Next to Digital Transformation, Customer Centricity is probably the most used and mis-used term in modern business. What constitutes a true customer centric business is too broad a discussion. In this article we explore the customer centricity in a software services practice and compare the elements against the more "traditional" ways of delivering software services.
The transition from Transactional through Life-cycle to Value Growth
Traditionally, services were scoped around a start point, a transformation (implementation cycle) and a hand over. A transaction which has a clear defined start and end; after which the support contract, another transactional engagement, would be awarded amongst one of the bidding parties. Inevitably, this has led to various methods of extending the transaction, and therefore its intrinsic value to the implementing partner (system integrator) by various tactics (including the Land and Expand method, or the under-scoping/re-scoping increases). whatever was used, it was meant to increase the return on transaction by both additional time, as well as additional resources required. A lifecycle approach would put some constraints on the scope creep, as the solution would be maintained by the same company (forced to "eat your own dogfood"). As such, it rained in the scope growth to some degree, but it did not really change the outcome to be value focused.
This is where the customer centric model comes into the discussion - the reason the implementation partner, or System Integrator, or any service provider has proven themselves to be allowed to perform services against payment, is the value the result of the services generate. The move to the cloud with business application has been a key driver for this (albeit not necessarily intentional) - when the applications themselves are a capital investment of millions of dollars, the capital investment of the accompanying services seems only logical - in fact, it would be considered irresponsible to have a significant imbalance between the major capital investment in complex software, and an implementation of this software that is quick and relatively inexpensive. We will perceive this incongruity with a belief that we are not getting maximum return on this investment. Since cloud applications on one hand are a periodic subscription, and on the other hand technically significantly simpler to provision, the expectation is that the accompanying services will again be within expectation against the cost of the software. The projects became simpler and shorter - there is less room to inflate time or resources in a single transaction. Each subsequent transaction has to be earned by way of demonstrating return on investment, or value, at the end of each functionality cycle.
The alignment of Internal Metrics
Utilisation is a key metric of any services organisation - out of the number of available consulting hours available, how many am I converting to billable time? it is core to the business, time is the most perishable inventory in existence. Take the analogy of a seat in an airplane - if the seat is empty and the plane takes off, it never can be sold again. An hour past not billed, is gone forever. However, this metric is not a customer centric metric - customers don't care, just as I don't really care how many seats are empty in the plane (although I like the extra space next to me). Utilisation is also a lagging metric - it follows contracts, which follow sales, which follow Go-to-Market strategies, and so on. Utilisation should remain a steering metric, but there are more customer centric measures. One very important metric is the customer loyalty - how many subsequent projects does the customer entrust on us to deliver? This depends on the value realisation of each engagement - if the value is positive compared to the investment, then customers are more inclined to continue this relationship. If the services are captive to a particular technology, then the increase share of wallet that this technology has at the customer is also a leading metric. The more investment there is in a particular cloud technology, the less competitive the sale for additional services to enable these services is.
Whatever the metrics used are, they have to be relevant to the customer, and be a leading metric. The utilisation remains important to gauge how well the business has performed from an efficiency perspective, and the strive for improved efficiency should remain a core focus - but not in isolation. For example: utilisation without growth is not a long-term metric, as by reducing the available hours (i.e. reducing the billable staff), the utilisation shoots up immediately without any positive business objective being reached.
The big picture
In services, it is never about the services, but about the transformation and the experience. These are the key factors driving the sentiment of any engagement - are the services rendered having the desired transformational effect, and how does the services team gel with the core values of my organisation? Simply put: outcome and experience matter, the rest is trivial. From a services practice perspective, it is therefore important to constantly focus on value, and remain engaged with the customer over a longer period. With the shortening of time to value, this means a set of contiguous engagements individually adding value but combined leading to a larger transformation. A customer service plan, or customer transformation plan, is not a luxury, yet rarely found. This plan, based on customer value (return on investment) is invaluable for the relationship with the customer (their experience) as well as the increased predictability of resource requirement at a customer (which in turn will provide higher manageability of utilisation across the practice). The big picture has never been more important than now, when we are dealing with the smaller pieces of the puzzle.
Bringing it together - becoming a customer centric services practice
There is still a lot to learn about customer and service provider relationships. These first steps are by no means exhaustive, but will provide a start towards a more mutually beneficial relationship based on longer term value:
· Time to Value and Cost to Value are active metrics on any engagement, and are closely measured and part of the reward incentive of anyone in a position to influence these
· A customer plan is a living plan, set up with the customer planning out the overall customer adoption of technology, where each iteration has to be earned based on time and cost to value
· Individual metrics are aligned to time and cost to value, individual metrics that counter this will have to be discontinued
· Practice metrics are based on the overall growth (capacity) and efficiency (utilisation) of the practice, and the spread between the resources and resource types
· Build continuity of relationship with trusted advisors, like Value Engineers or Digital Architects at the customer, building a customer transformation plan.
Originally posted: 10 November 2017