The operating system behind ServiceNow’s success, and how it could evolve
This is part two of a series on the three operating systems that inform how much growth and AI potential is trapped or liberated in your business. If you missed part one, start here. Today’s article unpacks a case study of ServiceNow: a strong 2D company that’s poised to break through to 3D if McDermott is ready to make some bold moves.
As a refresher, there are three archetypal operating systems that describe the different “rules of the game,” or underlying logic, for how businesses organise themselves and create value.
Complexity and silos are the plagues of 1D, squashing revenue, growth, and AI potential. Level 2 removes friction and makes it exponentially easier and faster to create value. By Level 3, you’ve completely owned the game board.
Somewhere between Levels 2 and 3 is where you’ll find ServiceNow.
What is ServiceNow?
ServiceNow is “the AI platform for business transformation” that connects and automates work across the entire enterprise. Instead of every department running its own disconnected agents and data, ServiceNow gives companies one place to orchestrate it all.
As you’ll see, they’re essentially using technology to help companies evolve from 1D to 2D operating systems. And with 21% year-over-year growth and a 98% renewal rate, they’re clearly doing something right. In this article, we’ll unpack:
How they operate as a 2D company internally
How they’re halfway to 3D
A hypothetical and ambitious 3D end state
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“𝘈𝘐 𝘪𝘴 𝘢 𝘤𝘳𝘰𝘴𝘴-𝘧𝘶𝘯𝘤𝘵𝘪𝘰𝘯𝘢𝘭 𝘴𝘱𝘰𝘳𝘵.” - 𝘉𝘪𝘭𝘭 𝘔𝘤𝘋𝘦𝘳𝘮𝘰𝘵𝘵, 𝘊𝘌𝘖, 𝘚𝘦𝘳𝘷𝘪𝘤𝘦𝘕𝘰𝘸
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ServiceNow as a 2D company
2D companies always start with their best-fit customers, figuring out what they really want, and reverse-engineering everything to create that value. Loyalty-based revenue is the goal.
ServiceNow’s best-fit customers are enterprise; they serve ~85% of the Fortune 500. In addition to dedicated industry-specific teams and solutions, here’s how they keep delivering value for those customers:
1. Executive accountability
In 2D companies, there’s always a senior executive who ensures the business is delivering customer value. At ServiceNow, there are two: Kellie Romack owns the customer internally, Chris Bedi externally.
As the Chief Digital Information Officer, Romack’s mandate is to go through the same AI transformation process their customers go through. First comes cross-functional journey mapping to break down silos and reimagine workflows, then adding AI to streamline it all. The goal is frictionless experiences for customers, employees and partners.
This, by the way, is the textbook approach for evolving to a 2D, AI-powered operating system.
Kellie’s team is Customer Zero — the first real-world users of every product – so they’ll pilot and deploy new capabilities internally first and then feed that learning back into the product roadmap. The result? $355 million in internal AI-driven improvements generated from the same platform they sell to customers.
Chris Bedi then carries the proof outward. He had Romack’s job before stepping into the Chief Customer Officer role, so he lived and breathed that internal complexity firsthand. Now he leads the Chief Transformation Office to help enterprise customers like Starbucks, Nvidia and Standard Chartered see ROI from AI by going through the same process.
2. Cross-functional and AI-first by design
Executive team
McDermott said that AI is a cross-functional team sport and he walks the talk. Notice all the “ands” in the SLT titles:
Amit Zavery — President, CPO, and COO: product, platform, operations, and AI
Chris Bedi — Chief Customer Officer and AI Enterprise Advisor
Kellie Romack — Chief Digital Information Officer and ServiceNow’s own first customer
Jacqui Canney — Chief People and AI Enablement Officer
Gina Mastantuono — CFO and President, oversees AI investment strategy
They don’t just span functions; every one of them is also accountable for pieces of the AI puzzle. There’s no Chief AI Officer because they all are. That’s how AI gets embedded into the business, not passing the buck to the dedicated “AI person.”
Org design
ServiceNow teams are organised around products, which is an improvement over organizing by function and great for innovation speed. However, it’s not ideal for customers who buy multiple products — which is most of them. Best practice is organizing by customer segment, but hey, with 98% renewal rates I won’t poke holes. They likely have a customer-centric overlay to fill any gaps, although this does add an unnecessary coordination layer that will vanish if they move to 3D.
3. Measure value, not activity
ServiceNow is more rigorous than most software companies about proving impact. Customers set specific targets in their Impact portal — cycle time reductions, incident rates, audit timelines, first-contact resolution — and the platform tracks them in real time.
Even better, they translate these operational wins into financial terms: hours saved multiplied by labor rates, cost avoidance, and so on. It’s a serious attempt to connect the platform to actual business value.
