Scott Nelson is the president and chief digital officer of Tamarack Technology. He has more than 30 years of strategic technology development, deployment and design thinking experience working with both entrepreneurs and Fortune 500 companies. Nelson is a sought-after speaker and contributor on topics related to IoT and digital health. His involvement in technology in the local and national technology community reflects an ongoing and outstanding commitment to technology development and innovation.
The equipment finance industry “owns the invoice,” putting lessors at the nexus for helping customers connect among a growing list of sectors. Scott Nelson details the steps necessary for defining the good, the bad and the ugly for invoice methods and techniques.
“Whoever owns the invoice owns the customer.”
This was the message of future Telefonica CEO José María Álvarez-Pallete López speaking at the 2014 Telefonica Leadership conference. The emerging business trend at the time was the ecosystem of cellular device apps and services (now known as digital transformation and the IoT). Álvarez-Pallete López was letting the audience of suppliers, partners, and wannabe solution providers know – Telefonica owns these customers, we can help you make them your customers. If the partners and suppliers were paying attention, this insight changed their view of IoT and their go-to-market strategies for future business.
Equipment finance is an industry that similarly “owns the invoice” for an incredibly wide array of operational equipment and now services such as medical diagnostics and retail payment transactions. As such, the industry helps customers experience the spectrum of digital services and practices that connected equipment and IoT offer. This puts lessors at the nexus for helping customers begin their own digital transformation journey.
The Good, the Bad and the Ugly
Invoices have many personalities – some good, some bad, and some ugly. This can present risk to a vendor or lessor who does not consider an invoice’s varied impact on customer relationships. But if they are considered in the new context of digital technology, they illuminate the growing power of the invoice. Let’s look at the various personas invoices present, the perceptions and reactions they create with customers, and how each can be leveraged or converted to a strength in the digital ecosystem.
This is important: an invoice is a voice of your brand. It reminds the customer of how important you are to their operations. This should be considered in the convenience of delivery, ease of use, and presentation of information in the invoice. In the digital world all these communications can be automated, tailored, and managed for content in the same way a company manages its web page or newsletters. Indeed, invoices can be live documents with live links to other content and marketing with which a customer can choose to engage. Following the lead of the famous western film director Serio Leone, let’s start with “the good.” First and foremost an invoice is an ongoing communication channel with the customer. The invoice can communicate gratitude in personalized messages, empathy with corrections and adjustments, and perhaps most importantly, commitment with discounts for bundled or large purchases.
Engagement is perhaps the most powerful part of an invoice in the digital age. Álvarez-Pallete López knew this and told all the partners and suppliers in the audience that his invoice was a channel for their services. Sure, Telefonica also owned the physical platform for the communications, but customers don’t see cell towers and network switches. They interact with monthly invoices and they love it when they can reduce the number of invoices with which they have to deal (see Bill Processing in “The bad” below). Adding maintenance and consumables to leases is not new, but with the emergence of connected equipment that has digital services to help operators be more productive and efficient – think trucking IoT logistics systems – lessors are in the position, like Telefonica, of being the channel for digital transformation.
Okay, the good is exciting, but there’s always room for improvement. An invoice, particularly if sent in paper form, must be processed. Processing requires human intervention. Processing slows down operations and costs money. Obviously, digital banking services like ACH and autopayment can, and do, address the “processing” friction of invoicing. The invoice facilitates the customer relationship and as such must enable convenience.
But even a digital invoice can create a negative experience if it is just a bill. That experience is even worse when the invoice reminds the customers of an unhappy event like the downtime of unscheduled maintenance. Invoices of this type are typical in “break-fix” businesses – when it breaks, we will fix it and bill for it. Think about the unhappiness of any home repair experience that requires truck rolls and spare parts. Break-fix is not a digital business model; uptime is a digital business model. Both manufacturers and lessors alike need to consider how they can change their model to accommodate the unexpected and move from break-fix to uptime without excess cost to either the provider or the customer.
This leads us to “the ugly.” Ugly is an invoice that has dozens of line items including everything from finance and late fees to service calls to consumables and spare parts. Invoices that enumerate complexity have transparency, but they intimidate customers. Complexity costs money. Complexity breaks and usually costs a lot to fix. The conversion from a break-fix mindset to uptime offers the solution here and digital technology makes the conversion tractable for both vendors and lessors.
The key to implementing uptime solutions is data – both historical and operational. Historical data provides a statistical model for how systems are used, how often they break, and what it takes to get them back online. Historical data allows a “digital twin” of the offering. Operational data, then, provides both on ongoing assessment of the use of the equipment as well as where the customer is in the service lifecycle. Uptime models are built for and provide preventative maintenance based on real time usage data. A great example of an uptime digital transformation is Evoqua’s WaterOne® offering. They switched from selling water treatment hardware, chemicals, and service truck rolls to selling subscriptions for clean water. Clean water is what customers want to buy and the invoice now needs only one line item: gallons of clean water. Uptime is elegant. Uptime is beautiful.
José María Álvarez-Pallete López saw in 2014 that owning the invoice was the high ground for competitive strategy in the digital ecosystem. Considering the personalities of the invoice in the context of digital technology and experiences makes them even more powerful. Some may say a truly digital invoice is a subscription – this is the way we pay for streaming services, smart phones, most software today. This is the right way to think. Subscriptions deliver experiences with known reliability, costs, and outcomes. Subscriptions are a hallmark of digitally transformed business.
Lessors hold the high ground in the competition to sell the operational use of equipment, but they must consider the possibilities of the invoice to exploit its power and stay on top as a provider of the equipment experience in a digital world.
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