3 min read

Why push Product-as-a-Service models if customers do not see the value?

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Why investing in Product-as-a-Service models when it seems hard to convince customers about the value and to pay for these services? There are more external drivers. And the fact that customers do not adopt new solutions now, is not an indicator for future demands.

 

 

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Want to see more from this Executive Service Roundtable session?

Check out the recording and slides of our introductory presentation and some notes from the discussion. (Click here)

 

Transcript

So also in July, I hosted two Executive Service Roundtable discussions around the topic about shifting to a Product-as-a-Service model. Now, it is a hot topic in the global service community.

However, often we do hear that it is still a struggle to convince customers to see the value of these offerings and also to pay for it.

Now, if this is the case, why bother? Why push for something customers do not really want?

Now, we did start the discussion with better understanding and describing the different offerings, we often have in mind when talking about Product-as-a-Service offerings. It can be quite complex topic, because there are many big themes and topics around advanced services, starting with predictive and prescriptive services (maintenance), remote services, performance based contracts, Product-as-a-Service, subscription based services and outcome based service.

So a lot of big themes, but what do we exactly mean with it?

It is useful to different shades of different types of offerings. Without losing ourselves into the semantics, it's good to kind of separate first of all, that we talk about the different value propositions, which is all about what customer problem are you solving with what kind of solution and what kind of responsibility to take away from your customers. And on the other hand, along the vertical axis in this diagram, the different kinds of revenue models, in essence can be effort based fixed price, or can be more performance based revenue model.

So one of the topics we've been discussing are what are the key drivers to shift towards a Product-as-a-Service offering or the other advanced service offerings. And if customers are not really asking for it right now, there can be many other drivers which justify the reason to invest in these developments, like competition is changing, we see some shifts from requirements for sustainable business models or circular business models, and what have you.

But then it's also important to understand that maybe customers do not see it right now or find it easy to make that shift. In the end, we are talking about some some rapid changes in the whole industry. And that's not only a challenge for service businesses, like yourself, but also for your customers to adopt new ways of working. So it does require some time.

But another thing is that there are many signs that customer needs can and probably will change in the near future. And that is typically what we see with any exponential growth trajectories, also in the past. There was a long period, which we can call the period of deception. So there were initially high expectations, but then actually, in practice, we do not see a lot happening, or we see a lot of signs that it is not feasible or not desirable. In the meantime, there are things changing companies are developing capabilities or testing offerings, there are the first small segments are embracing and adopting it.

And then all of a sudden, when, for example, obstacles are are reduced dramatically, then all of a sudden, it accelerates. And that can even become kind of disruptive, and then it's hard to jump on the bandwagon if you have not developed the capabilities, the processes or tools and the competencies, etc.

And then indeed, when it's all about digital, then you can also see some next steps coming where it's about the disconnecting from physical products. So, the dematerialization then the everything that is digital or in the cloud tends to lose value or reduce the monetary value to de-monetization. And then we also see democratisation basically everybody has access to the information can do smart algorithms with it. And then actually everybody can provide the same kind of offering or customers have the option to take other choices, what to do themselves and what to outsource. So this is typically we see also for example, in the Spotify or other technologies, where these mechanisms have been taking place.

So besides that, we have been discussing other topics. For example, what are critical success factors? Where are the different companies in different industries from insights from the Service Transformation Benchmark, and many more topics.

If you have any interest in this, you can have a look at the presentation, the recording and the slides of my introduction presentation. We do not make recordings from the discussions itself. But we do share some some key takeaways from the discussions in the notes. So they are all available on our website.

So if you're interested, go to moreMomentum.eu. In the top menu, see Executive Service roundtable and there you can find all the information.

Otherwise you can also click on the link in the first comments below. So, this is it.

Have a good day and see you next time!
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