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The tech industry grew up in a way ill-suited to current day success. Sales organizations reigned and service organizations subordinated. That is due to the old economics of pre-XaaS business models.
So now here we are. And we are all wrong. The state-of-the-art tech business model has a simple message to customers: “We deliver value and you pay us. If not, then you don’t. The more value you consume, the more you pay.” That is a far cry from the “Pay-up-front, take ownership of the hardware or software and call us if there is a problem” model of the past.
In the old model, closed sales – preferably big ones – were all that mattered. When the deal was signed, the revenue and profitability of the deal were guaranteed. In today’s state-of-the-art tech business model, the initial contract is simply a right to begin to serve the customer.
Tomorrow’s customer won’t pay based on the commitment; they will pay based on their consumption. And soon, they will pay based on their business outcomes. A customer who signs the contract and doesn’t adopt, doesn’t get the outcome…is an unprofitable customer.
The traditional tech industry in 2020 is far from ready for this. Particularly in the sales and service interplay.
And so, tech companies are losing the customer battle to their internal legacy. They can’t imagine a future where sales and service are a single integrated motion. The two organizations battle for turf. Their incentives reflect their legacy interests. Even the most sophisticated will talk about lifecycle selling but still have compensation and organizational models that reward transactions, not customer success.
Let’s face it. Sales is still driven today to pack volume commitments into the initial order, not to do what really matters – to set the conditions for customer success. They don’t want to talk about the bumps in the road, they paint a picture of clear sailing. They don’t put the fact that services are beneficial front and center, they avoid the conversation just as their commission plan encourages them to do. Then ironically, they hope that services can deliver a satisfied customer who is ready to adopt, expand, and renew.
This is an antiquated division. It’s not two cycles, not two phases, not two organizations…it’s one.
But the devil is in the details. It’s about incentives, when and why commissions get paid, whether customer business outcomes are discussed, de-bugged, and whether they are delivered. It’s about whether the hard parts of success were discussed in pre-sales or avoided all together. Is there an actual, customized, funded, agreed upon plan to drive adoption and outcomes? Was the customer business outcome, the necessary adoption plan, and agreed upon success metrics (the golden thread) discussed and documented? What about the people, process, and technology needed to deliver that golden thread? It’s about winning deals because you confront the obstacles of the golden thread with the customer, not run from it.
The state-of-the-art customer lifecycle engagement model is complex, nuanced, and evolving. I don’t know of a single tech company who is doing it right. And that is due to their legacy, the industry’s legacy, and short-term thinking. The irony is, this is eminently doable. But who has the courage to actually do it? I fear that it will be startups who eat at legacy tech companies until they implode.
I hope someone partners with TSIA to prove my premise and joins the fight to build a new and different lifecycle sales model.
Post Date: July 8, 2020
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J.B. Wood is president and CEO of TSIA. He is a frequent industry speaker and author of the popular books, Complexity Avalanche (2009), Consumption Economics (2011), B4B (2013), and Technology-as-a-Service Playbook: How to Grow a Profitable Subscription Business (2016), and has appeared in leading publications, such as Fortune, The New York Times, and The Wall Street Journal. He works with the world's largest technology companies on strategies to extend their innovation platform beyond the lab and into the customer experience, particularly in the age of cloud and managed services.
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