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Develop new service offerings

Applies to: Microsoft Office Project 2003

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 By Larry Melillo
Consulting businesses must continuously develop new services if they want to stay competitive and meet the needs of a
shifting market. When executed properly, the development of new services is a cyclical activity in the company.
The first step is to evaluate your current service portfolio to identify those services that show growth and those that drag
the company down. The next step is to replace less valuable services with high-growth, high-value services that better
meet client needs.
When you develop new services for your consulting company, consider two approaches:

• Incremental Look for ways to expand your existing offerings to capture new revenue. This expansion takes advantage
of the current skill sets of your company's employees.

• Transformational While incremental expansion merely tinkers with current service offerings, transformational changes
are more radical. Transformational changes typically require your organization to acquire a new set of skills.
After you identify potential changes to service offerings, your final step is to establish a rigorous process for validating and
then launching service lines that add value to the company and the client base.

Evaluating your current service portfolio

As part of the planning process, company leaders need to evaluate the organization's portfolio of service offerings as part
of the entire financial picture.
Key questions to consider as part of this evaluation include:
• Which service offerings contribute the most to our current profit margins?
• Which service offerings contribute the most to our current growth?
• Which service offerings will provide high levels of growth in 12 months? In 36 months?
• Based on our current skill sets and capabilities, can we capitalize on potential high-growth opportunities?
• Which of our current service offerings are expected to have poor growth or low profits over the next 12 months? Over 36
months?
By analyzing the current portfolio in this way, you can determine which of your current service lines should be maintained,
which ones require more investment, and which ones should be pruned or receive fewer resources.

Identifying new service opportunities

After the current service portfolio has been evaluated and pruned, you may find that valuable resources, in the form of
people or funding, are now available. These freed-up resources can help your organization pursue incremental or
transformational services.
Staff and money can be applied to improve current service lines that are performing well or that have solid growth
prospects. For example, a consulting company that provides system implementation services may offer training as an
incremental service. This extended service captures more of the client's business, yet does not require a radical shift to
your company's business model.
Or you may have the opportunity to create an entirely new service offering, requiring a significant retooling of your
organization's skill sets and possibly even of the business model. To determine whether transformational service
opportunities are available, identify your organization's internal strengths and weaknesses and its external opportunities
and threats by using SWOT analysis.
Some of the issues that your organization should evaluate by using SWOT analysis are:
• What core skills do we have that can be applied to other areas, allowing us to serve new markets? (Strength)
• What skills or capabilities do we lack that would prevent us from taking advantage of a potential major market trend?
(Weakness)
• What services are our clients requesting that we do not currently have the capacity to deliver? (Opportunity)
• What are our competitors doing that could change how we do business? (Threat)

Evaluating new service offerings

After evaluating your company's current service portfolio and identifying potential new service offerings, your final step is
to evaluate the benefits, costs, and risks of each new opportunity. Review the following key questions to ensure that you
choose new services with the best opportunity for success for your company and your clients.

EVALUATION CRITERIA
AREA

Benefit
• What level of revenue will this service bring over the next year? The next three years?
 • What percentage of total revenue will this service provide over the next year? The next three years?
• When will this service make a profit?
• Does this service line provide synergy with current or planned offerings and provide greater overall revenue
opportunities to the organization?
Investment (cost)
• What are the startup costs associated with training, marketing, and recruiting for the proposed service line?
• What are the ongoing costs of maintaining the proposed service line?
Risk
• Can the risks associated with offering this service be managed by using current processes?
• Does this service support or diffuse the brand strategy and mission of the organization?

As you evaluate each opportunity by using the preceding framework, build a budget and marketing plan to help you. Based
on your analysis of all opportunities, rank each potential service according to the impact that it will have on your
organization's overall health, investment budget, and competitive state. Add to your service portfolio only those
incremental and transformational services that provide the most value to the organization.
Developing new winning service offerings is a critical activity for consulting businesses and requires a diligent process. By
using the recommendations in this article, you can evaluate potential new service offerings and then identify which ones
add the most to your organization's future growth and profitability.
About the author Larry Melillo is a manager of CFO Advisory Services at KPMG, a leading provider of audit, tax, and
advisory services. CFO Advisory Services professionals help organizations implement strategies and process changes that
drive a more value-added finance function.
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