Enterprise software: 'Do our customers love us?'

Enterprise software: 'Do our customers love us?'

Summary: It's time for enterprise vendors to think beyond features to create great outcomes and experiences for customers. Learn how to start this important journey.

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A recent conversation with analyst Ray Wang, who appeared on CxOTalk (see video embedded below), makes clear that a significant business model shift is taking place in many companies. This shift marks a turning point away from feature-based selling to a broader focus on the ultimate outcomes that reflect customers' business goals. The discussion got me thinking about how enterprise software companies design, develop, market, and sell their products.

Focusing on outcomes stands in stark contrast to feature-based selling, which historically has been the approach used by technology and enterprise software companies. For example, we are all aware of "feature wars," in which software companies publish endless lists of product attributes in an effort to demonstrate greater value and benefit than the competition.

A blog post by product manager, Gopal Shenoy, eloquently explains why feature wars don't work:

Engaging in a “feature war” is death knell for two reasons:

1) You are losing focus on the fact that the customer is looking for a solution to their problems and not for a product with features. They want to know how your product (as a whole, not individual features) benefits them, solves their problem(s) and achieve their goals.

2) If you get caught up in the features (weeds), your driving force is going to be add more features and create a very complex product – a “Frankenstein”.

Although feature lists create an easy way for buyers to compare products, especially in competitive bidding situations, they position the vendor as a homogenous follower rather than an innovative leader. Feature comparisons rest on the assumption that competing products are interchangeable except for differences in attributes. These comparisons often do not reflect the fact that some products are particularly easy to use, offer a better experience, come with responsive service and support, or constitute a better business fit for the buyer.

In enterprise software, creating successful outcomes for customers means driving innovation (and efficiency) in business processes such as HR, finance, marketing, manufacturing, and other corporate functions. However, the achieving a positive customer experience demands involves a complete life cycle that starts when the customer evaluates its own needs then selects software, goes through implementation, and finally uses the product over time. The high rate of IT failure forces us to conclude that many enterprise software products deliver lousy outcomes and poor customer experience.

The most successful software vendors create a continuum of positive experience in which product features and attributes are only one dimension among many considerations and customer touch points. Adopting an outcomes-based perspective in enterprise software requires the vendor to develop a detailed understanding of customer aspirations and pain points across the entire buying and usage cycle.

More importantly, the vendor must also take greater responsibility to ensure that customers buy the right product and implement it properly. An entire set of economic relationships in enterprise software, that I have (only half-jokingly) called the IT Devil’s Triangle, militates against this alignment of goals between vendor and customer.

The cloud can definitely help this situation by simplifying products, enabling agile approaches to implementation, and removing infrastructure from the equation. Nonetheless, one can find plenty of dissatisfied cloud customers, so software delivery mechanism alone is not a fundamental driver of customer satisfaction

Creating an outcomes-focused software business requires rethinking a broad mix of corporate functions including product design, software development, quality assurance, partnership, and customer service. When shifting the reference point from revenue-however-we-can-get-it to outcomes-and-experience, a business must rethink many of its priorities and strategies. This transformation is especially challenging for engineering-driven technology companies, because features are the lifeblood of how engineers design products.

In my experience, working with many enterprise software companies and startups, making this shift requires the company to recognize that competition on features alone will drive the business towards being a commodity. While features are relatively easy for competitors to replicate, creating a positive customer experience requires shaping the entire relationship with customers, including all the touch points and interactions, throughout the entire customer lifecycle. Although making this transition is a big shift, it can create clear competitive differentiation and advantage.

Defining your business in terms of customer experience and outcomes demands a new way of thinking. Stand in the cold, harsh light of a metaphorical mirror and ask yourself this question: "Do our customers love us?" Then figure out how to make it happen.

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Here is a brief excerpt from the conversation with Ray Wang that got me thinking about this topic:

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CXOTalk brings together senior executives and prominent thought leaders to explore the impact of technology on innovation and disruption in the enterprise. Join me, and co-host Vala Afshar, to participate in these exciting and interesting discussions every Friday.

