J.B. Wood is president and CEO of the Technology Services Industry Association (TSIA), the tech industry’s largest trade association for services. Before joining TSIA, he was the CEO of Prognostics and executive vice president of InsightExpress. He works with senior executives of the world’s largest tech companies on strategies to extend their innovation platform beyond the product and into the customer experience, particularly in the age of cloud and managed services.
We caught up with him recently to talk about the B4B model, which he writes about in “B4B: How Technology and Big Data Are Reinventing the Customer-Supplier Relationship.”
Tell us about “outcomes-based” business, your B4B model. How does it differ from the old model of delivering a product to a customer, and what are the benefits to both the seller and the customer?
In the old model, technology suppliers sold products to customers and largely left it up to the customer to figure out how to make the technology work for them in the way they had originally intended. In the outcomes-based world that I describe in my book, B4B, the role of technology suppliers is completely transformed to one in which they play an active, ongoing role in ensuring their customers realize a measurable impact from their technology investments in the form of business outcomes.
For customers, this means suppliers now have skin in the game to help ensure that the solutions they sell produce a positive business ROI. Suppliers who execute this model successfully create competitive distinction and position themselves for sustained growth and profitability over the long term.
How can a company become more of an outcomes-based organization? What’s involved in making that change?
Making the shift to becoming a true outcomes-based organization is an enormous transformation that will take years to fully execute. Essentially, every facet of the traditional supplier operating model, org structure and underlying business processes must be re-thought and re-architected. This includes:
Redefining the business model and the way in which a tech supplier monetizes their intellectual property.
Changing the technology delivery model to one that leverages the principles of “As A Service.”
Transforming the sales motion where the end game is having the ability to execute sales transactions at high volume and low cost.
Defining a new portfolio of service offerings that help drive customer adoption and ultimately lead to helping customers achieve targeted business outcomes.
Integral to this model is becoming highly adept at capturing and analyzing massive amounts of customer usage and other data and then turning those insights into actions that add value to the customer. There is also the emerging function called Customer Success that is pivotal to executing the B4B outcomes model. In the end, this entire shift is about customer success.
What are some of the challenges for tech companies that want to make that switch? What’s at stake for them?
The biggest challenge is probably the sheer scope and magnitude of what’s required to make the shift. There is really no single part of the traditional tech company operating model that remains intact through this transformation journey. It requires commitment from the board level on down, and leadership grit and stamina to see this through.
In terms of what’s at stake, the reality today is that it has never been harder to keep a large tech company large. For the last eight years, TSIA has tracked the quarterly financial performance of 50 of the largest technology companies. The combined product revenues for these companies have been steadily declining and have shrunk by tens of billions of dollars during this time.
Our belief is that if left as is, most large enterprise tech companies will continue to shrink if they keep operating in the future in the same way they’ve operated in the past. So the stakes are enormous, and that is why TSIA is providing a path forward with the concepts and frameworks we’ve developed in B4B around how to make the shift to becoming a supplier not of technology, but technology-enabled business outcomes.
What are some best practices of outcomes-based organizations?
At this point, we’re only a year into the B4B tech industry transformation journey. One of the key learnings so far is that there is no right way to go about making the shift. The important thing is that company leaders begin the conversation and start to put some of the fundamental B4B capabilities in place, things like investing in a very robust analytics infrastructure that includes technology and skills.
Companies must also begin to study and document what makes customers successful. This is something we call success science. We advise our members to look closely at their most successful customers and figure out what made them that way so they can turn that knowledge into repeatable processes that can be applied to other customers.
There are also significant changes that need to be made to the customer engagement model. TSIA has defined a framework for customer engagement that has four major planks – Land, Renew, Adopt & Expand.
And lastly, another important observation is that making this shift is not an exercise in organizational redesign, meaning that if you’re starting the conversation by trying to move responsibilities around on the corporate org chart, you’re focused on the wrong thing.