What characterizes digital B2B business transformation?

This text was first published on the Ericsson Networked Society blog on August 28, 2017

Digital transformation refers to a journey where the destination is what a business will look, like once the transformation is complete. The reason for transformation can vary but there are trends that can be broadly identified.

Triggered by digital disruption

Digital disruption is shaping the future of businesses and market segments. It is enabled by a technological shift, where superior customer offerings become possible. A disruption can happen at the infrastructure, operational, or business-model level.

Businesses can play different roles, depending on their starting point. Start-ups play offensively to disrupt an existing market category. Established players tend to play defensively to neutralize the disruptions. Both aspire to serve the new market with similar offerings in the long term, where digital plays a key role in sales and delivery.

Centered around innovations driving user value

Digital innovations often start around customer-led innovations. Here there is potential for disruptive innovations to offer significant performance improvements by through simplification.

The first option is pricing simplification; simplified business models combined with significant discounts to create rapid growth. Amazon Web Services’ cloud offering is a great example of this strategy, where prices for comparable services are dropped constantly.

The second option is proposition simplification; where you offer simpler ways of using a product or service.

Software-enabled offerings

Software plays a central role in creating digital business value. This is true for pure software products, and hybrid offerings where software enhances a physical product. A software-based approach delivers two primary benefits. First is the ability to upgrade the offering in steps, without changes to the physical product. Second, the ability to measure products in usage as a basis for improvements, from detailed information about actual use.

Incremental development

Digital businesses rely on incremental development – refining the offering in steps based on customer feedback and structured around an agile development process.

All digital businesses follow a similar path. Prove the technology with a minimum viable product and an early launch. You then refine the offering in small iterations based on measured input from real customers using your offering.

Customer engagement starts digital

The digital business paradigm has changed the way we sell our offerings, as well as changing the offering itself. Digital businesses support a customer-decision journey that starts in the digital realm and finishes with an online sale or an interaction with sales professionals.

Digital businesses integrate marketing and sales functions closely to support this reality with tailored, digital journeys as the foundation. These journeys are designed to support buyers at each stage of the buying process, helping customers to make buying decisions and are more complex than digitalized sales pitches.

Interpreting data is crucial

Digital businesses thrive on data and collect vast amounts from both the sales process, and how products perform in use. Here, algorithms required to turn data into actionable insights are key.

A traditional business can be very business-case driven and focused on numbers. The big difference though is where the numbers come from. A traditional business aims to use quantified market estimates, which works fine for predictions in stable markets. Digital businesses, however, are more volatile and rely on real-time measurement, allowing management to respond rapidly to more dramatic changes. They interpret large volumes of data and facts, rather than make predictions.

High degree of automated work flows

Digital businesses have a high degree of automated work-flows for both customer-facing and internal processes. Digital workflows deliver faster and more accurate output at a lower cost.

The digitization of value-adding flows for customers play a critical role, as a prerequisite for capturing and analyzing more data. Capturing more and more data in classic flows can create bigger operational bottlenecks. A good strategy is to get the flows straight first, and then to digitalize.

Exploiting digital business models

The last most important aspect of digital businesses transformation is new business models; models where you can charge for your offerings in new ways that better match the value provided, rather than reflecting your own cost structure.

The most common digital business model is consumption based, where you sell your offering as a service, rather than having to be cheaper for a longer-term total cost of ownership. The goal is to make buyers comfortable in paying for the service, in a way that correlates with their own business.