Adjacency The New Buzz Word

The newest conversation taking front stage today is that if we expect to grow we must
pursue adjacent business opportunities. Is this really the path to growth? I suspect the
answer is more complicated than the question suggests.

Regardless to whom I speak with these days the word “adjacency” finds its way into the
conversation. I guess I’m not surprised, after all, the past few years have been spent looking
for relevant ways to invigorate growth, as all inelegant life realizes that staying the course of
traditional copy is not sustainable.

But, what really is an adjacent business. Some say that if the reoccurring revenue business
model is core to the business model, it’s adjacent. Others say that similar technology is the
clear sign the business is natural for us to just enter and succeed with. I’ll suggest that these
are both just too simplistic to adopt. I’m persuaded that we need to consider all the nuances
of the business we are considering. What is the sales process like? What knowledge is
necessary? What levels of support is required? Can your infrastructure support the
diversion? Does your business systems support the financial requirements? Will you need a
new staff? Will this be a distraction for your sales, service and admin team? Frankly, I could
go on, but you get the picture.

Let’s explore some of the popular areas of opportunity and see if that adjacency is really a fit
for our existing core business.

Managed Network Services: The opportunity getting the most attention today is that of
Managed Network Services, and who could argue it’s adjacency. Let’s however, look at the
accounts that make up your base. What percentage of our accounts are 250 employees or
less? If the answer is a substantial percentage then this could be a good fit. That said, the
chances are that the sales process you have in place for these accounts is the most
transactional. Managed services are account centric. This alteration to our organization is not
insignificant. The existing sales force handling these accounts is likely the least qualified to
support this business process. It’s not that they are poor salespeople it is just that the
methods of account development are very much a team process as opposed to the “my
account” mentality of this sales group. So it is likely that you must consider a specialized
sales force. This is far from an insurmountable problem but if we fail to address it from the
onset it could create a path to distraction and failure. Infrastructure may, however, be a hill
that keeps growing as the business does.

The IT services business is one that requires a significant amount of investment capital.
Consider that the value proposition for this vertical is that the customer does not have to
make the constantly changing investments in an ever-changing business, and can focus on
their core business. This means that they expect you to make those investments and stay
ahead of that ever-changing curve. For this reason, I recommend teaming up with a company
such as Continuum. It is important to hold the investments down while you are learning a
new business, and keeping up with the most current “cloud” technology can be all
consuming. Amazon is putting out over 300 new “cloud” products per year. Staying on top
of this is an almost impossible task, and it is only one aspect of what you would need to do.

There are those that suggest that acquiring an MSP is the answer but, acquisitions where the
disciplines, not core can be difficult to integrate. I believe that acquiring should be left until
after you have established yourself in the market. Even if you have already started down the
managed services path reaching out to a partner can help lubricate the mechanisms and
reduce the investments. In the very near term, most companies under 100 employees will be
utilizing the cloud as their network and you need a partner that is already there.
This is a fast moving business and going it alone can be a course to frustration and capital
drain. Finding the right partner is the key to success in this fast-paced business. It can allow
you to learn while you develop and support customers… profitably.

3D Printing: This so-called adjacency is anything but. The only thing 3D has in common
with the traditional print is the word “Print”, everything else is different. The sales process is
different, the justifications are different, the language is different and the sales cycle can be
extremely elongated, especially by copy standards. There are those that will tell you that 3D
will change the world. I agree. I do not agree that everyone is properly positioned to
participate in that transformation, and as far as utilizing your existing structure to grow
nothing could be further away. If you’re thinking about heading into this market make sure
you are fully committed and have the money to weather the road ahead. Don’t even try to
utilize your existing sales structure.

Labeling: The technology is identical but the sales process and justification for acquisition
are not. This is another step into the world of manufacturing. It may not be as dramatic as
3D, but it has nothing to do with the office. So, there is a legitimate question as to whether it
is an adjacent business. The first step should be to review your account base. Do they use
labels and is that use critical to their business. Breweries, wineries, and medical centers fit
the profile. Almost everyone has some of these types of accounts but is it enough to be a
sustainable business. If so you might want to consider the move. The sales process is
transactional so there is little change to your existing sales process. Most of your
infrastructure will be compatible but you will absolutely require sales specialization.

Production Print: I really question if this is more of an extension of our core business
opposed to an adjacency. Every dealer can and should move into this area. If they
haven’t done so should speak with their OEM today. This is not to say that you don’t need to
make investments and the knowledge necessary to compete is more demanding than the
office, but the customers may very well be the same. Most importantly the support is there
from your OEM supplier. The opportunity exist is all your accounts. One of the mega trends
in our industry has been that the ability to process more complex jobs closer to the point of
need. This is creating more opportunity for production print. The best pace to turn for her
here is our OEM they have a specialist on staff and can support your actions to ensure that
your investments make sense. Can you use your existing sales force? Maybe, but that will
depend on their skill sets and willingness to change some practices. It can defiantly create a
new step in the career path.

Managed Print Services: Most dealers have abandoned this golden opportunity, or do it
only defensively. It is a shame. The problem with this adjacency is that we got off on the
wrong foot. In the early days of MPS we were told this is natural for all of us; just a different
approach. Nothing could have been further from the truth. This is a large account
opportunity with a lot of moving parts. Like Managed Network Services, MPS is an account
based sales process. The major difference in this area is that it is not about the machines, but
bout the base. One of the huge benefits of MPS, if done correctly, is the decline in the help
desk traffic. Nearly 50% of all help desk calls are printer related. Bringing the right level of
support and knowledge to an account offers a much smoother running operation and a huge
relief for the CIO. The number of resources to turn to for help in this market are dwindling,
but a great place to start is with the MPSA. This organization has a complete line of
condensed knowledge for this vertical and is reasonable to join.

There are more adjacent market opportunities but regardless of the disciple, there is no
substitute for knowing your organization and customer base and make sure they’re
compatible with the new business structure. The most important advice I can muster is, don’t
be sold. Understand what you know and what you don’t know, Be honest with yourself. Are
you looking for something new because you can’t make your existing situation work? If so,
get back to basics first before you consider anything new. Whatever new you are considering
will require investment, and if you’re existing business isn’t sound, strengthen it first. Then
enter the adjacency with your eyes wide open not because someone has a new machine to
sell you.