But operational improvements are not the same as true customer outcomes. Faster ticket resolution and lower incident rates are a great start, but whether those changes lead to improved customer lifetime value, revenue growth, or sustained margin expansion is a different question that ServiceNow won’t be equipped to answer unless they level up to 3D.
This gap is the classic 2D ceiling, and it’s where the most interesting part of ServiceNow’s evolution begins.
It’s rare to find a customer outcome that any single company can deliver on its own. They usually require a mix of capabilities that are just too expensive for one company to tackle. That takes us into 3D territory: orchestrating ecosystems to create outcome-based value. ServiceNow is halfway there.
The 3D horizon
In part 1, I used game analogies for each level. If 2D is chess, then 3D is Go: a game where value is not intrinsic to each piece, but instead emerges through the right combination of stones to achieve a goal. In the business world, most of those stones you don’t even own.
The example I shared is Haier, the Chinese company that’s in the business of living well, not home appliances. They draw on two ecosystem principles of 3D companies, modularity and orchestration, to deliver custom outcomes at scale.
Here’s how they do it.
A few years back, CEO Zhang Ruimin reorganized 80,000 employees into 4,000 autonomous micro-enterprises, each functioning like an independent startup with its own decision-making authority over hiring, distribution, and capital. These aren’t temporary teams; they’re stable, specialised capability units.
When an employee spots an unmet customer need — say, easy family dinners for working mothers — they’re empowered to form an Ecosystem Micro-Community: a temporary alliance of micro-enterprises and external partners configured around that specific scenario, contracted to provide their respective modules: the smart refrigerator, custom cabinetry, even recipes and cooking guidance. When the job is done, the alliance dissolves and the pieces recombine differently for the next one. This scenario-based approach falls under their SanYiNiao brand, which is growing at 100% year over year.
The approach is used for products too. A customer enters exactly what they want: let’s say a 2-door refrigerator with a dual ice-maker that churns out round ice cubes, a 60/40 fridge/freezer split, and a family photo printed on the door panel. Lighthouse factories then combine pre-made modules – some by Haier, others like touch screens and compressors are ordered in real-time from partners – with custom fabrication on the same factory line. Ta da!
COSMOPlat is Haier’s industrial internet platform that makes all of this possible from order to production. For SanYiNiao, the scenario brand, it handles the sourcing, matching, coordination, and smart contracts that govern how micro-enterprises and outside partners work together. IoT, AI, big data, blockchain… it’s a technologist’s dream. And if you’re in manufacturing, you can license it.
ServiceNow’s 3D foundation
While ServiceNow is a very different kind of company, the ecosystem principles and opportunities are the same.
Everything designed to meet a customer need or scenario
Solutions are modular and compiled dynamically
No one tries to do everything; it takes an ecosystem
Everyone in the ecosystem benefits: it’s win/win/win all around.
ServiceNow is making good progress; let's say they're at 2.5D. Here’s what they have in place now:
Partner program
Every major tech company has a partner program, but most are distribution plays: you sell licenses, partners get certified, you collect your margin, everybody’s happy. What ServiceNow is doing with theirs is more strategic.
Joint development of industry-specific playbooks and workflows
A composable agent marketplace where builder partners list modular, reusable agents that are accessible by both customers and delivery partners.
Outcome-oriented incentives. ServiceNow’s Market Development Fund and new Strategic Investment Fund reward partners for driving measurable results, not just closing deals. This not only raises the quality bar; it’s yet another way to keep the whole ecosystem aligned.
A tiered standards architecture. At higher tiers, partners’ agents must be able to discover, communicate, delegate, and coordinate in a governed way, not just “work with” the platform via loose integrations.
ServiceNow refers to their platform as a System of Action, but I prefer to call it a “Standard of Record” for agentic business: they’re setting the rules, protocols, governance and measurement standards that the entire ecosystem builds to, rather than just with.
Modular or reusable building blocks
At 3D, everything needs to be modular, not just software. ServiceNow is on the right path with repeatable playbooks, success packs, task-plan templates, workflows and blueprints for different sectors and use cases. It’s a fantastic start, but ServiceNow still has a ways to go before becoming a true 3D business.
The 3D move: transforming the ecosystem
Before we dig into how ServiceNow could evolve, it’s worth spelling out why they’d even bother. They’re already a market leader with 98% customer loyalty. But AI’s continually moving the bar, and there’s plenty of room for improvement, especially on the services side of the equation.
There’s a reason I want to shift gears into consulting services, just bear with me.
Can we all agree that the consulting model is broken? High costs, slow delivery, uncertain ROI. Clients pay for time, not outcomes, so there’s no real incentive to change. Until now, anyway, because AI’s disrupting that business model. Which means the shift to outcomes, not outputs, is already underway.
