Consumers have come to expect a new level of personalization and choice in their life - television shows and movies on-demand, a favorite new song rather than the whole album, cars and bicycles by the trip. They now pay for the exact services they want and need - no more and no less.
Take ZipCar, the biggest name in "Transportation as a Service." People can drive a car only when they need to and pay an affordable fee for the miles they actually drive. Its members are able to view vehicle availability and reserve a self-service car in increments as short as one hour, paying only for time they reserve.
Rumor has it Apple is working toward a new model so its iTunes customers can buy and listen to songs in a way that doesn't require a download. Will its customers access music stored on servers through cell phone networks? Time will tell, but these so-called "cloud music" services have gotten a boost from recent music price cuts and newer applications that allow playback even outside of cell phone range.
These are a couple of examples of how consumers interact with business every day, and a very real look at the business models that are winning and how people expect to buy products and services today. These interactions in turn color our expectations and force accelerated innovation and adoption of ways to personalize our work lives.
Speed and cost efficiency aren't new priorities to any corporation, but personalization and real value have become just as important to B-to-B companies as it's always been to B-to-C companies. Look at what Amazon.com and Salesforce.com are doing to revolutionize the ways companies "rent" technology - infrastructure, storage, platforms with application development tools - all delivered as a service.
When almost anything you can think of can be purchased as a service (Everything as a Service, or EaaS), what will determine which vendor comes out on top? It's all in the business model. Success will be dictated by a model based on real business results and completely linked to performance and not just on how a technology is delivered.
Think back to some of my original examples of new "service" industries. Imagine if your satisfaction was tied to how much you paid. You paid for your download from iTunes based on how much you like the song or only paid for the ZipCar if it performed to your satisfaction. While the notion of pay-for-performance probably wouldn't work in the B-to-C world, it is gaining popularity with a handful of next generation, B-to-B technology solutions vendors.
Pay-for-performance is a big risk for the IT vendor not confident in its services. But for organizations who believe in their solutions enough to institute this type of business model - one that takes vendor payment out of the equation until the solution uncovers net-new revenue - the success has been overwhelming for several key reasons:
- Instant customer loyalty - Customers immediately have a bond with an organization who wants to see them succeed - less like a business deal, more like a true partnership. The variable cost partnership resonates in a big way with the CFO because it mitigates any up front risk and both parties are motivated to succeed.
- Reputation - This maps back to customer satisfaction. Establish a loyal customer base by putting your money where your mouth is - this approach is totally refreshing to customers, who then spread the word.
- Organizational motivation - In the pay-for-performance model, you can never settle for good enough. The business must operate at the highest level of performance in order to keep customers happy and keep the organization profitable. Employee engagement and commitment levels are guaranteed to be high.
One thing is certain, everything as a service is here and these new models will continue to capture headlines. The true test will be around how the business model is built. Will you select a model based on uptime or seats? Or will you select a model based on performance and real business results?
Mike Smerklo is Chairman of the Board and CEO of ServiceSource.