The Solution is Selling Solutions
by Bill Inmon
Originally published October 14, 2004
The following is a true recollection, as I best remember it:
In 1995, when a certain hardware supplier’s stock price was approximately $80/share, I telephoned them. The call went as follows:
“Hello. My name is Bill Inmon. I would like to invite you or someone from your company to participate in a seminar we are holding on data warehousing. It will be an all-day affair. In addition to speaking, there will be an opportunity for you to have a table or booth for your materials and to talk with attendees during breaks and at lunch.”
The marketing executive replied:
“I don’t know who you are. I don’t know what this data warehouse stuff is. We have no interest in participating in data warehousing events, whatever they are. We are busy people with a big budget. Please don’t call us in the future. If we want something from you, we will call you.”
In 2001, when their stock price was approximately $12/share, I again placed a call to the same supplier. This call went as follows:
“Hello my name is Bill Inmon. I would like to include you in promoting an architecture for information systems within the Federal Government called the Government Information Factory (GIF). As you know there are special problems for information systems within the government and we have developed a blueprint to be used as an intellectual roadmap for dealing with them. This is a comprehensive blueprint that encompasses the entire technology needs for information systems within the government, including how to deal with stovepipe systems, massive amounts of data, special security needs, etc.”
The supplier’s federal information systems executive replied:
“Thanks for showing me this, but if it doesn’t bring sales and revenue in the next quarter, I am not interested. I can only invest in activities that will directly lead to immediate sales. I am so focused on short-term sales that I have no time for future business development which would produce long run future sales.”
In 2004, when their stock price was between $3.50 - $4.00/share, one of the supplier’s key executives called me. This call went as follows:
“We are in a pickle. We are laying off a massive number of people. Our sales pipeline has shrunk to a fraction of what it used to be. We are desperate for sales. So desperate that we want to turn the company into a solutions company. If we were only a solutions company we could be making lots of sales like IBM, Teradata and the others.”
As we have learned, there are solution sales and there are commodity sales. A commodity sale is where the product is a plug-in product – a black box that you snap into place and forget it. There can be lots of other snap-in products that do the same thing. There is nothing particularly distinctive about a plug-in product except its price. In many ways the personal computer marketplace is a commodity marketplace. Personal computers all run the same software (for the most part) and the same applications. All of them can serve as a node on the network, etc. Occasionally, a new feature such as a flat screen display will be added as a distinctive feature. But in a short amount of time all of the competition will add that feature. The main differentiator in a commodity marketplace is price. During price wars consumers pays less for the same commodity.
Then there are solutions. Solutions are unique combinations of products and services. Solutions are sold to the end-user to solve a particular business problem. Often, the department that is responsible for the installation of these solutions is not consulted. The real decision to buy has already been made. The unique solution is bundled with other commodity technology in a solutions sale. As a rule, the profit margin on a solution sale is significantly higher than on a commodity sale.
This hardware supplier created a problem for itself. For years, they were a commodity company and a very good one at that. But time and the marketplace caught up with them. Their competition, for the most part, has been focused on solution sales for a long time. The competition has put a lot of effort into building solutions and crafting the final product. It is paying off for the competition today.
How can this company become a solutions company? By starting to emulate what the competition has done. They must adopt new industry trends; consult with innovative industry thought leaders regarding new opportunities and form alliances with companies with complementary products and solutions. The problem is that the competition has a tremendous head start. The opportunity for establishing complementary partnerships is all limited. It is like entering a football game in the fourth quarter behind 28 points. It’s not that the game can’t be won. It is that the odds of winning the game are mighty slim.
For years they were a commodity company and were very successful. Their marketing executives went out of their way to belittle independent experts, who provided thought leadership and innovation with regard to important industry trends, such as data warehousing. Because of their past attitude and positions taken years ago, they have painted themselves into a corner.
But, by deciding to become a “Solutions Company”, they can transform themselves into a viable company for the 21st Century!
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