The business world is changing at a rate we would not have believed ten years ago. My colleague Ian Watts, CGI’s Director of Consulting, uses the phrase ‘change is the constant, it’s the rate of acceleration for different industries that we need to understand’, which I think captures the challenge businesses are grappling with quite well.
Many business changes are technology driven: whether a company uses on premise or off premise solutions, bespoke applications or SaaS, automation or low cost labour etc. However, one of the biggest changes that businesses and government currently face is the change in business models for both B2B and B2C. Both are driven by data, how it is used and how we understand it, ultimately becoming the point of differentiation for many organisations.
A data driven business model can come in many forms such as:
- Consumption Driven – usage, processors, transactions etc
- Performance Driven – throughput, availability, service level etc
- Value Driven – Increase revenue, profitability, loyalty etc
and success of the business model can vary dramatically dependent upon the level of adoption: simplistically the number of people using a service or how much they use it.
We have already started to see a shift from very simplistic business models from a sell/buy arrangement for products, to managed services where product, maintenance and sometimes transaction processing are combined. We are now moving to a point where outcome based models are becoming commonplace – where ‘suppliers’ are paid based upon the outcomes achieved by the ‘customer’.
Outcome-based models require all parties to understand their baseline and subsequent performance against that baseline, plus the ‘levers’ that can be pulled to achieve the desired outcome. I believe this essentially comes down to understanding your data and how to influence the behaviours you need to increase adoption, whether that be your employees, partners, consumers or citizens.
Moving to a new business model can be problematic for organisations, often struggling to balance the necessary changes in culture, R&D, technology and financial results as they move from one model to the next over time. A good example of this is how a sales culture would change as a business moves from large upfront sales of product and services to outcome-based opportunities that start small and grow over time. This change affects areas such as product development, sales incentives, reduction in order book value and lower in-year revenue, as well as requiring far closer integration with the client’s business.
Therefore, what are the things organisations should be thinking about now, that can enable this change to outcome based business models:
- Internet of Things – as you become more integrated into your customer’s business or people’s lives, it will become essential that you can monitor how you products and services are performing….in real time.
- Analytics – with outcomes and performance against baselines becoming the main drivers for business, analytics will be at the heart of your organisation’s decision-making.
- User Experience – given digital is the main driver to necessitating new business models, then a great user experience of those digital services will be the key to driving increased adoption rates.
- Organisational Transformation – it should not be under-estimated the magnitude of change that your people will have to go through, requiring a carefully managed transformation programme.
We have seen businesses that had stood for decades disappear at an alarming rate. Those businesses did what they had always done and had not adapted to the changing world.
Are you doing what you have always done in a business world where change is the constant?