The Service-Led Growth Checklist
Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talent.
Service-led growth is a compelling alternative to product-led growth for many companies.
It is based on deep customer understanding and relationships and synergies between software, data and services. Together, these three pistons work together to turn a growth flywheel that can generate enormous shareholder value for relatively modest investment, as has been demonstrated by companies like SAS Institute (one of the most successful technology companies around).
How do you know if you are on the path to service-led growth? We have created this basic checklist to help you with your planning.
Step One - Foundations for Service-Led Growth
✓ There is a software platform used to deliver the service
Service-led growth requires software. The software can be sold through professional services, it can require configuration, support and general hand-holding, but without the instantiation of the service into software it is hard to scale and to build momentum.
✓ The data collected from the software provides insights
The software collects data that is shared by the service provider and the customer. The service provider supports the customer by interpreting the data and making the connection from insight to action.
Data is the fuel of service-led growth (and product-led growth, for that matter). If you are not collecting, data you are not building long term value.
✓ The insights trigger additional professional services
Service-led growth is about synergies between the software, the data and professional services. The initial engagement can be through software or services, but if there is a one time engagement with no follow up, then there is no growth flywheel. A series of one off engagements will not power service led growth.
Step Two - The linkages that drive growth
✓ The revenue generation model is integrated across services, software and data
In service-led growth there are not two or three independent revenue and pricing models. The approach is integrated and the focus is on (i) the long-term value provided to the customer (V2C) and (ii) the lifetime value of the customer (LTV or CLV).
Separating the professional services offers from the software or the software from the data analytics sets up the wrong incentives. The marketing and sales process and the sales compensation models need to be aligned and not in competition with each other (no internal fighting about the share of wallet).
Pricing model design for service-led growth businesses is its own special domain.
✓ The domain model is coded into the service, the software and the data model
Domain driven architecture, and its offshoot behavior driven development (BDD) are best practices for software development.
Read Martin Fowler on Domain Driven Design
Behavior Driven Development on the Agile Alliance Site
In service-led growth the same domain model is used across professional services, the software platform and the data model.
Most people in professional services do not have experience in domain driven design and will have to work closely with the software and data modeling team to represent their processes in a shared language. This is hard work and needs to be renewed regularly.
✓ The business is organized around the synergies
It is not enough to have a revenue model and domain model organized for service led growth. Adopting a service-led growth strategy impacts the entire organization. The competency model for service-led growth has different roles than do the models for professional services or product-led growth. These roles get organized in new ways to breakdown the silos that are often built up around software development, professional services and data management.
Service design is the discipline that is best prepared to lead organizations through the organizational side of service-led growth. The Service Design Network is a good place to learn more about this approach.
Step Three - Measuring service-led growth
✓ Each revenue stream predicts the others
This is the most important measure of a service-led growth model. The revenue prediction model should not be based on the pipeline and pipeline metrics. It should be based on the interactions with current clients. Pipeline metrics can be an input, but making them the foundation of the model removes attention from the critical synergies.
The goal is a revenue model in which each piece of revenue predicts the other components of revenue.
Let’s say there is a usage component to how the software subscription is priced. Does the level of usage predict the insights derived from the data? Do those insights predict new professional services? Do the professional services lead to additional subscription revenues?
✓ The data is connecting
The professional services and the software both depend on data to create value for customers. Service-led growth depends on building up databases and being able to connect the data across data models to get insights.
To know if you are making progress you need to have some way to measure the depth, breadth and connectedness of your data. The best tools to do this come from graph theory where there are many well validated techniques available. Basically, your data metrics should measure
Breadth, how wide is your data set, how much of the domain model is covered?
Depth, how many examples do you have, is there enough data to feed machine learning?
Connections, how are data points (vertices) connected to other data points (by edges)? Do the vertices and edges reflect the domain model?
✓ Skills are being added and role coverage is improving
Service-led growth is not just about the development of software, data and new revenue models. It also requires that people develop new skills. One of the critical things to measure is skill coverage. Coverage is a measure of how well people’s skills cover the skills identified for critical roles in the organization’s competency model.
Does the organization have the people it needs to fill the roles for service-led growth?
Are people’s skills growing? (Range of skills and level of expertise)
Are connecting and complementary skills emerging?
(Connecting skills are the skills people use to work with other people on cross-functional teams, the ability to understand and apply the domain model is an important connecting skill for service-led growth. Complementary skills are skills not often found together in the same person but frequently used together on the same team. A data analyst’s skills and a business consultant’s skills are often highly complementary is service led growth.)
Read other posts in the Service-Led Growth series
Product-Led or Service-Led Growth: Which is a Better Fit for Your Business?
The Service-Led Growth checklist (this post)