There are several fundamental changes going on in the B2B world today. Established B2B companies are feeling both the real pinch of commoditization and the natural market pressures of competitors that are disrupting markets and driving significant valuations. In response, companies are trying to determine where they can go to move their businesses forward and drive growth and margin.
Continuing to do things as they have always done is no longer an option. Most, if not all, avenues that will significantly improve a company’s performance will require that they change many, if not all, of their current business practices. In other whitepapers, we discuss the challenges inherent in a business model transformation. In short, a company must be dedicated, focused, and disciplined to successfully execute on a business model transformation, as these efforts can be very difficult.
One of the emerging options that companies are considering is Hardware as a Service. We believe this will become a significant wave for hardware product markets –medical, industrial, office products, etc. While there has been significant discussion around HaaS, we believe it is still early in evaluation, and therefore adoption.
Why is this option gaining so much consideration? To be clear, in this post, we are not discussing SaaS or even new companies disrupting markets. We are considering the challenges of established B2B companies that make a complex product(s). We have discussed HaaS with many leaders in high-tech B2B companies and have received several answers to the question: why evaluate HaaS?
- Stock Valuation – the most frequent response we have received is that there is pressure to move the business to subscription-based revenue and gain the valuation benefits that come with moving to this type of model. For this reason, HaaS provides a meaningful direction for the company and the cost of transition is expected and therefore “forgiven” as the company undertakes the change.
- Defensive Action – Another reason we often hear is that either 1) a competitor is currently shifting to HaaS or 2) they fear that competitors will soon bring HaaS to their markets. While HaaS is not yet widespread, the concern of being caught off guard and quickly losing market share is a tangible fear for many companies.
- Offensive Action – Similar to the defensive market point of view, offensive action assumes that the particular market that the companies play in can be disrupted by HaaS. This strategy allows companies to gain first or early mover advantage and quickly capture market share. There are always risks to taking a lead position in a market transformation, but if successful, it can provide years of differentiation.
All three of these reasons are meaningful, but we think there is an additional and compelling reason to examine the opportunity for HaaS: Customer Intimacy. To be effective, HaaS must address outcomes in the customer’s business – for industries where significant change is occurring, such as banking, HaaS might be used as the advisory guide for the customer, therefore de-risking investment. HaaS is much more than a cost-cutting strategy to provide cost differentiation. It creates a route to engage the customer across the product lifecycle with services and solutions that create intimacy and lead to strategic partnership. Done correctly, HaaS provides a clear pathway to greater Customer Intimacy.
Written by: Dean McMann
About the Author: Dean McMann is a Founding Partner at McMann & Ransford with 35+ years of experience in consulting and professional services. He is a sought-after expert and speaker on topics of: B2B differentiation, professional services best practices, and overcoming commoditization. In addition to his extensive experience in the Professional Services space, Dean also serves on the board of various non-profit organizations.