CONTACT: +49 7083 922130

CONTACT: +49 7083 922130

Product

The boundaries between product and service are blurring.

In the B2B business every product should be accompanied by a service in order to achieve unique selling points. Even pure service providers such as development companies or consulting firms cannot rely on the soft factors in the marketing of their services. They need a solid, exemplary consulting product or they have to present prototypes to prove the know-how and the efficiency of their organization.
The question “which product will we offer in the future?” is thus increasingly interlinked with the question “on which business model should our income be based?”. The current business model is thus implicitly questioned. Unfortunately, too few companies have the courage to face this question openly. This is precisely where the “call-to-action” for the management lies.
In the “good old days” it was enough for suppliers, machine and plant engineering firms or service providers to rely on additional spare parts and service business in order to add a profitable aftersales or service area to the ruinous competition in the systems business and original equipment. As a rule, they could live with the resulting mixed calculation.
That time is over. In the digital era, B2B customers are also increasingly taking advantage of the best prices offered by changing providers, or are calculating with lifetime cost models from the start. As soon as the discussion with customers shifts to price as the essential element, the perspective narrows and the fronts harden. Of course, development departments try to highlight technical advantages that can be manifested in the price. However, the specification sheets leave less and less leeway, and essential elements of the product or service are defined in advance by the customer, long before the price discussion begins. The measure “we will quickly develop a feature that sales can sell with a higher margin” is doomed to extinction in the age of data.
Both the supplier or service provider and the customer bear the disadvantage of this situation! Why? Because they mostly rely on an outdated way of working together. The classic customer – supplier scheme is becoming obsolete. The borders have long since dissolved here too. Car manufacturers buy components and entire drives from their competitors. Private niche providers are being courted by large corporations and developing new models for them. An e-car group buys a German automation company and, in the next step, lets him develop patents and systems for the production of vaccines. What happened? The new successful companies are asking completely different questions, while the traditional companies are still looking for the answers to the old questions.

How could that happen?
It’s a story of arrogance due to past market power. Less than 20 years ago, when the majority of companies still believed in the infinite growth and the unrepentant use of all available resources, large B2B customers were of the opinion that they had optimized their development and purchasing systems to the point where they could decide for themselves how much profit they still wanted to allow their suppliers. In any case, the profit margin of suppliers should not be significantly higher than the published margins of their groups. The system behind it is so sophisticated that manufacturers almost accept to generate a percentage of zombie suppliers. If a zombie supplier goes under, the group’s insolvency specialists take care of the costs and relocate his business. The logic: the sewn-to-edge supply system with a calculated probability of failure is more cost-effective for the group than allowing higher profits for all suppliers. Darwin’s selection revives business, the evolution of suppliers will only allow the strongest to survive. That sounds plausible and is still widely practiced today. However, the tectonic plates are shifting and this situation will be over in some industries very soon.

How is the competition for the best products changing?
In the future, the dividing lines and trench warfare will no longer predominantly run between manufacturers, and then only be passed down the chain of suppliers with increasingly ruinous competition. In place of competition between manufacturers, there is competition between the most powerful business ecosystems. A business ecosystem is a broad network of companies and organizations that can influence the way a company creates and records value. The aim is to provide a product or service. Companies that create their own business ecosystem are characterized by extraordinary success, which is aimed at the mutual value creation in partnership in company networks. Success comes from the co-creation of products, cooperation between specialists, system understanding that goes beyond the limits of a product, right up to the effects of the product and its services on employees and society. The conception for creating a business ecosystem arises from
(1) The vision and realistic business plan for a groundbreaking new product or service. For the assessment of what is considered to be groundbreaking, Google / Alphabet has always used a factor of 10 times better, which may apply to digital corporations. Other industries tend to bake smaller rolls here.
(2) The closed consideration of the entire buyer cycle from the idea and creation of the desire for a product to the return of the disused product in a closed cycle, with the lowest possible consumption of resources over the entire cycle and compliance with ethical standards.
(3) Understanding all of the related services involved in this buyer cycle, and deciding which ones you want to improve yourself in order to provide the buyer with optimal added value.
(4) The decision which kernel elements of the buyer’s wish are to be generated in the core company, and for which parts of the value chain network partners in the ecosystem are better positioned to increase the value of the product with the least possible resources.
(5) Finding the right ecosystem partners and integrating them into the ecosystem for the benefit of all other partners on an equal footing and with partnership contracts in the sense of increased mutual benefit within the ecosystem.
(6) The creation of a suitable working platform with agile processes geared towards maximizing value and minimizing time consumption. The shape of the platform is adapted to the purpose. It can range from a simple contract model to an industry-wide digital standard platform.
(7) The definition of procedural rules of the game for cooperation, which offer all partners the opportunity to fully exploit their strengths in the ecosystem.
(8) The presentation of a first successful product from the collaboration, with which the efficiency of the ecosystem is objectively proven and new customers and partners are attracted.

Does this work, and what is the practical result of such an effort?
The role models for such business ecosystems emerged primarily in digital and technology companies. In classic sectors such as the automotive and mechanical engineering industries or metal processing, the trend has largely not been recognized until today. This is why even today’s most valuable car manufacturer was able to calmly build one of the most valuable business ecosystems in the world – under the protective umbrella of being laughed at and the negation of its success by expert circles. His competitors even helped him by buying stocks and components from him. We are of course talking about Tesla. Whether you are a fan of this brand or not does not matter (in between there are ideological rifts as deep as the Mariana Trench in the Atlantic). All the elements of a business ecosystem concept described above were implemented with the precision of a Swiss watch and driven by the dedication of a thoroughbred entrepreneur. The story could be extended to Space X and other projects by the same entrepreneur at will.

What does this mean for medium-sized companies that cannot set up a large business ecosystem themselves, like a digital or technology group would be able to?
We get the answer when we investigate the question: “What is my product today – how can it look in the future – and what changed role my company can play with it in the world of business ecosystems”. Because the entire rules of the game are changing at breakneck speed. It is important to define the best future role for the company and to find the right partners. A business ecosystem is predestined to create complex products for end customers, such as smartphones, telecommunications systems or cars. But SME companies also benefit from it either as a partner or by tailoring the idea to their needs in the B2B area. This works regardless of the size of the company, as I myself was able to experience in a start-up with only a few employees.

How can product development adapt to these questions?
Best not in isolation. Classic product development is just as overwhelmed with answering this question as sales or management. It is most likely that the preliminary investigation on this question can be carried out by an experienced business development expert, if there is one in the company. The answer can only be given together in a cross-functional team or, even better, in a network including important partners. Such a team should be accompanied by a coach with business development experience or, in the agile world, by a Scrum Master or Agile Coach.

To enable the long-term success of your company together with you is my calling. I would be happy to discuss with you in a personal conversation what your specific requirements and goals are, and what changes can be achieved.
Talk to me!