Even though the Fourth Industrial Revolution is here, only around 20% of executives feel prepared to adjust their business models. Completing a SaaS/XaaS transformation for your business takes between 3-5 years to transition from crawl to walk to the run stage — and beyond. This blog highlights what to focus on and implement during each phase to maximize your XaaS transformation.
Before the Migration
You’ll need to do some prep work before you jump into the deep end of your SaaS/XaaS transformation. There are several things to keep in mind and implement before getting started:
1. Unify Your Communication Across the Company
Transforming your business into a SaaS/XaaS model affects your entire organization. You must first inform and convince your staff across every team (product development, sales, support, finance, etc.) that the transition will be operationally and financially beneficial for the company. Eventually, with a proper plan and timeline, your business will systematically undergo a shift in mindset. You’ll also need to train everyone on customer success best practices during the five-year transition. Think through both internal and external communications. Your customers will have to be informed of the plan as soon as possible.
2. Create Sales Incentives
Make sure your sales reps have incentives to transition—craft policies around who will be selling and what they will receive in return. Also, create strict guidelines to ensure that no one takes advantage of the new model. Remember, this is a big transition for your sales team, so you’ll have to “swallow the fish” to ensure that your teams don’t experience as much financial crunch during the transition.
3. Get Your Channel Partners on Board
You need your channel partners to come along for the transformation. Talk with your channel partners about your plan for training and the incentives you’re offering to ensure they will be effective during the transition. It’s a lot of work, and partners will be less likely to embrace any change that introduces risks to their current financial models.
Starting your SaaS/XaaS Transition: The Crawl Stage
Everyone crawls before they can walk, and you can expect the same of your business in the beginning stages of its SaaS/XaaS transformation. Crawling is an immature stage involving little revenue, few offerings, and limited-service areas. To get the most out of this stage, start by offering a sole product or service line that is subscription-based. Don’t expect your processes to be automated yet — instead, embrace what are likely to be manual processes (think spreadsheets vs. dashboards).
Primary Focus Areas of This Stage
- Define Your Strategy. Make sure your executives agree on your business’s strategic objectives, like revenue and profit goals, your business model, and how you will brand the transition.
Consider focusing your success KPIs (key performance indicators) on:
- Annual retention revenue (ARR)
- Gross and net retention rate
- Annual contract value (ACV)
- Clear a Path Forward. First, complete a capability gap analysis to find where your company’s standard practices fall short in a XaaS environment. This analysis will tell you what you need to innovate to close the gap. It will also allow you to highlight each step you need to mature in your transformation. Start by focusing on go-to-market capabilities.
- Land Financing. A XaaS transformation isn’t free — you’ll potentially have to pay for things like labor costs, operational investments, and more. By creating a strong ROI in your business case, including all the costs, you’ll be able to secure financing from your business’s leaders.
- Initiate the Transformation. Create a transformation team to manage your business’s transition and ensure they have the necessary resources to do the job. This team will act as the shepherds to ensure the success of your transformation.
- Test and Validate Processes. You’ve launched with a single product/service offering, processes are primarily manual, but are defined and operational. Before you begin automating these processes, test and validate that everything is performing optimally. This validation procedure will ensure that you don’t run into foundational issues as you scale your operation.
Ensure that you build a cross-functional transformation team encompassing sales, operations, BI, finance, and HR. Do not underestimate the power of rep/manager feedback! They are the closest to your customers and can provide guidance and insights that might otherwise be missed.
Getting Things Going: The Walk Stage
During the walk phase, you’re getting your legs underneath you. Your essential processes are better defined and documented, and you may have automated some. You will also invest in improvements to scale operations and have a deep understanding of revenue goals. The routes to market and geographies may remain limited.
Primary Focus Areas
- Create New Operations. You’ll need to create new documented and standardized processes to get to the next transformation phase.
It’s essential to over-communicate during this phase, as you may find the application of processes to be different from theory.
- Choose What to Automate. Start with select automated processes, like quoting and DIA (days in advance) renewal notifications. Make sure you create specified processes to go along with them.
- Design Your SOPs. Create documentation around your standard operating procedures for the new automated processes, so future handoffs between teams can become as seamless as possible.
- Establish Business Policies. For things like billing or sales, create simple and straightforward procedures during the XaaS transformation.
Making Advancements: The Run Stage
Now that you are more mature and have been working as a XaaS business for 1-2 years, you should be able to move quickly. Your business is now delivering more than one offer to your customers. Your procedures have become more advanced, along with your available resources and automation capabilities. There are multiple routes to market and geographies that you’re operating.
Primary Focus Areas
- Clarify Procedures. Learn from any procedural issues thus far to revise your processes. Include any new methods you’ll need to streamline the transition for more of your business to a XaaS model.
- Execute a Systems Design. Use end-to-end automation for your systems to create a robust digital architecture for your business. You’ll want to achieve a high level of automation across your technology and processes.
Change According to Feedback. Gather the voice of the customer (VoC) via customer surveys and employee feedback via surveys to allow your transformation team to assess and perfect your XaaS capabilities.
Optimized and Ready: The Fly Stage
It’s now been three or more years, and it’s time to spread your wings. You have four+ offerings you’re able to sell to customers, and you have officially gone global. During the fly phase, your business enacts enhanced processes that maintain end-to-end digital purchases and renewals. All your processes have been standardized.
Primary Focus Areas
- Scale Up. You’ll need to confront the intricacies involved in scaling into a complex digital XaaS system. Your mature business needs to remain constant across its capacities.
- Add Progressive Technology. Look to adopt capabilities like machine learning and artificial intelligence to implement analytics in your end-to-end operations.
As you scale, periodically conduct premortems to assess future potential scenarios & determine steps you might take to avoid business, market, & or financial interruptions proactively.
Get an Experienced Partner to Streamline Your XaaS Transformation
Don’t go it alone on your digital transformation. ServiceSource has years of experience helping leading businesses with their XaaS Transformation. We can offer you the insights you need to take your SaaS/XaaS transformation from crawl to run — and beyond. Reach out to speak with an expert today.