December 11 by Eric Dreshfield
Innovate or die. It’s the harsh truth that businesses face today. Startups with fresh thinking and new, innovative business models are ratcheting up the competition and threatening to displace incumbents. Companies like Amazon, Uber, and Netflix have turned entire industries upside down, and in some cases have all but caused the extinction of old business models. For businesses to succeed today, they must provide additional services to customers that are perceived to offer greater value than their tangible core products alone.
In recent years, there has been a rapid surge in the number of companies that offer products of all types (hard goods, digital goods, and services) through a subscription model, commonly referred to as Anything-as-a-Service (XaaS). The current list of Fortune 500 companies contains more service companies and fewer manufacturers than ever before. In fact, manufacturing is transforming to the point where standalone products are the new “loss leaders” while services are the new revenue drivers. A recent McKinsey analysis across 30 industries found that average earnings before-interest-and-taxes (EBIT) margin for aftermarket services was 25%, compared to 10% for new equipment.
This market shift, fueled by advances in technology, catalyzes new sales and delivery models that enable buyers to browse, buy, and pay for diverse products and services through multiple channels with unprecedented ease and speed. The formative challenge enterprises face today is modernizing and evolving their business processes to offer an easier, better, and more personalized buying experience for customers.
When everything is consumed as a service, buying hinges on how painless it is to procure products, especially complex ones, in combination with other offerings like subscription, professional, and aftermarket services. As a result, shrewd businesses are automating processes and investing in new Quote-to-Cash systems that provide the necessary agility to respond to changing customer needs and manage complex sales and renewals across multiple product and service types.