Episode 110 Transcript

Banoo Behboodi: Welcome, everyone, to The Pursuit Power Half Hour. I'm Banoo, and I'm joined by Kantata’s very own VP of Operations, Melissa Korzun. Both Melissa and I have extensive experience leading professional services organizations, but we also work extensively with our customer base at Kantata to help them drive results. It is with this knowledge that we come to you today to have a discussion on how AI is blowing up the old rules of professional services and reshaping how value is defined, delivered, and monetized.

Future-ready PS organizations will position themselves as expertise engines, not manpower suppliers anymore. Instead of charging for effort and time, we’ll have to look at charging for results and impact. We're going to tackle topics that will allow us to set the roadmap and the how to getting there. We'll address rethinking service product offerings and commercial models. How do we shift talent and resource profiles to account for AI agents and automation? How do we look at measuring performance for our talent pool? How do we rethink the service sales motion and consider transformation in a way that can be done effectively and timely? Thanks for joining us today. With this, let's get started with Melissa.

Melissa Korzun: Absolutely. I think we've all recognized at this point that AI is collapsing the gap significantly between effort and impact. Up until now, services’ value has been tied to the hours spent and the complexity of what we've delivered. That paradigm has been shifting for a while now.

Customers don't just want results; they care a whole lot about how fast they realize those results. They want them now, not in three or six months. We really have to finally address not just whether we delivered what we promised, but whether it changed the customer's business in measurable ways. Did they get faster adoption, higher margins, better decisions? Did we achieve that in a timely manner? That's the new scoreboard we are looking at. We can't kick the can down the road anymore and say it's too hard to figure out how to do that. We have to figure it out now.

It's been hard to navigate that. With AI augmentation, new ways are opening up to achieve those results in a much faster time frame. Services organizations will have to change foundational elements: how we price, how we sell, how we deliver, how we measure success, and ultimately what tools we use to support the way we drive our business.

We're thinking a lot about this at Kantata every day, about how our solutions are going to help services organizations address these issues and help their customers achieve results. That's where we're really focused on things like our expertise engine, orienting around increasing time to value, augmenting expertise, and enabling the ability to prove and sell customer outcomes.

Banoo Behboodi: We've been doing this podcast for a couple of years, and we've had guests historically that have looked at this outcome-based model from a professional services commercial model that's based on outcomes and measuring value for the customer. I think it was more of a distant concept and more exception-based, but it's inevitable. This is the shift that has to happen if you want to stay ahead of service delivery and be in the forefront, making margin and staying afloat in this new era. With that, let's tackle specifically commercial models. From your perspective, how do we make that transition to an outcome-based, impact-based model?

Melissa Korzun: Yeah, absolutely. Services went from "What can we do?" or "What are we going to do for you?" It started to become "What have you done for me lately?" because of the recurring services. Now it’s "What have you helped me achieve lately?" It's not "What have you done?" but "What have you helped me achieve." This is becoming at the heart of discussions regarding outcomes-based pricing. Even if you're not doing outcomes-based pricing, when you go into a renewal right now, you better be justifying the outcome and the value that you've provided to a customer, or it's really hard to justify a price.

We're seeing our customers come to us and ask, "What are you seeing in industry? How are people developing service offers where they can confidently define outcomes that can be achieved and prove the ability to achieve them?" Services being priced at 400 hours must be framed around a transformation target. How do you get a customer to full adoption within 90 days with a measurable lift in productivity? It's not about how to get to go live anymore.

Now that AI is coming into play, we can deliver a better outcome with more value in fewer hours. The other thing we're starting to realize is this doesn't always mean a cheaper price tag. There's not only the ability to shift from pricing based on hours to pricing based on outcomes, but we're also bringing in new drivers, such as the cost of an AI solution. AI agents aren’t free. Developing them in-house or buying solutions brings new costs into the services industry, and that's a part of the overall services margins being considered. It's a shifting cost profile where you might get some efficiency and other costs added in, along with the ability to define and improve the outcomes you're trying to achieve.

Banoo Behboodi: In addition to the improving of the outcomes, I know we've talked about this is putting a value on expertise. When you and I were having a conversation, you made an analogy that really stuck with me, which is within a retail store, if you go to a designer versus Walmart, the output or the value, who knows? The quality theoretically is better, but you're paying $1,000 for a top versus $20 for a top because of your perceived value in terms of the quality, the output, and the consistency of that quality that it brings you. It is a very similar analogy in how we have to start looking at expertise. It's about how we position the expertise and the consistency quality of that expertise that we deliver with the customer.

