The foundation of Vixul’s mission is the idea that emerging tech services companies are a different kind of business than both tech product companies and commodity staff augmentation companies. These companies’ focus on emerging tech creates a different kind of beast altogether, a new medium-risk medium-reward profile distinct from the two other models.
By their very nature, emerging technologies create a storm of change for any business they impact. Your customer seeks to cross these rough seas. As an emerging tech services company, your goal is not to be a navigator or an oarsman. Your goal is to be a fully staffed ship with an expert crew ready to sail your customer to their lighthouse goal. To achieve that, your company needs to be aligned with delivering value at every touchpoint - from sales to delivery.
In practice, there are two main motions for delivering value in consulting: implementation or advisory. Many firms do one or the other. This article will help you understand why an ETS company must do both to thrive.
With an implementation-only approach, your company provides the hands-on doers the customer needs. This works well for customers who already know what they want, and they only need hands on deck to deliver it. The burden of expertise shifts to the customer, while the responsibility of execution rests with your team. That’s why it’s also easier to grow this type of team: just hire more junior engineers and train them. But there are limitations.
The first limitation is that implementation work is heavily commoditized. You end up competing on price and operating at low gross margins. That makes it harder to grow your business.
The second limitation is that in such an approach, the underlying assumption is that the customer knows what they want. But if you’re delivering an emerging technology, the reality is that - by definition - the customer does not know what they want. They are not the experts in this emerging technology - you are. They lack senior staff experienced enough in this emerging technology to navigate issues and direct your staff appropriately. That’s why they needed external help. But they themselves do not know how to use this help without expert advice.
This is why the sales motions in ETS are so different from commoditized staff augmentation services.
Many emerging tech services companies focus on delivering advisory services. This approach is a natural fit for highly experienced consultants who can guide their customers through the challenges they’re facing. Expert advisory is high gross margin work that puts you - as the expert - in a position of thought leadership in your industry. Advisory firms can be extremely profitable with a smaller staff. On the whole, it’s very good business. But there are limitations here as well.
Firstly, too much of the value of an advisory company ends up being locked in the people in the company. This can make it harder to sell the company later on, although creation of good IP can help with this - for example, an assessment platform that turns mysteries into puzzles.
Secondly, your revenue remains a very tiny fraction of the amount your expertise is able to influence. As an expert advisor, you already have the trust of the customer. There is an immediate need that the customer has that you are aware of. This can be one of the easiest sales you make.
And thirdly, your biggest limitation is in how disconnected you are from the reality of the customer’s implementation problems. You are able to guide the customer at a higher level. But you don’t know the reality of the pain the customer experiences. That would require getting your hands dirty too.
Neither implementation nor advisory can meet the needs of customers in the rapidly changing environments served by emerging technology services. The greatest possible value delivered to your customers requires a blend of both implementation and advisory.
The resulting synergy will improve your gross margins, but more importantly, it will create a complete solution for your customers. Your solutions will be more grounded, based on not just your expert knowledge but also an awareness of problems encountered during its implementation.
Having a single point of contact that takes care of their problem end to end also vastly improves the customer experience. Their perception of your value changes from that of an order-taker or a consultant prone to lofty ideas, into someone who comes in to solve their problems.
But ultimately, this dual capability goes beyond customer experience and gross margins. This synergy is at the heart of an ETS company’s full impact. By being both the expert that envisions solutions and the architect that implements them, you position yourself as a pioneer who defines how - and in what direction - work is done in this technology. You get to truly operate at the cutting edge of your chosen emerging technology, not bound by the limits of non-experts’ knowledge nor removed from the reality of translating ideas into reality.
This allows your work to be transformative in itself - and it also makes you a valuable target for an acquisition at a high multiple of revenue. Such an acquisition is what we talk about when we at Vixul talk about empowering tech services entrepreneurs to scale their companies toward life-changing financial exits. This is the yellow brick road of ETS companies’ journey to success, and we believe it is a path worth forging. If you would like to be a part of this, follow us on LinkedIn.