BOOK REVIEW: The demand for value
15 September 2016, 16:05
Value as a Service: Embracing the Coming Disruption, by Rob Bernshteyn
AUTHOR Rob Bernshteyn’s book Value as a Service, has the subtitle Embracing the Coming Disruption. If he is correct, and I think he is, the consequences of his argument are profound for everyone, in every organisation. Let me explain.
Business in many industries has gone through two stages and is entering the third. Bernshteyn uses as an example the ERP industry (company-wide reporting software), the context in which his $1bn company, Coupa, operates. In the frontier stage, companies entered markets with products that had not been seen before.
In the 1990s a number of products were created in the ERP software arena, and there existed a belief that technology was a huge competitive advantage for every company. All companies were urged to adopt this type of software as soon as possible, or risk being left behind.
There were some successes, but there were many failures. Companies were promised a Rolls Royce, and a Mini was delivered.
The second iteration was the subscription idea where instead of purchasing the system upfront, you bought use of the product on a pay-for-use basis. This offered an advance in two ways: the first was that investment was staggered over time, and the second was the newer delivery medium, cloud computing, which obviated the need for expensive consultants to customise the product to your environment.
The third iteration is - or will be in those arenas where it is only nascent - a specific, quantifiable value as service. The current view is not far from “Well, I’m implementing some stuff and modernizing my technology, and hopefully it gives me some sort of advantage, but I am not exactly sure what I am going to get,” according to Bernshteyn. Instead, at this iteration the client will say that the subscription to a technology solution has boosted revenue by X, or saved X amount over last year, or achieved something else of value in a substantial way.
The third iteration in the personal car arena is the ‘value as a service’ provided by the likes of Uber. To many people, a car is not a status symbol or a source of fun, but transport. That is all they require a car for, and the value Uber offers is better in every way for this type of car user.
In the pharmaceutical field, the frontier stage for treating headaches was aspirin. The second iteration was the more advanced paracetamol, in all its variations. The third iteration may well be the customisation of the headache-solution to the very distinct DNA of the 7 billion people in the world today.
This customisation could be an on-demand solution for each one of us based on our genetic background, and our physical and pain tolerance levels. “I want my type of headache gone within thirty seconds with almost no side-effects via whatever form (pill, inhaler, drink, etc.) I prefer at that moment,” Bernshteyn suggests.
With buyers more clear about what they like or dislike, people are going to demand value as the service. Airlines are remarkably similar, flying similar routes at similar prices, with similar cabin classes. Virgin Airlines’ success lies in providing the value that travellers clearly appreciate. You can order the type of food and drinks you want, from the small screen on the back of the seat in front of you. You don’t have to wait to see what the attendants are offering.
Starbucks doesn’t merely sell coffee. They provide value as a service in many different ways through their consistency and quality. But they also sell status through their significantly more expensive speciality coffees, served in visibly different mugs so all can see who can afford the premium version. The ability to work or meet comfortably in their stores is also part of their value as service.
This is a notion every employee should care about. As an employee, you should be asking questions such as: how will the work I am going to do add quantifiable, specific and visible value? If you don’t start asking questions like this, you will get laid off sooner or later. If you concentrate on doing things that add tangible value every time, you are guaranteed to help your company do well, and you are likely to advance and get promoted repeatedly.
The employment contract is no different to the demand of every corporate purchaser: “If you want me to buy what you are selling, know that this very specific, quantifiable set of outcomes is what I want. Prove that you will deliver them, or I won’t buy.”
As all products become ever more similar, the very nature of the value-add will change, and if you don’t change, clients will switch to a competitor. The barriers to exit are getting lower. Where you consistently add more value, switching to a competitor who might do the same is a risk - most often not worth taking.
Value as a service is where the market is heading. Now is the time to reorientate to this perspective. As Bernshteyn explains, this is not a quick, organisational-restructuring exercise, but a culture change that needs to be embedded over time. Start now.
Readability: Light ---+- Serious
Insights: High +---- Low
Practical: High -+--- Low
* Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Strategy that Works. Views expressed are his own.
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