How IT Services Firms are Using Thought Leadership for Differentiation and Lead Generation

Many management consulting firms have long understood the value of thought leadership. McKinsey & Co., for instance, has published its management journal The McKinsey Quarterly since 1964. Booz Allen has had its newsstand publication Strategy+Business since 1995. Management consulting firms like these have seen the power of thought leadership to establish authority and spark new business.

IT services companies, on the other hand, are relative newcomers to thought leadership marketing. Long relying on sales-driven models, these firms are now paying much greater attention to capturing and marketing their expertise through articles, books, conference presentations, research and other staples of thought leadership marketing.

Few have been in a better position to observe this trend than ITSMA, the IT Services Marketing Association. Based in Lexington, Mass., the organization has nearly 100 corporate members from around the world, including Accenture, Cisco, EDS, Hewlett-Packard, IBM Global Services, Microsoft, Oracle, SAP, Verizon, Wipro and Xerox.

Recent ITSMA research shows that being viewed as thought leaders is now high on the marketing agenda of IT services companies. We wanted to know why, and what IT services firms were doing to attain thought leadership. In late July, The Bloom Group’s Bob Buday interviewed two of ITSMA’s leaders on this issue: Julie Schwartz (senior vice president of thought leadership) and Dave Munn (president and CEO).

Bloom Group: From where we sit, it seems that IT services firms for many years have focused on sales–driven marketing models, not a thought leadership–based marketing model. Why have they been shifting to thought leadership?

Julie Schwartz: In part so their services aren't seen as commodities. It's not that these services really are a commodity. They just seem to be so because they aren't marketed well. Every time a service is delivered, it is unique. It is an interaction between the provider and the customer. That is the complete opposite of a commodity.

And what thought leadership enables these services providers to do is differentiate their services. It's not just what they are delivering but how they are delivering it – i.e., the experience and the ideas behind what they are delivering.

Dave Munn: I agree with that. But I would add that many technology companies have a minimal understanding of what thought leadership is and what it requires. We haven’t seen many make aggressive investments in thought leadership marketing. However, our numbers show that it is increasing in importance and that they are spending more on it.

Schwartz: They also are increasingly aware of the important role that thought leadership plays in the sales cycle. And because of that, they have been able to build a case for why they should invest in thought leadership.

A lot of it comes from looking at what companies like McKinsey, Booz Allen, and Accenture have done with their thought leadership programs. Those are best–practices, and people have taken notice that they work. People look at what McKinsey has accomplished without any advertising. How have they done it? It’s through thought leadership and the power of their ideas.

Many IT services companies don't have big marketing budgets. The IT services companies that are part of technology product companies don't have nearly as big a marketing budget on the services side as they have on the product side. They need to look at ways to make their dollars stretch.

Munn: Many of these companies have not dealt with thought leadership seriously in the past. So it just happened almost serendipitously across the organization. It was not managed. It was not controlled. There wasn't a lot of forethought. They didn't tie it in closely to, for example, branding.

So once they say, "Wait a minute, we need to be more thoughtful about our thought leadership programs," now they have to establish a budget for it. So they're going from "Well, we don't know if there really is a budget for thought leadership, it sort of just happens" to "Let's build a budget." Once you do that, there's automatic growth in that activity.

BG: Do you think that the rapid growth of the offshore IT services firms has played a role in U.S. and European IT services firms recognizing the importance of thought leadership? By that I mean if the offshore companies have been able to take away so much business so quickly, doesn’t that suggest that many buyers of IT services view those services largely as commodities, and therefore that they base purchasing decisions largely on price?

Munn: We've heard this from members. We were in a meeting with a marketing leader of a major IT product and services company. He said, "If we don't learn how to be a solutions provider and really drive high value into our client organizations, we might as well go home because we'll wind up losing to the Indian firms." He was basically saying that if they don't get higher in the food chain, they'll be dog meat. His statement was followed by five seconds of silence. It truly resonated.

So clearly, if you're going to be that kind of solutions provider, thought leadership is one of your key marketing tools.

BG: That goes back to my statement about how the Indian IT services firms — and the Chinese IT services companies that will be next in line — are undercutting U.S. IT services firms on price. If the customer believes that all these services are the pretty much the same, he will go with the lowest–cost provider.

Munn: Exactly. I think the offshoring movement has played a role in IT services companies wanting thought leadership. But I think the ball started rolling downhill after the bust in technology at the beginning of this decade.

Schwartz: I agree. I think offshoring has been a driver but not the main driver.

