Offering Development: A point of view

**?The views and opinions expressed in this article are my own and do not necessarily reflect the views or opinions of my employer?**

Earlier this year, I enrolled in a product strategy course from one of the reputed B-Schools in India. In this 6 month course, I got a fundamental understanding of the new product development process. In my current role as a Sr Advisory Solution consultant for partners, I get to see offerings built by partners at close quarters. For some time I have been thinking of jotting down my point of view about offerings based on this learning. This 2 part blog is an attempt at the same.

According to Michael E Porter Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceed the firm's cost of creating it. Offerings?are products and services designed to deliver value to customers—either to fulfill their needs, satisfy their “wants,” or both.? Just as it is important to understand what an offering is, it is also equally important to know what does not constitute an offering. An offering is not - just a capability or competency, just a marketing term, just a category of technology, just a buzzword. According to Porter, there are?3 generic strategic approaches to gain competitive advantage: Overall cost leadership, Differentiation, Focus

In this blog, I will look at how GSIs can gain a competitive advantage by building Hybrid Offerings along with?OEMs/vendors that bring in differentiated value for their customers.

What is a hybrid offering? The combination of a product and a service that delivers differentiated value to customers is called a hybrid offering. Such offerings can cause market disruption since relevant and targeted combinations of products and services bring in differentiation that cannot be easily matched by competitors.

Experimentation becomes key if one wants to find previously undiscovered or breakthrough combinations for differentiation. However, like any other business initiative, ?there is nothing like limitless funding. It is vital to have a clear rationale of what a sufficient combination for differentiation looks like and how it might work in the long term.

Advantages of a product and service hybrid offering :

• They offer the opportunity for increased margins (selling two things rather than one)
• They offer the opportunity to create increased dependence on and in particular the cost of changing to a competitor theoretically rises
• They offer the chance to meet all of a customer’s needs or wants rather than some of them (for improved user experience)
• They offer the opportunity to deepen the relationship with a customer by providing more touchpoints to interact with that customer

A hybrid offering is like say a fusion cuisine or say fusion music. But just as in some cases, fusion music/cuisine can become confusion music/cuisine one needs to be careful as one develops hybrid offerings. Hence it is necessary to abide by some first principles as one starts developing a hybrid offering. Here is a list that one can focus on:

1. The offering value proposition needs to reduce the commoditization
2. The hybrid needs to solve a complex problem and by doing so it’s going to make it harder for a competitor to break into the market.
3. Ensure that the product-service hybrid can be scaled to meet market demand.
4. Which part of the hybrid (the product or the service) offers the best opportunities for profits? Can you reduce the costs of the side which offers fewer opportunities to drive market share in the higher opportunity area? Accordingly choose one of the 2 approaches: Product-Dominant approach or Service-Dominant approach
5. How often will a customer replace the product? How often will they use the service? Can you balance these to deliver continuous revenue flow? In other words the lifecycle

The offering development process can be visualized as a set of activities aimed at value creation and delivery.

Choose the value: As stated earlier a hybrid offering needs to bring differentiated value.

• Start with customer segmentation. The goal of segmenting customers is to decide how to relate to customers in each segment in order to maximize the value of the offering to each customer.
• It is highly ambitious to think that a single offering can meet all markets. Select the markets that you want to invest in and pursue.
• Value position is what sets your offering apart from all the other offerings from competitors that are vying for your prospect's attention. Define this once you have undergone the market sensing exercise.

Provide the value: How will you go about providing value to your customer

• Feature identification: based on the core value capability that you want to provide identify the set of product capability features and service requirements that you want to bundle together.
• Offering build: The actual offering is designed, specifications for it are written, and prototypes of it are developed
• Delivery: Some of the considerations here are: What is the Service Infrastructure required for the offering?? What is the product delivery Infrastructure? What is the level of governance required?
• Pricing: This is where we need to consider the cost structure that accounts for products and services. What is an optimal margin that can be set for the offering?

Communicate the value: This?involves communicating credibly, the differentiating benefits of your product.

• The salesforce that is responsible for selling the offering needs to be suitably trained on the value selling concepts. They need to be able to articulate the differentiated value of the offering
• Promotional Activities: While the standard offering promotional activities include the creation of Whitepapers, Case Studies, Webinars, it is the creative ones like “Offering Day” that can convert more prospects to?buyers.

As I end the first part of the Offering Development Blog, I want to leave you with the litmus test you need to consider as you build an offering:

True - Your differentiators have to be grounded in reality Relevant - If it does not matter to your clients then it doesn't matter Provable - Anyone can claim anything. You have to be able to prove it