What Is an "Integrated Solution"?
A colleague of mine called the other day and wanted to know how I would answer the question, "What is an 'integrated solution'?" It seemed that he was entertaining this concept with others in senior management and he was struggling to find an answer that didn't sound like gobbledygook or pure philosophy and offered nothing pragmatic. In typical management fashion, he needed an answer right away. And, it would be particularly helpful if it could be condensed into a 10-second sound bite that anyone could comprehend. Of course, pressing all that knowledge and insight into a 10-second statement is quite a challenge; one that launched us into a 30-minute animated conversation. Here's the 10-second version:
An integrated solution:
* Targets what a specific customer's organization—business, not-for-profit, government agency, etc.—is providing (portfolio), the manner in which it does that (model), and the context in which it operates
* Appeals to the combination of values considered most important by an individual customer
* Provides a package of products, services, and technologies that function more effectively as a whole than the sum of the individual elements that comprise it
So, what is so difficult about that?
While this definition of an integrated solution makes intuitive sense, it challenges management's conventional wisdom. Here are some reasons:
First, organizations do not really know their individual customers: what each is doing, why they are doing it, or the realities that drive them to do what they do the way they do.
The result: generalizations are made about customer buying patterns, marketing and advertising campaigns based on those generalizations are developed and launched, and products and services are developed and delivered that respond to the aggregated assumptions about customer buying behaviors. However, they don't really get behind the behaviors to understand the specific dynamics about what the individual customer is doing, why, and how. Instead, the organization strives to stay competitive solely on features and price. To improve their bottom lines, they focus on making what they offer more attractive, cranking up sales / delivery volumes, and reducing operating / product costs.
To lump customers together into various segmentation schemes creates a psychological distance between the provider and the customer and keeps the customer in the position of having to define and acquire the integrated solution.
Second, organizations do not know how to measure the value of what they provide with metrics other than money.
The result: assumptions are made about price, return, cost, and profit that are predicated on a narrowly defined value equation. In other words, the value proposition does not include key factors that drive customers to make buying decisions. Certainly no customer intentionally chooses a portfolio of deliverables and operational model that loses money. At the same time, though, customers are increasingly interested in the impact their operations have on factors such as the environment, safety and security, and quality of life as indicated by the following metrics: What percentage of energy consumed to produce and deliver is green? How far away from the point of use was something produced? Can what is produced be tracked and traced from inception to delivery? How much carbon is emitted versus sequestered in producing it? How much total time does a customer spend to define an integrated solution, bring it together, implement it, and follow-up to see that it functions as intended? What is the balance between a customer's investments in the operation compared to other of life's interests?
To focus solely on money misses the point of differentiation that distinguishes an integrated solution: its capacity to answer to multiple drivers within a unique customer's evaluative framework.
Third, organizations measure their success on providing profitable standalone products and services rather than combinations of products and services that can be easily integrated.
The result: the sale of the products and services becomes the prime objective and additional features and functions are thrown in as incentives to sweeten the pot, beat what the competition is offering, and win the deal. In other words, option packages default to bundling techniques rather than giving the customer the best deal for the price based on improvements in the customer's business operation. Furthermore, there is often an even greater difficulty in putting combinations together that cross from one brand to another. To connect solution elements from two or more brands, the customer must purchase ancillary parts, components, and modules both in hardware and software. In many instances the customer must purchase an entire system from one brand in order for it to function within a more comprehensive solution even though several elements that comprise the system are still functional. This makes it challenging for the customer to leverage investments in assets.
To assume that customers will always be drawn to purchase a product or service based on its reputation, capability, and price alone is a questionable strategy: technology advances and integration increases; integrated solutions become easier and more commonplace; they become the new baseline from which one enters or stays in a market.
But how long will this take? What if an organization is already doing quite well with standalone products and services? How can the incremental add of selling a solution ever equal the advantage that comes from simply selling more products or services?
Hold an iPhone. Think back ten years. How many pieces of electronic gadgetry would you have to carry to equal what the iPhone can do—if such functionality was even possible? Think past all the things it can't do or do as well as you like and fast forward five years into the future. What will be the degree of integration you can anticipate then? It's hard to imagine but one thing you can count on—there will be more integration and in different ways than you thought!
Increasingly, customers have more choices. That is a good thing—to a point. Unfortunately, the customer is left having to sort through countless combinations and possibilities to come up with the best-suited solution alternatives. As technology continues to get smaller, faster, stronger, more embedded, more intelligent, and more integrated, each customer will expect choices to be measured according to their full value as effective integrated solutions. The successful organization of the future is one that establishes its reputation as a trusted provider of integrated solutions. In effect, it will earn the right to be the integrator for the customer. Does this mean that organizations will have to change the way they relate to customers? By all means! To have this distinction saves it from "commodity hell" and positions it for a sustainable future. Integrated solutions: it's the future that is fast upon us! And that's the 1-second version!
posted by Steve Bosserman on Sunday July 15 2007
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