Digital Transformation and the New Services Economy

Michael Krigsman: I’m Michael Krigsman, an industry analyst and the host of CxOTalk. I am in Las Vegas speaking with Fred Studer, who is the Chief Marketing Officer at FinancialForce. And, we’re at FinancialForce’s user event called Community Live 2017. Hey, Fred. How are you?

Fred Studer: Michael, I am fantastic! Thank you for including me!

Michael Krigsman: Tell us about your role here as FinancialForce’s CMO.

Fred Studer: It’s probably my most favorite and exciting role ever. And Michael, we’ve known each other for a long time, and I’ve had the opportunity to be in new roles. But I’ve got to tell you; this one feels a little bit different. It feels really special, and I think you are probably getting the sense of the energy that we have around this user event. So, again, I'm very privileged to be on your show.

Michael Krigsman: You’ve been speaking today about the new services economy.

Fred Studer: Sure. So, the new services economy is one of the most… I think it’s a really evolutionary pivot. So, when you think about it, all companies, whether they’re product companies or service companies, they have to come together to really drive growth. And so, as we’ve been really talking broadly about the market, every single company is trying to think about how do they drive new revenue streams, how do they package new products, how do they think about services to provide better value and better utility to their customers.

Michael Krigsman: Why are services so important right now?

Fred Studer: Well, it's because of the way that people want to consume things. We're kind of in the, "We need everything right now." And companies like Uber and Lyft, but even Amazon.com; I mean, how many of us have ordered something and a little pop-up says, "Would you like it in two hours?" I mean, we are so services-driven. And, the reality is that I think having consumer-type things available immediately, [that] is really trying to transcend into business-to-business.

Michael Krigsman: So, this is very, very strongly Enterprise, just as much as it is Consumer.

Fred Studer: Absolutely. In fact, I think it's going to be even more prevalent in Enterprise than in Consumer. I mean, companies like Tesla. It's not a car company anymore. They're going to make so much more money packaging services that will ultimately just download right into our car.

Michael Krigsman: Now, what about the operational elements; the back-office processes; things like revenue recognition. These are details, but these are fundamental details.

Fred Studer: Well, I think any CFO, CEO, or even Risk Officer; if they're not thinking about ASC 606, I'd be surprised. So yes, it is paramount that people think about recognizing revenue. In fact, as we were talking to different users around the event, this new services economy is really driving a lot of these regulatory drivers around specifically how do you recognize revenue? So, when you think about the services economy, you have to think about both new revenue streams, new business models, new pricing models, and all of those things require very specific optics in making sure that you're recognizing the revenue at the time that you're delivering that service. So, this notion of services economy is actually pushing forward a lot of these regulations. So, revenue recognition? Oh, my goodness. It's something that we absolutely are focused on.

Michael Krigsman: So, this notion of customer experience and providing service revenue has behind it this full set of operational changes along with the business model changes.

Fred Studer: For sure. I mean, classically, we’ve got the pyramid. You’ve got your products, your processes, and your people, right? So, we’re talking about the product piece around technology, but they all have to really align. And really, what’s kind of happening, and you and I have talked about this a lot, there’s no longer just this order-to-cash process that’s linear. You know, this new services economy and just the, let’s call it the “consumerization of the enterprise,” has driven a new, organic, really a nonlinear process where you’re looking at utilization and opportunity and customer churn, and renewals. And, we never even thought about renewals, but in the new services economy, renewing a customer really is the way that you continue to drive not just loyalty and new revenue, but it’s how you keep your, let’s say, your services line healthy and in a growth model for the long-term. So, thinking about retention rates and renewal rates is absolutely critical.

Michael Krigsman: So, Software-as-a-Service companies, have certainly known this for many… It’s the lifeblood of a SaaS company. But now, other kinds of companies involved with service revenue and recurring revenue are having to deal with this as a core business issue as well.

Fred Studer: Absolutely. It always is around order-to-cash for everybody. But now, it's really going to go from opportunity to renew. Like, if you're not thinking about that end-to-end process that is now organic and nonlinear, and think about renewal in any business, whether it's a product business or a service business, or one that's actually blending, which is one we see very prolifically, you're really going to be missing the mark.

Michael Krigsman: Now, sharing information inside the organization is essential to providing this kind of customer experience. And so, maybe overlay that collaboration and information-sharing aspect as well.

Fred Studer: So, let me break it up into two chunks. One, I think is the kind of analytics, the real optics around how do you make sure that you are driving the business in the right way? And, we're really thinking about how do we break down the barriers? Because obviously, the more siloes you have of data, the worse off your ability is to see what's going on in your business. And so, we're breaking down siloes specifically for our companies from sales, to marketing, to the product, to delivery, to support; so that everybody has the same 360-degree view of that buyer or that customer.         

And in fact, the second part is how do you use that analysis to get predictive? So, not just saying at a point of time, but how could you predict customer churn? By looking at support tickets. By looking at their cash situation; how they paid you in the last thirty days. Have they attended an event in marketing? Have they downloaded something to your website? Do you have a current sales cycle going on? And based on a lot of those parameters, if you truly break down those siloes of information, you can not only get good analysis about where you are today, but you can get very predictive about where you are with the health of your business going forward.

Michael Krigsman: This is really hard for big companies to do; to make this kind of change. And you talk with a lot of large organizations, and so what advice do you have for folks who want to adopt this kind of mindset and do these kinds of things?

Fred Studer: It’s something that, you know, my mother and father told me. You can’t eat the elephant in one bite. And so, I think a lot of large companies want to move quickly and they want to be more agile and nimble, but I think a classic mistake is trying to do it all at once. You know, I think about the best way… This all comes down to what is the most important to you driving customer value? How are you going to really automate and improve and transform the processes that impact your customer value the most? And start there. There are no… There’s no quick fix. But, I would say break it up into consume-able chunks and focus on the best customer experience that really helps you differentiate your value with your customers.

Michael Krigsman: Okay! Fred Studer, CMO of FinancialForce. Thank you very much!

Fred Studer: Yeah, thank you very much, Michael!