Do you think it takes too long to launch new services?
A manufacturing company was actively seeking growth through new digital services. Digital Service Development Manager was hired with the responsibility to define new service concepts and earning models to complement existing revenue streams. In 100 days, a fresh business concept was presented. However, a key member of the deciding body said to the development manager: “Looks nice on paper, but implementation is simply too hard. Considering our data, processes, and systems, it will never become a profitable business.” The concept was aborted in the next business review.
The story above is fictive but may sound familiar to many of us. Many established companies are seeking growth through new data-driven service concepts and modern XaaS business models. However, the common concern is: “How to succeed in a reasonable timeframe and with a reasonable effort?”
Why new service digitalization often fails?
The challenge is that existing processes, business systems, and data assets do not support the quick implementation of new offerings, pricing strategies and earning models. In these situations people tend to choose one of the following approaches:
- Compromise the initial concept to make it fit the current process and system landscape.
- Start with a manual process and see how things get going. Rely on excel spreadsheets.
- Build a custom-coded solution and integrate it into relevant core business systems.
The first one is assumed to speed up the implementation as sourcing of new IT systems is avoided. However, to handle requirements typical for a service business, several customizations to ERP and other legacy systems are needed. These customizations are expensive and stiff. And yet, the end result is far from what initially was envisioned. Customers are not getting a wow-experience and the offered value can be too low.
The second approach can provide you with a quick start, but the process is based on totally disconnected systems and several manual steps in between. This approach is highly prone to errors and won’t scale up if the business concept flies, not to mention other services. Customers are not getting the speedy responsiveness that fully digital processes would offer.
The third approach can probably respond to the concept at hand, but it requires detailed specifications and lots of coding work. The drawback is that it is rather expensive and usually results in inflexible systems supporting the specified use case but requires more investment to cover other models down the line.
Fast track to market with new services
Based on our experience, the following points are key to success in new service business model implementation:
- Select one concept with limited scope and potential for scaling.
- Form a cross-functional team that can think more about to-be than as-is.
- Provide the team with access to data and other resources needed to conceptually design the earning model.
- Empower the team to select modern tech solution to enable monetizing the concept end-to-end.
- Demand accountability and frequent reporting on progress and costs.
- Allow the team to test the new service business model from quote-to-cash with potential customers as early as possible.
We at Good Sign help our customers solve existing pain points in monetizing service contracts and managing subscriptions and pay-per-use services. We help companies freely grow scalable services.
Read how some of our customers, such as Technopolis and Fortum can now introduce new business models quickly:
Feel free to contact us and let’s have a chat on how we can support your company.