When it comes to drumming up new business, just about every IT service provider knows to segment opportunities by vertical industry. But rather than going after the market leaders in each vertical segment, IT service providers might be better off targeting the middle of the customer pack.
Speaking at an IBM PartnerWorld conference this week, Ray Wang, principal analyst for IT and marketing consulting firm Constellation Research, said the issue with market leaders is that they rarely feel enough pressure to try leveraging IT in new ways to be more competitive. Instead, it’s usually the companies that don’t dominate a particular sector that are open to new ideas, Wang explained.
Making that distinction is more important than ever, Wang said, because the level of digital disruption to business models that is being enabled by IT has never been greater. Most business leaders these days are worrying most about how their whole business model might be made obsolete by some new competitor that is using IT to transform an entire sector. While the best known examples of this are Uber and Airbnb, Wang says some form of digital disruption is now playing out in every industry sector.
Beware of cautious adopters
The most critical thing, said Wang, is to be able to distinguish between customers that truly aspire to become market leaders and those that are cautious adopters of new processes or outright industry laggards. Cautious adopters are especially problematic, explained Wang, because they tend to drag out the IT acquisition process, which often results in an extended sales cycle. Wang said IT service providers need to be prepared to fire those customers or put a sales pitch together that scares the customer enough to become a faster adopter of new processes and technologies.
As for industry laggards, Wang said while historically it’s been tempting to service these clients because they tend to renew maintenance agreements for an extended period of time, many of those laggards are about to made obsolete more rapidly than ever, thanks to digital disruption. The end result is that IT services firms could easily wake up one morning to discover that a perceived valuable customer no longer exists.
Move beyond being a trusted advisor
Finally, Wang made it clear that in this digital age IT services firms need to aspire to be more than just trusted IT advisors. They need to be seen by customers as co-innovators that help them navigate digital disruptions in ways that make them more competitive in their industry. In essence, IT service providers need to be viewed as strategic business partners that have a stake in the ultimate success of the customer.
Of course, none of this means that IT service providers should turn down business from market category leaders. But they do need to realize that landing that business will be several orders of magnitude more challenging when the executives at that company are convinced they’re already doing everything right. For that reason, IT service providers may want to focus more on the rivals that are clearly looking to use IT to knock as many of those market leaders off their lofty perch as IT might allow.
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