The ‘as a Service’ Revolution
A lot has been written about the massive economic movement that has built the new services economy. Thousands of Software as a Service (SaaS) companies, Uber, Airbnb, and many more, are paving the way for what good looks like when it comes to building companies that offer ‘pay-as-you-use’ services. Less literature, however, has been produced around established companies that have transitioned successfully from selling products to selling services. A few recurring examples get mentioned again and again, but not many others are cited. Why? The transition is very hard. Shifting business models is not a smooth transition, it's a radical transformation; companies need to treat it as such, or the complexity of the task and complacency will get in the way of change. Welcome to the ‘aaS revolution’.
A Complete Business Model Shift
In today’s industry, customers are pressuring product-centric businesses to transition towards the as-a-service models. Customers have become comfortable with the model pioneered by SaaS companies. The model is challenging traditional ways of doing business. It requires a 180-degree shift from being product-centric to becoming customer-centric. That transition touches every part of the customer's journey, and hence, every aspect of how organizations develop, sell, transact and support their customers.
Offers need to be designed with radical agility to listen and adapt to the customer's ever changing needs – unless you do so, those customers will churn! This requires new development frameworks allowing for very fast release cycles (e.g. Agile / DevOps). It forces the offers in the market to provide massive amounts of data back to the product managers. This information must be deciphered (often with the help of AI) and used to reshape offers based on customer use, love and hate. The role of a product manager evolves from the orchestrator of the development and launch of a successful gadget to the CEO of a living offer that must be developed, piloted, improved, evolved, grown, and be renewed for years after launch.
The commercial terms of the offers are now expressed in price per unit of value (time, usage, units, people, etc.) and not by price per product. This creates a new set of questions for product managers and commercial experts. “What is that unit of value for our offers?”; “how much do we charge so the value to the business is equal or greater to the previous one-off model?”; “how often do we ask our customers to renew (month, year…)?”; “how do we adapt the pricing and tiering into different segments?”, etc. These are new questions for traditional businesses. The answers radically impact the bottom line and the success or failure of the transition.
Go-to-market motions are different. Buying centers and the way of selling is pivoting from one-off big-ticket items sold to a single buyer, often supported by an army of procurement experts, to multiple decentralized small sales to individuals armed with a company credit card that buy with the click of a button and without much control. Deals involve new digital and direct channels. Buyers expect the company producing the services, and not its partners, to be prime; to own the solutions and guide them during the experience. The channels and partners need to evolve, provide new value and add services to continue their relevance.
Once the offer is sold, businesses need to accompany their customers into what is now referred to as the customer experience. Every interaction is an opportunity to improve the relationship with the customer. This can increase the adoption of offers, the ability to up-sell them additional offers, and the chances of that renewal at the end of the subscription term. Traditional businesses need to build and equip those teams to follow the customer.
Beyond the customer-facing part of the organization, all support activities must evolve, too. CFOs now need to deal with future promises linked to subscription contracts vs actual dollars hitting the bottom-line year over year as products get sold. They also need to deal with the investors' nervousness as they see a decrease in revenue while customers migrate from large one-off purchases to smaller recurring payments. A phenomenon known as the fish, where revenues dip during the as-a-service transition to revamp again once all customers have adopted the new model. Legal, security and policy teams need to deal with a multitude of local regulations, which are becoming increasingly draconian and diverse from country to country. Customers want simpler and faster transaction processes, terms and conditions. They also expect all the enabling infrastructure to work flawlessly. CIOs are now digitally enabling companies to higher levels of customer expectations and providing customer information (and not product information) to every part of the organization.
Dismissing or minimizing these changes has led to many companies failing in the as-a-service transition. What many businesses fail to realize is that there is a method to the madness, and, while not easy, that it can be achieved if there’s alignment and commitment.
The not so hidden secret is that there are countless ‘born in the as-a-service’ businesses that are doing phenomenally well. So, why can’t we codify what they do and apply it to companies that want to transition? The common answer that we get from product-centric businesses is that their operating model (processes, flows, systems, data, etc.) needs to evolve slowly without breaking what’s already working, all while adapting to the new business requirements. Unfortunately, this holistic approach tends to fail. The complexity of the old gets in the way; people prioritize what they know versus the risk of the new; investments gravitate towards current margins versus growth, etc.
Successful transitions invariantly have created parallel operating models that are designed to grow independently of their legacy counterparts. Once those operating models are robust companies, they might decide to merge into one or keep them separately. Building new operating models is not an excuse to do things independently and without considering the overall company. You still need to ensure compatibility with core infrastructure and processes (think data management, ERPs, etc.). But it’s a very powerful tool to become agile in a time where your ‘born in the services’ competitors are doing things at a very fast pace.
Once businesses decide to build new operating models, doors open. Speed and agility become the new paradigm. The elements of the transition can be broken down into smaller pieces that contain interaction episodes with embedded processes, people, data and technology – we call them “use cases”. Small agile teams can be dedicated to each use case, developing, piloting, improving and deploying them at faster speeds.
The TechTorch platform enables a successful process by providing prepackaged, curated and battle-tested use cases that can be adapted very simply to a specific business’ needs. The platform also provides you with the environment to quickly deploy and test different use case configurations (different tools, sets of data, etc.).
The answer is out there. Come and get it!
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