Last week, Peter Alternative and I met with the CEO of a successful BPO faced with a familiar challenge. The business process that they are fulfilling for customers remains a critical need, but the multi-billion dollar market for this service is no longer growing, in fact it’s shrinking. His firm provides a service that everyone needs, but we don’t need it as much as we used to. He’s essentially in the computer repair business (actually, it’s a little more sophisticated than that), and as computer hardware and operating systems have gotten more reliable, his business has declined.
Despite declining revenue, the Company remains quite large and very profitable. This isn’t a buggy whip manufacturer, it’s not going to go to zero – so the board of his Company feels the Company should expand. But how? The natural inclination is to acquire a similar business – “buy market share” – but many of his competitors are just as big (or bigger), and mergers won’t change the underlying reality of a market in decline.
Our recommendation was to move up market. “Keep your valuable blue chip customers by finding new ways to deploy the talents of your technical staff, leverage the investments the Company has made over the years and offer new services”. Rather than merely show up and fix something when it breaks, this Company has the capability and know-how to predict problems and be pro-active. That’s what customers want – and they will pay for it.
Our advice, to borrow a phrase from Twain, was essentially,don’t be afraid to go out on a limb, “That’s where the fruit is.”