Getting Out What You Put In
In the Outcome Economy, data-driven decision-making reigns.
By Robert J. Derocher | Summer 2017
There are bean counters, and then there are laugh counters. No, wait. I’m being absolutely serious.
In Barcelona, Spain, the Teatraneu Theatre uses facial recognition technology to register each laugh
and charges customers on a per-smile basis. The result? A 25 percent revenue increase over previous
ticket prices, says Steven Tiell, senior principal at Accenture Labs in San Jose, Calif.
WELCOME TO THE WORLD OF THE OUTCOME ECONOMY.
“It’s no longer about selling products and services; it’s about selling more meaningful outcomes,”
Tiell explains. “It upends long-held notions of how superior products and services are defined.”
Thanks to continued technological advances, companies no longer need to just sell a widget—or a
service—and move on. Now, they can learn about the consumer who bought that widget and what
they did with it, in the hopes of selling more widgets, making better widgets, and being more useful
to consumers down the road. And that’s likely to mean more precise tracking, auditing, and financial
analysis in the future as the global economy shifts towards more precise measurement of who buys
what and why—and how it all works out in the end.
THE AGE OF DATA… AND THINGS
Helge Tennø, a technology consultant, writer, and speaker in Oslo, Norway, traces the beginnings
of the Outcome Economy to GE Chairman Jeffrey Immelt’s discussions about the company’s cloud-based
platform for the Industrial Internet, Predix, in 2014.
“GE could move to an economy where the business model was
based on the measured output of their solutions,” Tennø explains.
“Since then, there has been an emergence of smarter and smarter
hardware—as in sensors, software as in AI (artificial intelligence),
and machine learning—which has increased our ability to measure
whatever.”
One of the keys to the acceleration of the Outcome Economy,
according to Tiell, has been the ability among more companies to
place that intelligent hardware where digital and physical worlds
intersect, allowing companies to capture meaningful data that can
generate information and insights into how customers use products
and services.
And in this new technological frontier, the term “hardware” is not
confined to the traditional computer lingo of servers, networking
gear, and PCs, Tiell explains. How about getting feedback and information
from your washing machine, the activity tracker on your
wrist, nearby security cameras, or your office elevator?
“With this feedback loop, companies are, for the first time, able to
have a quantifiable, end-to-end understanding of how their products
perform—not just for their customers, but for their customers’ customers,”
Tiell adds. “The Outcome Economy is defined by companies’
abilities to create value by delivering solutions to customers
that, in turn, lead to quantifiable, measurable results.”
And that, in turn, brings a deeper understanding of what customers
ultimately want from those products and services.
The concepts, collectively referred to as the Outcome Economy
nowadays, are not entirely new, says Swaminathan Sridharan, John
and Norma Darling Distinguished Professor in the Accounting Information
and Management Department at the Kellogg School of Management,
Northwestern University, Evanston, Ill. “Measuring data
related to products and services delivered, customer behavior
including customer satisfaction, and the efficiency of such operations
at every link of the value chain is something we’ve been studying
and practicing for several years now. The difference now is that
companies are able to measure more precisely a greater number of
such aspects throughout the value chain thanks to improved flow of
information.”
The obvious benefit, he says, is more data, more quickly, which
enables real-time decision-making to meet customer demands.
A GLOBAL REVOLUTION
In just a few short years, the Outcome Economy has picked up
momentum across the globe. In Europe, Tennø credits Finnish companies
and groups such as Siemens and Smart & Clean (a public-private
partnership dedicated to improving environmental sustainability
in metropolitan Helsinki) with driving interest and changing
established mindsets.
“What we were basically saying was, ‘Get off of autopilot, you can
measure anything,’” he says. “Don’t let that stop you from identifying
new ways of finding and measuring what is important and valuable
for your company, however.”
A 2015 report issued by World Economic Forum and co-author
Accenture illustrates the growing potential for the Outcome Economy.
“Agricultural companies now have the data necessary to calculate
how many bushels of wheat can be produced on a given
piece of farmland with a particular mix of seed, fertilizer, water, soil
chemistry, and weather conditions. By combining analytics software
with connected tractors, tillers, and planters, they can apply the precise
mix of seed and fertilizer to maximize crop yield at harvest,” the
report stated.
Tiell cites two other specific examples of successful outcome-driven
programs that illustrate this new economic approach:
The City of Los Angeles has 7,000 smart parking spaces that communicate
real-time parking conditions to smartphone apps, telling
drivers where parking is available. These connected parking spaces
have delivered tangible outcomes: Parking revenue increased 2 percent;
average parking costs decreased 11 percent; and space utilization
increased 11 percent.
Proteus Digital Health, billing itself as the world’s first digital medicine
service, integrates a tiny, inert sensor in the pills it produces.
The sensor acts together with a wearable device and mobile app to
provide full “adherence transparency,” indicating to patients, healthcare
providers, and payers when medication is taken or missed. Not
only can the Proteus hardware-based system determine when
patients take their medications, but it also can send alerts and
reminders to patients if they forget to take a pill. What kind of economic
impact might that have? A 2007 study by the New England
Healthcare Institute estimated that missed medications cost $100
billion annually in excess hospitalizations alone.
“Delivering customer outcomes is a strategy for sustaining competitive
advantage today,” Tiell contends. “It will be a turnaround strategy
in the next few years, and a survival strategy beyond that.”
CHANGING THE FACE OF FINANCE
This new technology-fueled landscape is likely to mean a combination
of old and new approaches to accounting and finance in the
years ahead, Tiell and others say. Books will still need to be audited,
finances analyzed, and information collected and disseminated, but
just what’s in those numbers and how they’re analyzed is already
changing, as is the finance approach behind them.
“There are new ways to accrue revenue, such as micro-payments,
new commission-based roles, and ecosystem partners,” Tiell
explains. “Similarly, raising capital has been upended. No longer are
banks and capital markets the only options for financing new
endeavors; crowdfunding or ‘customer-funded’ financing models are
now as much a financial strategy as they are business and product
strategies.”
The ready availability of more and more data also opens up possibilities
for accountants—and potential pitfalls, Sridharan warns.
“Accountants have always been looking for ways of going beyond
our traditional business boundaries,” he explains. “We now have
quite a lot of data available. Now auditors can gain access to off-balance
sheets, and more access to computer networks. I can foresee
huge conflicts of interest. Do you want insurance companies to
know some of this information?”
Tennø worries that companies may misuse the surplus of data to the
disadvantage of customers—as well as their own employees. “The
prerequisite for understanding the market is measurable data. However
this leaves out troves of valuable data that gives insight and
understanding, but is just not measurable,” he says. “With the Outcome
Economy, we are trying to capture more data that can be
measured, but also make sense of data that is important but not
measurable.”
Tiell foresees “an ecosystem-driven digital economy” with increasing
business/technology partnerships continuing to drive change. “In
fact, one of the key trends we identified in the Accenture Technology
Vision 2017 report is that to fulfill their digital ambitions, companies
will need to take on a leadership role to help shape the new rules of
the game,” he says.
While there still may be some ethical minefields, Sridharan agrees
that the Outcome Economy will present opportunities for the
accounting and finance industry, with versatility and technological
literacy being important requirements.
“We can’t call ourselves by just one name—we’re not just
accountants,” he says. “It’s a very exciting time to be a student of
economics. And if you’re a practice manager, you better learn about
what’s happening.”