Twice a week, I receive a message from someone claiming to have the best team for customer software development, and I should hire them. This article is a reality check. You cannot have a high-performing team without having a focused positioning. This shouldn’t be a controversial statement because it is a foundational cornerstone of economics.
Following up from our article discussing the impact of positioning on sales and marketing in tech services companies, we wanted to discuss how positioning impacts the delivery of services. Rather than positing new theories, we felt it was appropriate to discuss this point as described by the Father of Economics in the above quote.
In this article we are not making any claims. We are just applying basic principles of Economics to how a tech services founder is impacted by them. The three points Adam Smith makes are:
Consulting always has a customization aspect to it. Even with templates, automations, AI, etc., in the end, you will have a developer/engineer exercising their skills to create value. The skills of a developer are a mix of talent, expert knowledge, and insights from experience. A narrow focus reduces the amount of knowledge and experience needed making your team more effective and productive. Your team will gain deeper expertise and achieve this expertise quickly.
When a tech services company focuses its positioning around a specific domain, technology, or problem set, the delivery team gains repeated exposure to similar challenges. They have a better understanding of what can go wrong, the implications of decisions, how different systems work together, relating the symptoms to the root cause, etc. Your consultants are able to take this depth to solve more difficult problems and structure your relationship around telling your customers what they need to do rather than becoming order-takers. This will allow you to acquire higher-value, higher-margin work and build a strategic relationship.
It’s not just an increase in the depth of knowledge. The pace at which the relevant knowledge is acquired also increases. The amount of knowledge and training your team needs decreases. They are able to focus on a smaller knowledge base. So they are able to rapidly gain the expertise needed to be an expert. This reduces your COGS since junior engineers are able to perform at the level of their more senior counterparts in the specific domain. In addition, hiring and training are an essential part of scaling a services company. A fast-growing services company would not be able to maintain its customer reputation without narrowing its scope.
While we may think we can solve the problem with specialized roles within the company at first glance, the problem is larger than that. Just having to manage different kinds of work creates inefficiencies in your system.
You may have a rockstar developer. They have reached the level of expertise where they need a broader understanding and are experts in adjacent fields. You may think you can utilize their breadth without any cost since they already have the knowledge and expertise by broadening your positioning. But this is not true. There will still be a cost in learning new tech stacks. In addition, while broad technology changes happen slowly, specifics of technology iterate at a rapid pace. While they would have a high-level understanding of how to solve the problem, they’ll have to relearn how to solve the specific problem with the specific technology at hand. This wastes time and imposes a cognitive overhead. Even if your team is talented, every switch between domains or delivery models resets part of their mental context. That results in inefficiencies, slower execution, and a higher likelihood of errors. With focused positioning, teams are able to accomplish more through their focused execution on their domain of expertise.
A wide positioning increases the odds that you’ll have team members on the bench, not because there’s no demand, but because the available projects require a slightly different skill set. When your firm is focused, your bench becomes more fungible. Team members can be moved more easily between similar projects, improving overall utilization and reducing the cost of idle time.
It bears repeating that this is an area where the strategy for a startup IT services company is different from that of a giant global system integrator (GSI). A startup doesn’t have the amount of business where it can maintain multiple expertise and steady utilization. It's because of its size that it can have a wide breadth of services, not that the breadth of services allows it to be big.
Focus allows you to make capital investments to improve your productivity, which is very closely aligned with the increased skill. Generally, in a services company, the capital investments are in the IP of delivery.
The simplest of these is through improved processes. When your delivery is focused, it becomes easier to identify inefficiencies and problems in your processes. You can structure them better with a deeper understanding of your customer problems, improving the customer experience. You understand what type of dependencies jeopardize projects and can address them earlier. These improvements come from repeatedly doing the same thing and observing what works and doesn’t. In the end, you provide better customer outcomes and increased productivity for your team.
In addition to optimizing processes, you find more repeatability with a narrower focus. This allows you to create an IP that allows your team to be more productive. There are many aspects to this. Templates, automations, and reference architectures that allow you to solve the customer’s problems quickly. Training IP that improves your team’s time to gain the required skills. The best place to see this effect is in a managed services offering. Where you are able to build better automations, making it easier to roll out updates, track changes, reduce SLAs, monitor the assets, etc., as you develop your systems. But in consulting work, you regularly see accelerators and improvements to help solve customer problems. All of this requires repeatability, or in other words, similarity in the work being performed. This can only be obtained by narrowing the scope of the work you do.
Do you claim to be the best at what you do? Have you ever come on a sales conversation and said we are horrible? Of course not. We all claim to be the best. We may give ourselves many reasons for it. But here is the fundamental reality. Any advantage you can create, whether it be access to offshore resources, relationships with universities for hiring pipelines, a network of sales prospects, etc. There are many other people who have the same advantages. There is only one way to make your delivery team stand out, and that is to build a team of focused experts by having a narrow positioning.
This exceptional delivery team will win you repeat customers and referrals. These long-term relationships are essential for growing your business. This article and the previous article discussed how positioning is essential for your customer acquisition and customer delivery to be effective. While these are the two most important parts of a business. What tech founders need to realize is that your positioning is the essence of the strategy for your business and is the most important leadership decision you have to make as a tech services founder. Our next article will discuss how positioning interplays with the strategy. Please subscribe to make sure you don’t miss it.