Make happy customers

Last week, I gave a presentation to a company that’s in the midst of a strategy revamp. I always admire leadership teams that take on the incredibly difficult challenge of taking a step back and reviewing how the organization is operating right now and what change in direction is required to achieve future success. As the saying goes, what got us here in many cases won’t get us there.

One of the key discussions was concerned with the R&D resources allocated to providing customizations to some of the most important customers. Large customers often know how important they are to the company and, as a consequence, typically negotiate very hard for special treatment in terms of customization, free services and similar. As these companies provide a significant part of the revenue, the short-term and immediate response often is to go along with their requests.

When a company becomes increasingly dependent on a small set of powerful customers and these customers exploit their power, the consequence may easily be that all R&D resources are consumed by providing customizations and customer requests. The result will be that the company’s offering becomes increasingly commoditized as the R&D resources aren’t used for building differentiating functionality.