The Future is Not Here: Win at SaaS as a Digital Realist

In 2020 everyone is using search-engine optimization, marketing automation and CRM systems. Data supports us in making the right decisions. We communicate smoothly using modern tools.

Isn’t it a digital dream come true? There is a tidal wave of connectivity sweeping across the globe. Now must be the moment in history when we as IT professionals should see great results with low effort.

I’m going to be the wet blanket and say that the future is not here. Sure, the state of consumer electronics in 2020 is enough to make your jaw hit the floor. But when it comes to the general degree of digitalization in businesses, we have a long way to go.

If you are working with software business-to-business relationships, a clearer understanding of the digitalization terrain can help you avoid some risks. 

A short but sweet glossary

In order to at least be a pedagogical wet blanket, I will define my terms.

Digitization means you start with analog information. Then you change it into a format that can be read by computers as zeros and ones.

Digitalization describes a process. It’s a movement towards putting the data you have to good use. As you digitalize, it becomes easier to gather new data and learn from it.

Digital intensity can be used to describe the state of a business’ digitalization journey. Digital intensity concerns both which digital tools are used and how much they are used.

Digital transformation happens when the digitalization wheel spins faster and faster. You start using a larger number of digital tools and using them more. You become better at picking the right tools. When you start thinking digital, you start allowing the tools to change the way you generate value.

2020 will be considered the Stone Age

Less than a fifth of companies in the EU have achieved a high degree of digital intensity. This takes into account aspects such as access to fast internet, automated invoicing, web-based sales and smartphones for employees.

For the EU as a whole, only 17,8% of companies invest in more complex, cloud-based tools. Even Finland – at the top of the list – can only boast a 50% cloud adoption rate.

Graph: The European Commission (2019)

Not surprisingly, the computer programming sector leads the way when it comes to digital intensity across different sectors. But even here, less than 70% of companies are considered to have reached a high or very high digital intensity index.

Graph: The European Commission (2019)

Being able to showcase specific tools isn’t the only measure of progress in a digitalized world. In my work as a customer success associate, I see a wide variety in the way our software is adopted. Some customers make full use of the capabilities – the rest use only parts of it even if it would make sense to deepen the usage. I dare to say that this is true for software used in business, in general.  

What seems to be the problem?

It seems like there is a giant portion of businesses who are still waiting to see major digital transformation happen. What could be the reasons for this?

Photo by Andre Hunter on Unsplash

Corporate culture

It’s one hundred percent possible for a company to spend millions on digital tools while failing to empower individuals. Without individual mandate to act, companies can struggle to make the best use of available data.

Traditional corporate structures were built on the basis that only senior management had actionable data points on which to base meaningful decisions.

It’s only when organizations take information and run with it that they can keep a competitive edge, and not giving people the mandate to act will block the massive initiatives needed to achieve a digital transformation.  

Image credit: Marc Jost Culture can both inhibit and drive digital transformation.

Unrealistic self-image

Leaders might think they are leading digital-minded organizations when they aren’t.

Having an overly optimistic self-image means leaders will not prioritize improving the corporate culture – missing the opportunity to create a culture more supportive of digital transformation.

 “Transformation usually implies moving from one fixed state to another, yet digital transformation at its best involves a journey from inflexibility to a ‘permanently agile’ condition.” Thinking the organization is highly digitalized only because a new tool was brought in is way too common.

Things are going too well or not well enough

A company has a limited number of hours per day. When the business is thriving, new customers need attention. Products need to be developed. It’s natural to focus on core business and the things that are already generating revenue. Increasing efficiency with the help of digital tools might not be seen as a top priority since the current state of affairs is working just fine.

Difficult times can result in the same kind of tunnel vision – focusing on keeping the core business floating. In order for anything to happen, the importance of digital transformation needs to be promoted internally in order for a business to decide that now and not later is the time to implement new digital tools and processes.

Many of the actions supporting digital transformation can actually be done even under stricter budgetary conditions: increasing transparency between functions, developing skills, and other “soft-value” actions that require more of leadership but not necessarily more in terms of resources. 

