Archetype
Also called: Value added reseller, Managed service provider
See also: Guaranteed Availability, One-stop-Shop
| Key Partners | Key Activities | Value Propositions | Customer Relationships | Customer Segments | |||||
| Key Resources | Channels | ||||||||
| Cost Structures | Revenue Streams | ||||||||
How: Take the role of trusted advisor and partner rather than vendor by solving complete business problems for customers rather than delivering individual building blocks.
Why: Build retention and continuously improve your product by gaining insights about customer habits and needs through a close on-going relationship.
This business model is part of the Business Model Patterns printed card deck.
A collection of business models that will help you understand the key drivers of business model success. The card deck will be ready for purchase in the end of 2023 and is now undergoing rigorous testing.
Reserve your deck!A Solution Provider offers comprehensive coverage of products and services within a particular domain, consolidated into a single source. This typically includes customized service agreements and consulting services, as well as all necessary supplies and spare parts. The aim is to furnish customers with an all-encompassing package that addresses their tasks and issues within a specific area, allowing them to fully concentrate on their core business, thereby frequently enhancing performance. This model is particularly suitable for customers seeking to outsource a complete area of expertise, such as to an Internet Service Provider for web services or to a transportation company for international delivery tasks.
The core principle behind the Solution Provider model is that customers want to pay someone “to be the solution provider.” This means that instead of focusing on a product in your catalog you wish to offload, you find the best way to see your customer’s pain points and turn them into your opportunity.
Solution selling is all about finding the suite of products and services that can give your customer the most favorable outcome. This involves thinking out of the traditional boxes, as well as innovating and developing new methods when necessary.
A major advantage of utilizing a Solution Provider is the possibility of cultivating increasingly close relationships with customers. As the single point of contact through which customers solve their problems by way of specific information or training, Solution Providers increase efficiency and performance. By becoming a full-service Solution Provider, a company can augment its revenue by identifying new ways to expand its range of services. Furthermore, insights into customers’ needs and habits can be employed to improve the products and services offered.
By way of providing a single point of contact to customers, Solution Providers help them to resolve their problems by way of specific information or training, thus increasing efficiency and performance. Becoming a full-service Solution Provider can enable companies to discover new ways to extend their services, and as such, increase their revenue. Additionally, by gaining insights into customers’ needs and habits, Solution Providers can improve their products and services, thus increasing their customers’ satisfaction.
Where did the Solution Provider business model pattern originate from?
Theoretically, the Solution Provider concept can be implemented in any area imaginable, but it originated in the mechanical engineering industry. Given that this industry is highly cyclical, many companies are dependent on generating revenues beyond product sales. Heidelberg Printing Machines serves as an exemplar of this phenomenon. Over the past 15 years, the company has undergone an impressive transformation from a traditional printing press manufacturer to a total Solution Provider.
Heidelberg Printing Machines not only sells machines, but also the entire process involved in producing printed products. In addition to selling printing presses, the company also provides monitoring and consulting services to assist customers in improving their printing workflows. As a global leader in sheet-fed offset printing, Heidelberg Printing Machines has seen a shift in its revenue streams. In the past, 80% of its revenues were generated through machine sales, while today that figure has been significantly reduced.
Heidelberg Printing Machines’ evolution from a traditional printing press manufacturer to a total Solution Provider is a prime example of how companies can adapt to changing market conditions by providing a comprehensive offer to their customers. The company’s move towards providing monitoring and consulting services as well as machine sales, has enabled it to diversify its revenue streams and become a global leader in its field.
Applying the Solution Provider business model
If your customers believe that your products and services can and should be expanded, becoming a Solution Provider may be an advantageous course of action. One typical area in which this concept can be applied is that of after-sales services. In certain sectors such as the elevator industry, after-sales services have surpassed new installations in terms of both importance and profitability.
Another area in which the Solution Provider model can prove fruitful is in the integration of various offerings from suppliers for your customers. By consolidating the products and services of multiple suppliers into a single source, you can streamline the customer experience and potentially increase revenue by providing a more comprehensive offering.
Example: The elevator industry
In sectors such as the elevator industry, after-sales services have come to exceed new installations both in terms of importance and profitability. This presents an opportunity for companies to expand their offerings and become Solution Providers. Additionally, integrating various offerings from suppliers for customers is another area in which the Solution Provider model can be applied.
Advantages of the Solution Provider business model
- Automated quality controls can be introduced, production data can be used to optimize production processes and shorten production times, resources, inventories, and capacities can be planned, and maintenance measures can be implemented.
