Solution business acceleration
Many firms are turning towards solution business in order to find an antidote to shrinking business volumes and margins. The argument is that by moving forward in the value chain and offering more complete, integrated offerings one creates more stable cash flow and enables growth of both top line and bottom line.
Key drivers of solution business
The key drivers for developing solution business can be divided into external and internal drivers. The external drivers relate to overall changes in the business logic that have an impact on most industries, whereas the internal drivers are factors that actively push management attention towards new types of business logics, such as solution business.
External drivers
- Outsourcing non-core activities in order to achieve efficiency and increased productivity. This creates a natural demand for suppliers who can offer more complete solutions for taking care of larger, non-core process activities.
- Focus on key suppliers. Supply chain management capabilities are developing and customers are increasingly focusing on a few key suppliers who have the capabilities to offer turn-key solutions.
- Network based value creation where firms are actively striving to build functioning networks in order to increase their competitive advantage.
- Low-cost pressure that forces firms to seek alternative strategies and new market positions.
Internal drivers
- Seeking growth. Analysis of growth opportunities focuses on selected markets, customer segments and individual customer relationships, in order to find the best opportunities for innovation and new sources for growth.
- Customer orientation can be achieved by developing a customer oriented business model. Customer orientation means focusing on understanding customer concerns end developing comprehensive offerings, or solutions, to meet these concerns.
- Stable cash-flows. Adding service business elements to equipment business (especially industrial) allows firms to smoothen the impact of business cycles. Whereas equipment sales is likely to be very cyclical and dependent on upturns and downturns in the global market, service business tends to be much more stable from a cash flow point of view.
- Competitive advantage through differentiation. Systematic solution business development increases customer loyalty, as it often implies more complete, integrated and adapted solutions to the customer’s business problems.
Vectia’s solution business framework
Vectia has, based on several years of research in service business development and solution sales, developed a framework that identifies the key capabilities needed in successful management of solution business. The elements of this framework form the core of Vectia’s offering within solution business. These elements are explained in more detail through the left-hand navigation.