BG: So what is the state of thought leadership in the IT services world? Are they winning or losing at trying to become thought leaders? How good do they think their ideas are?

Schwartz: Most of them acknowledge that it is important. Therefore, they are paying more attention and investing more. However, many are still taking ad-hoc approaches. It's not as organized and centralized as it can and should be.

About a third of our audience looks at attaining thought leadership as critical. Many think it's important. But it hasn't risen to the level of being critical for the majority of the companies yet, which is probably why it is still being done largely on an ad-hoc basis. Once it becomes critical, it will have its own budget and its own oversight.

BG: Do you think thought leadership will become critical for the majority of IT services firms, and if so when and why? What would be the driving force?

Schwartz: It's going to be an evolution. What is going to push people to see it as critical will be the competitive environment. More and more they are going to see that they are competing on their ideas, and that those with the best proven ideas are going to win. There has to be a track record and references that attest to those ideas.

Munn: I would put a little more urgency on it. Our buyer behavior study shows that customers are having a hard time differentiating IT services and solutions firms. They are really struggling to understand one firm over another. And they are looking for answers. If you can educate them through some kind of "pull" marketing activity like thought leadership, your marketing will become more effective.

So our members might not want to do it. But we're seeing their buyers behaving in a way that will force them to do it.

Schwartz: That's a really good point, especially because buyers today cannot tolerate being sold to. They don't want to hear sales pitches. Anything they want to find out, they can find out from their colleagues, the analysts, and Websites. What the salespeople need to deliver is not a pitch but information that adds value. And that value is in the form of thought leadership: How can we take what we do and apply it in your environment? The communications have to be very relevant and value–laden.

Munn: We've heard this over and over. In one of our programs (on account–based marketing), we had a CIO come in to speak to a group of IT services marketing people. I asked him what he looks for in a trusted adviser. He said, "I need someone who can educate me, someone who gives me new thinking and ideas." It blew these people out of their chairs. He was talking about thought leadership.

We spent a lot of time on thought leadership in a working session with a large consulting and IT services firm last week. They kept coming back with: "How do we justify the expense?" If you segment our membership and you separate the professional services companies from the technology product companies, in general the professional services companies understand that thought leadership is a necessary expense and marketing discipline. In technology companies, marketing is still being forced to justify [thought leadership spending] upstairs. "Why are you spending on this stuff?" It's hard for them to connect the dots.

It used to be that when you built great technology, you just had to sit by the phone. In the late 1990s, Cisco, EMC and others — the orders just flew in. They were focused on push marketing — telemarketing, email blasts, and so on.

I don't know of too many professional services firms that say they can just sit back and write orders for strategy development or something like that.

BG: There are exceptions. The consulting firm I was at in the 1980s and 1990s — CSC Index — was able to do that after developing and marketing business reengineering. We became order takers.

Munn: There are exceptions. But Index did a great job of "productizing" a complex idea. That was rare. Michael Porter did something similar with his concept of Five Forces.

BG: What barriers do IT services firms have to becoming thought leaders in their domains?

Schwartz: One is making it relevant — picking the right topics. Marketing people in these firms are used to packaging ideas for dissemination. But they don"t spend as much time on deciding what the right ideas are. We believe these companies must decide on a thought leadership strategy that fits their brand. Thought leadership falls into three buckets: pragmatic, innovative and inspirational. A company that is delivering a bread–and–butter technology service or solution needs to create thought leadership on pragmatic ideas.

Another barrier is recognizing that they're sharing ideas, not selling. They easily fall back into the selling mode. A third is getting the internal buy-in throughout their companies that this type of marketing is important. Thought leadership marketing is new to these companies. They have to get everyone on board with what thought leadership is and how they should use it.

In addition, they need to choose the right delivery mechanisms — the right marketing channels. They also need to engage the right audiences — internal and external — looking at all the industry influencers that they need to involve. But the biggest barrier is the resource issue.

Munn: Another problem is that people don't understand the difference between the content and the channel. When they think of thought leadership, they think of a white paper. That may or may not be the right approach to packaging the content. But a white paper isn't the content — it isn't the only way to package the content.

Another barrier is making certain individuals the thought leaders in their firms and in the marketplace. They're focusing too much on the thought leaders and not enough on the thoughts. There's a real danger if those thought leaders move to another firm or if they get hit by a Mack truck. The investment in thought leadership is squandered.

Firms like McKinsey don't build gurus. They don't lionize their thought leaders as much as they lionize the McKinsey brand. The lesson to me is that you don't want to focus your efforts on just a few people. You want to spread thought leadership around your firm.