A Perfect Storm
Why now is the right time to implement As-a-Service business models
The Service Design Group, since its founding in 2011, has always believed there’s no time like the present to consider implementing as-a-service or digital-service business models. That belief is only amplified today. There is a confluence of macro trends make it the right time to get started with your as-a-service transformation.
Time and again, we see that successful transitions are rewarded with significantly enhanced Enterprise Value and doubling of revenues.
The reasons to consider as-a-service transformations have been well understood and documented for some time. And while those reasons – increased customer loyalty, expanded wallet share, recurring cash flows, and heightened customer intimacy – should have been motivating enough, today we’re witnessing more compelling reasons: Enterprise Value and Revenue Growth. Time and again, we see proof that successful transitions to as-a-service models are rewarded with significantly enhanced Enterprise Value (to the tune of 20% to 50%) and doubling of revenues (within 3 to 5 years).
Studies asking CEOs what’s top of mind in 2021 and beyond produce a consistent point of view: companies need to adopt more customer-centric business models. As-a-service business models – the types we help our clients design and deliver – are the definition of customer-centricity. The key here is that these types of business models are relational whereas product-based business models are transactional. No product business ever achieves the level of customer-centricity possible with service-based models.
Readily available technology
Many requisite technologies are now available as turn-key solutions
Let’s face it. Ten years ago, it took quite a lot to execute an as-a-service transformation. Five years ago, it was still tough going. But today, many of the requisite technological building blocks are available as off-the-shelf, turn-key solutions, ready to deploy and customize with little to no effort. And, the possibilities are more exciting than ever before. There’s a veritable grab bag of goodies at your disposal, from IoT devices to Edge computing platforms to insurance, financing and monitoring services and ecosystem providers. Less and less does an as-a-service initiative require building or buying capability. Instead, partnering is increasingly viable, with attractive ways to de-risk the equation for both parties.
Demand for complete offers
In the past, there was still a significant hurdle to overcome in as-a-service transformations: the customers weren’t ready or didn’t want to adopt! That concern is gone!
Today, B2B customers expect the same experiences and flexibility they enjoy as consumers. That means as-a-service pricing, associated service level agreements and aligned incentives, all available via meaningful units of subscription or outcome-based packages. And, just like the complete consumer packages they buy for themselves, they want their B2B supplier, vendors and partners to show up with carefully designed service packages which help them adopt, finance, and transition to new, better and more impactful solutions, all in service to providing them a key competitive edge and operational improvements.
Lasting impacts of COVID-19
In many ways, the required adjustments from a global pandemic have put pressure on activities that may not be as valuable as once believed.
Many predict and see a future where the norms of B2B business, supplier, partner and vendor relationships will not return to what was perceived as “normal” pre-Covid-19. There will be a “New Normal.” In many ways, the required adjustments from a global pandemic have put pressure on activities that may not be as valuable as once believed. Does a field specialist have to be on location? Do deliveries and shipments have to rely on legacy systems? Do sales have to be conducted in-person and with multiple meetings? Do replenishment orders require site visits? In other words, do your customers truly value, want and need your “traditional service” or was it just “the way you both operated.” Instead of “returning to normal,” might you find new ways of working together that create new value? Our resounding answer is Yes!, the pressures from Covid-19 will eliminate some “waste” and enable all participants in B2B relationships to find new models of working together, with an expectation around outcomes – not activities – that are most aligned with as-a-service business models.
Just. Get. Started.
Put these trends together, and now is the right time to get started with servitization, digitalization and as-a-service transformation. Many companies are still waiting, watching, pondering and considering whether they should. Our advice? It won’t hurt to get started!
In fact, we’d encourage you to act now, before it’s too late. Who knows what future trends will emerge, but we imagine there’ll be one concerning the outcome of early movers vs. late adopters of as-a-service business models.