Commercial risks for software providers

Even for a provider with consistently high customer satisfaction ratings, you will at times suffer the consequences of overestimating digital progress in the companies you serve. I’ve attempted to summarize some of the risks involved.

Bad word-of-mouth

If a company:

1. is in the early stages digitalization but thinks of itself as highly digitalized,
2. wants to add a new tool on top of its current processes as opposed to evolving the processes to match the capabilities of the tool
3. doesn’t want to communicate its needs to the provider, or
4. all of the above

 … it’s quite likely the project will not go that well. Unfortunately for the provider, the best of efforts can still result in bad word-of-mouth since the preconditions were not good to begin with.

Overspending

There is a lot of effort in the software industry being spent on looking after customer needs. We want to make sure they learn the product and get value out of it. If, however, the customer is too lost in digitalization, we run the risk of losing them before gaining back the cost of acquiring and onboarding them.

Scattered efforts

When a portion of the customer base is lost in digitalization, it will influence discussions on what strategy to adopt. This can result in trying to make some customer relationships low touch while spending large amounts of time and effort on others, but without a clear reason for why.

“False” product development input

Companies that are in an advanced stage of their digital transformation journey and have adopted a digital mindset ask for other software improvements than those who are just starting out. Without a clear view of who the product should be catering to, it can be an easy trap to go after all customer improvement requests at once. This can at worst blur the unique niche that the product should be in and take up developers’ time adding features that are not logical or optimal in a digitalized world.

Minimizing risk with the right questions

What questions can we ask in order to help our bottom line and minimize risk? In my mind, these questions can be divided into two categories: those on the supplier/software company’s side and those on the buyer/customer’s side.

Photo by Mike Meyers on Unsplash

Questions for software providers to strategically handle customers whose digital transformation is blocked

• Are we brave enough to pass on a sales opportunity if the timing is not right? Do we have the experience needed to know when the supplier-buyer relationship will bring more harm than good?
• How high is the cost of acquisition of the account in relation to the total potential value? Is there room for resources to be spent on coaching the customer in their digital transformation? What would be the opportunity cost of spending these resources?
• Is the customer open to being assisted and coached, or are we preaching to deaf ears? Do we know when to cut our losses?
• How can we improve the product to suit the less digitally mature portion of the market? Do we want to? If so, how can we do it without compromising the general vision of the product?
• Do we need to address both a low-touch segment and a high-touch segment in our customer portfolio, or pick one? What will be the difference in handling them?
• If we are to challenge the customer, do we have the courage as a team to step out of the conventional hands-off, the-customer-is-always-right-attitude? Do we have the humility?

Questions for software customers to increase the chance of the software becoming a useful tool

• Do we have an understanding of our operational needs? Have we really distinguished between nice-to-have and need-to-have features before buying? What will be the impact on the business once the software is implemented?
• Have we selected a project manager for the implementation? Will the product specialist (the person whom the staff will ask for help) be the same person?
• Are we willing to invest time now to save time down the road?
• Where are we at in our digital transformation journey? What is our digital intensity level? It can help the customer success representative if they know what other tools the business is using and how they are used.
• How many in our organization are digital natives and how many are sceptics or late adopters? What is our organization’s general attitude toward new tools and technologies?
• What kind of blockers do we see internally? What can we as a project managers or leaders do ourselves to remove blockers? What do we need the supplier’s help with?
• Are there any blockers that are so great that we do not know how they should be handled? Can our project manager and the supplier’s project manager think of a solution together?

As a software company or software buyer, what questions would you add to the ones listed?

Thanks for reading so far. Don’t hesitate to reach out here on LinkedIn for further discussions.

Additional sources

https://www.forbes.com/sites/jasonbloomberg/2018/04/29/digitization-digitalization-and-digital-transformation-confuse-them-at-your-peril/#9373dee2f2c7

https://www.cio.com/article/3513849/the-state-of-digital-transformation-in-2020.html

Image, Boost or blocker: https://blogs.mulesoft.com/author/amanciobouza/