There two interesting articles in last Tuesday’s FT about IBM’s restructuring of their service offerings.

The first article reports on IBM’s efforts to shift leadership from hardware divisions to service divisions. The second article is an in depth analysis of the cultural shift required to transform IBM’s consulting approach from a process approach to a product approach (Richard Waters).

What’s the difference between a product approach and a process approach?

Here’s Matt Porta, vice president of IBM Global Business Services, describing IBM’s traditional service approach:

“‘You needed a tremendously smart business analyst who got out a blank sheet of paper’ for each assignment and devised a response from scratch.”

Porta gives a good description of the extreme end of a process approach to management consulting. Rarely if ever do IBM’s consultants start from scratch; they have an enormous knowledge base of past projects to draw on, complete with every type of boilerplate assessment report and presentation you could imagine. But Porta’s story effectively illustrates the point they’re trying to move away from.

The product approach attempts to standardize and homogenize the work of those smart business analysts. It’s a reasonable goal for an organization with the overhead of IBM. They’ve seen slow growth in their services sector, and they’re hoping that taking a product focus will lower their operating costs and stimulate profitability. IBM has also been making aggressive moves to service small and medium sized businesses. Reducing costs will be key for them to penetrate the SMB market.

Another excerpt from the Richard Waters article:

“‘We always relied on the same business model – one deal at a time,’ says Mr. Corgell [IBM's general manager for SMB services]. ‘But there are only so many hours in a day’.”

Only so many hours in a day. This may be a familiar sentiment to anyone who reads Vinnie Mirchandani’s blog. He was recently advised to “find revenue sources that make money while you sleep.” Hmm. Is this the new clever aphorism for off-shoring knowledge work to Asia?

I like to reference the work of operations strategists Krajewski & Ritzman. They relate these ideas as being the core distinction in an organization’s positioning strategy. They recommend that an organization choose either a process focus or a product focus. With that fundamental distinction in place, the challenge lies in how you link your decisions together throughout the operations functions.

IBM seems to be following this page from the Krajewski & Ritzman playbook. It makes sense and seems like a smart strategy.

Fortunately IBM and I aren’t competing directly for business. In fact we’ve been known to work together, like when they introduced their plants, growth and innovation advertising campaign around this year’s superbowl. That may be one of the first of my ideas to indirectly make it to a national televised audience. In the future I think we’ll be working together more.

It’s also important to mention that my customers prefer a highly personalized approach. They work with me expressly because I don’t offer boilerplate solutions, and I don’t delegate large chunks of my projects to recent college grads. This is an advantage to my clients, and it would perhaps be a disadvantage to me if I were pursuing a product focused positioning strategy. I’m not. I like to sleep while I’m sleeping.[tags]IBM, product focus, productizing services, Krajewski & Ritzman[/tags]