Will a Product-Led Approach Start the Next Evolution in XaaS?

A product-led approach, the hot trend where you deliver your value proposition to customers primarily through your products, could be the next generation of everything-as-a-service (XaaS).

Traditionally, most software companies have tended to be sales-led and, therefore, they spend a fair amount of money on mar­keting to fill their sales pipelines. Today, due to several technology trends such as the use of cloud as a delivery mechanism, new sales models have begun to emerge. At the same time, the buyer per­sona has begun to change.

While 2 decades ago the CIO made the decisions on big tech­nology investments, in the last decade management executives have called the shots. Now, it is the users on the frontlines—from IT to business—who seem to be influencing the buying decisions.

How? By trying out easily accessible software through free trials available on the internet. Often, the software comes from new startups. At first, it might seem strange; why would they provide professional software at nearly no cost? However, if you take a closer look, it makes sense.

Growth Before Profits

Many startups are heavily venture capital (VC)-funded and need to demonstrate growth much more than profit margin. In satu­rated markets, this means that they turn to radical and aggressive new sales models, and one of them is giving access to professional applications on a freemium or trial basis. With virtually unlim­ited compute power through the cloud, they can seed the mar­ket and scale much more rapidly than they could have with a traditional sales force.

However, it also means that the experience must be flawless. The first minutes when a user tries the product are cru­cial. Every obstacle, every frustration in trying out and using the product must be removed. A fluid and frictionless customer expe­rience that elicits positive emotions must be achieved, first and foremost. Then that adoption and upsell by the organization can begin either in-app or through the extended sales force.

This approach now has a name, and it is called “product-led.” If you want to learn about it, entrepreneur and author Wes Bush offers a good starting point. It is not rocket science; rather, it is common sense, and the implications are far-reaching. In summary, in order to create that ultimate experience, you need to measure and analyze how users are using your product so you can improve it.

Smart Equipment Manufacturers

Smart equipment manufacturers (or any smart product devel­oper for that matter) should pay close attention to this new trend in software development. Smart products are not only augmented by software, as companies who are already investing in making their products smart know.

To stay competitive, “servitization”—where customers pay for a service rather than buying the equipment themselves—is the way forward; this prevents commoditization of their product. Instead of asking for a large upfront investment in the product, you offer them the products based on a monthly fee—which will include maintenance and other services. Some might even go so far as offering their products on a pay-as-you-use basis. This is basically what XaaS is all about and this is where product-led insights will become crucial.

What if, through your IoT platform you could understand how your users are interacting with your product? You could under­stand which features are the most valuable, which are underused, and which are overused. This would allow R&D to improve the product faster, support better marketing, and allow sales to more precisely price the services.

Coordination is Key

Will it be easy? No, most likely not. Coordinating any of these experiences has proven to be very difficult. Especially if those expe­riences are a mix of physical and digital. The goal is to create the kinds of immersive engagements that customers find easy and achieve a sort of silent adoption—meaning the product and the application must work so smoothly together that customers will upgrade without sales involvement, because it simply works.

Here’s an example: Imagine you are a provider of a smart speaker. You already have a great app that goes with it, but your developers just created this amazing new option—one that auto­matically tunes the speaker for perfect acoustics. What if you could gate this access as a free trial (with a paid upgrade)? And, based on the adoption behavior, your system could dynamically adjust the price to maximize revenue.

Moving from a B2C example to B2B, what if you were the producer of smart connected indus­trial ovens to industrial bakeries, and you wanted to aggressively price the base model to gain market share?

Then, through applications provided with the connected oven, you could deliver new analytical services as in-app paid upgrades over time. For example, you could launch in-app a new function for improving better consistency of temperature and quality of production, or a more efficient heating program to save energy during production. All with a “try before you buy” option in-app. In this way, you could find new revenue streams with hardly any sales involvement.

Enterprise integration, modern API management, and analyt­ical tools all help to build up an open architecture upon which services can be developed, distributed, and consumed. Yes, big steps must be taken. The business side needs to get its head around this as well, and sales and marketing will have to adapt.

As a smart equipment maker on your path to XaaS, you may not have a choice but to embrace this product-led philosophy. Otherwise, your competitors will disrupt you.

History has shown that the best companies tend to innovate and integrate the latest technology into their processes. So at least start experimenting with the product-led approach and see how it can evolve your smart products to the next level.

There is proof: Product-led initiatives in the software indus­try have already shown that superior services can be delivered for lower prices and market growth can be faster than ever imagined.


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