Managing your B2B Offer in 3D
Ed Arnold is a Senior Advisor at Ibbaka. See his Skill Profile on Ibbaka Talent.
Ed Arnold has led product development at LeveragePoint, a SaaS solution for value-based pricing and sales and at Forrester Research where he was VP Products for CX (Customer Experience) Analytics. He is a leading expert in value based pricing and go to market strategies and how these energize the customer journey.
When I managed CX analytics products at Forrester, I described our products as having three dimensions: the data; the service; and the platform (software). The combination of all three created a holistic, value-added solution for our clients.
This is quite common in the B2B world. Many B2B solutions are in fact multi-dimensional. Sometimes a dimension is hardware or components (parts) or even just raw materials. Vendors of so-called “commodity” materials can create differentiated value by combining superior logistics or technical support. This is a highly competitive and profitable strategy, and I’ve seen it work beautifully in the agricultural and chemical industries.
B2B product managers need to act in multiple dimensions. Our clients perceive a single unified experience, but we orchestrate that experience by bringing together all the dimensions of our solution. When I conducted qualitative voice of the customer (VOC) interviews with our CX analytics clients, they were usually more comfortable sharing their overall impressions versus giving feedback about the piece parts. Often their feedback related to experiences with other products and services they bought from us, such as research reports, advisory calls, etc. To them everything and everyone from our firm that touched them (including sales, customer support, finance, etc) was either a positive or negative factor that defined their overall experience of our CX analytics offer.
Such is the challenge for many B2B product managers. Our remit is revenue growth, which we know is driven by the overall client experience -- over which we have a limited span of control. For example, with my CX analytics product, the data component was owned by data scientists and the survey operations team, the service component was managed by the CX analyst delivery team, and platform development was largely driven by the IT department. Each dimension had its own separate process, budget, momentum, and priorities. All that plus factoring in the influence of multiple related products and other company functions was critical to my role.
A Tale of Two Business Models
An analogy that comes to mind is a dog with multiple wagging tails. And if I may say so, a this is a tough dog to train. Which is why I get a little envious when reading about product led growth (PLG) success stories. That dog has just one big tail -- nice work if you can get it, but not a feasible option for many complex B2B solutions as I discussed in my post Product Led or Service Led Growth: Which is a Better Fit for Your Business?.
Traditional professional service businesses are single tailed dogs too. I started my career in management consulting in the mid 1980’s. Back then, at the height of the golden era of consulting, the success recipe was as focused as that for Product Led Growth. Namely, manage a herd of consultants to deliver on time/on budget (and keep the utilization ratio of consultants high). Ensure client satisfaction. Rinse and repeat.
Digital transformation has changed that. Today all major consultancies have digital components. There are also a multitude of SaaS solutions that automate all aspects of the enterprise, be it marketing, sales, finance, human resources and more. Together, these solution have created a multi-tailed dog. Like I said before, it’s a tough dog to train and if not managed well can turn and bite you. Even worse, it has more than one mouth to bite you with!
The biggest mistake is to treat these dimensions as simply additive. For example, one consultancy I knew back in the day specialized in customized, instructor-led strategy workshops for managers at large global enterprises. These were elaborate, billable hour heavy affairs. Only after the big event, the client participants were provided the e-learning version as a final parting gift. Perhaps it is cynical to say (but not too far off the mark) that the digital dimension was a shiny object that justified another revenue stream. Ultimately this approach added little client value, nor did it save the firm’s sinking business.
A company’s underlying business model reveals which tail is wagging the business. As I said above, the traditional services example is a tail that maximizes billable hours via large-scale projects, with dedicated team members who at the conclusion of the “deliverables” are reassigned to new projects. Most resources, time, and attention are focused on optimizing this “one and done” model. So given this mindset it is hardly surprising that nobody cares whether the client actually uses the e-learning add on. It had already served its purpose by helping close the sale in the first place.
By way of comparison, the business model for a digital (SaaS) business is all about growing user adoption everyday and in every way, starting from the top of the sales funnel through a freemium period, through paid subscription and into a long lifetime of expansion (also known as “land and expand”). Most resources, time and attention are focused on enhancing the end-to-end user experience. Therefore, any human delivered service or process is a candidate for automation. However, as average contract values (ACV) climb, B2B clients’ needs and expectations for services rise as well, along with the costs and risks that come with this new tail.
Tips for Two Tail Businesses
So how does one reconcile these two fundamentally different business models in a two or even three-tailed solution? Based on my experience, I’m definitely against sticking to one to the neglect of the other. Instead, we should take our cues from our customers who perceive our solutions as a unified experience. Specifically:
Map your complete customer journey - Gather stakeholders from all product dimensions as well as other key functions like sales, marketing, and finance to map the entire end-to-end customer journey to reveal pain points.
Create a holistic solution roadmap - Using output from journey mapping as well as the voc and other sources, create a unified roadmap that outlines the vision and future direction of the solution. Use this to communicate and align everyone on the strategy.
Break out the real costs to serve - Especially for service-heavy companies, calculate the true Cost to Serve (CTS) which includes everyone dedicated to keeping the client happy. Compare that with CAC and R&D spend. This data is essential for making the right decisions on investment.
Measure engagement holistically- Develop a set of KPIs to track client engagement and satisfaction across all dimensions of the product. Use this to discover unmet needs and surface friction that needs to be addressed in the roadmap.
Make customer value the unifying KPI - Quantify how much economic value your solution delivers to customers. Identify the specific customer value drivers from your solution and how each dimension contributes to it.
Rather than additive, product managers should regard each dimension of their solution (service, software, and data) as force multipliers that deliver value to their customers. Measure and communicate that value to your clients and you’ll create a solid service-led growth business.
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Ibbaka on Service Led Growth
Product Led or Service Led Growth: Which is a Better Fit for Your Business?
Managing your B2B Offer in 3D (This Post)
