How your offering structure defines your business operating model

If you speak to other entrepreneurs, eventually in the same industry, you’ll find they’re running their businesses very differently from yours.

Some are highly automated and standardized, while others have many high-paid people and very low levels of standardization.

How can both be successful? And should you adopt what others do, e.g. automate everything?

Well, it all starts with your clients, offering structure and positioning. 

There’s no right answer on what your business operating model looks like. Instead, it needs to reflect the clients you serve, and how you’re serving them.

In this article, find out what your operating model should look like based on your clients, offering structure and positioning.

Clients, offering structure and positioning

What you sell, to whom you sell it and how you position your service has a defining impact on what your operating model should look like. 

Read more on operating models here.

Your clients

What clients you work with has a great impact on your operation model.

The size of your clients

If you work with small business clients, your operations can be much more standardized. Account management does not play as big of a role.

If instead, you’re working with large corporate clients, you’ll find that they dictate the rules and the way they want you to deliver your services. Consequently, a much more senior team is needed to operate in this environment.

You can’t fully standardize your delivery, as you need to adapt to the clients’ needs. 

In addition, you want to have a strong account management structure to keep existing clients happy and also be able to acquire new clients within the organizations you’re working with.

How similar your clients are

On top of that, the diversity among your clients will have an impact on your operating model as well. 

If you work with small and large clients, you have to consider their varying needs.

If your clients come from one industry only, you can standardize more. If however, they come from different industries, geographies or have other differentiating factors, your operating model will need to reflect that.

Your offering structure

If you’re selling a productized service your operating model can be fine-tuned to a certain degree. Repetitive tasks and processes allow for optimization.

A retainer based model allows for more plannable resource allocation than one-off engagements, but also requires you to manage an account more thoroughly throughout the lifecycle.

On the other hand, if you’re working in project-based engagements with varying scope, you’ll need to have a much more flexible operating model to accommodate the unpredictability of this kind of work.

The same is true for fully customized services: They’re often based on high-caliber team members that are able to make decisions on approach, deliverables, timeline and budget on the fly.

Your positioning

You can position your service as low cost, or as an white-glove, innovative service. And of course, anything in between.

For low cost offerings, clients are more likely to accept standardized and automated delivery with lower personal engagements.

If, on the other hand, you’re selling high-ticket services, your clients will expect more tailored solutions, more personal engagement and flexibility to accommodate their needs.

Now that we’ve defined what dimensions of your offering, client base and positioning impact your operating model, let’s have a look at the implications on each of the dimensions of people/orgs-structure, processes and tools, e.g. tech, automation and AI

Impact on people and org structure

The way you structure your team and what type of people should be on it depends on your offering.

The talent you need

If your offering is targeting small business clients, is highly standardized and low-cost, you can rely on more junior and untrained staff. Clear processes, high degrees of automation and no touch points reduce the need for highly trained people.

If, instead, you’re working with corporate clients, have a high-touch, high-ticket offering, you’ll need more senior people that can interact with clients and make judgement calls on how to best run a project or engagement.

How you structure your organization

If you operate in a more standardized setup, you can use a functional structure. 

Read more about different types of org-structures here.

You can find functional experts that operate under clearly defined procedures and workflows. The degree of interdependence between functions and the need for solving complex problems is low. Rather, the delivery of your standardized service is a sequence of well-defined tasks. 

The functions execute their work one-after the other and have clear hands-off. Using a functional structure in this type of setup is beneficial, as it is the easiest way to structure your organization, both for managing and recruiting.

If you’re on the other end of the scale, with a high-ticket service, targeting large corporate accounts in a one-off, project-based environment, a purely functional structure will likely not work.

In the accounts you work on, you’ll need to adjust what you do, make quick and good decisions about challenges during delivery, and accommodate the clients’ needs. 

Also, as each project is different in scope, you’ll need a diverse team semi-dedicated to the client account to be successful. A team-based structure, often only built for a particular project or account, will work better than a functional one.

Impact on processes

Also your processes are highly impacted by your offering structure. Not only the level of standardization, but also what processes you need and how they’re applied will vary.

