Fred Studer, Chief Marketing Officer at FinancialForce, speaks with CXOTalk about digital transformation and the new services economy. The company is focused on new revenue streams, updated business models and keeping growth and renewal rates stronger in the long term. He also explains why revenue recognition matters.
For more information see: https://www.cxotalk.com/video/digital-transformation-new-services-economy
Studer views the industry as being driven by enterprise just as much as, if not more than, consumers. “Let’s call it the consumerization of the enterprise,” Studer says.
“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… 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.”
From the transcript:
(00:50) You’ve been speaking today about the new services economy.
(00:56) 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.
(01:24) Why are services so important right now?
(01:26) 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.
(02:11) Now, what about the operational elements; the back-office processes; things like revenue recognition. These are details, but these are fundamental details.
(02:21) 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.
(03:11) 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.
(03:24) 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.