I talk to leaders all the time who are frustrated with their company’s lack of progress when it comes to embracing the potential that Servitization and delivering outcomes holds. This frustration is understandable, but it isn’t surprising – there’s a lot of deep-rooted legacy that holds many companies back from the world of potential that service can bring. On last week’s podcast, I talked about this issue in detail with Scott Weller, partner at Mossrake Group.
Scott was formerly the global leader for the support services business at Hewlett Packard Enterprise, a role in which he helped build a multi-billion-dollar IT-as-a-Service business that is now known as GreenLake. In his current role with Mossrake Group, Scott helps companies achieve success in introducing As-A-Service offerings in their own businesses based on the lessons he learned in what works – and what’s doesn’t – during his time at HPE.
According to Scott, the history of most product-centric companies creates an identity that is hard to overcome, both culturally and operationally. “Identity in a company is really around the unwritten rules it gets codified into the business model, so that the value chain aligns to it, and really, the business is optimized for that identity, and even over time, as the business might evolve, identity is what survives,” he says. “And so, if you try to introduce a new business model into an existing business, what can happen is the entire value chain can work against you. The identity becomes a barrier to change.”
As such, creating a new identity – say, as a service versus product business – is a difficult, fundamental shift that, as my conversations with leaders reflect, many organizations are still struggling to come to grips with. “This is why you find a lot of mature product companies either haven’t started on the journey or are working through the journey even though there are clear demand signals from the market,” says Scott. “Just think about the impact – you think about sales, for example. Salespeople have to move from a transactional relationship to one that’s continuous and collaborative. And of course, there’s the never-ending questions about, how do they get paid? You will find people who strongly believe that anything that leads to a monthly payment must be in the purview of the financial services organization or an external financial partner. And consider product development. You have engineers and product management who identify with making the coolest thing, the fastest thing, the best, the highest quality thing, and now they’re asked to be a supporting cast member in an ensemble trying to deliver unique experiences and outcomes.”
The Journey of a Thousand Miles Begins with a Single Step
While we’ve painted a daunting picture, though, it isn’t without hope. Bit by bit, organizations across industries and across the globe are recognizing the demands of the market and the value service holds in differentiation and growth. But the journey of a thousand miles begins with a single step, and this is why Mossrake Group so highly recommends the microcosm approach when it comes to making tangible progress in introducing As-A-Service and outcomes-based service offerings.
“Our view is, having done this in practice, is that the microcosm approach is really the best one. The internal incubator where you start small and take an agile approach is really the best way for us to see this evolution to succeed, because in the end, what this approach does is it allows the new business model to essentially gestate within the existing machine,” Scott explains. “This allows a company to knock down all of the value chain barriers one by one, which is not a small challenge. But when you do it in a microcosm, it’s just much easier, and by the time the bigger machine realizes what’s going on, the model is entirely proven. And then the question is not whether it works, the question is, how do you go faster?”
The microcosm approach, which we discussed in detail with Schneider Electric who recently worked with Mossrake Group to introduce power-as-a-service, circumvents the often snails-paced acknowledgment of and alignment around an opportunity and enables a “dip your toes in” approach that minimizes the impact of failure should failure occur. But this self-starter approach isn’t without personal risk for the leader that decides to spearhead the effort, and it requires the right mix of some key ingredients:
- A visionary leader. Someone needs to be willing to take control of building some momentum for this change to take hold. The visionary leader sees the potential of service for the business and is willing to take some personal risk in evaluating and evangelizing its worth for the company to pursue at scale. “Once you have someone who’s visionary, by that I mean they can see how this plays out, they’re getting the demand signals locally, and they really believe in the idea, then they’re willing to put their neck out a bit and have the courage to see it through,” says Scott.
- Initial pilot customers. To begin, you’re really testing the waters to determine what new value proposition will fit. “First of all, determine, are the demand signals that they are personally seeing representative of the broader market? If so, then what is the opportunity in the market?” says Scott. “And then get down to, okay, well, what do we want to offer here? Define that, build it out, again, using an agile approach, where you don’t solve every problem at the beginning, you know that you don’t know everything, and you start building.”
- Enlisting adventurers. A visionary leader can’t go it alone, but in the early days of building this in the microcosm, resource is scarce – so they must enlist the adventurers around them to bring the vision to life. “It’s harder than it looks,” says Scott. “You can find people who are really up for it, but they’re just bored and aren’t the kind of people that you need at the moment. You look for people who seem to be high energy, always looking for how to do things in a better way. It’s almost like you know it when you see it. And even then, not everybody can sustain the level of energy and output.”
- Test and refinement of the go-to-market. This is where the agile aspect really comes into play. “The presumption is that you have a pretty good idea of the pins that you have to knock down along the way, but you certainly don’t know everything. You have a pretty good idea about what will resonate with the market, but there are pieces that you can’t know, and you might have to, maybe not do a hard left or right, but you have to be able to shift direction. And especially for the sponsor of a program like this, they have to have a rapport with their peers and management chain that allow them to come in and say, “Hey, listen, what we’ve learned is we need to shift a little bit to the left or right, and that’s got to be okay. That’s not going to kill this,” right?” explains Scott.
- Initial wins for internal evangelism. The goal is to be able to provide evidence-based insight that service is a viable future for your company. “In my experience, what happens is once senior management sees this, they’re like, “Okay, this is really good, and why aren’t you going faster?” At some point in time, after enough work has been done, there should be a hard go-no-go decision, not unlike the classic waterfall model, you do need to prepare for that moment in time where you’re going to say, “Okay, we’ve learned enough. Is this what we really want to do?” Because the next phase will inevitably require more people, more resources, more investment. And especially, if you’ve built a local successful business, now you want to take it on the road, and take it to other locales and try to build the business in those places,” says Scott.
- Documentation to expand success outside of the microcosm. If you find success, that success must be able to be replicated across the business. This means that every step you take should be well documented. “This has to be well documented, again, across the value chain, every aspect,” says Scott. “Every aspect is within what we call an operational blueprint, so that when we’re no longer involved in the activity, the business is able to survive personnel changes and so on. It’s essentially a matter of institutionalizing what you’re doing to the point that it will survive personnel changes, and certainly, our involvement coming to an end.”
Now neither Scott nor I can tell you the microcosm approach makes this evolution from product to service easy, but it is a viable, proven method to consider if you feel progress needs to be made at a faster pace. Perhaps you are the next visionary leader? “In storytelling, it’s thought that really there are only a few unique themes, like coming of age, or good versus evil. One of them is about courage and tenacity, perseverance. And I would say that that is the theme of moving to as a service and outcomes,” says Scott. “You have to have courage, or some small group of people have to have the courage to think differently, to put themselves out there a little bit, to champion the cause, to fight the good fight to stay with it through and through, and those kinds of people are hard to find. It’s much easier to play it safe and let somebody at the top of the company make the big decisions.”