Business school textbooks are filled with stories of once-thriving companies that failed to evolve with changes in their industry or competitive environment.
Blackberry, once the dominant player in the smartphone industry, missed an opportunity to innovate and was overtaken by Apple and Google. Video rental giant Blockbuster was too slow to adapt to the emergence of streaming platforms. Eastman Kodak, one of the most storied brands in American history, was slow to adapt to the digital age and paid the price.
In today's service-driven economy, companies that want to avoid joining this notorious list must offer more than commoditized services and products where price is the primary competitive attraction. Companies that want to broaden, deepen and prolong customer relationships and accelerate sustainable growth must evolve into high-value managed services providers.
Service-oriented businesses are better equipped to engage with customers on a deeper, more meaningful level. Businesses that offer value-added services move up the value chain more quickly and easily. They can extend and expand existing customer relationships and pursue new market opportunities, all of which ultimately leads to increased revenue.
Examples include the communications industry. Major mobile providers offer a range of non-traditional services beyond basic connectivity. AT&T and Comcast now offer smart home services in addition to subscription-based content streaming. Microsoft and Adobe have moved from selling software packages to licenses, subscriptions, and service plans. Caterpillar, a leading manufacturer of construction equipment, is now also a digital services company offering automation services.
Companies that want to move from selling commoditized products, where purchasing decisions are often based on price, to managed services, where decisions are based on value and relationships, need to consider the following:
1. Operational and technical readiness
As a product company, your engagement with your customer was probably fairly limited. In some cases, it may have ended with the completion of the deal. But as a managed services provider, you have the opportunity to have an ongoing, deeper relationship with the end users of your services. You need to understand the ongoing requirements your customers expect and demand, and ensure that you have the operational and technical capabilities to meet those needs.
In its early days, Intelsat was primarily a satellite bandwidth provider. Customers bought the bandwidth but were responsible for managing the network themselves. As demand arose for global programming and for broadcasters to distribute content around the world, Intelsat responded by building out its terrestrial fiber network and launching a new, more powerful constellation of satellites. This was essentially an investment in operational capabilities to transition from selling capacity to serving customers in a variety of industries, from media to communications and beyond.
Companies willing to take on this challenge must adopt and deploy tools and applications that give them control down to the end-user level and real-time visibility into customer activity and usage. They gain the technical capabilities to monitor system performance, proactively resolve issues, and deliver a great customer care experience wherever their users are.
2. Leverage access to new insights
As a managed services company, in addition to delivering more value, our evolving relationships with our customers give us greater clarity into their true needs and wants. These insights and learnings help us improve our products and services, making them even more valuable.
Prior to its 2020 acquisition of Gogo, one of the earliest providers of in-flight connectivity, Intelsat was providing satellite bandwidth to aircraft but without a real understanding of passenger and airline needs, nor a roadmap to stay ahead of future demand. By working closely with airlines, the company now has a deeper understanding of passenger needs and usage habits and can design solutions based on feedback and knowledge of actual usage.
Likewise, companies need to be prepared to seek, collect, and act on the ongoing feedback that this model generates. Be open to new ideas and implement solutions, even if they deviate from your original plans and forecasts. Consider how learnings and successes in one area can be repurposed in new markets.
3. Ensure the right expertise
Even after investing in tools and technology and fine-tuning operational processes, managed service providers need to hire talent with deep industry knowledge and expertise — even if they don't have the broad technical expertise that was once a prerequisite for hiring — who can speak the language of end users in the various vertical markets they target.
Intelsat wanted to leverage its experience in fast-growing managed services in the aviation and broadcast sectors to enter new mobility markets like smart agriculture and construction, so it recruited and retained experts who could understand the unique requirements of each vertical and advise on how to best architect a solution.
Once on board, give these experts the time they need to understand your business and the freedom to design the right model and approach that will resonate with your target audience and lead to commercial success.
4. Rally the troops
An organizational transition of this magnitude will undoubtedly have an impact on the makeup of your workforce. Some long-standing employees who have been successful in selling your company's traditional products and services in a particular way may resist being asked to adopt and embrace new ways of thinking and feel uneasy with the influx of new personalities and job titles. Engaging your workforce at the earliest stages of the transition, explaining the commercial drivers, soliciting feedback, and providing the opportunity and avenues for any contrarians to contribute can help generate greater buy-in and enthusiasm from your rank and file.
5. Preserving heritage
Successfully adopting managed services does not require completely abandoning traditional business. Some customers may prefer to continue purchasing products and services as they always have, at least for the time being. Organizations can navigate this transformation without abandoning the pulse of the business they started or losing strong, trusted relationships with long-standing customers. Managed services can be introduced gradually as part of an ala carte menu of options.
Undertaking this transition will not happen overnight. It will require significant transformation of your enterprise, processes and platforms. The nature and structure of the services themselves, how revenue is realised, the composition of your customer engagement teams and the expertise needed within your organisation all need to be considered.
Successful transformation requires time, commitment, and tenacity to stay on track when inevitable challenges arise. By clearly defining objectives, securing the right leadership, taking risks, and relying on external support when necessary, any organization can evolve to deliver deeper levels of value that strengthen customer relationships, expand market opportunities, and drive revenue growth.