“But we were preoccupied with physical growth in the country. We wanted to have a national footprint.” It focused on that geographic growth for a while and now Genesis stretches across most of Canada with branches in Vancouver, Calgary, Toronto and Ottawa.
“That kind of put us behind on getting into the services business,” McCarthy says. “But to be really honest with you, I didn’t understand how to pivot or transition into that service business.”
Turning the Freight Ship
It may be a generality, but there is a tendency among many traditional integration firms not to realize that a successful shift to service revenue is almost always long, arduous and usually painful. In Genesis’ case it continues to be all those things.
You can’t make a decision, snap your fingers and watch the recurring service revenue roll in, says McKay. “It’s going to be a challenge for the next couple of years,” he says. “It’s going to take a while. We’re about a year into a three-year plan to be where we want to be, which is [with] a significant percentage of revenue coming from those service contracts.”
It goes without saying that there is a cultural shift involved and Genesis has invested in that shift. “It’s a whole bunch of new hires,” McKay says.
It was important to bring new skills to both the sales and project management teams. Genesis’ project managers need a whole new customer service skill set now that it’s in the managed services business, McKay notes.
“They’re not just doing a project and leaving. We’re building three-, five-, 10-year relationships with the customer.”
Traditional integration firm sales professionals, for instance, might not easily make the transition from talking about display resolution and networked audio to better understanding their customers’ organizations and talking to them about efficiency and productivity.
“We’ve grown the sales team by 30 or 40 percent in order to get us into this new place, but there hasn’t been a lot of turnover because we need to keep the existing model running while we transition.” It’s that transition period that can be the most draining.
“You can’t have one foot in the old world and one in the new world and expect to last very long,” McKay says. “Without jumping in with both feet I don’t think you can make the transition.”
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Meanwhile, transitioning companies need to prepare for short-term financial hits, almost like investing in the launch of a business. “Payroll starts to climb ahead of revenue, but you have to have the guts and finance to make that investment and manage that change,” McKay says.
It’s obvious that the young national sales director is pushing his traditional firm toward the new world. After all, it will be McKay who “will be taking over for me sometime in the not too distant future,” McCarthy says.
“The reason I have Kevin is because he’s smarter than me. He’s young and Kevin’s patience is lower than mine,” he says. “He doesn’t suffer fools easily. Consequently he wants to get there and I appreciate that.”
McCarthy wants McKay to push hard, “and I’m trying to make sure that I’m managing risk along the way,” says the firm president. “We have to evolve this company,” McKay adds. “I want to have something to manage for the next 15 years.”
Knowing Where to Turn
The concept of needing to earn more service-based revenue, although an important one for the integration industry, is generic. It requires integration firms to look within their organizations’ strengths to identify areas in which they can bring unique value to customers in the form of branded services.
It’s that second step that tripped up McCarthy and delayed Genesis’ embrace of service-based revenue. That’s not an indictment on McCarthy; rather it’s a testament to how he values his customers.
“For me it wasn’t just about trying to write a bunch of service contracts and getting extra money out of customers,” he says. “There needed to be an entire strategy wrapped around this thing, and I needed to figure out how to do that.”
As so often happens when searching for an idea to infuse into an established organization, this one came from what in essence was a set of fresh eyes. In April 2015 Genesis hired Gabriel Gely as executive VP based out of its Toronto office. He had been head of a technology firm that was almost completely focused on collaboration.
For Gely, “everything is about service,” McCarthy says. “That was extremely helpful. He gave us a lot of guidance.” Gely also gave Genesis the idea for IndabaCall, a video conferencing-as-a-service platform that projected the firm into the world of managed services.
What he brought, though, was more than just an idea to implement. He brought some intangibles that proved invaluable to push traditional Genesis through the dramatic transition.
“It’s kind of funny, because when you have no one on your team who knows what the next steps are or has walked through the jungle, you’re kind of walking blindfolded,” McCarthy says. “You’re worried about stepping on a landmine as you go along. But [it’s easier] when you have somebody who’s been there and just walks you down the path.”
