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Commentary & Analysis

Value Added Services...and the Siren's Song

By Barbara Pellow July 26,

By WhatTheyThink Staff
Published: July 26, 2006

By Barbara Pellow July 26, 2006 -- Over the past few years, graphic communications service providers have consistently been told that the real benefit in the migration to the world of digital is in the ability to derive improved profitability through value-added services. It is your opportunity to get out of the pricing wars and decommoditize your offerings. This past week, I came across a book written for IT professionals called "Building Professional Services: The Sirens' Song." It was written by three leading experts in creating professional services organizations with skills in managing them to maturity and delivering both quality and superior margins--Thomas E. Lah, Steve O'Connor and Mitchel Peterson. As I was reflecting on its messages, I saw how strong the linkage was between the migration that took place in the IT professional services world and what graphic communications firms are experiencing today as they get lured into the world of value added services. The book's first message links directly to the "Siren Song." A graphics communications company has grown up in the world of producing product. As they advance, the call of value-added services sounds sweet. According to Lah, O'Connor, and Peterson, "The potential for more revenue is seductive. The hope of higher margins is uplifting. And, the benefit of greater account control is a soothing concept to the business owner. But before a product company launches a new services endeavor, it must set clear parameters for that portion of the organization. If these parameters are not discussed at inception, the success of the new service can be grossly inhibited." While I am not certain I found the exact version of the Siren Song that Lah, O'Connor and Peterson were referring to, these lyrics from Hernandez and Carter seemed to capture the essence of their message. In the land across the sea They speak about a sailor In the days of mystery When Earth was a different place And you still will hear the tale They tell of his wisdom In his hour of destiny He followed the song of his heart. Beware the siren song A song of delirious beauty Though you want to sing along A song full of promised delight Lash yourself onto the mast A song that will lead you to madness Till the siren song has passed A song that ends only in pain Through the wind and through the rain Through the long night of tempting Of torment and of doubt He cried out in his pain But this captain stayed the course Guiding the ship through danger Past the siren's melody On to the promise of home. Beware the siren song Try not to listen Make sure the ropes are strong Focus your vision Beware the siren song A song of beauty Guide your ship on the right course. And the ocean is so deep Blackening water is raging As the ship is tossed about A speck in the infinite void And the map is old and worn Stained with the tears of captains Who have sailed this way before To follow the song of the heart. Navigating Treacherous Waters If done properly, with the right levels of management commitment to focus and stay on course, companies are finding that there is a safe way to navigate that doesn't take their firms into the rocks. There are four distinct levels of service(s) provided by firms in the industry today with differentiated value to the client. Companies are finding that there is a safe way to navigate that doesn't take their firms into the rocks. Basic support services: For the graphic communications firm, this includes prepress support such as pre-flighting, trapping, scanning, color separation and correction, file assembly, imposition, proofing and plating. These are linked to facilitating the base printing business. Education: More and more graphic communications service providers are offering training on pre-flighting and file preparation, and variable data applications, and they are integrating workflow systems to streamline both their clients and their own operations. Some firms are offering on-site education while others are incorporating tutorials into web sites or conducting webinars. Managed Services: Graphic communications service providers have identified a core set of expanded services that they can use horizontally across their customer base. These services are relatively tightly scoped and similar from customer to customer. They typically have some level of standard pricing associated with them and include offerings like warehousing and inventory management, web to print on-line storefronts, pick and pack , product assembly and kitting, variable data and personalization support, document archival, online inventory accounting and mailing. These programs that can be repetitively delivered across a number of customers, and that means accelerated time to revenue and the ability to continually enhance an existing offering. Consulting and project management: This is the set of services where graphic communications firms integrate their services into the customer's business. These services involve developing custom software, consulting with the client on workflow and re-engineering a business process. Whether it is advanced supply chain management, marketing automation solutions, or new techniques in supporting franchisees with variable data, the graphics communications firm must invest in new skill sets and processes. Today's client wants business solutions versus point products. There are sound reasons for taking the services plunge . Today's client wants business solutions versus point products. It gives the graphic services provider the ability to establish deeper client relationships and improved account control. Typically, the deeper the relationship, the easier it is to expand share of customer and pull through incremental revenue in each account. And to the extent that you add significant incremental value, margins improve. There are also benefits to the end customer. The concept of one stop shopping with a single interface is important in today's market. As a value-added services provider, customers are looking for your expertise and technical skills and they want to decrease the time it takes to implement solutions. The Guiding Parameters While just about every graphic communications service provider I talk with wants to offer the highest level of consultative services, want and should are entirely different things. Lah, O'Connor and Peterson talk about fundamental questions that need to be answered to safely navigate the shallows as firms build out their services portfolio. For the graphic communications industry, these are worth pondering. 