Product Orientation to Solution Orientation
Product Orientation to Solution Orientation: A Journey
Most industrial goods manufacturers and other organizations operating in B2B markets currently face testing times owing to bad economic conditions. While the economic downturn threatens the growth of a lot of these B2B businesses, other factors have also emerged that have contributed to this situation of the “perfect storm”. Increased price competition from the traditional low-labour countries, increased product quality levels from these same low cost countries, increasingly demanding customers, advances in technology and information making it easier for the customer to shop around, increased costs of raw materials, etc., have meant that B2B firms now have to look for ways to weather this storm, so that they can survive to fight another day. In these trying times, B2B organizations are increasingly focusing internally to try and refocus on their core activities/competencies and scrutinizing all the other activities that are considered as peripheral and hence do not necessarily add value to the firm[i]. While this act of introspection by a lot of B2B firms has led to an “extensive trimming” of the fat, it does not solve the fundamental problem of commoditisation and competition. In an effort to boost profit margins, companies increasingly need to supplement their products with value-added services. And as the key driver of differentiation and competitive advantage, these value-added services take on a leading role, while the core products take a supporting role. Nothing highlights this better than the recent quandary that HP found itself in. Faced with tough competition resulting in decreasing product prices and reduced margins, HP was turning its attention to provide more value-added services to their customers. More specifically with the acquisition of EDS in 2008, HP was trying to take on the likes of IBM to provide complete solutions to customers looking to outsource their non-core activities. However the
Most industrial goods manufacturers and other organizations operating in B2B markets currently face testing times owing to bad economic conditions. While the economic downturn threatens the growth of a lot of these B2B businesses, other factors have also emerged that have contributed to this situation of the “perfect storm”. Increased price competition from the traditional low-labour countries, increased product quality levels from these same low cost countries, increasingly demanding customers, advances in technology and information making it easier for the customer to shop around, increased costs of raw materials, etc., have meant that B2B firms now have to look for ways to weather this storm, so that they can survive to fight another day. In these trying times, B2B organizations are increasingly focusing internally to try and refocus on their core activities/competencies and scrutinizing all the other activities that are considered as peripheral and hence do not necessarily add value to the firm[i]. While this act of introspection by a lot of B2B firms has led to an “extensive trimming” of the fat, it does not solve the fundamental problem of commoditisation and competition. In an effort to boost profit margins, companies increasingly need to supplement their products with value-added services. And as the key driver of differentiation and competitive advantage, these value-added services take on a leading role, while the core products take a supporting role. Nothing highlights this better than the recent quandary that HP found itself in. Faced with tough competition resulting in decreasing product prices and reduced margins, HP was turning its attention to provide more value-added services to their customers. More specifically with the acquisition of EDS in 2008, HP was trying to take on the likes of IBM to provide complete solutions to customers looking to outsource their non-core activities. However the