These Fears Are Holding You Back From Growing Through Services
Creating growth requires change. But, change is difficult.
We are biologically hardwired with a built in risk/reward assessment, fine-tuned over years of evolution to favor risk-aversion. While this serves us well in many cases, it is detrimental to business leaders tasked with growth and innovation.
There are standard hurdles to consider – timeline, cost, expected return and fit with company mission – and business leaders are adept at analyzing these hurdles to arrive at justifiable cases for not changing. What’s the problem? The analysis is your built-in risk-aversion. Fear is preventing growth!
In our experience, the 3 most common manifestations of fear preventing leaders from adopting a services approach are:
- Product revenue cannibalization
- Customer receptiveness
- Industry readiness
Let’s explore each in more detail and understand how to better tackle these fears head on.
Product Revenue Cannibalization
…avoid focusing on the short-term view and look at the future cash flows you stand to gain
“If we launch a new service, it will cannibalize our product revenue!”
Sounds good on the surface, but the widespread fear that servitization cannibalizes product revenue is simply short-term thinking blinding you from seeing and achieving long-term growth.
Sure, moving from a product offer to a service offer will likely decrease your in-quarter and in-year revenue while also putting a dent in your profitability, but you’ll come out the other end with healthier, recurring, stable and more predictable revenue. You’ll also have increased customer touch points leading to improved customer insight and innovation loops. If that’s “cannibalization” then it doesn’t sound so bad.
Bottom line: don’t let the “cannibalization fear” prevent you from moving forward and at least exploring a services strategy. Instead, set the fear aside, avoid focusing on the short-term view and look at the future cash flows you stand to gain.
…moving from transactional product sales and break:fix relationships to outcome-based service models is in the interest of both parties
“Our customers aren’t ready for a service or subscription model… they won’t be interested.”
This fear of customer receptiveness is common. It’s a seemingly logical and rational argument for many business leaders, giving them pause and preventing them from moving forward with a servitization agenda. They intrinsically worry their customers might not be open to new pricing models, subscription contracts or sharing of data. This worry leads to conviction that “our customers won’t do it.”
To overcome this fear, business leaders must ask themselves: what customer doesn’t what an opportunity to shift CAPEX to OPEX, outsource non-core activities to focus on core competencies, and get solutions from true partners willing to offer complete packages with enforceable service level agreements?
The fact is, moving from transactional product sales and break:fix relationships to outcome-based service models is in the interest of both parties. Don’t let your fear convince you that your customers won’t be interested. They will be.
As a business leader, it’s your job to set aside this fear and instead focus on finding early adopters in your customer base
“Our industry is slow to change. It’s not ready for this.”
Many business leaders are skilled at explaining why their industry is different. They use this skill to stoke their fears and convince themselves that a service approach won’t work because their respective industry is not ready for servitization.
To overcome this fear, consider this: the global economy is becoming more and more service-based by the day. And, time and again, market by market, we see that early movers are rewarded for pioneering a service-based approach and becoming an industry disruptor.
This should not be a question of “if” your industry will move in a services direction, but “when.” As a business leader, it’s your job to set aside this fear and instead focus on finding early adopters in your customer base that are looking for you to show up with a compelling service offering and lead the way. Eventually, the others in your industry will follow. Don’t let this fear prevent you from getting started.
What do you think?
What do you think? Which fears are holding you back? Servitization is a growth and innovation lever that utilizes proven best practices to provide customers with outcomes. Businesses across industries have successfully grown through services in the face of these same fears and their stories echo a similar theme: overwhelming success. Sure, there are a variety of reasons that should give leaders pause when considering the switch, but don’t let fear be one of them.