By Nicolas Zimmerman
At SAMA we hear it all the time: Customers expect more than ever from their strategic suppliers. They expect insights, they expect a distinct point of view, and they expect best practices gleaned from other customers. Most of all, they expect their strategic suppliers to help them solve actual business problems.
National Instruments, a global provider of testing and measurement software and hardware platforms, traditionally has functioned as a products company, which meant responding to customer challenges by helping them to achieve technical success through its testing packages. Responding to its customers’ evolving expectations, NI is learning to help its customers achieve business success by developing in-house tools and capabilities for conducting rigorous business assessments for its customers. They use these engagements to create alignment at the customer and accelerate decision making.
NI’s mission is to take the customer on a journey — first to agree on a “future state” vision and then to gain organizational consensus on a course of action and free up resources to execute on that vision.
When NI’s customers get stuck on their status quo, Deb says, it usually can be attributed to one of two factors: Either they didn’t build a strong enough business case for change, or the company failed to build internal consensus to focus on a particular problem at the expense of all the other problems it could seek to solve.
Before the engagement
Says Deb: “If you do not validate that the customer is ready to change and ready to execute, you can do a lot of good work and end up with a report that just gathers dust.”
That is why NI makes sure it has explicit customer buy-in from the beginning in the form of a formal memorandum of understanding, sponsorship on the customer side from someone at VP-level of above and a nominal upfront payment for National Instruments’ services.
What the customer brings to the engagement:
- Highly confidential data that normally would not be available to suppliers
- Access to the right people in the customer organization
What National Instruments brings to the engagement:
- Industry best practices — common problem statements from best-in-class organizations and the high-level testing strategies they’ve used to overcome them
- Sophisticated financial modeling capabilities, which they use to build a compelling business case
Building Internal Consensus through Business and Technology of Assessments
Research from Harvard Business Review shows that, in the past two years, the average number of entities involved in making complicated solutions purchases has jumped from a little more than five to nearly seven. This helps why so many “slam dunk” projects fail to gain the requisite internal consensus to move forward.
“Our starting challenge is the customer status quo,” Deb says. “If we can’t challenge the customer enough to change from that, this whole flow doesn’t work. They may go through this process and decide, for all sorts of reasons, that they’re not going to move forward. So our whole idea with these business impact engagements is to help the customer through this journey.”
They do this by conducting comprehensive business and technical assessments of the customer organization, which consist of six steps:
- Assess testing organization. Because NI’s customers run the gamut from consumer electronics and heavy manufacturing to medical technology, the company is in possession of copious data on what best-in-class testing looks like. Using this stockpile of data, NI assesses its customer’s testing capabilities across five competencies ranging from the highly technical to the highly business-oriented.
- Identify areas for improvement. NI grades its customer in each of the five competencies as “average,” “above average” or “below average.” The goal isn’t necessarily to be above average across the board but to identify how important each area is to the company and to use that to guide decisions on where to invest in improvement. The goal is allocate resources most efficiently for maximum impact.
- Co-develop a test TCO model. NI creates a baseline model to show the customer its current distribution of costs. The idea is to open the customer’s eyes to the “hidden cost of the status quo,” Deb says. While customers usually have a very strong sense of their hard costs (e.g., material costs), they are often shocked to see how much “invisible” costs (like hardware and software development) impact their bottom line.
- Quantified high-impact recommendations. Using the baseline model, the company’s current testing capabilities and the metrics that are most important to them, NI forward projects ROI and payback period for addressing certain areas.
- Proposed multi-year plan. NI makes a set of recommendations for improvements, highlights the metrics they believe will be affected, and tries to quantify the risk of doing nothing.
- Help build internal consensus. Even more than highlighting the benefits of moving forward, NI sees its role as lowering the customer’s perceived risk of a given project. Says Deb: “You may have the world’s greatest ROI project, but if the customer perceives there is tremendous risk associated, they will back off.”
NI has learned from its past mistakes and feels like it has fine-tuned a process for conducting its customer business assessments. A rough outline of NI’s process follows:
STEP 1: Business alignment at the VP level or above. Discussions are held with the leadership sponsor regarding alignment with the company’s business needs and signing a Memorandum of Understanding (MOU).This ensures NI will get access to the right people at the customer and the necessary data during the information-gathering phase. This also encourages commitment to execution on the back end
STEP 2: Kickoff engagement and onsite interviews. NI uses these interviews to understand the customer’s processes, how it uses its assets and how it makes investment decisions. It’s during this stage that NI makes sure its financial models are tailored to the client’s specific needs and goals.
Interviews last no more than an hour and are done with the fewest number of people possible. NI focuses on three levels of customer stakeholders: engineers and other “boots on the ground,” middle management and senior management responsible for mapping long-term strategy. NI pays special attention to the people up- and downstream from these key stakeholders, as it’s usually at these “handoff” points that Deb and his team see the most value gained or lost. “Most of the value creation we find is at these interfaces,” he says. “Within these blocks, most companies do a decent job. It’s in these ‘handoffs’ and interfaces where value is lost.”
STEP 3: Process maps and test TCO models creation. National Instruments develops process maps, showing the decision flow based on the interview and follow-up conversations, and builds factory and service center TCO models that identify needed data for input.
STEP 4: Acquire the right customer data needed to build out NI’s projection models. This is the most difficult step, but Deb says it may also be the most important. You can show a customer case studies all day, but unless you’re using the customer’s own data you are going to struggle to create the urgency needed to make the case for change.
Deb emphasizes that this stage of the engagement must be beneficial for both sides. In exchange for furnishing NI with the data it needs to populate its models, NI provides its customers with data insights. While some of the information the customer provides NI will be readily available, much of it is data the customer has never captured and, in many cases, doesn’t even know how to capture. Here, NI works with its customers to think through its knowledge gaps and how to build proxies to capture missing data.
STEP 5: Report preparation and executive debrief presentation. A formal report is prepared and the highlights presented to executives in a debriefing presentation, followed by discussion on follow-up execution. The deliverables include a report on the highlights of the interviews, a TCO financial model including ROI, a formal business report documenting insight and an executive-level summary.
But the business and technical assessments are just the beginning. While they free up budget and resources to start investing, customers still need help executing all the way through the end. If you over-promise and under-deliver, it may be the last co-creative engagement you have with this customer. But if you’re there until the end ensuring a successful execution, you will likely find yourself with a long-term strategic partner.
For a more in-depth treatment of NI’s award-winning process for conducting customer business assessments, see the forthcoming issue Velocity magazine.
- Positioning your value for maximum impact with customers: An interview with a former CFO on how companies make investment decisions - June 18, 2020
- Your secret weapon in times of uncertainty? “Liquidity” - June 1, 2020
- Being accessible, being human and being thought leaders: How a 150-year-old insurance company “shows up” for its customers during a crisis - May 11, 2020