Melissa Korzun: The experience that's wrapped around that expertise. When we look at how much we're willing to pay for services in our lives, let's go outside of the professional services industry we're talking about. In many cases, it's the experience that's being provided and the proven ability to provide me with a certain result. Creating a better customer experience goes into the value that the customer's perceiving, but there's also a cost to provide that better customer experience. It's thinking more holistically beyond what is the dollar or the hour that someone's paying for. Dollars and hours are no longer the final equation.

Banoo Behboodi: Exactly. We know AI isn't replacing people. I think everyone's coming to terms with the fact that it's just changing how we define roles, how we redefine roles, skill sets, and applicability or talent base. In your opinion, how do leaders help their teams shift from doing work to driving outcomes? For all this time we've been positioned to look about and think about utilization and hour spans. How do you make that shift?

Melissa Korzun: I think it starts really with redefining success at every level in the organization. Instead of celebrating the person who logged the most hours or who had the highest billable utilization target, it's about celebrating someone who helped a client achieve a big business win, maybe their first significant business win, who created an exceptional experience for our customer. Leaders are going to have to connect those dots for their teams. They have to show how that expertise drives an outcome, not just a deliverable, because it's a language shift. We've been talking about the result of services and the value of services in a very specific language for a long time. Leaders have to start changing that narrative.

That also means leaders have to find new tools and new ways to help surface those signals. It's not always easy to know, especially the larger your teams get, what impact they're having on a customer. It's really easy to know how many billable hours they logged, what their rate per hour is, what their revenue per head is. Those are easy numbers to figure out, but there aren't many tools in the industry right now that are surfacing signals that are telling you what the impact is of a consultant with a customer. What does their engagement look like? What does the customer sentiment look like when they're working with that individual? How do we measure that relationship, which can drive a result with a customer? It's about finding tools and ways to do that.

That's really at the heart when we look at the expertise engine that we're putting into play. It's about going deeper than how many hours somebody is spending working, but really uncovering the impact of that work, the relationships that they're building, the expertise that they're unlocking, the lessons that they're learning, and how they're contributing all of that back to the organization. It's a much different relationship than what we've seen before.

Banoo Behboodi: I have to share a story with you. I have a daughter, 24 years old, that's in an environmental consulting company, and I was having this conversation with her. The reason I'm sharing this is because I think with the new generation coming on, maybe the transition will be easier because they'll understand it. She was approaching me, saying that, "Mom, they're asking me for our utilization. They're saying we have to keep measuring utilization, that I need to increase my utilization, etc. I just don't understand because I can spend more time working on a particular project for a customer, but that doesn't mean that I'm doing it any better, or I'm getting the customer to what they need. I can work faster and get things done, but my utilization will go down. I don't understand that concept." It was interesting to have someone at her age actually pose that question. It's already becoming questionable why we are measuring utilization and how that is going to define the quality of work and the outcomes that I'm delivering to my customers. I think that's fascinating.

Melissa Korzun: We can go deep on this one. I think it starts to push against why 40 hours a week. Am I logging 40 hours a week or am I achieving the result? I think we are seeing as the younger generation comes out into the workplace, some of those questions are starting to get pushed on. What is a standard workday? Utilization is based on 20/80. You work 40 hours a week. We're seeing flexible schedules, flexible PTO, unlimited PTO. It's about getting your job done and driving the result, not hours worked. It will be interesting to see how that generational change impacts all of this as well.

Banoo Behboodi: Right. How the HR system and everything evolves around it, because so much has to happen for this change to take place. Going back to skills and roles, what are the critical skills and roles in your opinion as we take this journey forward?

Melissa Korzun: I think I’d focus on two big ones. The first one, I think we can gloss over really easily, is AI fluency. Two years ago, no one was using AI tools. Now everyone's using them, and they have come fast and furiously. I get people who ask me all the time. It surprises me, given their technical knowledge and depth, who will come and say, "Where can I learn about this specific area in AI?" or "How are you gaining competency in these areas?" This isn't just about prompt engineering or knowing how to put a prompt in, but it's about how we train an AI model. How do you make sure that what you're putting into that model is really driving and helping it give back to you what's beneficial? How do we use it appropriately to analyze, to summarize, to generate insights, and to augment our expertise?

That fluency is a skill that everyone needs to gain, and they need to gain it quickly. We can't discount how important that is.

The second one is around outcome design. We're talking about outcomes-based pricing and that sort of thing. Banoo, the role that you have in the organization, I know you think a lot about this. It's not natural for everyone to be able to say, "Here's what my customer is trying to achieve." Can you define the outcome that they're even trying to achieve? Can you figure out how to measure that? We can look at every employee who's ever tried to write a SMART goal, who struggles with defining what a measurable success criteria is, and then how to put an action plan in place.

