Guest
Marc Salvany
Founder, GrowthBeam
Episode description
In this episode of the Data for Subscriptions podcast, we speak with Marc Salvany from GrowthBeam. Marc explores the most common challenges OEM’s face when transitioning to As-a-Service models and ways to overcome these obstacles.
Highlights
“All and Nothing” misconception
“The all and nothing issue is that you either need to change everything or nothing. It’s a huge risk aversion and innovation killer.”
A significant barrier to implementing the As-A-Service model is the misconception that it requires an all-or-nothing approach. Many companies mistakenly believe that they need to make a 100% transition to this model to be successful. This is not true. A company can continue to be a successful product-based business while offering As-A-Service propositions to specific customer segments.
Furthermore, the As-A-Service model can mean different things to different industries and even to different companies within the same sector. For some, it might involve simple leasing arrangements, while for others, it might mean a fully outcome-based service model. This variability means that companies can adopt a hybrid approach that suits their specific needs and market conditions.
IT Stack & the product DNA
“The biggest issue is that we’re still at the infancy of creating insights using IoT sensing data or usage data.”
When an established company tries to undertake a servitization journey in-house, it often faces significant internal challenges. Every decision made is influenced by the company’s existing “DNA.” This includes biases towards product-based language, tools designed for product organizations, and deeply ingrained cultural norms.
A major hurdle is the integration of As-A-Service offerings into existing financial reporting structures. For instance, consider a scenario where a product has been developed to be connected, upgradeable over the air, serviceable, and capable of capturing relevant data for the customer experience. While this product is ready to be sold as a service, integrating its revenue into a product-based financial reporting system can be a nightmare. Traditional financial systems are not designed to handle revenue recognition, splits, and invoicing for service-based models. This misalignment can lead to significant delays and complications in the transition process.
Moreover, IT departments often inform management that substantial changes to IT systems and financial reporting are required to support the new business model. These changes are not trivial and can be incredibly costly and time-consuming. Additionally, the lack of initial results can make it difficult to justify the investment, creating a vicious cycle of resistance and slow progress.
Cultural resistance
“Sometimes we think that once we find a nice product market fit, everything will be solved, but you really need to focus on the culture of resistance from all levels of the organization.“
One of the primary pillars of a successful servitization journey is culture. It’s important to analyze a company’s existing culture to assess the level of resistance that may be encountered. Interestingly, the usual suspects of resistance are often the sales teams. However, resistance is not confined to this group alone; higher management, R&D, product management, product development, HR, finance, and IT departments all play a role in this resistance.
The main issue is not that these groups are against improvement. People generally want to see progress and better outcomes. However, they are often resistant to changing their established ways of working. For example, asking an engineer who has been focused on developing new product features for years to suddenly shift their mindset to prioritize customer experience can be a monumental task. The same resistance can be observed in HR, management, and other departments.