Sometimes it feels like the majority of content I’m creating is around the move to delivering outcomes. But, guess what? That’s because it is THE single biggest trend – in the form of a truly monumental opportunity – that our audience needs to better grasp, understand, and navigate. In a recent report published by Boston Consulting Group (BCG), the firm summarizes the importance of this topic quite nicely by saying, “As the focus of creating and capturing value shifts from one-time sales to long-term partnerships, it is driving higher customer retention as well as rapid account expansion. No wonder many CEOs are convinced that deploying outcome-based business models (OBMs, for short) is the best way to win the future.”
As business leaders take note of outcomes as the way to win the future, there’s a deeper recognition than ever before around the criticality of service – as well as the need for digitalization. In fact, BCG states that “Companies deliver outcomes mainly by combining servitization with digitalization.” I’ve never heard it put this simply, but I love this statement and it illustrates why both of these themes are so inextricably linked. While the statement of outcomes = servitization + digitalization makes it look so darn simple, the reality is that the journey to outcomes proves quite complex for those that seek to cash in on its opportunity.
What It Takes
BCG discusses the evidence of how pervasive the move to delivering outcomes is becoming. The firm also examines the three common characteristics they’ve recognized among adopters of an outcomes-based model. It’s well worth your time to read the report in full, but let me summarize here briefly in my own words:
- Customer focused. The first characteristic is that these organizations are customer-driven, which is absolutely necessary to have success in this endeavor. If your focus of delivering outcomes is solely the impact it can have on the business in terms of revenue, without the focus on how you can actually help fulfill a customer need, you will fail. The report quotes a Harvard Business School Professor, Theodore Levitt, as writing: “People don’t want a quarter-inch drill. They want a quarter-inch hole.” You absolutely have to master the understanding of what it is your customers want and need.
- Measurable results. The second characteristic the report discusses is the need to provide measurable, quantifiable results. If you think about the nature of outcomes, this makes sense. Customers will want evidence and tracking of the value they’ve been delivered, so as an organization, you have to think through how you will provide that level of insight.
- Enabled by digital. The journey to outcomes isn’t possible without digitalization, and BCG discusses the fact that many recent digital transformation efforts have been put in place specifically to enable this move to outcomes. The availability of asset performance information, the real-time exchange of insights, and the ability to leverage data are all foundational elements of delivering on an outcomes-based model.
What Stands in the Way?
When you begin to really ponder the layers of an evolution from transaction-based business to an outcomes-based model, it becomes easy to uncover where the complexity comes in. While the bumps on this journey vary from industry to industry and company to company, there are a few common challenges we’ve uncovered in our Future of Field Service interviews:
- Lack of alignment. For an outcomes-based model to be fully embraced and adopted, there must be agreement on the value of moving to outcomes and this agreement has to be shared by the top leadership of the company. Often, we speak with service leaders who are bullish about the opportunity outcomes presents their company but are working with top leadership who is very traditional and doesn’t share that perspective. Because the delivery of outcomes relies on an elimination of siloes and a cohesive, collaborative approach, alignment among leadership is imperative.
- Layered legacy and change management. For most organizations, the move to outcomes represents a massive change and legacy mindset, culture, and practices often get in the way. From sales and marketing to operations and service, from R&D and production to IT and financials, everyone has to be on board with this change for it be successful and there are a lot of historical beliefs and processes that have to evolve. Overcoming resistance to change and creating buy-in on the value of migrating away from the company’s legacy is often the hardest challenge companies face on this journey.
- Digital lag. As we discussed earlier, digitalization is essential in delivering outcomes. Companies that are laggards in their digital transformation efforts must first contend with modernizing their systems and creating foundational functionality before they can really dig into the introduction of an outcomes-based model. Whether the challenge is outdated, legacy technology, disparate and disjointed systems, or functionality gaps, a certain degree of digital competency must be achieved to fulfill the outcomes-based value proposition.
Will It be Worth It?
Absolutely, undoubtedly, 100-percent yes. The reality is, in fact, there’s no choice. Outcomes is the future, for service and for business overall. I couldn’t say it better than BCG does in the summary of their report: “A word of caution. As more customers start demanding outcomes, challenging suppliers and software vendors to deploy outcomes-based models, it may be dangerous to ignore them. Companies that can’t deliver outcomes and don’t have a role to play in their customers’ ecosystems may find they are expendable. They will give up market share, miss growth opportunities, and lose long-term buyers.”