AUTHORS

Brandon_Mills-10924_headshot_small
Brandon Mills
Manager,
ZS Associates
Jason_Bell_11099_headshot.jpg
Jason Bell
Associate Principal,
ZS Associates
John_DeSarbo_thumbnail
John DeSarbo
Principal,
ZS Associates
Kyle_Heller_thumbnail-1
Kyle Heller
Associate Principal,
ZS Associates

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Five Strategies for Tackling Flexible Consumption Models

Posted by Kyle Heller on Mon, Jul 30, 2018

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This post is the first in a six-part series on strategies for high-tech companies and business leaders to adopt to meet the evolving requirements associated with flexible consumption models.

For as long as I can recall, tech executives and industry experts have been avowing the urgent need for the industry to transform and meet the requirements of the new digital world, or risk being left behind as a cautionary tale. They cite the same trends and confluence of things which make the timing right: the rise of mobile, social, connectedness, new technologies and data sources, and any number of statistics about increasing customer sophistication and the changing nature of the customer journey.

And the thing is, they’re right. Customers do want to engage in different and more meaningful ways, with more control and reciprocity, and technological advances during this time certainly help leading technology companies meet this challenge, and realize the efficiency and effectiveness from such a digital transformation. A great example of this is the increasing demand for flexible consumption models, where barriers to entry and exit are low, customers pay for what they use, and customer outcomes are critical to everyone’s success. It’s a model which Gartner reports accounts for more than 50% of new software implementations, because it’s valuable for everyone involved. According to a recent ZS survey, about 40% of tech leaders cite improved revenue as their primary reason for shifting to a consumption business model, followed closely by better customer engagement and cost savings.

So, if there’s agreement on the necessity, urgency and benefit, why hasn’t there been less talk and more progress? Our research suggests that tech companies feel insufficiently prepared to manage the significance of the shift. While it’s not a new model, for most tech companies, the shift to a flexible consumption model introduces a deluge of complex strategic and execution challenges related to how they go to market, including: pricing, contracting, delivery, invoicing, revenue recognition and operations. Plus, this new model must often coexist with existing models and processes, and all the associated commitments, investments and business priorities. It can feel daunting.

A successful transformation starts with clarity and alignment on how important this shift is to the overall growth and success of the company, the parts of the business it will impact, how success will be measured and evaluated, and how to manage the transition and change management plan required.

Once aligned on this vision, our research suggests there are five areas to prioritize for transformation success, which we’ll explore in detail in our upcoming series of TechBytes blogs.

  1. Inspect the customer journey: As barriers are reduced, the importance of each customer moment is heightened, and having deep, comprehensive and “always-on” customer insights will be a critical element to achieving required business outcomes.

  2. Incorporate advanced analytics: Access to unprecedented amounts of new data provides a wealth of insight on customers, products and business programs. Creating an analytics engine based on these data will be critical to enabling the transformation.

  3. Rethink customer engagement: Changes to the customer decision journey, preferences and moments of truth mean that tech companies must find new ways to engage with customers to create a unified and seamless end-to-end experience.

  4. Evaluate metrics for success: To properly measure impact, decide which metrics matter, in leading and lagging form. Each new success metric also must be tightly integrated into existing tools, processes and teams.

  5. Assess current partners: Current partners and channels must have the right incentives, capabilities and infrastructure to enable effectiveness at scale and help the transformation succeed.


While daunting, focusing on these five strategies can help technology companies worry less about their own readiness, and more about what will move the needle for themselves and their customers. Those who do will realize the benefits of the transformation and improve the customer relationship and their business, more broadly. Those who don’t, as the saying goes, will be left as a cautionary tale.


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Topics: buyer behavior, flexible consumption, customer journey, High Tech, data and analytics

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AUTHORS
Brandon_Mills-10924_headshot_small
Brandon Mills
Manager,
ZS Associates
Jason_Bell_11099_headshot.jpg
Jason Bell
Associate Principal,
ZS Associates
John_DeSarbo_thumbnail
John DeSarbo
Principal,
ZS Associates
Kyle_Heller_thumbnail-1
Kyle Heller
Associate Principal,
ZS Associates
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