Why should ServiceNow care about their delivery partners’ business model? A 2D company would shrug and say it’s not their problem. A 3D company, on the other hand, understands that their own success is entangled with that of the whole ecosystem. And the only way to truly take the future into their own hands is to be an ecosystem enabler, not a participant. Especially when their own ability to deliver outcomes is constrained – or accelerated – by partners.
So now let’s imagine a Haier-like version of ServiceNow, dynamically orchestrating all parts of the ecosystem to achieve measurable customer outcomes.
This approach includes:
Modular templates: Delivery partners have productized their expertise into standardized, reusable outcome templates for specific customer scenarios like resilient supply chain coordination or clinical asset optimization
Fully modular agents: Builder partners are designing agents to plug into these templates, not just into ServiceNow’s platform.
Dynamic assembly: ServiceNow’s platform now assembles the right combination of modules for each scenario — pulling in the appropriate partner templates, agents, and workflows on demand, governed and measured through the Control Tower.
Outcome-based platform functionality: To accomplish scenario-based outcomes, technical partners contribute to the platform to add automation to every transformation stage (see IT help desk example below — ServiceNow would handle the Configuration stage, but there’s plenty of automation opportunity in other stages too, and no reason why SN would have to build it all).
Smart contracts serve as the decentralized governance and financial ledger, eliminating manual procurement. It handles SLA tracking and conditional multi-party revenue splits.
Transparency: Every module’s performance is measured, scored and ranked, introducing much-needed transparency into what works and what doesn’t.
Flywheel of improvements: Reused templates generate richer data with every deployment. The AI gets smarter, recommendations improve, and outcomes get stronger.
The following help desk scenario isn’t automating the help desk; it’s automating the consulting process to deliver this scenario — which means a lot of new platform functionality that could be built by the ecosystem.
This approach benefits everyone.
Customers get to measurable business outcomes in less time, with less risk, lower total cost, and far greater predictability.
You might think delivery partners would resist it, but they get plenty of perks:
They don’t have to invest in transforming their own processes if they run on ServiceNow’s platform.
They can now charge for outcomes, not outputs, because ServiceNow is measuring impact.
Firms can run 3x to 4x more projects concurrently with the same headcount.
They focus their time and resources on solving the messier work that can’t be automated and where the real value lies.
They can create new revenue streams by licensing their high-performing templates.
There’s better visibility for partners based on performance, not marketing budgets.
And of course ServiceNow benefits too:
Deeper platform stickiness and defensibility for customers and partners
Ecosystem partners add to platform functionality and maximize network effects
The most valuable database in the world: ServiceNow knows exactly what moves the needle on AI transformation.
And it unlocks new markets.
By lowering cost to serve through automation, ServiceNow can now move downstream to mid-market.
Then spin up vertical-specific ecosystems. I’d reorganize the team internally around these customer segments — like Haier, they’d be micro-enterprises that deeply know the customer and can orchestrate partners and technology to accelerate outcomes.
Bottom line: it’s about territory
Someone in your sector will take on this ecosystem-hub role eventually, and when they do, no one will be able to catch them. This is why I use Go as an analogy: the player who controls the most territory wins.
ServiceNow’s bet is that the most valuable territory in the agentic era isn’t any single AI capability, but rather the organizing layer that governs how all those capabilities come together. A 3D operating system will help them own more territory with less investment.
If they succeed, partners and customers will naturally build to ServiceNow’s standards, measure on their platform, and assemble outcomes through their ecosystem. ServiceNow won’t need to own every Go stone because they’ll own the board.
This is a territorial moat, not a product moat. And in Go, territorial moats are the ones that win in the long game.
Your turn.
What ideas can you borrow from ServiceNow to drive better customer-centric performance?
What ideas do Haier’s operating model or COSMOplat platform inspire?
What ecosystem do you already operate in, and how could you be the central hub?
PS. I’m sure you, my dear smart reader, have loads of holes to poke and I’m happy to field your comments and questions. I spent quite a bit of time beating this up in AI. And for any ServiceNow peeps, if I’ve gotten any facts incorrect, please let me know.
While my main expertise is shifting clients from 1D to 2D, I’ve been thinking about this ecosystem approach for ages. 20 years ago I helped design a dynamic developer community for Microsoft. Then a cross-sector ecosystem approach using collaboration and big data to solve deforestation for the World Resources Institute. A community systems change solution in Nigeria for Shell. And I’ve kicked around two startup ideas along these lines in the past couple years.
So if you’re curious about what a 2D or 3D version of your company could look like, let’s dig into it.
