Article written by Mavenlink co-founder and CEO Ray Grainger
According to the Kellogg Institute, the digital revolution has created a power shift from sellers to buyers, driven by advancing technology that provides buyers with unprecedented access. Where once they had limited choice, now they have abundant choice. Where once they had limited information about sellers, now buyers can read others’ experiences at the click of a button. Where once innovation was slow, now it is disruptive.
We know what this kind of power shift can do to a market. Since the early 2000s, e-commerce has rocked the retail industry. Amazon crippled big box retailers; Uber has disrupted transport; Airbnb is impacting on hotel chains.
The winds of change are driven by innovation in business models that comes from the power shift from sellers to buyers. While this disruption has had a strikingly similar pattern across consumer industries, the impact on business has been less visible and slower to transpire. Until now.
Today, the industries that serve businesses with professional or creative services are in the midst of a similar period of transition. Buyers or clients are demanding greater speed, quality and agility from service providers. Providers are under pressure from increased competition, compressed delivery timelines and tighter margins. Services firms are finding themselves needing to adapt — or risk being left behind.
Reacting to the situation, services leaders are designing new operating models that allow them to better connect, orchestrate and optimise their businesses.
Until recently, businesses valued owning their resources above all else. They hired and managed large workforces, assembled their own operational and recruiting capabilities, and built and maintained all of their technology resources. Organisations grew large in order to have more control over resource availability.
Yet today’s speed, complexity, growing competition and the global nature of business have rendered this approach inadequate. The skills required are much more varied, and the demand is inconsistent. As a result, large resource pools of specific skills can be a detriment.
Today, a new model is emerging. Organisations striving to be more agile and scalable are finding ways to best leverage networks of external resources.
The potential benefits of this new model are clear. A network of service providers allows a business to tap the right skills and resources at the right moment, without the larger investments of time and costs associated with recruiting, training and managing resources internally. Organisations can stay lean and focus on their core business functions while leveraging highly specialised expertise. The model maximises flexibility and speed while optimising costs.
With this new model gaining traction in every industry and every geography, it’s a great time to be a service provider. The globalisation of services represents a massive, $3 trillion opportunity and is growing rapidly.
Yet there are challenges inhibiting service providers from realizing this full potential. Service providers themselves are experiencing intense pressure to meet the increasing demand of their buyers,
Historically, technology has poorly served the service provider industry. Providers have had to operate within fragmented business environments where critical data stays isolated in CRM, resourcing, project management, collaboration, accounting and other systems. They are stuck using old, inadequate tools.
Getting out of these siloed systems is critical. Service providers must move beyond spreadsheets and email if they are to thrive in the fast-paced, hyper-connected, hyper-specialised world of the Service Level Economy.
Advanced technology is beginning to offer everything services firms need to succeed. They can grow and scale confidently, facilitate the management and mobilisation of resources, and expand their networks quickly while accessing the specific skills and resources needed — all on a project-by-project basis.
In the future, service providers will rely on a single, unified Operational System of Record that packages up the processes, frameworks, guidelines, analytics and insights demanded by the Service Level Economy. The adoption of this system will significantly improve business agility, elevate financial performance, and enhance operational execution.
Furthermore, it may even potentially help firms to stand out from the competition, as buyers recognise these sellers’ commitment to best practices and to meeting their expectations. Buyers will want to work with providers they see adopting this new, more transparent, more trustworthy philosophy of business.
My vision of the future, the Service Level Economy, is one that demands connectedness and flexibility. This fuels the need to collaborate. A digital infrastructure evolves to facilitate better business relationships in which providers work together to serve clients beyond the capabilities of any single participant.
Based on their success, buyers consume a larger volume of higher value services from these networked providers. In a ground-breaking Deloitte report, visionary Eamonn Kelly explores how this dynamic rearrangement of business is dramatically reshaping the core structure of the economy:
Increasingly, forward-thinking operations managers are looking to optimise performance across value webs that span and connect whole ecosystems of suppliers and collaborators. Properly activated, these value webs can deliver superior results across multiple dimensions—reducing costs, improving service levels, mitigating risks of disruption, and delivering feedback-fuelled learning and innovation.
Supply chain leaders who are able to manage more effectively in this new environment will benefit from greater agility, responsiveness and resilience.
Kelly also foreshadows the value firms will see upon dissolving their business boundaries. As it becomes increasingly possible for firms to deploy and activate assets they neither own nor control, to engage and mobilise larger and larger numbers of participants, and to facilitate much more complex coordination of their expertise and activities, the art of the possible is expanding rapidly.
I believe these ecosystems of suppliers and collaborators are one of the biggest transformations of our lifetime, and the benefits will extend beyond traditional business outcomes.
Finally, how we are going to get there? The critical piece that will enable these ecosystems is the establishment of trust. Once buyers have the confidence that sellers will continually meet their expectations, business ecosystems will proliferate and begin to orchestrate complex and mission-critical work. It’s the service level economy that accelerates this evolution of business into dynamic and collaborative ecosystems. And this will transform work as we know it.
The emergence of the cloud has profoundly impacted how people, ideas, and systems connect. We are finally ready to realise the potential of the service level economy. Service providers will support client needs better while optimising their own processes. All parties — from buyers and prime orchestrators to subcontractors — will have greater visibility and more granular control of their projects, people and financials.
Increasingly and with greater speed and confidence, buyers worldwide will find and consume hyper-specialised services and support. Trust, above all else, will be the primary driver of success.