Make Decisions Based on Data, Not Opinions

Introduction to Decision-Making

According to Clayton Christenson, the late Harvard University Professor and strategy expert, “To find the biggest opportunities in the world, seek out the world’s biggest problems.” This is terrific advice if your goal is to win a Nobel Peace Prize, but what if you are a senior executive in a business trying to survive? What to do? Substitute “Your Market” for “World.”

“To find the biggest opportunities in your market, seek out your market’s biggest problems.”

This is true if you are responsible for growing your company or service business. The problems are the same, but the resources available to help solve the problem at the business level are much greater than those at your disposal in the service business. This resource limitation frequently causes service leaders to make their plans based on opinions, not research. The outcomes are usually disappointing. The formal name of the solution process is Evidence-Based Problem-Solving.

Your Budget – An Exercise in Decision Making

Most service leaders are asked to prepare a budget, including a revenue and profit projection. These two commitments are then rolled into the next higher level’s budget. The budget is accepted, or, more likely, the higher-level executives will return with comments like “We need an additional 10% on revenue and profit” or “How much more can you deliver next year?” The only way to answer these questions is by having evidence to back up your projections. When you finally settle on the new budget, you will first have to convince your team that you knew what you were doing when you submitted the budget and, second, that you have an actual plan to deliver on your projection.

The implementation of your decision will require some service marketing. For example:

• Evaluate the profitability of all your services
• Create and price new services
• Update and reprice existing services
• Grow the number of people purchasing your services
• Align your branding with the corporate image
• Other things that affect your customers

One of the most critical decisions when making a budget is what to charge for spare parts. To make your decision easier, read this article.

Evidence-Based Decision Making

This simple drawing shows the four steps that IMPORTANT customer-impacting service decisions should follow to minimize the likelihood of having the outcome fail to meet expectations:

When trying to solve your fundamental problems, following these four steps will not guarantee success, but not following them makes it highly likely that you will miss the real opportunity.

Step 1 – Brainstorm to define growth objectives.

Defining your growth objectives seems easy –accept your boss’ target. But doing this will be a big mistake because:

• The target may be unreachable within the time or operating budget set.
• The target may be too low, and achieving it would leave money on the table.
• Your original proposal may have been spot on, but you could not defend it because it had been a guess and not backed by facts.
• Over time, every business tends to become less effective. It would help if you used this opportunity to evaluate your assumptions and make appropriate changes.
• Your operating environment may have changed. You need to update your plans to account for current situations.
• Your business likely experienced significant staff changes because of COVID-19. Some people retired, some may have been made redundant, and others joined but were not fully onboarded into the organization. They may not be the right people for the long term or have undiscovered skills that will influence your plans.

The first thing you must do is identify any valuable data. Some of it will come from your financial, CRM, and service management systems. Other data will come from external sources like industry projections, management articles and books, webinars, and discussions with thought leaders in your network.

Data collection should be an ongoing activity. Data from internal systems are usually reviewed daily, weekly, or monthly and examined to identify areas that are doing well or need help. The external data is a different story. At all levels, the service management team members should be assigned one or more sources to follow and create and circulate summaries of helpful content. These summaries may result in group discussions and actions leading to operational or strategic changes. Be sure to credit the people participating in these activities and consider their actions when evaluating promotion candidates.

In the “crazy busy” world of field services, the organization can benefit from a periodic ½ day to multiple-day meeting to go off the grid and focus on continuous improvement. This is a fantastic way to prepare up-and-comers for future positions while getting their unique insights into your business.

There are two desired outcomes from this brainstorming – action:

1. A set of growth targets for the coming year or two that everyone believes is attainable with a bit of stretch.
2. A list of potential ways to achieve these targets.

At the end of step 1, you will have gone from data to insight to action!

Step 2 – Internal audit to find growth capabilities

Remember that step 1 was all about brainstorming to identify your 1 to 3-year targets and create a list of potential ways to achieve these targets. In step 2, we expand our list of possible services we created in step 1, understand the available resources to grow the business, and identify some underutilized resources in the organization.

There are two desired outcomes from this stage:

1. A prioritized list of all the possible ways the organization can grow revenue and profit. This list must include the following:
   1. A brief description of the offer
   2. Your best quantified guess (a range) of the contribution to achieving your target
   3. The advantages and disadvantages of each from both the customer’s and business’s perspective
   4. The essential resources that will significantly increase over current conditions
   5. The resources that will be needed and are not currently available at all
   6. The resources which presently are used and will no longer be required at all
2. A list of the underutilized resources in the organization, including people, parts, equipment, space, etc. These will be candidates for redeployment or removal as the organization changes.

