Feedback Print E-mail this
E-mail this Print Feedback

Helping a Global Company Revive
Its Long Term Prospects

This case study describes how our analysis and advice helped a company facing an uncertain future rethink its strategies in order to outsmart fierce competitors, avoid deep discounting and ultimately achieve both growth and profitability.

Customers and management ask hard questions

When we first met Fulcrum Services, it was grappling with the tough challenges and fundamental strategy decisions that confront many firms in today’s highly competitive and uncertain environment.

Fulcrum’s future looked rosy enough on the surface: Its markets were expanding. It kept landing new business. Revenue was rising.

But behind the scenes the $2 billion company was battling strong rivals from different quarters. It had trouble developing a clear advantage for its offerings in the many segments where it competed. It wasn't the leader customers went to outside its main market. And even there it struggled to gain appeal and leverage.

Symptomatic of the situation, when prospects asked the defining question “Why should I buy from you rather than from your competitors?” Fulcrum often came up short, forcing it to compete on price.

With net income shrinking and its share price stagnating, analysts, investors and the board were growing uncomfortable with the company’s current and projected performance, putting its senior managers on the spot.

“Which market segments will give us the strongest, most profitable growth at the lowest risk?” the executive suite was asking. “How can we stand out and get the best results there?” “Where should we disinvest?”

Yet like at many companies wrestling with this complex puzzle, management lacked a process for finding the answers on which Fulcrum’s future depended.

For help charting a course through this maze, they turned to Saklad Consultants.

Growth built on deals induced a false sense of security

Fulcrum Services (a fictitious name chosen under our confidentiality agreement with the client) sells technology infrastructure services, applications services, business-process services and consulting services to the healthcare, financial-services, manufacturing and other industries, as well as to government agencies.

Over the years virtually all its business units had grown by winning customers opportunistically, or as one company officer put it, “This is a company built from a collection of deals.” As a result, Fulcrum often had just a few major customers in each of its diverse market segments.

Fortunately most of those segments were expanding rapidly through strong demand for the company’s types of offerings, and through the surge in customer desire to outsource services to lower-cost countries where U.S.-based Fulcrum employs numerous skilled engineers.

Continuing to grab new business in each of these dynamic segments thus appealed strongly to the vendor’s management, yet had created a false sense of security for the long term.

As Fulcrum’s director of global sales and marketing, put it, “There's a strong belief here that the markets are so big and growing so fast that we can survive, at least for a period of time, on the fact there’s enough food on the table for even the smaller members of the family to grab during the general scuffle to feed themselves.

“But that’s not going to last forever,” he cautioned with an eye on the growing competition. “At some point you have to build differentiation. Instead, we devise strategies that are linear extensions of what we are, as opposed to what we should be.”

Lack of focus and distinctiveness led to deep price cutting

Fulcrum faced numerous hurdles on the road to achieving lasting success in the segments where it competed.

Not only was the company facing off against entrenched tier-one companies like IBM and aggressive new Indian outsourcers like Infosys and Wipro.

Fulcrum’s presence in too many markets had spread its resources thin, hampering its ability to develop services that customers would prefer over rivals’ offerings.

Proposing a remedy the global sales director advised, “We can do a lot of things in a mediocre way, or we can do two or three things well. Focus here is key to our success.”

As background he explained that Fulcrum had “a highly ingrained ‘build it and they will come’ culture that makes us reluctant to challenge our own assumptions and think about what the customer really wants versus what we think they ought to have.”

Not surprisingly, all these factors forced the vendor to cut prices sharply to win many orders.

“Every deal I’m haggling on price, nothing else,” the head of the company’s largest business unit told us. “Every day I’m approving 20- and 30-percent discounts. To get out of this trap, I need to achieve differentiation and be able to speak about it convincingly.”

Operational excellence and reputation failed to sway customers

Fulcrum enjoyed a sterling reputation for operational excellence and consistently ranked high in Fortune’s annual survey of America’s Most Admired Companies, what the magazine calls “the definitive report card on corporate reputations.”

Yet the company’s results continued to disappoint, and Fulcrum’s weak growth and sinking profitability vs. its peer group’s strong performance made it hard for the company to tell the financial community a compelling story about its future.

