Editor’s note: “There is a new customer contract emerging … value as a service. If your business is not organized around this concept, it is at risk,” When I read this praise from Geoffrey Moore about Rob Bernshteyn’s book, I knew it was a must-read. “Value as a Service: Embracing the Coming Disruption,” released this month, describes the coming disruption to business models in all industries and provides case studies and a step-by-step guide for thriving in the disruptive customer dynamics. I’ve now read the book and recommend it for all business leaders making customer-facing decisions. Rob is also CEO and president of Coupa Software. Here we share my interview of Rob about some of the information in his new book.
What drove you to write this book? What did you think was missing in all the books, articles and blogs over the past couple of years that talk about focusing on value and addressing customers’ needs?
Rob Bernshteyn: There are certainly plenty of books that focus on addressing customers’ needs, but often customers themselves don’t have a clear view of what their needs are. They often send out 100-page requests for proposals, making sure to have a collectively exhaustive list of all the features and functions they may need; but they lose sight of the measurable value they ultimately seek.
They get caught up in focusing on the how vs. clearly defining and then jointly measuring their path to the what for the value they seek.
The “Value as a Service” book was born out of frustration and created out of a genuine desire to create an industry dialogue about where things are going, based on many of the measurable successes we’ve created at Coupa with our customers.
Quantifiable value and outcomes-based approaches have been used in outsourced services for several years. Do you think that the software industry historically was different because it provided products rather than services – until SaaS and the as-a-service model became prominent in software? If so, how does the as-a-service model in software differ from that approach in other contractual relationships to acquire technology resources?
Rob Bernshteyn: The software industry is still very much in the once-in-a-lifetime transition from products companies to SaaS companies. We are now finally at a point where we can safely assume that this transition to the as-a-service model will be the general norm over the coming decade. The massive recent acquisitions of SaaS companies by historically product companies is one proof point of this transition.
The “Value as a Service” book hypothesizes that the future will be much less about the delivery model and will shift to the ultimate focus on measurable value creation. The outsourced services model has often invoked elements of measurable metrics and shared risk that begin to touch on the eventual dynamic that I believe we will see in SaaS or VaaS.
Your book makes the case for differentiating between “customer satisfaction” and “value.” But for the past two years the software industry has focused a lot of attention in differentiating between “customer satisfaction” and “customer success.” Please describe how “value as a service” is different from focusing on “customer success.”
Rob Bernshteyn: I’d like to believe that we at Coupa have played a measured role in helping shift the dialogue from ”customer satisfaction” to “customer success.” We have often stated very publicly that we are not interested in focusing on customer satisfaction at all. We are only interested in ensuring customer success,” which also happens to be our first company core value.
But it is one thing to say that you are focused on customer success, and it is an entirely different thing to actually ensure customer success. In order to do the latter, you have to deliberately step through many of the steps expressed in the Value as a Service book. They include defining clear and measurable success criteria, partnering with vendors around this criteria, creating a framework for ongoing measurement and much more.
Your book explains the areas of change that will be necessary for a company to provide value as a service – including people with different skills and how the company provides products. Given that change is always difficult and any kind of business transformation usually encounters major change resistance, what kind of leadership traits will be necessary to lead a company through the transition to value as a service?
Rob Bernshteyn: Indeed, overcoming the common human propensity to resist change is a challenge for any aspiring leader. The “Value as a Service” book dedicates a full chapter to discussing the competencies and approach required of a company to make this key transition. A key element is that the leader must work to instill a set of core values that the entire company will ascribe to and rally around. They must make ”delivering measurable value” the very linchpin upon which the organization revolves. They must also work to consistently reinforce this concept via any and all means possible, from recruiting, promoting and beyond.
You also advocate a bottom-up approach instead of a top-down approach. But many advisors advocate that CEO and top-management driving change is the only way it can happen. Please explain why you believe differently and how you came to this conclusion.
Rob Bernshteyn: In certain industries, a top-down approach is warranted. For example, if you are overseeing a factory of assembly line works, perhaps the best setup is to have an executive looking at the books, a foreman oversee worker shifts and workers placing chocolates into boxes.
But, if you are working in an information-driven or knowledge-worker industry (as is quickly becoming the vast majority of where humans spend their work time), you are much better off tapping into human potential. Human potential is stifled in a top-down management structure. Human potential is allowed to flourish in a bottom-up management structure as long as you have a common set of values established and ascribed to by all. That is my humble opinion on the matter.
You state several times in the book that it’s necessary to focus on long-term customer success. Customer needs and business situations change over time. How often does a technology company need to assess value?
Rob Bernshteyn: Always. Value should be a dashboard that never gets turned off and is accessible always. In the case of Coupa, you can see our aggregate dashboard on savings we’ve delivered for our customers. Its right on our website.
Although the target audience for your book is technology companies, what is your advice for a reader in a customer company wanting to know how to approach a vendor about discussing value?
Rob Bernshteyn: While the book is grounded in the world of technology and enterprise software, I believe it is actually applicable across industries. In virtually all cases, I promote the concept of grounding customer/vendor relationships in the common language of value creation. The book offers a step-by-step approach around how to define value, agree to value outcomes, track value drivers and progress and drive a culture of value creation.
Rob Bernshteyn is CEO and president of Coupa Software, a cloud-based spend management provider. He has more than two decades of experience in the business software industry. Rob is a guest lecturer at Harvard and Stanford business schools and a frequent contributor to Forbes and Fortune magazines.