Last year I met with a British researcher who was out in Australia to talk about Innovation policy. From my point of view, the interesting thing about David Connell was that not only was he a researcher at Cambridge, but he was also, until recent years, the CEO of a Venture Capital fund specializing in technology.
David spoke of a concept that he had, dividing business offerings into “hard” and “soft”. Basically when your offering was quite malleable and different for every customer, you were considered a soft business, or when the offering was fixed, a hard business. Businesses could also have both hard and soft offerings at the same time.
Fore example, consider a hairdressing salon. They sell shampoos and hair treatment products and hair colouring services, these products and services are the same every time they are sold, and are therefore “hard” offerings. However the salon also sells haircuts, which are different for every customer and are priced differently. This would be considered a “soft” offering.
David was using the concept ,amongst other reasons, to differentiate whom was paying for innovation. When you have soft offerings, your customer pays for your R&D, with hard offerings the business or its investors pay.
Now when I was in advertising, we regularly had small engineering businesses, wanting marketing assistance. However they always shied away from mass marketing programmes, as direct selling had traditionally been where they had got results. Unfortunately, we didn’t have a conceptual framework to explain what was happening and work with their intuition.
It’s occurred to me since though that this hard / soft concept also makes for an interesting way of viewing marketing spends. When your offering is soft, business is best generated through one to one relationships (salespeople). When your offering is hard, one to many advertising spends always work best.
Soft offerings need that (more expensive) feedback loop where the salesman listens to the requirements and continuously tailors the offering to suit.
I feel that this explains a phenomena I regularly see in small technology and consulting businesses, where the CEO normally outsells all other sales people combined. The offering is generally much more than just a product, and therefore generally a soft offering. Consequently it needs a salesperson to get the sale across the line; and whom better than the CEO, who has the authority to make any change instantly to make the customer happy. Consequently he will always be the person that customers want to develop a relationship with.
Alternatively it can also explain why sometimes mass marketing programs have difficulty selling your offering. It may be because your offering is actually soft, and it takes a one-to-one “relationship” to close the deal.
So I’m thinking that this idea creates a couple of useful points:
1. If your offering changes depending on what the customer wants, spend the majority of your money on sales programmes, not advertising.
2. If you want to be able to access efficiencies through mass marketing programs, you need to harden up your offering before you will achieve success.
There is a fair bit more that you can do with this concept, especially around redesigning a business to make it more scalable. For the meantime though I think it’s a nice concept, especially considering the conflict that normally concurs when you have sales and marketing people try to agree on anything.