I recently heard Tod Nielsen, CEO of cloud financials software vendor FinancialForce, argue that an even bigger trend is that "services are devouring the galaxy," as businesses shift from owning assets to consuming services:
I think we’re going to be at the point where some day in the future balance sheets for companies are going to be very, very sparse, because nobody’s going to own any assets. It’s all going to be comprised of an aggregation of a whole set of services.
Every business is turning into a services business.
While I wouldn't disagree on the rise of services, I see this as an extension of the same phenomenon. You can't have those services without software, and furthermore the secret sauce that makes both of them so disruptively impactful is being connected.
Every type of product and service is first of all being transformed by software — and then supercharged by connections. The end result is that every business is moving towards providing everything as-a-service — a phenomenon we at diginomica are calling XaaS (pronounced 'X-ass').
Surviving the shift to XaaS
This brings us to the fourth article in our initial series setting out a CxO's practical guide to surviving the as-a-service revolution. Confronted with such a massive shift, it's easy to latch onto just one part and miss the bigger picture. As we've said, XaaS is more than just bolting on services, and goes beyond simply repackaging products for sale on subscription.
In the old model, whether it's a product or a service that's delivered, the relationship is a simple transaction — money in exchange for an item. In the XaaS model, the vendor engages with the customer to help achieve an outcome. It's no longer a one-off transaction but instead it's a continuing relationship. The effect of that change in emphasis ripples back throughout the entire business, requiring a fundamental change in how it operates — not only its IT systems but also its processes and people — to deliver results in a far more joined-up, responsive and iterative pattern.
For the CIO and CTO, that change demands a new joined-up approach to IT systems, connecting data and workflows across formerly discrete silos. For everyone else in the CxO suite, it demands a more customer-centric mindset and a new joined-up approach to helping the customer achieve their desired outcomes.
Connected products, connected systems
When the R&D team at energy management and industrial automation giant Schneider Electric embarked on a proof-of-concept for connected products, it found it also had to connect into product management, field service management and CRM systems. This meant a lot of work on converging the data and the taxonomy so that field engineers and product designers are both talking about the same things when they communicate.
The result is that problems the engineers encounter on the customer site can feed directly back to product designers, so they can iterate on the product and enhance its reliability or performance. But setting this up requires designers to think upfront about what data needs to be collected, says Twila Osborn, Vice President of Information Process Organization (IPO) for R&D and Innovation Efficiency:
If we don’t have the characteristics and the attributes we can’t build them in. If we don’t think about R&D we won’t design in these attributes that are needed for these new business models.
Electronics and healthcare giant Philips has made a huge investment in building a converged repository for health data as a first step in shifting the healthcare industry towards delivering continuous care and wellbeing, instead of the traditional model of simply responding when people become unwell. The converged data provides the foundation for delivering better outcomes, as Philips CTO Jeroen Tas explains:
What you can see here is that we’re starting to connect these dots which were never connected ... It only works if you combine that data and make it actionable.
We want to make sure that everybody in that journey understands what the ultimate outcomes have to be and how you can guide every participant to understand how we can optimize to get a better result for the patient.
Philips Lighting, now a separate business after spinning out from its parent last year, has transformed the humble lightbulb by making it part of a connected infrastructure, as George Yianni, Head of Technology, Connecting Lighting, explains:
In a lot of cases, the reasons we’re winning the projects is not because of the light we’re selling. It’s because of what we do with the lighting infrastructure. It’s totally transformed the way we conduct our business.
Changing culture and processes
Services businesses are being transformed as much as product businesses, again by data convergence that allows them to deliver outcomes in the context of a continuous engagement. As Andrew Brem, Chief Digital Officer at UK-headquartered insurance giant Aviva, explains, this means constantly analyzing the data to become more responsive to changing circumstances:
I think our whole industry will gradually be transformed by services that help people make smart choices and reward them for that, and I genuinely think it’s in everyone’s best interest.
Once the systems start going into place, line-of-business executives must lead change in the culture and business processes across functions such as sales, customer service, and operations. At Lifesize, which has transformed itself from an HD videoconferencing product business to a cloud-based conferencing-as-a-service business, refocusing around customer outcomes rather than product sales has meant re-educating everyone in the business. Everyone now puts the customer first, says Amy Downs, Chief Customer Success Officer:
Customer success teams are becoming more prevalent. It’s their job to bring the voice of the customer back into the business and to connect the rest of the business to the customer. We do that throughout the lifetime of the customer.
In fact, a good template for the transformation every company must undergo as they transition to the XaaS model is the history of how the software industry adopted software-as-a-service. As I recently opined, there are many lessons to be learned from that experience:
Every business is becoming a SaaS business, and thus all the technology and business model learnings of SaaS vendors are now invaluable to every other organization that has to adapt to the as-a-service model.
There's much more to be said about the transition to XaaS, so watch for more on this topic in the weeks and months to come, including customer stories that illustrate the practical experiences of enterprises undergoing this transformation. In the meantime, please give us your feedback in the comments below or on social media using the #XaaS hashtag on Twitter or mentioning us on LinkedIn.