Complexity Drives Cost Sky High for Partners
I always wonder what business owners were thinking when they created the layers of complexity in their business models. Maybe they weren’t thinking and that is why it grew so complex over time. I look at the average Microsoft Partner today and wonder how they got so complex for a business that, on average, has revenue of only $6.5 million dollars. Now this leads to a BIG problem when it comes to scaling and growing an organization, since clearly complexity drives cost and slows growth.
Complex Models = Added Time x Added Expenses
It cost more to hire people smart enough to understand what the management team wants done in a complex model. It costs more in time, communications, systems and training to have people do the tasks that should be relatively repetitive. It creates opportunity for error and Mr. Murphy to show up, and he does every other week, resulting in large write-offs of time and unhappy clients.
So why make the business model so complex?
I think the answer lies in the fact that the entrepreneurial mind is not really a manager or leader mind. It sees walking away from a line of business or prospect as a loss rather than risk reduction.
Rarely does the entrepreneurial mind contemplate how anyone else, other than themselves, would be able to complete this piece of business. They do not take this into consideration prior making the commitment. They jump in with both feet; then get angry when others become confused or fail to achieve the result they were looking for.
They never considered the fact that:
- Certain customers buy in a certain way.
- One vertical approach does not work in another.
- It’s difficult for consultants to transition from vertical manufacturing to horizontal food distribution customers in the same week.
This complexity is wreaking havoc with the Partner’s bottom line as well, with an average 6.1% through April 2010.
The Bigger Picture with Microsoft
Microsoft’s whole vision of bigger, healthier Partners will test the limits of the entrepreneurial mind, because to scale an organization it will require that you:
1. Make it easy for everyone to understand who the customers are and what value you bring.
2. Narrow the focus to certain types of customer scenarios, in certain industries, so everyone knows how to approach them.
3. Make your marketing messages crystal clear, simple and meaningful to the prospects.
4. Make it easy to onboard new young talent at a better cost basis and make them billable quickly.
5. Eliminate errors by doing similar types of projects repeatedly.
When we consider the whole world of cloud computing, SaaS or S+S whatever you want to call it, the model will demand the Partner simplify their business to survive. The current context of how systems are paid for and deployed will be changed forever and there will be no return to ways of the past.
Simplify to Survive
So it is far better for every Partner to consider the complexity they have allowed to creep into their business and examine whether or not it is supporting their efforts to build a bigger, healthier business. If you do that over the summer, come fall, there will be a lot of people simplifying their business to make better progress against the changing tides of this industry.
– Software Delivered as Promised. No Surprises.