Process innovation will create a strong barrier to entry for businesses in the 21st Century

Recently, I start pondering the chasm that exists between what the sales team promises the clients and what is technically feasible by the operations teams given the resource constrains. This is not a new question, but one that surfaces from time to time during my discussions with countless people working within IT companies.

The first time this question surfaced was more than 8 years ago when I was just in the midst of stepping into the IT service provider arena. The name is Patrick. He was then studying in NUS in the school of computing and had teamed up with a few of his ex-classmates from his polytechnic to start an IT company. One of his two chief sources of headaches then was the problem of the sales man over promising the client in order to clinch the deal and thereby leaving the technical team to deal with the issue of implementation. This issue coupled with the second of headache of excessive scope creeping by the client often lead to projects handled by his company falling from the profitable regions to the regions that are down right unprofitable. He soon closed down his IT Company. The last time I met him, he was working as an employee in one of the government run business entities. Whilst it may not be what he had intended prior to his graduation from NUS, he no longer had to deal with the problems he faced when he was venturing in a start up.

A few months back I managed to sit down with Mathew Noble who is currently working in SQL Star. SQL star is an IT company that specializes in Microsoft Sharepoint projects that are mid ranged in size, with projects normally ranging from $50,000 to $80,000. Interestingly what I managed to glean from Noble during our coffee session together was the fact that SQL Star has a very strict and well defined standard operating procedure set in place for its entire staff to adhere to. This has enabled SQL Star to maintain a project success rate of 95%, impressively higher than the market average success rate of 50% for projects this size.

He did share some of the procedures that his company’s sales staff and technical staff engage in prior to the pre-sales phase of and IT project. There are high levels of interaction between the sales staff and the technical staff during this phase of the project. The sales staff does commit huge amounts of effort in the pre-sales phase to work on potential clients to bring them from the phase of being potential prospects to the phase of closing. Often towards the latter phase of this process conflict occurs between the sales team and the technical staff team. It mainly occurs when the technical team does a feasibility check after having acquired feedback from the sales team the client expectations of the potential project. The sales staff having spent lots of effort to work on this prospect is eager to close the deal, whilst the technical team states clearly what is about to be promised by the sales staff to the potential client is not feasible. Often in this scenario, the sales team differs to the technical team, and the sales staff is thereafter delegated to work on another potential lead. SQL star thus manages to ensure quality and fast turn around time for their projects thereby profitability.

Once during a drinking session with a close friend of mine, he brought up the subject of dropping the use of the off shore development center he has been working closely with for close to the the past 10 years. The main reason was because he finally lost his patience with them. His complaints were mainly the fact that sales staff from this off-shore company attempts to promise everything within the job scope all the time and more often than not above and beyond what was asked for. Had this off-shore company delivered what was promised, this friend of mine would have been an extremely happy man. However such is usually not the case. What often happens thereafter is pro-longed delay to the delivery of the required scope and at times only 20% delivery of what was promised. My friend remains a very unsatisfied person thus.

My brother on occasions when we have the chance to hold discussions does reveal some of the knowledge he acquired while being in the same trade as I did. The main difference between him and me is the fact that he has always been working within a corporate environment where the technical team and the sales team are two different groups of people. One of the main things he sometimes mentioned during our discussions is the need to keep the sales team in check so as to avoid unnecessary and sometimes damaging over promises by the sales team to the clients. Such scenarios often lead to contingencies in the midst of the operating process.

Such a thought was also expressed by the current Chief Marketing Officer of Huelabs, an IT company that specializes in education software. The last time we met, this company was rapidly expanding overseas to Dubai, Australia and parts of Europe under the guidance of this CMO. He always states “a company will not die from starvation, but will definitely die from indigestion.”

This dichotomy in philosophy could not have shown itself better than these two recent projects I had the chance to come into contact with. The first project is one that is worth a few hundred times the salary of an average working adult in Singapore. The essence of what happened in this project could be surmised in this statement by the project manager from the client’s side “just between you and me and off the records, the sales team has been lying to me since day one. What was built does not even conform to what we wanted.”

While it is too harsh to call what the sales man did as lying, I would rather express it as failure by the sales man in the management of client expectations, thus leading to unrealistic expectations by the client.

The status of this project has since fell from the profitable range into the reds for the vendor IT Company.

The second project was a pretty challenging one as the client company had more financial muscles than the vendor IT Company. The truly fortunate situation that occurred is the fact the project manager had the strong support of the company director and that the both of them stepped in prior to the sales closing of the project. Attempts had been made by these two individuals to ensure expectations of both parties were realistic prior to project commencement. The project manager was deeply involved with communications with the end users of the client company. In the process, he managed to identify potential pitfalls and steered the project clear of them, thus far keeping the project within the profitable region.

Based on so many examples I have had the chance to come across it seems that while the end products remain almost similar in nature what truly ensures the successful completion of a project has really a lot to do with the process that runs within the existing company.

Thinking back now to the statement made by one of the consultants who conducted one of the courses I took back in NUS, it is very true indeed. Product innovations and process innovations both take place within an organization. Knowledge about a product can be easily diffused out of a company and quickly copied by a rival company who there after produces a rival product. Knowledge about a process remains large tacit and has difficulty in terms of adoption by rival companies. In that sense, in the 21st century arena where information flow is so rapid, the true edge that a business can create over its competitors is not in terms of product innovation but in terms of process innovation. This is in line with the factors that result in the dominance of UPS and Wal-mart in their own markets.

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