Topics: CXO, Enterprise Software, Social Enterprise

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4 comments
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  • Time to close the interpretaion gap between business and IT

    This move for Enterprise software is long overdue. “Outcome" based takes the focus to how these are achieved and guess what takes you to people who create all source information. This opens the BPM door and here is its history and my journey started in the early 70s! http://fcw.com/Articles/2013/08/26/exectech-bpm.aspx?m=1&Page=1

    The function drive approach which has largely failed to support people is a result of the very complex component nature of the way Enterprise Software has evolved. This has been driven by the corrosive short term nature of the financial markets where the big vendors can’t really innovate relying on small start-ups with niche “functions” who sell out when the big vendors see threat or opportunity. The result for development of Enterprise Software has been near catastrophic! Real development has stalled exampled by the fact still using 30+year old 3 & 4 GL?

    So the future must be different and BPM driven but also delivering on that “dream” to remove coders to build exactly what the business requires focusing on supporting people with their outcomes individually and collectively. So “how” is this achieved? Your fellow enterprise irregular Naomi Bloom summed up eloquently
    “Writing less code to achieve great business applications was my focus in that 1984 article, and it remains so today. Being able to do this is critical if we’re going to realize the full potential of information technology” “…how those models can become applications without any code being written or even generated”. “If I’m right, you’ll want to be on the agile, models-driven, definitional development side of the moat thus created…..” “…”If your Enterprise vendor isn't pretty far down this path, their future isn't very bright”.

    It will be very difficult to mould old functional technologies to deliver outcomes as required. This is a big bullet to bite – it is going to be fun to watch the dominant companies put up a fight of self interest!
    David Chassels
  • Switch from feature-based buying to value-based buying

    Michael, I'm glad you wrote about the feature war problem. As it relates to customer RFPs and competitive analysis, I believe the big problem is that vendors are reacting to the customer demands. I agree with you that vendors need to focus on outcomes and goals rather than features. What about the customer buyers? The buyers are sending out RFPs that contain very little (if any) info about their pains and goals, but mainly about feature check boxes. Have you ever seen an RPF that list business problems and ask the vendor to describe how their tool solves those problems? Rather than a check list, maybe a request for a essay responses with demonstrations (visually with screenshots or videos and how others have succeeded).

    To your point, once a vendor is in with a customer, the focus should be on true value with outcome effectiveness. My company is proactive in learning how customers are using our project management tool and how we can help them improve their success. I'm sure a number of my competitors do that too. However, sales is trying to close deals and too many prospective buyer take the commodity approach with their initial questions about pricing and feature set. Many of those can be managed with good sales people, but the black-box RFPs are death to vendors who want to innovate and differentiate for end-customer business outcomes. I took a shot at describing the issues with feature wars and how a buyer might consider a better approach to RFPs by connecting business goals and objectives with the vendor feature list --- http://bit.ly/11V7JU6
    Paul Dandurand
  • Dinosaurs of Marketing & Sales Still Exist in the Big Software Companies

    Ray Wang is spot on with his assessment of value shifts, driven by the pace of innovation in the cloud. Unfortunately (from the perspectives of large software companies and their customers), there are still many dinosaurs of Marketing and Sales among us. While they have attempted to come down market, and the actual dollars asked for may vary considerably, they have further fossilized around their positions of the 4 F's: Find 'em, Fleece 'em, F' em, and Flee. It is not in their DNA to meaningfully deal with outcomes. Customers expecting to deal with outcomes from a professional software sales organization? Michael, you have written about the outcomes for years.

    The end of their era (of which I'm a part) can't come soon enough for their customers.
    KoolAidServer
  • It really means understanding the customer business and business outcome

    The truth is that both vendors (software providers and implementation firms) and customers need to focus on the customer business outcomes.

    For the customer, it means understanding how specific improvements in either business process, activities, tasks, or procedures will enable or produce the desired business outcome. Then the customer can determine whether its current software systems can readily support these changes or not. If the customer needs different software, the choice is driven by how the company needs to software to support the specific improvements that will create the desired business outcomes.

    Software that doesn’t readily support the way a company needs to work, is the wrong software regardless of feature / functionality richness, or the lower monthly cost of SaaS.

    For the vendor, it means being able to see whether your software readily supports the way the customer wants to work. Otherwise, you’re just force-fitting your system onto the customer and the customer easily achieving the desired business outcomes becomes a crap shoot and an arduous one at that.
    elizab