In his song ‘Stories of the Street” the singer/poet Leonard Cohen wrote:
“We are so small between the stars, so large against the sky,
And lost among the subway crowds I try to catch your eye.”
In a sea of information that we are all inundated with on a daily basis, it’s hard to stand out from the crowd. But with these new series, I’m attempting to do just that. A wonderful side effect of leading a Marketing organization after having spent time in Professional Services, Pre-Sales, and Product Management is that I’ve had a chance to witness the software market and our customers from a variety of angles.
The best way for me to try to articulate my vision is not by painting a singular, ambitious picture of a distant utopia, but rather to share short stories that illuminate the path that I believe our business is on. And this is what Stories of the Street aims to do. Your feedback makes this better so don’t be shy about using the comments field of this blog. It’s not a conversation if only one person is speaking.
Today I wanted to speak briefly about value. I recently had the privilege of attending an executive breakfast briefing in London set up by Mel Strangwick, our brilliant field marketer based in the UK.
The purpose of this event was to get a small group of influential executives in a room and have a conversation about business model transformation and the shift from product to service. This topic is very relevant to us, as companies are reflecting on the impact of digital transformation and how their business needs to change. We want to know how it affects the way they license, deliver and protect their software.
Creating Value: Easier Said Than Done
There were 10 of us at the round table, with a moderator from The Business Reporter, the digital arm of London’s Telegraph newspaper. It was a perfect setting with enough voices to have varied opinions, but not too many so that topics could be discussed in some depth. We actually didn’t really end up talking about the product to service shift all that much.
Instead, the theme ended up being how to monetize value in a product-centric world. Large established organizations recognized how challenged they are in making a change toward pricing based on value rather than product features.
There was an acknowledgment by all attendees that indeed product licensing would be impacted, but they had even larger issues to contend with, and many of those were internal obstacles. The most significant challenge appears to be the apparent disconnect in the notion of value between the typical exec (60yrs +), and the typical customer who is likely a millennial. Indeed the word “millennial” came up a lot in the conversation.
An analogy that was drawn was the difference between those that have grown up as sort of digital natives in an app store world, versus the old guard that comes from a product/feature mindset. The former looking to pay for value as its realized, and the latter coming from a place of product ownership. This is best exemplified in the subscription versus perpetual pricing approach.
Subscriptions are lower risk and more conducive to a value-based conversation, and perpetual pricing involves an upfront cost, but the satisfaction of product ownership. The two generations see things quite differently.
In the end, everyone agreed that value is the metric that matters, and moving forward if companies don’t have a plan to create a value-centric customer relationship, they risk irrelevance. The “Uber” effect of a truly digital company coming in and blindsiding an organization is a very real threat every executive in the room was concerned about. And no one felt that B2B companies are safe from this threat.
Speedbumps Along The Way
A significant obstacle many companies face, when looking at a major business transformation, is the pressure to hit their numbers. Less so with startups and smaller companies who can be more disruptive, compared with established companies who most certainly live under the microscope of quarterly targets.
Why would a CEO, who is probably “a few years from retirement” as one CTO stated, take on the risk of major pricing and go-to-market restructure? Additionally, when the existing model has worked for several years, companies are leery of making a big change. Of course, the irony being that once they are in a position that they are forced to change, then it’s often too late.
An organizational mindset shift was one of the single biggest obstacles these executives wrestled with.
The one element that everyone seemed to agree on is the role of services in the customer satisfaction process. It completely validates the approach many businesses are taking with a combination of Product, Services, and Customer Focused Sales to serve their market best.
The goal of a business is not to sell software, it’s to help a customer solve a problem. And the more transparency they can create between customer and vendor, the better their chances of a long-term relationship.
Everyone also all felt like subscription-based pricing was a big step in the right direction towards a value-based conversation, although many admitted that their version of subscription was really a 3-5 year term license derived from a perpetual model, and not a pricing that was truly based on value.
Where does our business fit into all this? In the segments we target, software is one of the primary vehicles for delivering value in a tangible way. The competitive landscape in every vertical is under threat from new entrants who create an offering that truly captures the essence of value to the customer. We aren’t going to solve all the complexities involved in an organization transformation, nor is anyone expecting us to.
But our role in how software can connect to value is very relevant and important to businesses looking to improve their customer appeal. And being able to associate a value to the way a company can license, deliver and protect software is fundamental to establishing our relevance in digital transformation.