing growth and profitability. After a while it really did not matter if they finally got it right.

It was a collective leadership failure !