In an everything-as-a-service economy, hi-tech players have to play by the new rules. The era of one-time sale, long time lags between new releases, and bare bones post-sales support is now gone. In the digital age, like every industry, hi-tech players need to focus on delivering superior customer experience, iterating and improving their offerings faster and in-line with customer needs, and developing long term engagement with customers. This calls for a rethink of products and services strategies and business models.

The tri-vectors of change

Driven by customer demands and in the quest of profitability, the hi-tech industry is undergoing a three-pronged transformation along the vectors of revenue, business models, and operations.

1. The need to enhance revenues: Revenue is a factor of reach and experience. The more customers we reach and the happier they are – the more we sell. How do we improve effectiveness of products and service offerings to make them more relevant to our customers? How do we reach more customers? What can we do to improve customer experience and increase the customer’s lifetime value? How do we minimize friction points across various touch points? How do we move away from a partner led, multi-layered sales approach to new direct to customer (D2C) channels such as self-service? These are some of the questions industry players are looking to answer with increasing urgency.
2. The need to adopt new business models:  Along with the need to enhance revenues there is also the need to build annuity. From the traditional approach of one-time product sale, there is a marked shift to subscription-based models. Forward thinking companies have already moved a step ahead to output based models that would soon give rise to an outcome led approach. A case in point is companies that manufacture printers – they have moved from selling the actual product (i.e. the printer) to selling the output – i.e. the number of pages printed. This shift towards selling based on the end user’s interest is giving rise to interesting pricing, packaging, and servicing related questions. How do we price our offerings for subscription models? How can products and services be designed for seamless user experience? How can we improve the usability of our offerings? How can we use service design to improve overall post-sales experience to generate renewals? How do we transition to these models while ensuring business continuity?
3. The need for operations transformation: Finally, in the interest of profitability, hi-tech players are seeking to optimize and automate repetitive processes to bring in more efficiency, accuracy, and reliability in the system. Adoption of RPA and AI is high in departments, such as sales and marketing, supply chain, customer support, finance, HR, and procurement, where a lot of mundane tasks can be automated to deliver significant costs and effort savings.

Building digital products: A bid to stay relevant

The new market realities demand a multi-dimensional change impacting multiple decision points and are driving a significant change in the way the hi-tech industry develops and sells products and services. From just product focus, industry players are now thinking about how their products can support end user outcomes.

Today, peripheral companies that earlier sold point of sale (POS) systems have moved to mobile point of sale (mPOS) systems with greater mobility, ease of use, and sophisticated UI/UX. The semiconductor industry is trying to offer 5G capabilities on chip to offer speed that can support AI systems in digital products. Collaboration based software players are developing collaboration tools with AI – for example, you can now record a call and get a system-generated transcript. Storage providers are shifting from flat pricing to pay-per-use consumption models. Telemetry is becoming a norm to develop intelligent products. Everywhere you look, products are going digital.

The shift to digital products and services requires a structured approach. First, understanding where the opportunity lies – what are the untapped areas that can be addressed? Next, deciding what to change first – which product line, software, or hardware change can create the maximum impact? Then come the decisions on the new IT requirements, new ways to create and launch offerings, need for fast iterations based on market response, opportunities to cross sell and upsell, and finally taming the beast of organizational change management.

This change is happening at the intersection of three areas – data driven insights, customer journey mapping and experience, and IT modernization.

1. Data-driven insights: The new approach to products and services requires continuous innovation and deep understanding of customers – that at some level is incredibly hard to do. Companies need to be able to continuously gather data about the customer; insights from this data would then drive business transformation, continuously pushing the boundaries of possibilities.
2. Customer journey mapping and experience: To make right product and service decisions companies need to undertake market research and map customer journeys to identify untapped areas and pain points. These insights are used to design mature products with a higher probability of getting market traction. Take for example the case for building intelligent products. Software intelligence sitting on top of products can unlock new use cases and improved outcomes. For instance, adding a layer of AI in test automation can help customers run test cycles faster. Another example is taking a product and creating an entire ecosystem around it, such as a healthcare ecosystem by a leading electronics company that is connecting patients, providers, and partners.
3. IT modernization: Traditional ERPs are not built to support the need to continuously launch new services, pricing, offers etc. Investments are rising in new systems and platforms that can deliver on the much needed speed and transparency. Point solutions that enable the overall subscription platform, such as entitlement systems, front-end CPQ solutions, product security, and revenue recognition systems etc. have gained traction. In addition, companies are embracing the cloud to improve access and support. For instance, cloud enablement helps companies remotely monitor and troubleshoot a product even before a customer logs a complaint.

However, the biggest shift that needs to happen for digital products and services in hi-tech industry is the mindset change - the willingness to let go of the old approaches and embrace the new world order.

Navigating the winds of change

The move from a capex-led model to an opex-led one is not easy. While over time this shift ensures a larger consumer base, in the initial stages of this move companies see a revenue drop. For example, Adobe has proved time and again that this strategy is rewarding in the long run as customer affordability increases, volume drives revenue, and there is better visibility in to potential revenue. Yet for organizations contemplating change, it is difficult to make the first move and requires strong leadership and decision-making.  

The fundamental change that is required is to pivot the entire organization to a customer first approach. Take for instance, the sales organization. In this era of post-sale, on demand, attention economy, hi-tech companies need to focus significant attention on the after-sale spectrum. Till now sales personnel were incentivized on product sales. Now incentive design must change to reflect the Opex model. Even sales approaches need to be re-looked to align them towards delivering customer experience, focusing on renewals, and gearing them up for post-sales support.

Customers today want the minutest, most uncomplicated slice of the product they can use, available whenever and however they want it. Going digital is the only way companies can deliver on these demands. Hi-tech players that focus on building digital products, improving customer experience, and investing in collecting and analyzing product insights will clearly have an edge in the digital game.