1. Scenario
A consultancy business had, in support of their core consultancy offering, produced a small stand alone database tool which they provided to customers on request. With the development of a new multi-user, network based tool they wanted to re-engineer the business model.
2. Existing Model
– Income was generated by selling consultancy services using the tool, with no revenue directly attributed to the tool
– Training and support were provided on a time and materials basis at consultancy rates
– Investment in developing the tool was provided out of a development budget and ‘bid’ for on an ad-hoc basis
Resulting in:
– A healthy but capped margin for the consultancy against an unpredictable revenue stream
– New upgrades and updates could only be funded from PV/investment funds or customer funded
– Customer perception was that they saw value in the tool, however, whilst the service was good, it was seen as expensive. This combined with limited customer budget created limited follow on opportunities
3. Re-designed Business Model
The offering was re-designed and layered into four distinct, but aligned propositions. Each with their own distinct business model attributes:
a) Software
– Offered at attractive price point similar to other business tools (e.g. accountancy packages), on a per user basis with discounts given for volume
b) Installation
– Offered on a firm price basis after assessment of the requirement and with a balanced apportionment of risk with the customer depending on their existing infrastructure
c) Training
– Course based, pricing which was funded from the customer’s training budget rather than the capital budget. The customer was best placed to encourage their staff to attend the courses and therefore they took the risk on the attendance
– The per student cost to the customer was attractive and an option was provided for the consultancy to provide the classroom and hardware at a higher price
d) Support
– A ‘mobile phone style’ model was adopted where the customer paid a fixed monthly fee which included a set number of hours support in the month
– A percentage of unused hours could be rolled over for a set number of months giving flex in the usage before additional costs were incurred by the customer whilst giving the consultancy a more stable revenue stream.
– The monthly fee/support hours available was higher for the roll out period and then reduced once the system was embedded
– An hourly rate was agreed for additional top-ups if required
4. Outcomes
From a customer perspective there was:
– A significant positive change in value perception, largely driven by the additional flexibility in the approach
– Higher use of support line which drove a higher customer satisfaction as they were able to ask for help where budget would have been a problem in the past
– Better trained users through the courses and the increased use of the help line
For the consultancy there was:
– A 50% improvement in the blended margin allowing for a higher investment in future developments
– A better uptake of services which resulted in a higher and more sustainable revenue profile