How involved is your client

In low-cost, retainer-based offerings, targeting a homogenous group of small businesses, you can optimize your processes to a large extent. Given the low-cost nature of the offering, the impact your client might have on the process is limited.

Also, there are services that clients just want done, and don’t really want to do much with it. Think about office cleaning or IT managed services.

On the other hand, if you’re operating in areas where the clients are typically highly involved, you need to stay flexible with your processes.

In many agencies and other service businesses, client feedback and approvals make fully standardizing processes almost impossible. 

You’ll find this often for larger clients that want to have a say in everything you do. Also, there are topics that clients are typically more involved in. Examples include brand development, strategy and operations consulting.

In these domains, it’s hard to operate on process alone. Client interactions – a factor for complexity in all forms of service businesses – are considerably more intense if your clients deeply care about the work you do.

Level of standardization

If your offering is a productized service, it means that a client buys a certain way of you doing things, as well as a standardized deliverable.

If you position your service as productized (e.g. predefined scope, fixed price, etc.), then your clients are more likely to accept the way you do things.

In this scenario, your processes can be standardized, too.

On the other end of the scale, if you’re offering bespoke and custom services to your clients, you’ll have to be prepared to keep delivery more flexible. 

You can still standardize components of it, but not the delivery and account management as a whole. This is what the client expects, this is why they charge a premium. (Footnote: If you’re offering a fully custom service and don’t charge a premium over your productized competitors, you’re in a tough spot. Either raise your prices or productize your services.

How much impact does your client have on the way you operate

Lastly, as mentioned above, working with larger clients often means they will have a say in how you deliver your service.

If the account is large enough, you’ll be likely willing to make adjustments to accommodate those needs.

An example: You have monthly reporting as a standard in your offering, but your corporate clients want a bi-weekly report with an extended scope.

Again, if the deal is big enough, you’ll likely accommodate that request. But this calls for doing something outside of your defined process landscape.

This creates stress on your organization, if they’re not set up for operating outside of standardized processes.

Impact on tech, automation and AI in your business

Your offering structure will have an impact on the way you use technology in your service, and on how automated your delivery is.

Use of technology

If you offer a low-cost service for small business, they’ll be expecting that you replace some or all personal interaction with tech solutions like task management systems (Asana, Clickup etc.), recorded videos (Loom etc.) or chat messengers like Slack.

If on the other hand, you offer a high-ticket service to larger clients, they’ll expect face-time with their account manager. Even though the pandemic has increased the acceptance of services that are delivered fully remotely, your account manager still has to be there in regular virtual update and project meetings.

On the other hand, larger clients expect you to be efficient. So they also want you to use technology where it increases speed and quality, as long as it doesn’t harm their ability to get you on the phone when they need you.

Automation 

Automation can be a large part of any client engagement, but your offering structure and positioning determine where.

If your delivery is very standardized, you can automate it much easier. If on the other hand, your engagements are highly versatile, automating larger parts of them will be difficult.

Using automation in client management (think onboarding, updates, approval requests) will more likely be accepted when offering a low-cost, productized service to small business.

If you sign a large and juicy enterprise account, and then tell them you won’t hold an in-person kickoff meeting, but send them a loom and a questionnaire instead, you’ll lose that client pretty quickly.

Artificial intelligence

Unless you’re an AI consultancy or tech provider, the use of AI in your operating model will depend on what clients you’re dealing with.

If you offer something at low-cost to a client base that hadn’t had that type of service before, they’ll often be content with AI-powered or fully AI-generated deliverables.

If, however, you’re dealing with experienced clients, winning against many competitors in a RFP or tender, you have to make sure deliverables are as good as possible. AI is often not there yet as of this writing.

Regardless of the above, it makes sense to constantly monitor and experiment with leveraging AI to streamline operations.

Summary

There’s no right or wrong in structuring your operating system, consisting of people, processes and tools.

Rather, ask yourself the question: Are my operations set up in the best way possible to cater to our clients’ needs?

Examine the dimensions above and create or refine your very own operation model.

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