A Four-Part Series by Jeb Dasteel and Amir Hartman
This is the first article in a four-part series on value realization and the subscription economy, where nearly any product can be delivered as-a-service. In this setting, helping customers realize and measure the value they have attained is more important now than ever. It’s even an imperative as virtually every industry evolves to offer products as a service, with the new model bringing fresh opportunities and new competitive threats.
Part One: Making the Case for Focusing on Customer Business Outcomes
Most industries are now engaged in the subscription economy. For B2B organizations especially, this means that the acquisition process has been turned upside down: customers demand to spread their purchase out over years in the form of a subscription rather than paying for a product upfront or paying as they go through financing.
The popularity of the subscription model is no fluke: It is simpler and reduces risk for the buyer—saving upfront expenditures, eliminating variability, creating new opportunities for innovation, and delivering business outcomes. The buyer of human resources software wants a complete talent management process, not just a tool. The quarry operator wants the excavation, not the delivery of a backhoe. The building manager simply wants power, not ever-changing utility bills or their own power plant. These days, organizations that provide even a great tool that plugs into the customer’s processes aren’t good enough. It’s all about handing over the process—and the outcomes—to a provider who can do it better than you can.
Subscriptions are Taking Over the World
In our research, 60% of all organizations say that they have at least some of their products available now as a subscription, 77% of which are B2B organizations. The subscription model gives customers the potential to reap the benefit of superior reliability and regular product updates, which translates to continuous innovation and improved outcomes. The customer can also constantly evaluate whether the subscription is worth renewing, which puts competitive pressure on the seller to constantly do better. Companies that offer subscriptions will be successful when they deliver, update, sell, and support a product that unquestionably enriches the customer’s business.
In the subscription model, the selling process can’t be detached from other interactions with customers. Selling has to be fully integrated into the many interactions you have with your customer’s business. Much of the focus shifts to delivering on the promise made during the sale. This means a different kind of partnership that demands hyper-vigilance if you hope to retain your customer for life.
These dynamics create a dramatic swing in the balance of power between buyer and seller. Not only are customers unburdened with big up-front capital outlays, the responsibility for costly maintenance, and dealing with ever-changing demand-driven pricing, they also gain much more leverage and control over the seller. A big portion of the risk of not realizing the full potential as the investment shifts from the buyer to the seller, who must now think differently about the customer.
Our research shows that 40% of organizations believe that “less risk” is the greatest advantage of the subscription, or as-a-service, model, with other top advantages including lower cost of ownership and better innovation. B2B organizations we spoke with consider stronger outcomes-based partnerships and lower cost of ownership to also be top advantages of the subscription model.
It’s All About Realizing Value
Many have written about the need for value selling, where the seller focuses on quantifying their value proposition. Value selling also transforms the conversation between seller and buyer to one of delivering value versus features. In our recent book, Competing for Customers, we made the case that B2B providers must transform customer-facing functions to ensure “customer success.” In this series, we address what is most important: customer outcomes. At the core of delivering outcomes is the collaborative delivery and measurement of those outcomes with your customer.
This definition of value includes five aspects that must be addressed:
Our research shows that 57% of predominantly B2B organizations use some form of value selling methodology. Across B2B and B2C, 73% of organizations with revenues of $250M and $10B have sales teams that employ a value selling approach.
Delivering Business Outcomes
Arguably, the most powerful marketing technique starts with engaging your most valuable customers who in turn talk about the results achieved by using your product. Word-of-mouth quickly spreads to prospects and other customers and keeps your employees on-mission. However, we’ve seen that only 35% of organizations with revenues less than $250M have programs that help customers assess realized value from deploying their products and services, while 50% of larger organizations have such programs.
There are three core principles to follow for aligning your business to the success of your customer’s enterprise:
Listening is about continuously taking the pulse of your customers to gain a deeper understanding of their business needs, objectives, and measures of success. This is framed by what your customer is trying to accomplish—whether driving revenue growth, increasing market share, or reducing costs. When you listen in the right way, you not only clearly define what success looks like, but you also develop a more acute understanding of your customer’s business and an ability to anticipate their future needs. According to a recent report on the State of the Connected Customer, 75% of business buyers expect companies to fully anticipate their needs and make relevant suggestions.
Engaging your customers is about how you collaborate with them to solve their problems and realize their opportunities. The organizations most adept at this have a portfolio of programs that promote and drive engagement, with practices that vary by customer segment.
Ensuring is the most difficult principle to master—and it is the focus of this article series. The point is to systematically ensure that your customer attains the business results they seek in exchange for the investment they have made in your product.
In the second article of this series, we will discuss four capabilities needed to guide your customers to attain desired business results. Your marketing, sales, and delivery processes need to be aligned to customer outcomes. Orchestrating these processes drives adoption of your products, allows you to focus on results, and ensures that your customers are the strongest advocates for your brand.
About the Authors:
Jeb Dasteel, Founder, Dasteel Consulting
Jeb operates Dasteel Consulting, focusing on advising Chief Customer Officers and helping organizations develop or refine their customer strategy. Jeb served as the global Chief Customer Officer for Oracle from early 2008 to September 2019. In this role, he worked with the Chief Executive Officer, Board of Directors, and Executive Committee members to implement enterprise goals for the Oracle customer strategy. Jeb also served as an executive coach, sponsor, and troubleshooter for large enterprise accounts, strategic deals, and complex customer projects.
Amir Hartman, Executive Director, Value Realization at Oracle
One of the leading global authorities on corporate and technology transformations, Amir is a bestselling author and sought-after advisor to senior business leaders across industries. Today, Amir is Executive Director of Value Realization in Oracle’s Customer Success Organization, where he works with customers to ensure they are achieving measurable value from their Oracle Cloud investments. Prior to Oracle, he founded and lead Mainstay Partners, a leading value realization consultancy. Amir has also served on the faculty at Berkeley’s Haas School of Business, and Columbia’s Graduate School of Business where he teaches in their MBA and Executive MBA programs.