Digital Hesitation

1. Digital transformation is reshaping B2B tech companies

"Simplicity is the ultimate compliment."

Complexity kills. B2B tech companies are facing a critical juncture where they must simplify their offerings and operations to survive. The digital transformation journey involves two waves:

• Wave One: Moving to recurring revenue models and connected products
• Wave Two: Integrating operational capabilities into the digital customer experience

This transformation requires:

• Eliminating non-critical uses of sales time
• Refocusing on critical sales capabilities
• Pivoting to low-friction land and product-led growth

Companies must rethink their entire digital approach, leveraging data-driven insights to reduce operational complexity and accelerate customer business outcomes.

2. The consumption gap drives the need for XaaS models

"The consumption gap frequently gets larger over time for most B2B companies."

Underutilized features waste resources. The consumption gap—the difference between a product's capabilities and what customers actually use—is a significant challenge for B2B tech companies. This gap has led to:

• Creation of entire departments to shield customers from complexity
• Inefficient use of resources on both supplier and customer sides
• Push towards XaaS (anything-as-a-service) models

XaaS models aim to close this gap by:

• Aligning customer payments with actual usage
• Providing ongoing value through continuous updates and support
• Shifting focus from selling products to delivering outcomes

3. Outcome-aligned pricing is crucial for XaaS success

"Pricing is what you pay for the value received."

Value drives pricing. Outcome-aligned pricing directly links a product's cost to the value customers receive. This approach:

• Increases customer satisfaction and loyalty
• Drives higher adoption rates
• Improves revenue predictability

Key attributes of successful outcome-aligned pricing:

1. Easy for customers to understand
2. Highly important to the customer
3. Grows naturally with adoption
4. Rides a growth trend
5. Can be measured and reported

Companies must shift from traditional per-user pricing to models that reflect the true value delivered to customers.

4. Data-driven sales force optimizes revenue generation

"With this new data we can lead sellers to wins and no longer need to waste their time searching for needles in haystacks."

Analytics guide sales efforts. The APLAER (Analyze, Place, Land, Adopt, Expand, Renew) model represents a data-driven approach to the customer lifecycle. This approach:

• Reduces wasted time on unqualified leads
• Improves win rates and shortens sales cycles
• Enables more accurate forecasting

Key components of a data-driven sales force:

• Propensity models for buying, consuming, succeeding, growing, and renewing
• Integration of customer telemetry and usage data
• Focus on industry-specific, outcome-based discovery

5. Customer success at scale fuels growth and retention

"Helping will sell; selling won't help."

Success drives revenue. Customer success (CS) is evolving from a cost center to a growth engine. To scale CS effectively:

1. Monetize CS offers
2. Give CS ownership of low-complexity commercial activities
3. Offset CS costs by reducing sales department expenses

Benefits of scaled CS:

• Higher Net Promoter Scores
• Increased customer expansion rates
• Improved retention rates

CS teams should focus on driving adoption, generating leads, handling upsells, and managing renewals, allowing sales to concentrate on high-value, complex deals.

6. Digitally enabled partnering amplifies market reach

"Whoever owns the data, owns the customer. Whoever masters data, increases growth, productivity, profitability, and retention."

Partners extend reach. Digitally enabled partnering (DEP) is crucial for XaaS growth. It involves:

• Seamless integration of partner solutions into the provider's platform
• Shared access to customer data and insights
• Collaborative go-to-market strategies

Key components of successful DEP:

1. API-driven integration
2. Unified digital customer experience
3. Shared analytics and performance metrics

Companies must evolve their partner programs to support "sell with," "sell to," and "sell through" motions, enabling partners to deliver value across the entire customer lifecycle.

7. Navigating the transformation to profitable XaaS requires strategic vision

"If the rate of change on the outside is greater than the rate of change on the inside, the end is near."

Transformation is imperative. Companies face the Innovator's Dilemma² when transitioning to XaaS models:

1. Technology disruption challenges existing offerings
2. New business models appear less profitable initially

To navigate this transformation:

• Educate leadership on XaaS business models
• Recruit talent with XaaS experience
• Align stakeholders on the transformation journey
• Assess and invest in new capabilities
• Communicate transformation goals consistently

Successful transformation results in higher growth, improved profitability, and increased market valuation.

8. The board's role is critical during business model transformation

"Boards are a critical asset when a company needs to transform its business model."

Boards must evolve. Traditional boards often struggle with business model transformation due to:

1. Lack of vision for the new business model
2. Lack of relevant expertise in XaaS

To make boards an asset during transformation:

• Paint a compelling vision for the target business model
• Recruit board members with XaaS experience
• Focus on long-term success metrics rather than short-term financial performance
• Encourage realistic rates of progress

Boards should act as wind in the sails, not sea anchors, during transformation.

9. Managed services evolve from "your mess for less" to "your mess for more"

"Your digital experience is your only scalable differentiator."

Value drives managed services. The evolution of managed services involves:

1. Moving from on-premise, unconnected solutions to cloud-based, connected offerings
2. Shifting from cost-reduction focus to value-creation focus

Attributes of compelling "your mess for more" offers:

• Operational simplicity
• Pay-as-you-need pricing
• Enhanced insights through analytics
• Accelerated adoption and business outcomes

Companies must rethink their managed services offerings to deliver measurable business value and outcomes for customers.

10. A digital operations and customer experience platform is essential

"We must eliminate the soul-sucking work for our employees and customers."

Integration enables transformation. A digital operations and customer experience (DOCX) platform integrates all aspects of a company's operations and customer interactions. Key components:

1. Complete Offer Portfolio (COP) Module
2. Business Operations and Support Systems (BOSS) Module
3. Enterprise-Wide Operating System (EWOS) Module
4. Experience Interface Secure Authentication (EISA) Module

Benefits of a DOCX platform:

• Seamless data flow between systems
• Real-time insights for decision-making
• Improved customer and employee experiences
• Accelerated innovation and time-to-market

Implementing a DOCX platform requires a unified approach driven by top leadership, committed to eliminating complexity through data, analytics, and automation.

Last updated: August 10, 2024