Secrets of the Guidance Economy

We are clearly going through a wrenching economic transition. But what comes next? The next economy, as I see it, should be thought of as the guidance economy. 

What do I mean by this?

Our economy has evolved from commodities to products to services over the years. It then split off into different directions. Some spoke of the knowledge economy. Some focused on the experience economy. The rise of new technologies and extraordinary corporate valuations put the focus on a new economy of ill-defined substance for a fleeting period at the turn of the millennium.

The thing that defines an economy, however, is the offering that represents distinction. When the offering is commoditized, companies must rise to the next level of economic sophistication to remain profitable and competitive. 

What seems to be happening right now is that there is a divergence between the considered purchase and the impulse purchase. While there are exceptions, most business-to-business transactions are complex and considered. Most business-to-consumer transactions involve less consideration and shorter decision cycles -- though a consumer's financial, health and real estate decisions, for instance, can be very complex and demanding.

When the decision is complex and demanding, there is a great deal of exploration, learning, comprehension, comparison, analysis and due diligence that must be undertaken before an investment can be confidently made. While little is at stake when you purchase an iPod or a new brand of shampoo, there's much at stake when a family considers its investment in a college education or a company assesses what enterprise software solutions are most appropriate.

Which gets us to the divergence. While it may indeed be the "experience" that represents economic differentiation in the arena of impulse purchases (mostly B2C), something else seems to be happening in the arena of complex, considered, high stakes decisions (mostly B2B).

In this arena, buyers have much at stake. Too often, however, they lack the knowledge, evidence, experience, trust and confidence necessary to invest and commit. More than anything, they are seeking reliable guidance that will give them the confidence to move forward successfully.
No one likes change, of course. But no one likes standing still -- and being left behind -- either.

It is with this in mind that an opportunity emerges for today's sellers, suppliers and solution providers. They can differentiate themselves and drive growth by making consultative guidance a core element of their overall economic offerings.

This is what buyers want most. In decades past, companies were far more insulated from competition by geography, regulation and other barriers to market entry. No more. Global trade, outsourcing and Internet commerce have reconfigured markets -- forcing most enterprises to operate in a far more lean fashion. They no longer have the technical resources to fully assess new opportunities, conduct necessary due diligence or smartly manage the implementation of complex solutions on their own. Nor can they afford to pay top dollar to have independent consultants manage all these tasks either.

And yet, these tasks all must be undertaken if buyers are to invest in high stakes solutions. This is where sellers must get much smarter.

Years ago, companies started to recognize this pattern by embracing such concepts as "solution selling" or "consultative selling." They trained their sales people to sell not just products, but wider offerings that encompassed services as well. Such initiatives, however,  have proven incomplete and disappointing. "The business of selling is not just about matching viable solutions to the customers that require them," argues Jeff Thull, author of Mastering the Complex Sale and other compelling works on the subject. "It's equally about managing the change process the customer will need to go through to implement the solution and achieve the value promised by the solution."

Buyers often felt (with much justification) that solution selling amounted to a new technique for moving the same old stuff on the truck -- supplemented with a service contract of some sort. It had very little to do with performance gains or measurable business value. It was just a repackaging of offers. Products plus services equaled "solutions," according to the new approach.

But this is no longer acceptable. Buyers aren't buying anymore without greater guarantees of value. Sellers, meantime, are unlikely to differentiate themselves and drive profitable sales if they are simply relying on the same old mix of products and services. Such offerings are vulnerable to commoditization or customer indifference. Why? Because customer expectations are rising. 

What seems increasingly clear is that buyers are now demanding far-reaching guidance to ensure they reach promised levels of performance and value. The opportunity, then, is for sellers to provide guidance on several key levels to ensure customers realize this value:

• Value Identification. Sellers must rise to the level of thought leader and trusted authority to help prospective buyers understand the key issues that make change necessary. They guide prospects by clarifying why particular trends, problems and opportunities may be relevant to them. What is happening in the marketplace? What are the consequences of standing still? What are the benefits of change that justify making it? What have other companies experienced as a result of their investments? Finally, enterprises can engage prospects through interactions and conversations that identify whether they may be experiencing the problems outlined in marketing efforts and are vulnerable to the risks that have been posed. 

• Value Demonstration. Sellers must collaborate with their prospects to make a convincing business case for change and investment. It's about showing how the cost of the problem lines up with the value of the solution. Indeed, the case for change often revolves around what Thull calls "the thoroughness of the diagnosis." In the absence of sufficient pain or risk, there is simply no incentive to change. Assuming the magnitude of the problem is great enough to justify action, the business case shows what steps must be taken to realize particular objectives. What is the financial case for change? What disruptions are necessary? How will we get from the present state to the future state? 

