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- August 29, 2016
- Rob Bernshteyn
It is already common knowledge that many traditional product companies are converting the delivery of their offerings to the as-a-service model. We are now approaching the final frontier of that model: Value as a Service (VaaS). As we shift to VaaS, customers will focus less on the delivery model and more on the value delivered.
Effectively delivering VaaS requires a new kind of relationship between vendors and customers, one that is outcome-based, rather than a negotiated, transactional exchange of goods and services for money. It’s more of a partnership in which both parties are empowered to support each other as well as hold each other accountable for achieving measurable results they’ve both agreed upon.
Making this shift is the hardest part of transitioning to VaaS. I am of the opinion that vendors must lead the way by creating a culture of quantifiable value that permeates everything they do.
Signing up for value
Since value is the ultimate foundation of the relationship, it is a policy at our company not just to sign a contract, but to reach an agreement on specific business success criteria that we will work together to achieve. I believe that this should be an integral part of your marketing and sales process.
From their first engagement with your marketing, prospects should get a sense of the value customers are achieving using your service. Sales discussions should focus not only on features and functions, product demos or even product benefits. Instead, they should start as authentic and open learning sessions about the customer’s business strategy, resources, culture and unmet needs. That’s a key part of what the customer brings to the partnership.
As the vendor, we bring the technology and functional best practices. In our line of business, a typical agreement might be that together we are going to save a hospital network $50 million on syringes, scrubs, bed linens, IT and maintenance and cut their order fulfillment and invoice processing times by 60 percent.
By working together to establish these very specific, measureable goals, we are already setting the tone for a different kind of relationship. We hear all the time in customer wins, “your company was the only one that sat down with us and really understood our real business challenges and what we are trying to do.” If you hear that too, you’re on the right track.
The focus on value doesn’t stop once the deal is inked of course. These success criteria must become the framework for all subsequent interactions. Too often, up front analysis of value is never revisited. I believe strongly that it must be revisited constantly.
The professional services team must be oriented to pick up right where sales left off, mapping the deployment and change management programs to those same success criteria. The product and technology teams must not only be listening to the customer, but digging below the surface of feature requests to understand the deeper needs that could drive long-term value.
Ideally, everyone is moving in lockstep with their eyes fixed straight ahead on those success criteria and how most efficiently to deliver on them. One way of achieving that is to emblazon them on everything associated with the project—communications, collateral material, t-shirts, screen savers and mousepads.
This effort has to be supported by an internal culture of value creation. This cannot be mandated from on high because it is based on employee empowerment. Inevitably conflicts arise in the course of a technology implementation project. The technology doesn’t function exactly the way the customer thought it would. The customer underestimated the internal challenges. The business climate has changed. These are the realities we confront when new technology and process change collide with people’s natural resistance to change.
Historically, in the face of these frustrations, the customer would beat up on the vendor, and they will probably feel better. And the vendor will take it because the customer must be satisfied, but the underlying challenges are rarely fully addressed. This is what often happened in the product world, and it led to adversarial relationships.
But in the VaaS world, that approach is not going to get us to where we need to be. Instead of trying to squeeze each other, or blame each other, we must stay focused on what we’re trying to do together. This is where your employees need the culture supporting them.
Keeping value front and center
I believe that it is up to company leadership to make sure value remains front and center in the daily life of the company, and to support the front line employees as they execute on it. As with the customer success criteria for any project, this starts with clearly and frequently communicating the company values.
At our company, our company values-- ensure customer success, focus on results, and strive for excellence—are written in large scale on walls throughout the building. They’re written on the back of each employee’s name plate on each desk. I believe that leadership should repeat them until they’re tired of repeating them, and then keep repeating them, with real illustrative examples of seeing them in action.
Your customer stories should feature customers achieving value. Your employees of quarter should be consistently rewarded for exemplify these values, as voted by their colleagues. Every employee should be evaluated on how well they execute on these values within the context of their role.
Culture in action
Here’s an example of how a culture of value impacts employees. We had a customer with a large number of open tickets and support requests. They were getting frustrated by how long it was taking to resolve some issues, and rightfully so. The customer success representative was getting frustrated with the number of requests and unreasonable customer expectations for turnaround time. Their egos clashed and they got caught up in a you-versus-me dynamic and lost sight of the big picture.
That employee came to an all-hands meeting where they saw a presentation of a case study where the customer achieved seven-digit savings. They saw someone get an award based on having delivered measurable success for this customer. They compared that to what they were doing and realized they should be aspiring to something greater than this back and forth at the ground level. They reengaged with that customer in a different spirit, refocusing on the success criteria and the bigger picture. They got back in the game, and resolved what actually mattered for their business.
The mind shift
That takes maturity, diplomacy and the knowledge that you have the support of the organization behind you. It’s not always as direct and causal as in that situation, but I see people waking up to the culture of value all the time.
When the customer asks for something employees are acculturated to ask, not why, but, "How does that support what we're trying to achieve?" They ask clarifying questions. They dig deeper and map everything to what they are trying to achieve together. They listen and build trust and get customers to problem solve together with them.
Delivering Value as a Service puts a greater burden of responsibility on employees. That’s why they need a strong culture supporting them. The skills are easy to learn, once you’ve made the mind shift. It’s the mind shift that really delivers the value for both companies, and for everyone involved.
Is your company ready to deliver Value as a Service? To learn more, check out valueasaservice.com and get my book. I’d love to hear your thoughts on this topic and how it applies to your company or industry.