Billing software and the value-added paper cup

In his book Business Agility, Michael Hugos says:

Opportunities to make money by being responsive have exploded. There are far more ways to use responsiveness to attract customers than there are ways to use efficiency and low prices. This is because there are so many different kinds of customers, and each is looking for slightly different mixes of products and services. Constantly changing environments and customer needs enable responsive customers to offer continuously evolving mixes of products and services.

This simple quote forces rethinking and prioritizing the role of the product versus the role of information products surrounding the product. Which is more valuable? The product or the information surrounding the product?

Billing software creates opportunities for innovation

Even simple products like paper cups create opportunities for innovation and new revenue. For this reason, some suggest that the “information product manager” is one of the top roles that will be in demand in the coming years.

Hugo’s book uses the concept of the “Value Added Paper Cup” to illustrate the many ways that simple products and the information surrounding those products can spin off new sources of revenue.

It started when Hugos was CIO of a food-service disposables company. Commodity food-service disposables don’t have a great profit margin, and, according to Hugos, “it gets lower every year.” Hugos was given the task of using information technology to make his products more useful and more valuable to his customers. His IT department built dozens of value-adding information products that could be added to every order by the sales team.

One of the enablers of the Value Added Paper Cup strategy was billing software. Hugos distinguished between the actual item or service (the paper cup) and the information products surrounding the paper cup.

The paper cup is easily copied, is a commodity and has a very low profit margin.

Information products help customers consume paper cups more efficiently, are customized to each customer and generates much higher profit margins. Sample activity-based information services that increased the profit margin of every paper cup sold included online ordering, customization of labels to expedite a customer’s inventory process, custom invoicing formats, injection of GL codes into invoice line items and even an online dashboard that displayed a customer’s order history, usage patterns and purchasing trends. All this was made possible by flexible and innovative billing software.

According to Hugos, information products are “where above-market prices and profits are to be found. Through the creative use of the information component, you can wrap any commodity product with a mix of value-added services that make it more useful and for which customers will pay a bit extra.”

When a paper cup – generally a simple static line item – is surrounded with custom value-added services, opportunities to use billing software as a source of innovation, explode.

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