- Integrating IT into products can create advantages for users, such as improved product performance, increased capacity utilization and a reduction in operating costs.
- Machine communication can change, with a large part of machine-machine communication becoming invisible and human-machine communication becoming highly interactive
- Human-machine interaction and assistance systems can support employees, making work more ergonomic, reducing non-value-adding work processes, and avoiding errors while training employees more quickly.
- Systems can be self-organizing and work autonomously, resulting in lower control costs, lower energy consumption, and higher availability.
Challenges of the Solution Provider business model
- Care should be taken to ensure that the solutions only contain functions for which customers are willing to pay.
- Too long waiting to bring the solutions onto the market can also be a mistake as competitors can already conquer market shares and new competitors can emerge.
- The high complexity of product development in the context of IT integration into products can be very time-consuming and resource-intensive.
- It can be difficult to show customers the benefits of innovative IT-integrated services, and if the business model is not adapted, the new service offering can even fail.
- It may be challenging to capture some of the benefits gained when customer benefits are not always tangible.
- A change in the business model can be necessary, as traditional billing mechanisms may no longer be advantageous.
- Services and products offered can compete with each other, reducing the possibility of selling new products.
Trigger Questions
- How can you increase perceived value by integrating more products or services?
- Can the increased complexity of integrating more products or services into your offering hurt profits?
- Are there any complementary products or services offered by other suppliers that I can integrate into my offering?
- What resources (financial, human, technological) do I have to support the shift towards becoming a Solution Provider?
- In what ways can we design our after-sales business during the early product innovation phase, such as through implementing preventive maintenance and remote diagnostics in the machinery industry?
- How can we effectively manage the complexity that arises from an increased variety of offerings?
- How do we maintain our reputation as a knowledgeable and competent partner while becoming less specialized in order to accommodate a wider range of products within our portfolio?
- How do you make sure that customers do not 'cherry pick' your offerings? That they do not choose you for the challenging parts and choose a competitor for volume.
Examples
IBM
Companies strategically outsource hardware capacity, maintenance, and support services to IBM and its Solution Providers.
Hilti
For a fixed monthly fee, Hilti covers all service, maintenance, replacement, and usage of their craftsman tools.
Heidelberg Printing Machines
Heidelberg Printing Machines, a global leader in sheet-fed offset printing, has transformed from a traditional printing press manufacturer to a total Solution Provider. They not only sell machines, but also the entire process involved in producing printed products. They also provide monitoring and consulting services to help customers improve their printing workflows.
Cisco
Cisco, a multinational technology conglomerate, has built its reputation as a Solution Provider by offering a wide range of networking solutions. They provide customers with everything from routers, switches, and firewalls to security, collaboration, and data center solutions. They also offer consulting services and offer training programs to help customers fully leverage the capabilities of their products.
Siemens
Siemens is a global leader in engineering and technology, providing customers with solutions across a wide range of industries, including energy, healthcare, and transportation. Their offerings include products, services, and solutions that provide customers with a complete end-to-end solution. They also offer consulting services and provide training programs to help customers fully leverage the capabilities of their products.
Lantal Textiles
Lantal Textiles, which began as a linen weaving company, now manufactures and sells textiles and services internationally to airlines, bus companies, railways and cruise lines. The company is in a constant transformation process, evolving from a textile company to a total Solution Provider that designs and implements solutions for customers. Lantal’s portfolio of services offers complete solutions for the transport and hospitality markets with additional service components, providing customers with total coverage of interior design activities and ensuring a steady revenue stream for the company.
Würth
Würth, a globally leading wholesaler, has supplemented its traditional screw business with over 120,000 fastening and assembly products as well as tools. By offering customers a One-stop-Shop for all their needs, Würth has transformed itself from a two-man business to a Solution Provider within a generation, earning €10 billion in yearly revenue.
Tetra Pak
Swiss packaging company Tetra Pak offers its customers a wide portfolio of products and services to process, package and distribute food. By providing complete one-stop solutions ranging from product reception to final treatment and packaging, Tetra Pak is able to attract customers with its efficient and cost-effective service, securing consistent revenue and high profits.
3M Services
Swiss packaging company Tetra Pak offers its customers a wide portfolio of products and services to process, package and distribute food. By providing complete one-stop solutions ranging from product reception to final treatment and packaging, Tetra Pak is able to attract customers with its efficient and cost-effective service, securing consistent revenue and high profits.
Best Buy's Geek Squad
3MBest Buy’s Geek Squad has a business model that revolves around providing comprehensive around-the-clock, 365-days-per-year service in the field of technical support and troubleshooting for all types of electronic devices. The company offers a one.
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