The newest conversation taking front stage today is that if we expect to grow we must pursue adjacent business opportunities. Is this really the path to growth? I suspect the answer is more complicated than the question suggests.
Regardless to whom I speak with these days the word “adjacency” finds its way into the conversation. I guess I’m not surprised. After all, the past few years have been spent looking for relevant ways to invigorate growth, as all intelligent life realizes that staying the course of traditional copy is not sustainable.
But, what really is an adjacent business? Some say that if the recurring revenue business model is core to the business model, it’s adjacent. Others say that similar technology is the clear sign the business is a natural for us to just enter and succeed with. I’ll suggest that these are both just too simplistic to adopt. I’m persuaded that we need to consider all the nuances of the business we are considering. What is the sales process like? What knowledge is necessary? What levels of support is required? Can your infrastructure support the diversion? Does your business systems support the financial requirements? Will you need a new staff? Will this be a distraction for your sales, service and administrative team? Frankly I could go on, but you get the picture.
Let’s explore some of the popular areas of opportunity and see if that adjacency is a real fit for our existing core business.
Managed Network Services
The opportunity getting the most attention today is that of Managed Network Services, and who could argue its adjacency. Let’s however look at the accounts that make up your base. What percentage of our accounts are 250 employees or less? If the answer is a substantial percentage then this could be a good fit. That said, the chances are that the sales process you have in place for these accounts is the most transactional. Managed services is account centric. This alteration to our organization is not insignificant. The existing sales force handling these accounts is likely the least qualified to support this business process. It’s not that they are poor sales people; it is just that the methods of account development are very much a team process as opposed to the “my account” mentality of this sales group. So it is likely that you must consider a specialized sales force. This is far from an insurmountable problem but if we fail to address it from the outset it could create a path to distraction and failure. Infrastructure may however be a hill that keeps growing as the business does.
The IT services business is one that requires a significant amount of investment capital. Consider that the value proposition for this vertical is that the customer does not have to make the constantly changing investments in an ever-changing business, and can focus on their core business. This means that they expect you to make those investments and stay ahead of that ever-changing curve. For this reason I recommend teaming up with a company such as Continuum. It is important to hold the investments down while you are learning a new business, and keeping up with the most current “cloud” technology can be all consuming. Amazon is putting out over 300 new “cloud” products per year. Staying on top of this is an almost impossible task, and it is only one aspect of what you would need to do.
There are those that suggest that acquiring an MSP is the answer, but acquisitions where the disciplines are not native to your core can be difficult to integrate. I believe that acquiring should wait until well after you have established yourself in the new market. Even if you have already started down the managed services path, reaching out to a partner can help lubricate the mechanisms and reduce the investments. In the very near term most companies under 100 employees will be utilizing the cloud as their network and you need a partner that is already there.
This is a fast moving business and going it alone can be a course to frustration and capital drain. Finding the right partner is the key to success in this fast paced business. It can allow you to learn while you develop and support customers…profitably.
3D Printing
This so-called adjacency is anything but. The only thing 3D has in common with traditional print is the word Print—everything else is different. The sales process is different, the justifications are different, the language is different, and the sales cycle can be extremely elongated, especially by copy standards. There are those that will tell you that 3D will change the world. I agree. I do not, however, agree that everyone is properly positioned to participate in that transformation. If you’re thinking about heading into this market make sure you are fully committed and have the money, prospects, and resources to weather the road ahead. Don’t even try to utilize your existing sales structure.
Labeling
The technology is identical but the sales process and justification for acquisition are not. This is another step into the world of manufacturing. It may not be as dramatic as 3D, but it has nothing to do with the office. So there is a legitimate question as to whether it is an adjacent business. The first step should be to review your account base. Do they use labels and is that use critical to their business? Breweries, wineries, and medical centers fit the profile. Almost everyone has some of these types of accounts, but is it enough to be a sustainable business? If so, you might want to consider the move. The sales process is transactional so there is little change to your existing sales process. Most of your infrastructure will be compatible but you will absolutely require sales specialization.
Production Print
I really question if this is more of an extension of our core business as opposed to an adjacency. Every dealer can and should move into this area. If they haven’t done so they should speak with their OEM today. This is not to say that you don’t need to make investments and the knowledge necessary to compete is more demanding than the office, but the customers may very well be the same. Most importantly the support is there from your OEM supplier. One of the mega trends in our industry has been the ability to process more complex jobs closer to the point of need, and this is creating more opportunity for production print. The best place to turn for help is our OEM. They have specialists on staff and can support your actions to ensure that your investments make sense. Can you use your existing sales force? Maybe, but that will depend on their skill sets and willingness to change some practices. It can definitely create a new step in their career path.
Managed Print Services
Most dealers have abandoned this golden opportunity, or do it only defensively. It is a shame. The problem with this adjacency is that we got off on the wrong foot. In the early days of MPS we were told this is a natural for all of us, just a different approach. Nothing could have been further from the truth. This is a large account opportunity with a lot of moving parts. Like Managed Network Services, MPS is an account based sales process. The major difference in this area is that it is not about the machines, but about the base. One of the huge benefits of MPS, if done correctly, is the decline in the help desk traffic. Nearly 50 percent of all help desk calls are printer related. Bringing the right level of support and knowledge to an account offers a much smoother running operation, and a huge relief for the CIO. The number of resources to turn to for help in this market is dwindling, but a great place to start is with the MPSA. This organization has the most complete line of condensed knowledge for this vertical, and is reasonable to join.
There are more adjacent market opportunities but regardless of the area there is no substitute for knowing your organization and customer base and making sure they’re compatible with the new business structure. The most important advice I can muster is, don’t be sold. Understand what you know and what you don’t know, be honest with yourself. Are you looking for something new because you can’t make your existing situation work? If so, get back to basics first before you consider anything new. Whatever new thing you are considering will require investment, and if your exiting business isn’t sound, strengthen it first. Then enter the adjacency with your eyes wide open, not because someone has a new machine to sell you.
We’ve been down this road before.
