| The challenge for 'product' driven companies is that they are not generally designed, from a process, people, or technology basis, to ensure service delivery. Unless an organization dedicates its entire being to providing services rather than products, I believe it will be difficult for them to succeed.The challenge for 'product' driven companies is that they are not generally designed, from a process, people, or technology basis, to ensure service delivery. Unless an organization dedicates its entire being to providing services rather than products, I believe it will be difficult for them to succeed. |
| —From an HBS Alum (MBA '98) |
Hard-Wiring Performance is Great in Concept...But....
The responses to the concept of promising and delivering results rather than selling products or services are in, and you've agreed that hard-wiring performance is a winning concept that provides benefits for customers, great marketing positioning in a customer's mind, and a way to keep an organization on its collective toes.
But the concept is, in the opinion of readers, one that in application raises more questions than it answers. Among these are: (1) Are you good enough to use it?; (2) Are you organized to implement it?; (3) Can you design processes to reflect the promises implicit in hard-wiring?; (4) Do you have the people, incentives, and technology to deliver on the promise?; (5) Are you big enough?; (6) Do you have the financial capability to protect against downside contingencies?; (7) Do you have the legal capability to draft documentation that protects against all contingencies?; and (8) Can there be a gap between the promise and the capability (a way to improve an organization's performance), or is this too risky? In short, there was a preoccupation with the potential downside of such a strategy. The idea was that maybe it was alright for GE, but could a smaller, less well financed organization employ it? And how safe should an organization play it when employing such a strategy?
Several of you offered other examples of performance hard-wiring. David Hawkins cited it as a motivation for consulting divisions of Big 5 professional service firms to separate themselves from their auditing colleagues in order to enable consultants to take equity positions in their clients' firms. Ilyas Naibov-Aylisli suggested it would be a good way to sell computing "power" rather than just equipment or software.
Others of you cited examples of your use of hard-wiring. Jay Cross offers it as an alternative to traditional pricing. Although clients don't bite, he claims that it gets him credibility points, more business, and clients that are more satisfied with his regular fees.
Darrell Berglund, from whom I might have expected as much as one of my former students, asked whether I was asking the right question. He proposed what was for him the real question: "Does it make sense to shift (to a supplier) the risk a purchaser normally bears to itself at no (or little) incremental payment ... over and above the "normal" selling price?" Berglund answers his own question in suggesting that it depends on the extent to which the new (GE aircraft) engine (used in the hard-wiring example) differs from past models. And of course that's the point. Hard-wiring can deliver better products and services that command different prices, costs, and margins.
The questions comprise a pretty good starter checklist for those contemplating the hard-wiring of performance. In total, they suggest the benefits of sharpening an organization's capability to the point where it is a viable alternative.