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