That AI fluency, coupled with being able to really think about outcome design and having every team member be a value architect in another sense, combining their human acumen with those AI insights to get a clear path for customer impact, is going to be the sweet spot that we need to continue to push our services team members towards.

Banoo Behboodi: A lot of what we are talking about is fundamental changes that touch on culture, system, technology. All of it has to come together to revolutionize or transform how we look at things. I want to tackle how do we do that best. How do we do that so that we do it in a timely manner, but we're also effective at the end of this journey? What does a crawl, walk, run maturity path in your opinion look like in this outcome-driven transformation?

Melissa Korzun: People really need to be honest with themselves about what crawl really means. For me, it's awareness. It is: Do you have the awareness and the language in your company to be able to change from hours to business outcomes? For example, does everyone in your company know what outcomes your company actually achieves for your customers? If I ask ten people, are they even going to give me remotely close to the same things? If you don't have that language and you haven't clarified for your company all the way from marketing to sales to services to success, the whole organization aligned on, here are the outcomes we can actually achieve for our customers, you're crawling. If you're trying to figure out how to do outcomes-based pricing, and you haven't aligned on what outcomes you achieved, then it's not going to work.

To me, crawl is awareness. It's defining the outcomes and making sure that everyone in your business understands: here are the outcomes that we can help our customers achieve. I think then you can start to walk, and it's taking that language and understanding and integrating it into your delivery, into your project plans, your governance decks, your reporting, moving your goalposts. If you're an embedded services organization and a software company, your goal should no longer be go live or a completed deliverable. You should be moving towards outcome achievement. Your measurement from success is going to shift from project health to customer health and ultimately customer results.

We do this here at Kantata and we talk about it. We used to celebrate go lives. We now celebrate something called green graduation. The customer went live, that's fine. Green graduation means they're alive, and they're actually using the system to achieve results. We are measuring adoption, and we're looking at that with our customers and working with them until we get them to a point where they have met a threshold that we consider green graduation. That's when we celebrate, not a go live. That's just a functional, technical aspect of getting a customer to results. Notice we're still not talking about selling an outcome or pricing an outcome. That's when you really get to run. You can monetize after you know the outcomes, after you've figured out how to measure them, and you have proven repeatedly that you can actually achieve those outcomes for your customers. Then you can start putting commercial models on and renewals around results and proven impact.

The trap that people can fall into is to try to run before they have that measurement discipline, before they have that language and lexicon and ability to do that. You just can't price an outcome if you can't prove it. You have to go through that process to be able to prove that you can achieve that, then you can put a price tag on it.

Banoo Behboodi: To build on what you just already shared, which is where we are within Kantata, I think we are at walk, meaning that we started with defining our framework and our entire journey from the time we are engaged in the selection process with a prospect to their entire journey and evolution and optimization with Kantata. Once they select, it is positioned around what are the key business objectives that the customers need or have and have made a decision on. How do we measure results against them achieving those business objectives?

As we transition and as my organization, the CSM, steps in and tries to be the backdrop of facilitating, bringing resources, everyone within Kantata will ask, "What is the objective this customer is after? How are they going to measure the results?" We have institutionalized this kind of thinking within our organization. We have to work our way to one, which is pricing our packages and revamping our commercial models to actually align with this.

Every step of the way throughout the customer journey, we have aligned to achieve focus on this. The important thing to point out is that things are changing quickly. What the customer objective was at the time of selection is not going to be their objective a year from now, two years from now. It is going to continuously evolve, and the results that they are after will evolve. As you continue to position services, the services and the outcomes you are after will evolve, and you have to be agile and have a process to account for that. Anything to add to that?

Melissa Korzun: When you talked about that agility and the processes, to me when we think about systems and processes and how we get that visibility across our engagements, really from sales all the way through to results and renewal and that continuing relationship, it's about having that connective tissue between all of these systems and communication channels.

One of the things that we really focused on is we should not have to ask our customer repeatedly through the journey what outcomes you are trying to achieve or what problems you are trying to solve. That does not create a great customer experience. Even though they're transitioning through different parts of our organization, we needed to have that connective tissue to continue that narrative through the organization and to make sure that when they left through one door and in through the next, they were being ushered through and put in capable hands that understood why they were there.

We've been at Kantata and as an industry connecting our CRMs, our PSAs, CS platforms, we are now realizing how critical it is to plug the communication channels in. It's where the real work gets done. When we're on Pulse, when we're talking to our customers through Zoom or Clarity or whatever tools we're using, when we're in our emails, that's where outcomes are getting defined or they're getting planned or actioned, and where we're discussing the achievement of them.

