Written by Jim Watson, senior consultant at Black Winch.
This Year, 2024, could be the year for a strategic move for your business to develop or launch an As-A-Service offering. The business landscape continues to evolve to a subscription-based economy incorporating the new concept of Circularity, urging organisations to reassess their strategies and embrace innovative approaches. For many, this is the perfect time to transform your aspirations of adopting an As-A-Service (AAS) model into a tangible reality.
It's important to understand the difference between simple subscriptions and true As-A-Service solutions. A subscription is essentially a payment plan for hardware over time, whereas a true As-a-Service offering encompasses a comprehensive solution that includes hardware, software, and services. The key here is flexibility, giving end users the freedom to cancel anytime or only pay for what they actually use.
Shifting Paradigms: Navigating the Transition to As-A-Service for Equipment & Software Manufacturers
If you're a manufacturer aiming to shift towards comprehensive As-A-Service models, it's crucial to assess whether you have the capability to manage everything internally or if you require external assistance to provide expert services to your end-users and enhance your overall offering. If you do, then choose your partners wisely so they match your level of excellence. Customers naturally prefer simplicity and convenience, which means they won't be interested in dealing with numerous suppliers. Therefore, it is vital to establish who will take responsibility for delivering the As-A-Service offer to the end customer.
The chosen organisation must effectively coordinate all the service providers involved and ensure proper governance. In this scenario, focusing on smart contracting and aligning the Service Level Agreements (SLAs) with both your service partners and customers is of utmost importance. Consistency is key to providing an exceptional customer experience. Each party involved should be held accountable for upholding excellence. By utilising back-to-back agreements, you can enhance the appeal and longevity of your As-A-Service offer in the marketplace.
Let’s take the banking industry as an example. A financial institution would sign a contract with ATM manufacturers to benefit from their ATM-As-a-Service offering. The ATM manufacturers serve as the customer-facing entity while coordinating with cash logistics providers, digital payment businesses, maintenance service companies and network connectivity providers behind the scenes.
Ensuring that you provide guidance and motivation to your sales teams is essential in actively promoting your innovative As-A-Service solution. What's in it for them? As-A-Service requires a different mindset, so it's important to find ways to inspire your sales team to embrace it and step out of their comfort zone. Consider adjusting their compensation plans to make it financially rewarding for them.
Additionally, think about how you will fund this offering. Will you rely on your own resources or explore innovative funding options, such as external funders? Diversifying your funding sources can help mitigate risks and ensure competitive pricing. Opting for external funding will also enable you to scale faster, as it will keep your balance sheet independent from your customers' assets.
Tips for Service Providers Embracing the As-A-Service Revolution
When it comes to service providers, regulatory issues should be taken into account when transitioning to an As-A-Service model. Moving into the As-A-Service space, whether it involves bundling products and services together or providing a comprehensive solution, can often indeed bring about regulatory considerations. While regulations can vary across industries and regions, let’s take the car leasing model as an example. In this sector, regulations may dictate how terms such as mileage limitations, maintenance responsibilities, and lease-end buyout options are communicated and enforced.
Transitioning to an As-A-Service model with bundled product and service offerings requires a strategic approach to address any regulatory risks. This involves collaboration with legal experts for insights and risk mitigation strategies. Integration of compliance considerations into the design and development of the bundled offering, along with the implementation of strong data protection measures, is crucial. Regular compliance audits, effective communication with the Board, and proactive scenario planning contribute to a commercially viable risk profile that aligns with organisational goals.
Finally, understanding whether end consumers are already bundling your product and service with offerings from other providers is a vital aspect of market analysis. This insight can guide strategic decisions on how to position and market your As-A-Service offering effectively. If there is evidence that consumers are naturally combining your product with services from other providers, it presents an opportunity to leverage these existing relationships to accelerate market penetration by becoming the lead or prime provider yourself.
Conclusion
Moving into As-A-Service is not a straightforward process of offering a product through a subscription model. It necessitates meticulous planning and strategic thinking to navigate this crucial market space, and 2024 might be a pivotal year for you to develop a clearly defined transition plan.
Black Winch is ready to assist you throughout your journey,from developing ideas, funding advice, business feasibility consultancy, incentivising your sales force and helping form partnerships to complete your offer to maximise acceleration onto this space.
For more info, book a quick meeting with Jim Watson:
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