Channel Alchemy – the Silverstring Story

Big goals, broken business models and lessons hard-learned. The story behind a UK partner’s business transformation.

In order to thrive, data protection experts, Silverstring recognised that it needed to switch from a product-led to a service-led business model.  Looking back at the early days of the company’s transformation, Silverstring’s Chairman, Alistair Mackenzie highlights the ups and downs and key learnings.

Why did Silverstring decide to change its business model?

We started life 16 years ago and were quite arrogant in thinking that we could compete head to head with the ‘big boys’; the large VARs.  Before long, we were running faster with more stress and less profit – even the most successful VARs were only making 3-4% retained margins.  This wasn’t just about surviving – we wanted to thrive, and our customers were crying out for something new.  ‘Staying safe’ wasn’t an option.

Our business was full of people that had plenty of passion, guts and determination – we had no fear in trying new things and being disruptive.  We wanted to harness that energy, find our niche and then invest all our time and effort into developing the capability. This change in direction ultimately led to the development of the Alchemis Protect® solution which would help us to maintain relevancy in the fast-paced world of cloud computing.

What were the key hurdles you had to overcome?     

 1. Cash flow fears

Operating as a VAR, it was relatively simple to manage the balance sheet and cash flow of the business and it was a model that the Financial Director was very familiar and comfortable with.  It came as quite a surprise how much the financial position needed to change under the new managed service business model.  It meant writing a clearly defined business plan, mapping out key milestones and identifying the financial investment we needed to commit to, how long we needed to invest for and at what point in the transformation we were likely to start cutting through the cash crunch – if we hadn’t have done this, I don’t think we would have ever got there.

We also underestimated the systems we would need in order to efficiently operate as a managed service business.  Our back-office systems at the time were unsophisticated and ill-equipped to deal with more regular, smaller payments from multiple customers.  We held on to those systems far longer than we should have which is why our transformation took much longer than anticipated.  After much procrastination, we acknowledged that the old systems had to be replaced with a new, more sophisticated ERP system.

2. Sharing the vision

We wanted to move to this model and naively, we expected everyone to jump on board and share our enthusiasm, but naturally, we had employees with different motivations and aspirations.  Unless they had a stake in the business, they were thinking: what’s in it for me?  This was of particular relevance for the sales team who traditionally were used to a commission model that was based on the big transactional deals we had been securing.

3. Breaking Bad Habits

Our whole business model had been centred around transactional selling – the focus being predominantly on a strong pre-sales team and marketing off the back of the ‘giants’ that were the core vendors – in our case, IBM.  We had never really looked hard at our organisational structure – it had simply evolved.  None of our resources, however, were aligned to our new vision of being an effective provider of technology as a service.  We needed to break the organisational structure and re-wire it.

4. Service Engine

The bottom line – we didn’t have a service platform.  Our business model was geared up for face to face site visits.  We didn’t have the tools or the equipment to allow us to be constantly connected to the customer – a fundamental component to delivering a 24/7 data protection managed service business.

5. Hunting mentality vs. customer success

As a VAR, competitiveness to ‘hunt’ for the next big transaction is part of the DNA of your sales people  – an approach that is completely alien to the MSP model which is all about customer success.

Traditionally, we would have big debates or tech-focused workshops analysing different vendors’ technologies – of course, being a technology-based business, this still needed to be part of our strategy.  However, we realised that we needed to spend much more time talking about customer engagement – how to service a customer, the attributes of great customer service vs. bad customer service.  Under an MSP model, it’s all about building long term relationships.

Our VAR world had always been driven by technical prowess, but in a world where information is readily available and free, this is no longer enough to differentiate.  There is certainly an awareness within Silverstring that the organisational structure is key to improving customer service excellence.  Is it fixed?  Not yet.  However, the fact that we have roles such as Culture and Talent Manager means that we’re thinking about it and exploring what’s required.  It’s fair to say that we spend as much time hiring for behavioural skills rather than simply technical capabilities.

Did it take you longer than expected?

It took us three times longer than expected.  Why?  We had never done this before, and we didn’t have anyone giving us advice or guidance on how to tackle this type of transformation, so we really did have to be somewhat agile, embracing and responding to whatever surprises came our way.

What would be the one thing you would do differently if you could start again?

We would dedicate more time to ensuring the leadership team were communicating.  And, I don’t mean telling our people ‘this is what we’re doing, and this is what you need to do’ – I’m talking more about listening, empathising and providing a forum in which concerns can be raised.  Continuously assuring and reassuring throughout the transformation process.  It’s easy to fix system problems, you simply replace it – you need to work far harder at ensuring your vision for the future is not only understood but embraced by the very people who will help you to deliver it.

What’s next for Silverstring?

In a world where information is pervasive, buyers know as much, sometimes more than the sales people, so we’re working harder than ever to become a trusted adviser to our customers.  This means focusing a lot of our attention on using metadata across a variety of customers and industries, applying analytical insights and machine learning to spot patterns, risks and opportunities to save money, that aren’t available through human interaction alone.  It’s all about using technology to provide our customers with greater intelligence.  We are using technology not for technology sake but to deliver a better service to our customers rather than simply being a ‘price check monkey’.