Bringing in those communication channels as part of that DNA and network and conversation around the customer is how we are going to be able to track from the sale all the way to the outcome, these real-time signals. We are going to be able to pull out augmented expertise and actionable insights. Ultimately, when you have all that, you plug that into a loop and start taking the lessons learned from that—here's what we sold, here's the outcome that we achieved, this is the experience that we got from that, the insights that we generated.

You can start engineering your services for the future. How do you define and measure outcomes? This is what we've done as we've collected this information through the stream. You can start to improve how you scope, how you define best practices, how you engineer your services to help meet your customer's needs. This re-architecting of the way that we take a customer through the journey, which we spent a lot of time on at Kantata, and how our systems collect, process, and use that information to feed signals back to us and help us better deliver for our customers is also a critical component of it.

Banoo Behboodi: Focusing a little bit on metrics, today's metrics around utilization, hours spent, and margin—I'm not sure that margin would ever be deprioritized, but regardless. How do you see our measurements evolving, measurements of the future in this framework?

Melissa Korzun: I'll go back to the first thing, which is creating the language as an organization and defining those outcomes that your company achieves, then figuring out how to measure them. You have to start somewhere.

Do we have to figure out every outcome your company can achieve? No. If you're just going by utilization, billable hours, time to staff, sit down and figure out one to three outcomes that your organization helps your customers achieve. Think of the clear ones that you're seeing most frequently across the biggest space of your customers. You don't have to define every single one.

Take that outcome and make sure you have a metric or metrics defined around the achievement of that outcome. Here’s the outcome that my customer can achieve. Here’s the way I'm going to measure that, and then bring those measurements into your delivery of your service. It's no longer just about what utilization was tied to for this team or even what the margin was. We want to know the margin, but it would be great to know here was the margin and here is the achievement of a metric tied to an outcome. The worst thing that you can have is a terrible margin on a project and a terrible outcome achieved on a project.

It's much easier to say this project didn't achieve the margin that we wanted, but it achieved a metric related to a key outcome our customer wanted to achieve, because that's an indicator of future relationship with that customer. Once you've got those defined, do you have to go and change your entire methodology and do every single project? I wouldn't. I've seen that happen before, and it results in frustration and changes.

Find a few key projects that make sense for that particular outcome. Don't find your biggest, most complex customer. Don't find the harder engagements that you have. Find a customer that is in your bread and butter, in the space that you work in most frequently, where you know you can help them achieve that outcome. Bring that in as part of the success of that service delivery and start measuring it.

Don't change the way you bill. Keep your billing exactly the same. If you're doing T&M, do T&M. Keep measuring utilization, but measure the outcome and the metrics related to that. Once you can do that and show impact, it becomes difficult to do additional projects in the future without having the ability to say, here’s what we achieved.

Banoo Behboodi: Let's bring this home and leave the audience with actionable steps they can take for their organizations to allow for this change. Just a set of steps they can take away and execute on.

Melissa Korzun: The first one is shift the mindset. Change from "Did we deliver?" to "Did we make a difference?" You have to make that shift in mindset to have those conversations within your organization. Make sure that the systems you have in place are built to drive and track outcomes, not just effort. Find ways to bring that into your systems, tools, reports, and governance. Redesign what success and progress look like in your delivery. Define progress in customer terms. What does your customer care about? Adoption rates, cost savings, time reduction, whatever it is they care about, start defining progress and success in their terms.

Start figuring out ways to compound your expertise. I think this is where AI comes in. Your outcomes need to be visible across your teams, not just the user stories, but all the layers underneath. What worked, what didn't work, what lessons did we learn? What best practices did we identify? This is really important because you need those outcomes to be repeatable. If you're not capturing that expertise that helped achieve them, you're leaving the guide rails too wide for that outcome-based delivery to continue to be costly because you're making too many missteps. You have all that information in your organization. You've got to capture it and put it to work. That's one of the key drivers behind the expertise engine that we're putting together—to be able to do exactly that. Once you can make those outcomes visible and repeatable, you can make them profitable because you can price and scale them with confidence.

Banoo Behboodi: That's perfect. It's been such an enjoyable discussion. I almost want to repeat this—not a year from now, but six months—because things are moving so fast. It would be great to see the evolution we've come through, our customers have come through, and revisit what we've discussed and how we've seen it play out.

Let's do that in due time; that would be great. Thank you, everyone, for joining us today. Thank you, Melissa, for sharing such actionable insights on how to prepare your business to be more outcome driven.

If you would like to see how Kantata can help you solve some of these challenges, please stick around. Our solution engineer will walk you through a quick demo. Thanks again, everyone. We look forward to seeing you again soon for our next episode. Have a great day!

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