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Monday, November 07, 2005

SLM: Learning from Dot-coms

The Pets.com Sock PuppetIn life, wisdom is generally thought to come with age. But in business, years of experience do not always lead to best practices. This often seems to be the case when it comes to the systematic application of performance management or service level management (SLM) practices.

Lately I've been working on the business value of SLM. In particular, I've been focusing on how to establish the value of SLM activities devoted to improving the availability and responsiveness of Web sites and e-business applications. In the process I've been speaking to several companies about how they approach this question.

Personally, as I said in my previous post, I'm convinced that there is always a good business case for SLM, if it's implemented properly. But I've spent many years advancing this proposition, so my opinion probably does not count for much. For any advocate, what matters more is the listener's own predisposition. In this case, regardless of how strongly a company seems to be embracing e-business approaches, their history and culture can still affect their readiness to embrace and justify SLM programs to support that business.

It's now more than five years since the dot-com bubble burst in 2000, wiping out billions of dollars that had been invested in speculative Web businesses. The survivors may have picked a better idea for an online business, but more importantly, they knew how to make a profit running that business. Those who did not quickly joined the ranks of eToys, Pets.com, Webvan, and hundreds of other long-forgotten companies.

At successful e-business companies, because business is conducted entirely over the Web, the value chain connecting SLM process to site usability to customer satisfaction to revenue and profits is an ever-present fact of life. At older companies, where e-business components are now being added to existing offline businesses, the corporate culture is not nearly as attuned to that e-business value chain.

Years of investment in IT infrastructure and applications were designed primarily to deliver the back-office systems that supported "bricks and mortar" businesses. Back-office systems are used by company employees, not customers. Although poorly performing applications may annoy employees, and even lower their productivity, it's usually safe to assume that they do not drive away business.

But when the company starts adopting e-business, those old assumptions must change. Older companies must learn what successful dot-coms must already know -- SLM is important, because it affects the bottom line.

Performance matters!

2 Comments:

Anonymous Satnam Singh said...

What you cannot measure, you cannot manage is not only an adage pitched by the sales ppl at performance companies, but often a deep-rooted reason why several companies with e-business initiatives do not subscribe to SLM services and associated benefits.

As per my belief and experience, such companies are concerned about:
1. Expense of SLM practices
2. Benefits accrued from following good SLM practices.

Essentially, they are not in the frame of mind to be convinced of the value of monitoring. To take from your blog, "value chain connecting SLM process to site usability to customer satisfaction to revenue and profits is an ever-present fact of life" is not entirely visible to them.

At the same time, we cannot lay the blame on them entirely. Performance measurement companies, like any other service, HAVE to sell themselves, and this is where I believe they need to do a better job.

Sales people need to stop selling QUANTITY of their products (not entirely their fault because most of the time their comp/salaries are based on the same). Such approach does not help their clients and often leaves the latter with huge expenses that they have to explain to their CIO later.

A smarter strategy might be to properly segment the potential customer base, and offer appropriate solutions rather than a one-size fits all solution.

Large corporations (Fortune 1000) should be served by a consultative team of Technical Sales agents, who are smart at engaging these clients and can showcase the value of the solutions.

Mid-size corporations can be served by a team of sales agents that can serve pre-prepared forms and literature touting the benefit of the services.

Finally, the small-sized companies (including mom and pops) should be served through a web-based infrastructure. This should reduce the price of the service and make it more affordable for such companies to utilize such services and see the ROI on them.

To close, SLM is not pervasive as it should be, not only because it has not been perceived by businesses properly, but also by performance measurement companies who need to showcase the benefit of their solutions in a new, more collaborative manner befitting their services. After all, doesn't a customer-focused approach have more "usability"? ;-)

- Satnam

11/07/2005 10:57:00 PM  
Blogger Chris Loosley said...

Satnam,

I agree that many companies have not embraced the value of SLM as a routine practice. Among the reasons advanced for this, some are cultural, some political, and some financial.

Ultimately, I believe it all comes down to management background. Managers who have learned from a previous unpleasant experience are far more likely to try to avoid a recurrence of that problem. So if the CIO has been burned by performance problems in the past, his organization is a lot more likely to embrace systematic SLM processes now.

Of course, vendors of SLM tools should do their best to evangelize the value of an SLM process, rather than just trying to sell their products in volume. In practice, some sales people do a better job of this than others. In the long run, I believe that salespeople who best understand SLM practice probably do sell the most product, because of the trust they build up with their customers. But there will always be some sales staff who exploit short-term sales opportunities that are less ideal for a customer in the long term. That is the nature of sales.

However, in my experience, the decision to adopt SLM or not always comes back to the customer. As an SLM tool vendor, no matter how well thought out your sales process or how knowledgeable your sales staff, a customer manager who has not yet experienced a particular problem is unlikely to buy a solution for that problem.

Anyway, thanks for the comments. You have convinced me to write a post about this subject. Look for it in the next week or so.

--Chris

11/08/2005 10:01:00 AM  

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