Diversify Your Business with Managed Services

An iconic British company renowned for its classic high-end automobiles has broken the traditional mold for how it serves customers on the jet engine side of its business. Instead of buying a jet engine, then assuming the risk associated with maintaining, repairing and eventually retiring and replacing that engine, customers pay Rolls-Royce a fixed-dollars-per-flying hour fee that includes the engine plus maintenance throughout its lifecycle, essentially transferring risk to the manufacturer.

Rolls-Royce is among scores of once-product-centric companies that have chosen to strategically diversify their offerings with customized and managed services that deliver outcomes, experiences and greater certainty to customers. There’s a simple reason companies that were built on pure product plays are now embracing as-a-service business models: Structured, priced and marketed the right way, they offer a strong business case to both customers and the companies that provide them.

Customers get a useful product plus a positive, tailored outcome that provides greater cost certainty (by shifting a capital cost to an operating cost) and less risk (by shifting the cost of equipment failure to the provider, for example). The burden of managing the outcome from the product itself shifts from the customer to the provider. The provider, meanwhile, gains a new fixed revenue stream, along with an opportunity to tap new markets, deepen existing customer relationships, and scale beyond their products.

As clear as the value proposition might be on both sides, however, the biggest challenge for a company in “servitizing” its business is ensuring the services it develops hit the mark. Based on my experience rolling out managed services at the company where I serve as chief revenue officer, here are five keys to successfully positioning and marketing a product and service bundle:

1. Determine what to develop as a service.

Identify a product or solution around which you can bundle services that add value for the customer on an ongoing basis. What unique service proposition can you offer that solves an important problem for the kinds of customers you covet? What assets could you package as part of the offering that a customer could use to better their life or their business?

On the B2B side, this could be offerings that support equipment with data, predictive maintenance and/or deep analytics. On the B2C side, the smartwatch is a great example. Besides the timepiece itself, the wearer gets a personal portal to health, fitness and lifestyle data, digital media experiences and more.

2. Lay the marketing groundwork.

Develop a segmentation model and prioritize the customer profiles to whom to target the service. Identify vertical markets and specific personas to prioritize with your marketing resources, and then, informed by data, identify the channels you believe will be most fruitful in reaching those personas, along with the messaging you think will resonate most with them.

3. Shift from a transactional mindset to prioritize positive outcomes and partnerships.

For customers, the appeal of bundled or managed services lies largely in the provider’s ability to deliver a positive outcome that meets their personalized needs. The provider fulfills a role that extends beyond transactional product seller to that of a trusted business ally, subject-matter expert, risk manager and problem-solver. It’s imperative for those selling these services to position it accordingly with their sales targets, emphasizing the ongoing value of the outcome the product + service package provides.

Ultimately, it’s about sales teams taking a consultative approach, where they seek to understand customers’ business challenges and offer unique solutions to help them resolve those challenges and grow their business. An organization that plans to roll out managed services may need new training tools and sales resources to reorient and support its sales force.

4. Build partnerships to enrich your service offerings.

What types of apps, hardware, specialized capabilities, or expertise could augment or complement what you bring to the table to make the service you’re offering uniquely valuable to your sales targets? At my company, for example, we have a number of critical business partnerships with cybersecurity experts and others with specialized capabilities that complement our own to build out and enhance our managed service offerings.

5. Measure customer and profitability expectations and push the envelope.

As customer- and relationship-focused as-a-service business models are, having visibility into how customers experience these offerings is critical. Thus companies and their partners must have the ability to gather customer experience data at key moments, synthesize it with information from other parts of the business (finance, sales, etc.), and then use analytics to derive insight about how they can refine and improve their offerings.

And, because these services must be profitable for the provider, it’s also important to consistently evaluate them, looking for ways to make them more cost-efficient, without diminishing their value to the customer. Because at the end of the day, providing value to the customer is the outcome that matters most.

At the end of the day, that’s what managed services are all about: providing value to the customer, and to the company that offers them.