How to know if you will win or lose in 2014

As the dust around the budget and debt ceiling settles, and as there is finally more clarity in the market, I’m hearing more people talk about 2014 as the year where winners and losers will begin to emerge.

The issues of 2013 were hard on everyone, but they did provide some cover for poor performance and misguided strategies. But that cover is gone in 2014.

While I can’t predict specific winners and losers, I’ll give you my take on the characteristics I see as being critical for success in the current market.

Technology-enhanced services

This might be the most profound shift we’ve seen in the market in the last couple years, and it is one that is going to accelerate going forward. One of the things I’m thinking about is cloud computing and the delivery of everything as a service.

Here, the customer isn’t buying technology per se, nor are they buying hourly IT support; instead, the technology and the services are tightly wrapped together, and the customer is paying for a service.

This has an impact on how you sell, how you reward people, how you structure deals and even how you structure partnerships.

I also include in the category of “technology-enhanced services” the strategy of adding some sort of intellectual property or proprietary process to services offering. A lot of people call it products, but it’s not the shrink-wrapped kind, but rather very specialized hardware or software. This is particularly big in the intelligence market where the need to do things such as data analytics and signals intelligence is so great.

I struggle sometimes to understand this factor completely, but many people have told me that having intellectual property that enhances your services offering is a great way of driving higher margins.

Scale

This is particularly true in the pure services business. Size will matter because companies need economies of scale to deliver the kind of profits they need to be a growing, viable company.

The prevailing wisdom is that corporate costs are relatively fixed. The costs to operate a $300 million company aren’t significantly lower than the cost of running a $2 billion company. So, the bigger the base in which you can spread those costs, the leaner you can be.

One result here is that it exerts even more pressure on the middle-market companies that don’t have the protections of small business programs and struggle to compete on price with larger companies.

Agility

Agility in this case is both the capital “A” Agile in the terms of the software development process and the lower case “a” agile for flexibility and responsiveness.

Agile development continues to gain ground as a formal process for building complex systems, but also as a mindset that encourages collaboration, continuous improvement, goal setting and measurable results.

Even if you don’t do Agile development, you’ll still be very well-served by embracing that mindset. You can’t be flexible and responsive without it.

Empowered Employees

This is a critical component of being agile; employees in the field need to have the authority to make decisions and respond to customers. Layers of bureaucracy will be the death knell of companies who can’t seem to get out of their own way.

While I’m a big fan of employee-ownership, I know it doesn’t work for every company, but what can work is giving a sense of ownership to employees. And that sense of ownership comes from their ability to make decisions.

I hear nearly every executive I talk to say how their people are their greatest asset, so unlocking that asset is crucial in today’s market and can have an impact on operations, business development, hiring and retention, and overall performance.

Focus

The signs of this are all over the market as we see divestitures have common place. Avaya is selling off its professional services business to Camber. Computer Sciences Corp. has gone through several transactions to shed non-core pieces of business.

We’ve seen the spin-offs from L-3, ITT and of course, Science Applications International Corp.

Even the largest companies don’t market themselves as generalists. No one is a one-stop shop.

If you can’t identify the handful of things you are an expert in, then you are likely lost already.

Customer intimacy

While the budget environment might be clearer than it was a year ago, budgets are still tight. Cost and efficiency are still the top priorities for agencies, and you can’t deliver that to customers unless you understand their mission, their challenges and their goals.

And it isn’t enough to just react quickly when they tell you what their pain points are. Ideally, you should be so close to your customer that you can tell them what their pain points are. You should be coming to them with creative solutions to solve their problems before a request for information or solicitation comes out.

Looping back to an earlier characteristic – Empowered employees are the best way to build that intimacy.

Not all of these characteristics apply to all companies, and I’m sure I’m missing several, so let me know what you think, and what other characteristics are critical to success in today’s market.