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Business Growth – AFAB Is a Four-Letter Word, So Say Focus Instead
AFAB (a-fab) noun:
1) Selling “anything for money” to generate revenue and keep billable employees engaged
2) Business conditions that may hinder the company’s growth, differentiation and/or profitability
3) In more mature companies, a sign of not focusing on a specific product or service offering
However you define it, AFAB (anything for money) is a condition that typically affects a business at some point or points in its life cycle. Identifying when your firm suffers from AFAB is essential to taking corrective action. Failure to do so will result in lower gross margins, increased opportunity costs, and a lack of brand and service differentiation for your firm. Better yet, learn the warning signs to avoid situations whenever possible (eg, flat revenue growth or staffing projects that always require different skills).
The remainder of this article covers business growth and where AFAB can occur, the causes, symptoms and treatment of AFAB, and the benefits of reducing AFAB in your firm.
Growth and maturity of the business
The growth cycle of an IT professional services firm consists of four stages. Many companies do not experience the full cycle, which is not to say that they are not successful. This means they may not have reached their full potential. Also, it is possible that a firm can jump into the market with a unique offering and rocket through the growth cycle. This situation would clearly be an exception.
The four stages of growth generally occur in the following order:
1) Initiation of business
In this stage the business is just starting from scratch with some sort of business plan or being seeded with one to two initial accounts that you have already sold. Attention is paid to marketing and sales activities and the quality of project delivery. The scope of services is based on what your team knows best, but you sell what makes sense to continue generating revenue, even if you have to use a third party contractor.
This is the most common scenario for AFAB. It’s easy to support and helps you generate revenue to fund the business. On the upside, you can start to develop some long-term customer relationships. On the downside, you have trouble differentiating yourself, because it’s hard to define what you do other than as an extension of the technology you use. To a potential client, you’re just like everyone else. Additionally, you typically discount your services based on the price you can command.
2) Practice development
At this point you recognize that there are patterns in your technology work. You have a particular focus on specific vendors and their products, so you decide to expand the firm’s experience in some of these key technologies. Practice managers are assigned to the development of solutions, the management of people in their practices, the development of partnerships (eg, product vendors and training companies), and ultimately the profitability of the practices themselves.
At this stage the company becomes known for its technical expertise. Most, if not all, of the company’s work is done in local markets. Your technical expertise starts to undercut the competition, but it’s still very difficult to differentiate the firm.
3) Business expansion
This phase is characterized by growth in business solutions and/or geographic expansion. Just as you identified technical specialization in the previous phase, your firm now has a pattern of performance across industries (e.g., verticals) and business functions (e.g., sales, human resources, etc.). The intersection of technology and one or both of these other areas allows us to focus on specific business solutions. For each you assign a practice manager as you did for your technology practices.
These business solutions firms begin to provide real differentiation. You narrow the field of competition significantly and you can start charging more for the work you deliver. Additionally, as you master these more unique offerings in the local market and are recognized for your expertise, you have the opportunity to take them to regional and national markets, especially those you are underserved.
4) Continuous improvement
Your business is growing, profitable, differentiated and well known in the market. Competition is the goal for you. You need to constantly reevaluate all aspects of your business, from service offerings to marketing and sales to operations. In general, the two biggest areas to focus on are adjusting your offering to meet market needs and improving efficiency in delivery and support services.
This is the time when you can more confidently introduce new ways of offering to your existing and target clients such as managed services (eg, application support or network infrastructure) and providing SaaS (ie, software as a service).
AFAB is prevalent in the first phase, business initiation. It can also occur in other phases that co-exist with specific practices or business solutions. In some circumstances, AFAB may be justified on a temporary basis. For example, if your firm is exclusively project-based and you are experiencing a “roller-coaster” sales effect, you may need to take action to improve utilization by accepting work outside of your normal scope. In this case, continuous monitoring of resource allocation is necessary to minimize the time AFAB is prevalent.
Causes of AFAB
There are many reasons why AFAB might come to your organization.
- Being in the business initiation phase of your firm’s lifecycle (where AFAB is a common occurrence)
- Not defining the scope of your services and assuming it will define itself over time
- Lack of attention to business planning and analysis of results – you are busy Working in business And can’t give enough time for that Work on business
- Not appointed counsel billable on the bench
- Relatively lean sales pipeline
- Have a good management team, but lack someone with the experience to proactively manage your service portfolio
The warning signs of AFAB are numerous. Controls are in place to identify problems as early as possible. Among the symptoms are:
- Revenue is flat or growing at a declining rate over time
- Each project you sell is either one-of-a-kind (ie, unique where you haven’t worked before) or a variation on previous work – delivery has little potential for repetition.
- You never seem to have the right staff to fill available project roles
- Gross margins are flat or declining due to rising delivery costs – you’re using third party consultants above budgeted costs
- The sales cycle remains relatively long and key opportunities are consolidated into one or two sales phases
- Qualified lead generation is inconsistent (eg, limited marketing activity) indicating another roller coaster wave in the sales cycle
Eliminating AFAB and avoiding future occupational plateaus requires diagnosis, treatment and preventive measures of the condition built around three concepts:
- Review historical information on projects (ie, numbers and revenue) to identify patterns of technology used, industry services and business functions, and problems addressed.
- Review historical client information (ie, number, revenue, industry, company size, buyers, issues, length of time as a customer, etc.) to identify ideal target account profiles.
- Knowledge of factors and other areas of current sales pipeline activity (eg, pending changes in technology, potential market changes, etc.)
- Refine your service portfolio to include offerings that best support the direction you set for the company
- Identify and hire practice managers to lead each area to further develop solutions, manage their consulting teams, develop partnerships, sales support, service delivery, customer relationship management and generate favorable financial results.
As basic as this sounds, it’s surprising how many IT services companies don’t analyze their projects and clients to ensure this critical information is available.
- Ensure the company management team is in sync with the business direction and decisions made around your service portfolio
- Provide business areas with a clear definition of goals and objectives that will support practices, particularly marketing and recruiting
- Communicate under a new refined business strategy, then market when ready
- Enhance your monthly performance dashboard to include indicators of potential AFAB conditions (e.g. increased use of third party contractors)
- Ebb and flow in new leads, closing delay etc. Manage the sales pipeline to get noticed.
- Develop performance reports for each practice to enhance the manager’s ability to run his/her business
Each of these three areas (i.e., focus, alignment, and metrics) requires constant attention as part of leadership responsibilities in the business.
Benefits of reducing AFAB
While AFAB has its place in the early stages of a company’s business life cycle and may be justified on an ad hoc basis at other times, you must at least develop the discipline to manage AFAB, i.e. learning to say “no” to an upset. things to do Potential benefits of preventing or limiting AFAB by developing solutions that address specific industries, business functions and technologies within your firm include:
- Enhanced differentiation of your service offering
- Great opportunity to work with client executives as you sell business oriented solutions
- Increasing the repeatability of projects and work elements
- More efficient projects, thus lower delivery costs
- Reduced risk on the project
- Better pricing opportunities based on differentiation
- Income increased
- Improved Gross Margin
- More efficient on-boarding of new consultants
These benefits are real and do not require significant incremental investment in your business.
Do you suffer from AFAB?
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