1. Can you define a service portfolio that will differentiate you from your competitors in the market? Do you have some unique expertise, or would you be better served by partnering with someone else in the market? Graphic communications service providers typically don't have the information technology core competency in place today to manage and maintain complex IT infrastructure, but there are a number of options and alternatives for establishing strong partnerships or leveraging application service provider models. Cleveland base Great Lakes Integrated invested heavily in a system called AKSESS, and the company manages and maintains the infrastructure itself. AKSESS develops and delivers web-based marketing communications tools to precisely track digital and material resources. Can you define a service portfolio that will differentiate you from your competitors in the market? Users can retrieve digital assets, create materials on screen, order from and check inventory, issue requests for reprints, and much more--anytime, from anywhere. With AKSESS, the digital files needed to create ads, marketing materials, data sheets, documents, and ad presentations, are delivered directly to the user's desktop. Other graphic communications service providers may not have the resources to build and maintain complex systems but want to provide similar service levels. They are turning to ASP (Application Service Provider) solutions. An ASP is an organization that hosts software applications on its own servers within its own facilities. Customers rent the use of the application and access it over the Internet or via a private line connection. Some firms are using tools like PagePath's MyOrderDesk to automate order entry, file transfer, reorders and estimating. Other organizations are using Printable or Saepio for template driven web-to-print variable data applications. Massachusetts based Tecdoc Digital is leveraging tools like MindfireInc.'s LookWho'sClicking to generate pURLs (personalized URLs) that integrate into direct marketing campaigns. With an ASP model, the tools graphic communicators need are available to participate in the advanced service market today while still focusing on their own core competencies. 2. Is there a market for your services? You may be able to articulate a value proposition for a array of new services that you think are core to future success, but you need to take the time to assess the real market viability. Graphic communications service providers often forget to talk to customers about what they really want to buy as they build out their product and service portfolios. As the digital transformation in graphic communications enables new product and services offerings, someone in the organization needs to be tasked with a "product/service portfolio requirements planning" role. With the myriad of solutions available for content management, marketing campaign management, web-to-print, digital color, finishing, and workflow, your investment decision process starts with understanding what your customers want and need. It means you need to talk with them. The tools graphic communicators need are available to participate in the advanced service market today while still focusing on their own core competencies. 3. Can you sell these new services to your existing customers or through your existing channels? You have identified the right value-added service, you are committed to it and it looks like there is significant market potential. The final major consideration is whether you have the ability to reach the ultimate buyer. Here is a simple example. Your company sells printing services and your typical buyer is the head of procurement. You have made a significant investment in a digital color press and are doing short-run digital color work successfully. You have built up expertise in variable data tools. Now you have decided to leverage these skills and provide automated multi-channel campaign marketing services. But guess what? The procurement manager has nothing to do with marketing campaigns and you have never sold to the VP of Marketing. Is this a show stopper? It depends on whether you are willing to make the right investment in your channel to ensure that you have the right skills to effectively work with the marketing executive. And In Conclusion As Lah, O'Connor, and Peterson clearly acknowledge, "Companies offering value-added services are a symbol of our business times. Customers demand complete solutions, not disparate technology components. Product companies faced with shrinking margins are anxious to pursue new opportunities to bolster the company portfolio and performance." Some graphic communicators are experiencing double digit revenue growth as they migrate into the world of services while others have spent an inordinate amount of money and are not realizing the return on investment. Graphic communications firms can greatly improve performance as they transform into service providers if they ensure that they have the right infrastructure, market definition and sales capabilities in place to succeed. The siren call of high growth, higher margin services is almost too tempting to resist. Your challenge is to take the time to navigate the waters safely for your organization and your customers. Barb Pellow is Managing Partner of Pellow and Partners, LLC. She can be reached at Pellow barb@pellowandpartners.com



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