• Value Delivery. Once a contract is signed and a commitment made, a seller must guide a prospect through successful implementation of its offering. Too often, purchases turn into shelf-ware -- an outcome that helps no one. Smart sellers recognize that they are unlikely to gain references and reach greater market momentum if their offerings are not actively in use. With this in mind, they provide the guidance -- strategy consulting, training, technical support, implementation and integration services -- necessary to get their clients up and running in a way that is consistent with projections in the business plan.

• Value Assurance. While many sellers walk away at the point of implementation, it's increasingly vital to recognize how important it is to document and assure value. Companies that are thinking in this way engage in efforts to measure and substantiate the value they have promised. (Some even tie some or all of their compensation to demonstrable results.) The key is providing the consulting and research resources necessary to assess ongoing business value in a way that is respected and certified by the client. 

• Value Expansion. Having delivered the value that was projected in the original business plan, the seller is in a great position to drive value expansion. The seller has achieved the credibility necessary to explore this opportunity. This may mean an expansion of the original contract to encompass more problem areas. It may mean a reference and introduction to new departments or lines of business within the same enterprise. It should also include a customer reference that can be used to promote one's business value with new customers. This may include a case study, reference calls, speaking engagements and other activities that encourage the initial customer to help substantiate and diffuse one's credibility throughout the marketplace.    

So these are the key forms of guidance now necessary to complete the "customer success cycle." However, few companies are presently organized to capitalize on this dynamic.

Instead, they are locked in silos marked "sales," "marketing," "service" or "product development." They are prone to truncated actions that fail to move their customers to the next level of value realization. It's largely because they don't consistently think and act as "guidance professionals." That is different, as I will argue in future posts, than performing as marketing, sales, service or product development professionals. 

To provide superior guidance, enterprises engaged in a complex sale must begin to organize around guidance. Indeed, they should cultivate a culture of guidance.

Rather than get locked in silos, they must collaborate and span boundaries to ensure that the case for change is articulated, developed and substantiated over time. The focus on guidance shouldn't stop when a "solution" is implemented. It's critical that companies continue to guide their customers to new levels of performance and measurable success. They will need to gather feedback dynamically and continuously, ensuring new insights are used to enhance new offerings and strengthen new marketing efforts.

The guidance economy is just now beginning to reveal its secrets. Companies that listen closely -- and take action -- are in a position to set themselves apart and drive growth to new levels. In the next economy, guidance will be the new source of differentiation and value creation. 
 

Comments

[Rob Leavitt]

Britton - bravo! A lot to chew on here. I like the whole idea of the guidance economy, and think you've put your finger on some key success factors for companies trying to sell "high stakes solutions."

You're also right that organizational issues are critical here; companies need to take a hard look at how marketing, sales, delivery, R&D, and support connect to each other -- and how executive leadership is working across the functions and helping bring them together in a customer-centered way.

A big challenge here is finding entry points to take positive steps forward. These might come through marketing -- e.g., marketing folks working across the functions as part of a thought leadership development initiative. They might come through sales -- e.g., top account managers working across the functions to create better "guidance" resources for individual key accounts. Or they might come from senior executives -- e.g., creating a more effective advisory board with top customer executives to help clarify the most important areas for which to invest in guidance activities. Wherever these entry points are, though, the very "leanness" you point to in most companies' operations these days suggests that bite-sized initiatives that show quick payoff are the most likely way to get moving in the right direction.

Great stuff -- I'll look forward to continuing the discussion.

[Michael Stelzner]

Nice work Britton. This sounds like some of the concepts I outline in my book. Keep that tbrain working.

[Ardath Albee]

Hi Britton,

I really like this post. And, I'm thinking that if companies embrace the concept and context of guidance as it impacts value, they roll right into helping their prospects and customers create steadfast life cycle loyalty. This is because the resulting experience and outcomes are produced jointly.

What do you think?

Thanks for the post!
Ardath

[Britton Manasco]

Great comments. To respond:

Ardath, you are right to see this tying to a more cyclical view of client relationships. Many companies that may have thought of themselves as "product-driven" in the past must now make the transition to a far more "services- driven" model. They must explicitly focus on customer/client lifecycles -- even think of customer success/results as the best form of marketing and worth investing in. While such investments may reduce margins in certain client engagements, they are worth it. This is going to be a key factor. With few exceptions, companies that merely drive for the sale (and move on) are dead men walking.

Michael, thanks for the note. You are right that I have learned much from your work. One of your most important points is that relevant content -- the white papers that are the star of your book -- are meant as tools to help guide decision influencers/makers/teams through demanding decisions. The content won't do the job on its own, but it's an increasingly vital part of the overall process -- and it plays a key role at many stages.

Rob, you, too, have offered a great comment -- and thanks for getting the balling rolling on this discussion. I am looking forward to exploring your point about "entry points" in much greater depth in upcoming posts. I'll keep bouncing my ideas off ya -- please feel free to do the same. Best, B