Lessons from the Performance Matrix

One of the keys to being a successful consultant is to keep a firm grasp on the obvious.?That’s because most of the trouble your clients get into stems from them having some kind of blind spot.?It is not that the issue is hard to see.?It’s that they just don’t see it.

Case in point.?The performance matrix is a simple table in which the revenue-generating offers in the Performance Zone are represented in rows and the sales channels for booking those revenues in columns.?Each cell in this matrix contains planned versus actual financial data about bookings, revenues, contribution margins, and the like.?Because companies must report their results at the overall table level, and because each cell competes with every other cell for budget, there is a natural tendency to apply one set of metrics across all the cells.?This turns out to be a big mistake, and it is important to see just how and why this is so.

Consider, for example, an enterprise with five rows in its performance matrix, each representing a line of business operating at scale in an established market (no incubations, no transformations, just good solid citizens paying the freight for everyone else in the enterprise):

1. Horizontal products
2. Vertical solutions
3. Professional services
4. Subscription services
5. Consulting services

(Spoiler Alert: I cheated!?The consulting services business is nowhere near the scale of the other four and is therefore bundled into the professional services row.?But since this is to the detriment of both lines of business, I am going to break it out in order to address an important blind spot.)

Each of these five business lines has a distinctive business model and operating model with its own set of critical success factors for creating radiating customer references.?At the risk of radically over-simplifying (another domain where consultants shine), this plays out as follows:

1. Horizontal products are sold to infrastructure buyers and end users on a price-performance basis calibrated by brand.?They are manufactured in volume, leveraging as common a bill of materials as possible, and customized at the surface to address different use cases.?Critical success factors include competitive feature sets, product led growth, user experience, and shortened time to value.?Product quality is the key to generating radiating customer references.
2. Vertical solutions are sold to business process owners on a value-based pricing basis calibrated by how successfully they resolve the buyer’s target use case.?They are assembled to order, leveraging a common platform architecture, tailored to the specifics of each customer’s situation.?Critical success factors include domain expertise in the target vertical industry, solution expertise, whole product completeness, and a services-led implementation.?Staying the course until the customer problem is truly solved is the key to generating radiating customer references.?
3. Professional services are sold to project sponsors on a time and materials basis calibrated by the level of experience and expertise assigned.?They are configured uniquely to fit the customer’s situation, leveraging playbooks from prior projects and underlying platform products where available.?Risk management, technology expertise, program management, and change management are all critical success factors, and bringing in the project on time, on spec, and on budget creates radiating customer references.
4. Subscription services are sold to infrastructure buyers and end users on a consumption economics basis calibrated by convenience, scarcity, and risk mitigation.?They are configured to order, leveraging a digital platform, delivery infrastructure, and where available, artificial intelligence and machine learning.?Viral appeal, user experience, customer success management, and embedded upsell and cross-sell are all critical success factors, and friction-free transaction processing creates radiating customer references.
5. Consulting services.?This is the exception.?Unless your enterprise is a dedicated consulting company, consulting services should never be sold.?They are far too valuable.?Instead, they should be strategically allocated and offered to prospective budget-sponsoring executives who are challenged by disruptions they have never seen before and who are looking for help.?The engagements consist of vendor-led, customer-directed dialogs designed to surface the issues at stake, survey the current best practices, and identify promising courses of action to pursue.?Critical success factors include thought leadership, gravitas, empathy, and action orientation, resulting in a trusted advisor status that supports a sole-source relationship invested in tacking a mission-critical concern.?Sound recommendations that lead to effective solutions create amazingly radiating customer references.?

As I said at the beginning, these five sets of ideas are not novel.?Nonetheless, companies consistently mismanage one or more of the rows in their performance matrix by applying rules that are relevant to some other row.?The lessons are simple.?Honor the business model of the row and hold it accountable to the metrics specific to it.?Call out any instances of applying the wrong model to the wrong row.?Just following these two rules can keep you and your team from inadvertently shooting yourselves in the foot.

That’s what I think.?What do you think?

Follow Geoff on LinkedIn | Geoffrey Moore Main Mailing List | Infinite Staircase Mailing List

__________________________________________________________________________

Geoffrey Moore | Infinite Staircase Site | Geoffrey Moore Twitter | Infinite Staircase Twitter | Facebook | YouTube