Imagine you're the CEO of an Airbnb business with several properties. You have a property manager overseeing one of your buildings. As the CEO, your key metrics are revenue, margin, customer satisfaction, and employee satisfaction.
Imagine you're the CEO of an Airbnb business with several properties. You have a property manager overseeing one of your buildings. As the CEO, your key metrics are revenue, margin, customer satisfaction, and employee satisfaction.
You approach your property manager and say, "Here's a $40,000 budget. I need you to double the nightly price of our property from $500 to $1,000. Either make it happen or let me know it's not possible."
The property manager, wanting to achieve this goal, decides the best way forward is to add a new bathroom to the property. However, she lacks the expertise to do it herself. So she heads to Home Depot, speaks to sales reps, purchases the materials she thinks they need, and hires a recommended contractor to install everything.
Here's where it often goes wrong:
1. The bathroom is built, but it doesn't function properly. The property manager didn't have the knowledge to purchase the right components, and the contractor simply installed what was provided.
2. The bathroom is fully functional but fails to impress guests. The design choices made by the property manager result in poor aesthetics, leading to negative reviews and decreased revenue.
In both scenarios, the core issue is a misalignment of accountability and expertise. The contractor isn't responsible for the ultimate goal of increasing revenue; they're only accountable for installing what they've been given.
Now imagine if the contractor approached the property manager and said, "Look, I can't guarantee that I can double your revenue. There are many factors outside of my control that influence revenue, such as the weather, economy, and seasonality. However, here's what I can do. I'm an expert in building bathrooms that delight guests. Pay me $3,000 a month for the next three years. I'll not only construct the bathroom, but I'll also maintain it, ensure it's always functional, and make any necessary updates to keep guests happy. I guarantee that the bathroom will maintain a customer satisfaction rating of 4.8 stars or higher. If it falls below that, you can cancel the contract anytime."
What the contractor is really doing here is presenting a "risk-off" price to the property manager for achieving their business goals. In a traditional model, a contractor might charge $30,000 to $40,000 for the two months of work required to build the bathroom. However, in this case, the contractor is only charging $6,000 after the first two months. They are co-investing in the project, and the contractor will only start to make a profit after the first year once they have proven they can deliver the desired business outcomes. Both parties are investing in the project and sharing the risk.
This model aligns accountability with the desired outcome. The contractor is taking responsibility for the factors they can control, which directly contribute to the overall goal. It's a true partnership.
The IT services market operates in a similar fashion. Clients often lack the expertise to achieve their goals, and service providers are only accountable for delivering on specifications, not outcomes. Platform providers like Salesforce are the Home Depot, and IT System Integrators are like the contractor. It's time for a new model, a joint venture approach, where service providers have skin in the game and are invested in their clients' success. By focusing on the key metrics that drive the overall goal and taking accountability for them, service providers can create a win-win situation for both themselves and their clients.
At Object Edge, we're pioneering this Joint Venture model in the IT services industry for the Manufacturing and Distribution verticals. We're partnering with our clients to deliver measurable outcomes, not just project specifications, by aligning our success with theirs and taking accountability for the metrics that matter most to their business.
It's time to fix the broken services market, and Object Edge is leading the charge.
Contact us at sales@objectedge.com to learn more!
