How to Survive and Thrive in the Services Economy
The majority of businesses say that services represent a higher percentage of revenues today than they did five years ago, according to a recent report. But many businesses are still not prepared for the transition to life in a services economy.
They really have no excuse not to be. They should have seen the services economy coming years ago when innovative companies like Salesforce.com propelled the services economy to national prominence by selling software as a subscription (SaaS) service via the Cloud. That was a radical change from the old way: shipping software to the customer, installing it and charging a one-time upfront license fee.
The services economy has grown exponentially since then. Beyond software as a service (SaaS), there is now a whole world of services for practically every taste and every occasion. These days you can get a personal jet as a service, razors as a service, even bacon as a service. These businesses don’t make products. What they offer is a model of easy consumption, using Cloud, Mobile and other technologies to make the customer experience seamless, frictionless and painless.
Businesses of all stripes are discovering they can accelerate growth by transforming their products into services that are easy to consume. Even classic product companies like GE, Gillette, and BMW are experimenting with ways of repurposing their products as services to capture their share of the services economy.
In this second phase of the services economy, what we might call the services economy 2.0, customers want the latest and greatest for the best possible value and they only want to pay for what they use. Things they used to buy for a one-time upfront cost, they now want to be offered as a subscription. Things they used to keep for years, they now want to subscribe to for months, weeks or even just days.
In this new world, every business needs to find its place or risk being left behind. Here are four essential tips for succeeding in the services economy 2.0.
Forget About the Sales Cycle, Enable Buyer-Driven Engagement
Recognize that the only thing that matters now is the buyer’s journey—not the Sales cycle. In the services economy, customers don’t want a single product or service, they want limitless variations of that product or service, and they want it when they want it. This means that companies must learn to repackage existing products and services in novel ways and create completely new bundles.
Today’s customers want offerings that really speak to them personally and are tailored to their wants and needs, so they can live their lives better or do their jobs more effectively. That’s really what service economy 2.0 is all about.
The newest example here is Netflix. People love Netflix because it’s a much more varied and personal experience than a traditional cable TV company. Nobody wants to pay a cable TV provider hundreds of dollars a month for 1,000 channels, of which they probably watch only a handful. Consumers want a personalized viewing experience that matches their lifestyle—and comes at a lower cost, with cooler, limitless content, for one predictable price.
It doesn’t matter anymore what you want to sell to customers, because the customer journey is now dictated by those customers. Your only hope of success is to engage with customers at all points in the buying cycle, when and how they want.
Read More: Interview with Anil Kaul, CEO at Absolutdata
Be Consumption Agnostic
Whether your customers want to buy your product or service for the short term, the medium term or the long term, you need to be able to meet their demand. If you run a product-based business, you must ensure that customers can make their purchases when and how they want.
From a business perspective, that means you have to be extremely flexible in the way you package whatever you’re delivering. And, by the same token, you have to service-enable all your products in a way that makes doing business with you seamless and frictionless. Customers who can consume your offerings in a way that’s optimized for their specific circumstances will be more likely to make additional purchases—and less likely to turn to your competitors.
Tesla is a great example. Its core capability isn’t only the car. It’s the way the car is connected to a set of services. Take, for example, its in-car trip-planning tool, which enables drivers to map their route and includes the best charging spots along that route, complete with information on the time they’ll spend charging at each point. There’s now even talk that Tesla owners will be able to play video games using their car’s steering wheel, essentially transforming their vehicles into a gaming accessory.
By being consumption agnostic, Tesla is turning its product into a series of services and giving its customers a myriad of delightful experiences on their own terms.
Make Everyone a Genius
It’s critical to make every employee a genius on the topic of your customers. And the only way to do that is by blowing up any and all data silos that still exist in your organization. You must rapidly identify and eliminate obstructions to customer happiness and business growth. In many cases, those obstructions take the form of internally created silos of information.
One way to eliminate data silos is by connecting the front and back office. Consider, for example, running your financial systems on the same platform as your productivity, collaboration, and CRM applications. This can create a single source of truth for your company data and help the entire organization synchronize and drive toward the same goals. It also means that all your employees are now customer geniuses because they have complete context and know where every customer is in the journey of using your service.
The services economy 2.0 requires organizations to be agile as never before. That agility should start with the systems you run.
Take billing, for example. Let’s say you launch a new service at a specific price point.
What happens when you want to create new bundles around that service? Or you want to offer special coupons or introductory discounts?
Or, what if you want to offer value-based billing to some customers and usage-based billing to others? There are limitless ways to sell your new service. What started out as one or two pricing models quickly morphs into one or two hundred—or even one or two thousand.
That’s why flexible systems are absolutely fundamental in the service economy. Beyond systems, organizations also need a culture that is agile across people and processes. When you get systems, people and processes in alignment, everything else falls into place.
In today’s digital business environment, the only constant is ‘change.’
Business models are evolving, customer demands are increasing and sales cycles are dissolving. Those who can quickly adapt will not merely survive in the new services economy, they will thrive.