Redrawing the Boundaries of the Performance Zone in the Era of XaaS
Geoffrey Moore
Author, speaker, advisor, best known for Crossing the Chasm, Zone to Win and The Infinite Staircase. Board Member of nLight, WorkFusion, and Phaidra. Chairman Emeritus Chasm Group & Chasm Institute.
The big change in business we are going through right now is a systemic shift in power from the vendor to the customer, one in which the product model is being supplanted by the as-a-service model.?The key difference is that, in the product model, business value realization is the customer’s responsibility, so the monkey is on the customer’s back.?Not so in the as-a-service model, where business value realization is a joint effort, with each side having something to gain and something to lose.?And that is what is driving the redrawing of the boundaries of the Performance Zone.
Specifically, under the new regime, while bookings are still the lead dog, they are no longer the only game in town.?Bookings create the occasion for business value realization, but they do not ensure its achievement.?That is where customer success metrics come in.?These come in two forms—end user adoption, which creates the opportunity for business value realization, and return on investment, which verifies business value has actually been realized.?End-user adoption metrics are part of a customer health score, one that can give early warning signs of value leakage in the current process, as well as highlight opportunities for upsell and cross-sell when all cylinders are firing.?Tracking true ROI is in the mutual interest of both the customer and the vendor, as this is the money that will reward the money paid in to date, as well as pay for continuing consumption of the service.?
Contract renewals are the forcing function in this model.?Performance Zone metrics must reflect a gain-and-retain responsibility for account management.?It is no longer OK to divide your sales teams into hunters and farmers, or commissioned sales reps versus cost-center customer success functions.?This is the era of the five-act sales play, where the go-to-market system has end-to-end accountability for sustainable vendor success, and everyone’s job description and compensation package needs to reflect this change in responsibility.
This includes two groups who, in the product model, were seen as tangential to account management, but who, in the as-a-service model, are a core part of the effort.?The first is the executive sponsor in the vendor organization.?This person is responsible for engaging their opposite number in the customer organization to develop
That businessperson is a key member of the account team, one with whom the vendor account manager must build a relationship of trust.?This puts a safety net under business value realization and ensures a high probability of customer renewal.
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The other group that as-a-service puts additional responsibility onto is the professional services function.?In the product model, they are a revenue center for project services needed to implement the vendor offering.?This role is part of the as-a-service model as well, but in addition, this organization must also serve as a cost center when an intervention is needed to rescue an account relationship that has gone south.?This requires making an accommodation to their performance metrics to reinforce the priority of customer success over billability and utilization.?The latter are still key metrics, to be sure, but they must not be allowed to incent the wrong behavior.?
That’s what I think.?What do you think?
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I agree with some of the comments below, this sounds nice in practice. As the owner/operator of a SaaS company, the main challenge we face is keeping lots of customers happy who have competiting priorities, various budgets, different timelines and high staff turnover at our customers. We need to do all this while maintaining differentiation in the marketplace and communicating that to our current and prospective customers. More deeply embedding our teams in the customer operations and understanding their needs and reality is good - but terribly expensive. SAP is all about customization. ServiceNow is probably doing this well. I think it is a tough nut to crack and not sure how to make it into a viable business strategy without becoming a custom software house.
Helping female CXOs of innovative companies transition from overwhelm to impact. Strategic Advisor + Coach | Former Fortune 1000 Executive | Certified Intuitive | Wisdom Keeper
4 年Lean into change, discomfort in our system will create the needed growth. #changemindset
AI and Machine Learning blended with DL and Explainable AI. Unorthodox, contrarian, non-believer.
4 年Geoff Parker how does this play out in a platform Sir! Who in fact controls a platform, the platform manager or the customer, user! Whose responsibility is it to realise the business value or is it same as the product model! My assumption is that the model used here is different from a platform!
Chief Harbinger, Futurist
4 年I kept looking at the date of this, thinking I was going to see 2012 or thereabouts.
Innovative Revenue-Growth B2B Cloud/SaaS Executive Specialized In Optimization Applications For Manufacturing, Supply Chain, Logistics, And Healthcare Sectors
4 年Having been the Executive Sponsor you describe at my previous startup, I founded my current one and spent the last 4 years exclusively focused on the topic of measuring the return on IT investments that you describe. I started from the IT Vendor perspective and then pivoted to the IT Buyer perspective after 100’s of customer research conversations to validate the problem and potential solutions. So obviously I completely agree with the theory and the hypothesis you are making. The reality is quite far from theory for most companies. On the IT Vendor side, I have never found one that paid an exec based on end-customer ROI - beyond lip service from the CEO - and very few companies in B2B are actually set up to collect and analyze useful customer value outcome data to turn it into actionable insights - not in small part because customers may not want to share their data unless that analysis is clearly part of the solution they are buying. Even on the IT Buyer side, we have found that most companies do a very poor job at measuring value. That is great news for us since that is exactly the problem we have pivoted to solve. Once we have solved that for IT Buyers, then we will also have something useful for IT Vendors as well.