In today’s services economy, both technology and services vendors, and buyers, require a change of mindset. That is because the way businesses buy from other businesses is shifting entirely – and the focus is on engaging and delivering continued value to the customer. As the trend away from owning assets to consuming services continues, successful businesses will have to change the way they operate. They will have to manage customer retention by delivering what the customer wants as quickly and efficiently as possible and continue to deliver value well after the initial transaction is made.
This requires more than simply bolting on services and repackaging products for sale on subscription as diginomica’s recent series on XaaS points out. The focus has to be on engaging with customers to achieve an outcome – building ongoing relationships that deliver value. And to do that requires a fundamental change in the way we operate across processes, people and systems. For us, it’s not so much about delivering software as a service, but delivering business outcomes as a service.
1. Think service and deliver results
The difference between a product and service is blurring. Products ranging from jet engines to razor blades are getting turned into pay-as-you-go services. Traditional professional services are getting productized and offered for a monthly fee.
At the same time, as technology and software become more mature, we have seen an increase in both knowledge among customers but also availability of technology at lower cost with more flexibility. Customer expectations have significantly changed.
For example, accessibility and availability of technology is not the main differentiator anymore for software firms like Unit4. The differentiator has moved from having access to the best technology toward deploying technology in the best possible way to help customers and their people succeed. Customers want us to think about their whole experience with and around our products and services. They are trying to solve a business problem, not use our products. As a result, we see companies increasingly adding products and services around the edges of their traditional products to provide a complete experience. And, customers want to consume what we have in a way that is convenient to them
The enterprise technology industry is moving to one where innovation is delivered in real-time in small doses, right at the time when the customer needs it most. Customers are asking more and more for alignment of their cash-out streams and the value they get from the technology they use. Data-driven business models, where they no longer pay for software functionality but rather for the content – the insight and the result – created through the use of the software, are already evolving and are defining a whole new set of differentiations and customer opportunities. In the next few years, we will see business models which are data and insight driven, and customers will buy and pay for results instead of code.
Our industry is an early adopter but all industries are moving closer to adopting this XaaS model. Essentially, customers in the service economy, no matter what their business, demand two things:
- A deep and thorough understanding by the vendor of their business and critical success factors.
- The ability to deploy technology in innovative ways so they can seize their opportunities or protect themselves from threats that they might be facing.
2. Innovate, innovate, innovate
Cloud computing and the prevalence of mobile and digital technologies have accelerated the shift towards the services economy, effectively giving every company the opportunity to differentiate their offerings. As customer retention and recurring revenue become critical to successful business, service-focused organizations are looking at how they can evolve their underlying business architecture to better support their people and service delivery.
Late last year, we commissioned an independent multi-national research study into global productivity and the time office workers spend on their primary job duties. On average across all of the countries in the study, office workers spend 552 hours a year completing administrative or repetitive tasks – the equivalent to 69 work days or roughly one-third of the working year. The research shows that the cost of this lost productivity to the service industry in 11 countries is more than $5 trillion USD annually.
For service organizations to be effective, their people have to be effective. But much enterprise software today is still too onerous and complex to use. In an economy where people and talent are scarce, this is a major issue. People want access to the latest technology so they can be serviced from anywhere they work or play.
New digital technology gives us a unique opportunity to rethink how work is done and how people use their skills and talent to complete critical and differentiating tasks that a computer can’t do. Convergence of conversational user experiences through chatbots for example, with augmented self-driving solutions that self-learn, support new customer-centric business models, and will fundamentally change how enterprise software serves people.
3. Redefine your offering
In a thoughtful exposition of the emerging services economy, ‘Everything is a service’, Xplane founder Dave Gray writes:
…a company with a service orientation cannot be designed and organized around production processes; it must be designed and organized around customers and experiences. This is a complete inversion of the mass-production, mass-marketing paradigm that will be difficult for many companies to adopt.
As the market around us has changed and customers’ expectations have changed, business models need to change which requires a fundamental rethink of customer offerings. For software vendors, the technology offering should define which business functions at the customer site are impacted and how. The service offering should define how fast we can help customers to improve their results and how we continue to improve and innovate together with them in the future.
We have learned that intensive dialog with customers and the market is essential for understanding the requirements and challenges so we can use our expertise in deploying technology to design state of the art solutions and offerings to help them.
In a service economy, increased focus on making sure existing customers, as well as new customers, can benefit from new innovations in product and services is vital. Service-focused companies must embrace new strategies and approaches to support new business models to win and keep their customers.
4. Build loyalty
The economics of business have changed. Companies have realized that the cost of acquiring a new customer is out of control, so they are looking for new ways to get more wallet share from existing customers. As a result, they are adding services including professional services and SaaS apps to complement their core product offerings. Creating new value for customers by focusing on their needs rather than on selling products, and building relationships based on trust and customer excellence is the new currency.
To maintain high customer retention rates, it’s essential to prioritize the customer’s experience. Ask yourself, “Are my customers really succeeding?” This is a change of mindset and requires an organizational change too. By creating a customer experience that is outstanding, service companies can increase their chances of acquiring and keeping customers long-term.
From a systems point of view, the key to this is delivering “software that customers want” first, loosely integrated with the “software that customers need.” Front and back office disciplines need to be combined to support this. ERP, for example, tends to be software that businesses need. It pays the bills and keeps the lights on and it’s necessary, but it doesn’t help organizations to do anything special. Software that customers want adds that something special that helps them differentiate.
And that software in the future will deliver self-driving user experiences to make the most of the front office applications that customers want. The real value of self-driving exists in the business applications that serve people using the reams of data we collect every day, not in the back office infrastructure. We moved beyond infrastructure components long ago. Self-driving business applications will learn from the past and actively make use of the data and knowledge that is captured in them to provide context-sensitive support for mission-critical tasks. People will have the data and the time to make a real impact for the companies they work for. It’s about reducing the time and energy spent managing non-differentiating processes that every business has to go through, but which do not create competitive advantage.
Organizations will be able to serve their customers and their people better than ever before, and vendors can support them further by delivering targeted expertise and value as the customer needs it.
5. Focus on renewal
Keeping your customers loyal also requires building sustainable relationships that increase customer retention, a new crucial component to business success. In the SaaS world, whether or not you provide an on-going customer success interface is not an option. You are no longer just selling some software, you are providing a service – a constant flow of functionality into the core of your customer’s business operations. Delivering what you promised becomes an imperative and not a ‘nice touch’. Customers must gain value from their interactions and their purchases, at all points in the lifecycle. They expect whoever they speak with at your organization to know everything about them.
To sustain customer renewals, service companies must consistently and continuously work at increasing the value of their service offerings for customers. Value that is powerful and resonates with customers to keep them interested and captivated to continue the partnership. The divide between sales and services needs to be broken down from organizational, cultural, systems and information perspectives.
The last word
Early 2016, Unit4’s Chairman, Leo Apotheker, an enterprise technology leader and visionary, wrote an insightful blog post in which he said that the winners of the coming revolution:
[W]ill empower their workers to be more productive in the truest sense of the word – liberated to contribute to the organization’s larger mission. The multiple services sector – parts of society that are intrinsically people-centric – will be the most promising places to look for improvements in productivity… I am convinced that the work of the future will migrate toward the tasks humans are uniquely skilled at, with automation taking over tasks that are rules-based, predictable and of lower value.
We are already seeing this come to pass as more and more industries understand that to serve their customers better and compete effectively, they must adopt an XaaS mindset. Businesses need to contemplate and challenge the way they are doing things across many aspects of their organizations, especially if they are new to services.
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