Outcomes are the new opportunity. In a connected world, companies across a broad swath of industries are developing strategies to deliver business outcomes to customers. By using digital technologies to create new offerings and complement existing ones, they’re shifting from the transactional process of selling products and services to developing deeper relationships and providing outcomes, which is turning into a fast-growing and profitable market segment. As the focus of creating and capturing value shifts from one-time sales to long-term partnerships, it is driving higher customer retention as well as rapid account expansion. No wonder many CEOs are convinced that deploying outcome-based business models (OBMs, for short) is the best way to win the future.
Companies deliver outcomes mainly by combining servitization with digitalization. In B2C markets, the early entrants are using digital technologies to deliver customized and personalized outcomes in real time. Their counterparts in B2B manufacturing markets are capturing data from the physical assets they manufacture and wrapping software around them to learn how customers actually use products and to prevent machines from breaking down by conducting predictive maintenance. This ensures that machines and processes work optimally and deliver measurable results. Thus, instead of selling locomotives, the pioneers sell momentum. Instead of power turbines, they offer electricity. And instead of selling jet engines, they provide thrust by the hour.
Analog and digital technologies must work together to produce outcomes. Data, data-driven insights, and software are critical for the delivery of outcomes, pushing many companies to develop or, often, buy different kinds of software. That has created a huge market for software firms as well. Helping to deliver and measure outcomes allows vendors to break free from today’s buying centers, such as CTOs and CIOs, and become partners with a company’s businesses and functions. As customers grow accustomed to purchasing outcomes, manufacturing companies and software firms must learn to cash in on the lucrative opportunities that OBMs create if they wish to thrive in the future.
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Authored by Jacob Konikoff, Alejandro Mayer, Florian Schmieg, Michael Stephan, and Stefan Trifonov.
If the tumult of 2020 has prompted your organization or leadership team to reconsider people priorities such as employee well-being, resilience, or purpose, then you’re in good company.
Your employees are reconsidering you, too.
Nearly two-thirds of US-based employees we surveyed said that COVID-19 has caused them to reflect on their purpose in life. And nearly half said that they are reconsidering the kind of work they do because of the pandemic. Millennials were three times more likely than others to say that they were reevaluating work.
Today, people have higher expectations of the organizations they work for, purchase from or invest in. Employees, consumers, shareholders, suppliers, governments and communities demand responsible organizations that are grounded in purpose and committed to delivering long-term value.
In this world of heightened corporate social responsibility and the renewed shift toward stakeholder capitalism, the promises companies make must be kept. And the only way to keep brand promises is with a purpose-driven culture.