At this point, no decisions have been made about the way forward. You only have a list of potential offers and constraints. You still must interact with customers and determine how likely they are to purchase them if made available.

Step 2 can only be done using internal resources, although a facilitator (internal or external to your company) may be helpful if your team hasn’t done many of these activities.

Step 3 – Market research to discover growth opportunities 

Step 3 will impact your evaluation since this is when your customers tell you what they want and don’t like and how much they are willing to pay for any novel offers you are considering. They will tell you their most significant problems, how much they will pay you to solve them, and if they have enough confidence in your business to trust you and buy your new services.

This step is best done by an outside resource who understands the service business and will not bias or spin any findings or opinions. You need honest insights if you decide to turn them into positive outcomes.

These are the steps most likely to be used to arrive at an understanding of what your customers want and need and are willing to pay for:

• Segment products and services your usual way, and then decide which segment(s) to concentrate on initially. This could be the product, geography, application, type of user, etc.
• Prepare to interview at least 15 customers in each segment.
• Develop a questionnaire including the importance of every proposed offering or modification and other relevant information about how customers feel about their relationship with your service business.
• Randomly select enough contacts to ensure being able to complete the agreed number of interviews.
• Telephonically interview the agreed number of customers in each segment.
• Prepare recommendations and findings:
  • Importance of each proposed offering or modification
  • Contract elements for one or more levels or types of contract
  • Value proposition(s)
  • Acceptable price range
  • Recommendations for initial and long-term metric deployment
  • Ideas for a sales strategy
  • Other information learned from discussions

A project like this for one product and one segment in one geographical area can easily yield 2500 unique data points plus numerous comments. Compare this to the opinions of one or a few internal people, and you see why this article is titled “Make Decisions Based on Data, Not Opinions.” And why your plans and commitments will carry enough weight that it will be difficult for anyone to challenge your decisions.

Step 4 – Service marketing to commercialize the best opportunities

Recently I was thinking about the differences between a product and a service. One of the differences nobody mentions is “There is no Kickstarter for services.” I know that Kickstart is for startup companies and rarely B2B, but the point is that companies can beta-test hardware products (including software). How do we try out our services to our captive audience? The only way is through Step 3.

Now we have to GTM (Go To Market). After we review the interview recommendations, we are ready to decide on one or more new offerings. Here are the steps in their approximate order:

• Get buy-in from the C-suite. Sales, Marketing, and Finance are probably the most crucial support you will need, although HR and Manufacturing may have a strong say depending on your proposal.
• Training will be critical to the success of your plans. People you must train include:
  • Your team.
  • Marketing to modify the standard quote forms and update the website to include your new stuff. You may need dedicated advertising and an appearance at your industry’s upcoming real or virtual trade shows. This is your opportunity to boost sales, so do not consider this a chore.
  • Sales need training on how to sell what you will offer and probably would like a slide deck to use when presenting the service package to a new prospect.
  • In Finance, the Accounts Receivables team should receive an introduction to your new services so they can talk knowledgeably while collecting overdue payments.
  • If some of your services are delivered by the channel, they have the same training as the Sales team.
  • Customer experience, wherever they report, should be asked to do follow-up surveys or interviews with some of the early users of your new services.
• You can now start selling your new products. And make sure the CX group is surveying all early customers. A senior service executive must promptly follow up on any negative feedback. And lessons learned should be quickly incorporated into your offerings and messaging.
• Repeat

Conclusion

This decision-making effort deserves the same attention as the launch of a new physical product. If you have done everything well, the impact will undoubtedly be the same in both cases. After all, new services are new products. Give them the same chance of succeeding as the product side of the business does.

If you follow all the steps diligently, the odds of success are in your favor. However, you will most likely waste much money and diminish your reputation when you try to do this without ticking all the boxes. Both personally and for the whole department.

This article first appeared on Field Service News on February 19, 2021.

Related article: Market Research Is Not a One-and-Done Process

About Middlesex Consulting

At Middlesex Consulting, we partner with the field service teams of B2B capital equipment companies challenged to grow their top and bottom lines. We use value creation, services marketing, and customer experience techniques to identify and create service offers that achieve customers’ desired business outcomes. To discuss how we can grow your business write to Sam here.