Company officers and the board began worrying that the lack of segment focus and competitive advantage, combined with pricing pressures, were endangering Fulcrum’s bottom line and long-term financial outlook.

Management calls for an in-depth review of company strategy

Responding to this situation and a request from the board, senior management began a full-blown strategy review, and asked each business unit to submit a detailed report on its markets, competitors, offerings, opportunities and plans.

As part of the process, Fulcrum’s head of strategy asked Michael Saklad to study this information and help management design an integrated and actionable corporate strategy that customers and investors would find convincing.

The assignment called for helping the company:

  • Identify markets where it could compete successfully and that would drive strong growth for the coming 5 to 10 years

  • Choose where to focus the company’s energies as part of that strategy

  • Develop a distinctive position in those markets for the company’s offerings, units and the company as a whole

  • Decide where to stop investing.

During the next few months, Saklad worked with the company’s top officers and with the heads of three large company units to understand and analyze their businesses and the challenges they faced.

What Saklad found didn’t surprise him. “Like many technology firms,” he observed, “Fulcrum had built its plans for success on an inside-out, technology-driven view of the world rather than an outside-in, customer-driven view, leading to disappointing results versus its potential.

“Smart companies recognize they have rivals,” he added, “and know that success requires learning from customers both what they want to buy and what it takes to stand out in their minds from hungry competitors. They apply this knowledge to focus their competencies, resources and people on markets where they can create that advantage, and turn it into profitable growth.

“Unfortunately, none of Fulcrum’s business units I spoke to was good at gathering that information and converting it into the offerings and competitive edge needed to win customers’ preference and business.”

Using a toolkit for decision making

To remedy this situation, Saklad provided Fulcrum’s senior management with a process, guidelines and recommendations tailored to help them make key strategy decisions about its different businesses.

Using these tools, Saklad worked closely with management to analyze the different segments where the company was competing. He helped identify the segments they should continue to invest in where the company could develop competitive advantage that customers would value and act on.

He also outlined a plan for applying that advantage to achieve market leadership and profitable growth in those segments. And he helped identify segments the company should exit where it was unlikely to achieve differentiation, leadership and profitable growth.

This process and its resulting strategy recommendations helped lay the groundwork for Fulcrum’s new five-year strategic plan. And it provided a roadmap for shifting from an unfocused, opportunistic mode of operation that exposed the vendor to threats from competitors, to a focused, strategic and more secure mode.

Now Fulcrum could concentrate its efforts efficiently on fewer, more promising markets. It would have the resources to develop offerings that customers in those markets would prefer to those of competitors. And it could thus win their business more easily and more profitably.

Management says our work made a difference

Speaking about our work, the company’s head of strategy, said, “You asked fundamental questions that we had overlooked about our businesses, and helped us answer them clearly. You also got us to think in a much more disciplined way about the areas in which we could really be competitive.”

The head of global sales commented, “Here we have too much history trying to dream things up and go out and do them without any understanding of what the real market drivers are. Instead, you’re focused on the right issues that we as a company need to address by bringing a strong adherence to “let’s not forget that we’re actually selling things to people, and that what they think matters.’”

“You are a much better fit for us than the high-powered, pushy groups with whom I’ve had experience that might show up here with boiler-plate approaches to dealing with problems,” he continued. “Your approach tailored to our needs and your helpful questioning of our conventional wisdom, combined with your experience and insight, have all been extremely valuable.”

Added the head of strategy, “Without question I would prefer you over one of the consulting firms. We wouldn’t get the insight we get out of a person like yourself. And to be honest, insight per dollar spent. Like an order of magnitude difference. I see it as that much.”

Saklad Consultants helps companies rekindle limping businesses, outsmart direct competitors, conquer new markets and achieve lasting, profitable growth.

We do so by working with senior executives and managers to develop competitive strategies and action plans grounded in a deep understanding of their firms’ capabilities, technologies, customers and marketplaces.

And we coach them in the processes needed to untangle complex strategy issues and make key decisions in today’s challenging environments.

To learn how Saklad Consultants can help your business grow profitably, write to us at the e-mail link below.