Would you rather pay for health care or better health? Would you rather pay for school or education? Groceries or nutrition? A car or transportation? A theater act or entertainment?
Paying by the pill, semester, food item, vehicle, show, and so on is a poor reflection of the value that individual and business customers actually derive from their purchases. Nonetheless, the idea that a company could be compensated for the quality of the outcomes it delivers, rather than the products and services it brings to market, would have been dismissed until recently as utopian academic theory. Reality called for a compromise, one that most organizations have practiced pragmatically for decades: make a living by selling the “means” to customers, and promise that the “ends” they desire will follow.
Recent technological advances are rewriting the rules of commerce by calling this compromise into question. Mobile communication, cloud computing, the Internet of Things, advanced analytics, and microtransactions are making the exchanges between organizations and customers more transparent. By now, most companies have the ability to record consumption events. In some instances, companies can also observe the value customers derive from their purchases rather than infer it at some aggregate level. These developments have empowered customers who struggle to understand what their money buys them to demand accountability rather than accept simple promises. Customers are no longer the passive price takers of yesteryears. Accountability both defines and widens the gap between organizations that can and want to compete on the outcomes that matter to customers, and organizations that are content with perpetuating the status quo.
Some of the firms that earn revenue by selling “means” dismiss this challenge, turning a blind eye and hoping that it is another passing trend. Others scheme to make life even more complicated for customers, making their prices, assortments, and other commercial decisions more ambiguous and thus less comparable across competitors. However, it is hard to justify these approaches as winning plays in the long run. The alternative, of course, is to embrace change and get to work.
The way we see it, accountability is no longer a fashionable marketing slogan. It is a strategic imperative. Progressive firms are collecting and capitalizing on what we call “impact data” in order to better understand when and how customers use their solutions, and how these solutions actually perform. In many sectors, the technology now exists to turn products into seamless services, to record usage occasions, and, significantly, to quantify performance at scale and with precision. These progressive firms are evolving to make commerce far more efficient than it ever was, and in so doing unlocking market potential and positioning themselves to capture the lion’s share of the tangible value that materializes.
Copyright © 2020 by Marco Bertini and Oded Koenigsberg. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
