COVER STORY OF THE MONTH

CREATING NEW DIGITAL REVENUE STREAMS

A famous quote goes “Change is the law of life and those who look only to the past or present are certain to miss the future.” It used to take Fortune 500 companies twenty years to reach a billion dollar valuation. Start-up unicorns are now doing this in less than three years. Thanks to the numerous opportunities enabled by digital, enterprises are no longer investing in digital technologies only for automating existing processes. Increasingly, enterprises are going beyond just cost reduction opportunities, to transform processes, launch new business models and deliver superior customer experiences. The role of a marketer is also significantly changing. As the quote from PJ Pereira, chief creative officer and co-founder at Pereira & O’Dell goes “Think like a marketer, behave like an entertainer and move like a tech start-up.”

We’ve seen several of these new business models that have the potential to create a completely new industry. New business models have fueled an entirely new channel of revenue for enterprises like never before.

There are a variety of new revenue models that have emerged in the past few years. Some of them include:

• As a service go-to-market model
• E-commerce marketplaces, multi-channel experiences
• Offering experiences that reduces customer churn and builds loyalty (aka Disney)
• Data driven new business models by leveraging existing customer & other data (like Michelin leveraging telematics)
• Crowdsourcing / crowdfunding
• Leveraging the ecosystem better – for instance Citigroup’s way of leveraging customer distribution channels to sell direct marketing programs to insurance companies

Several enterprises have currently less than 10% of their revenues from digital. Most of these could be coming from existing business models. How can they look for a larger share of revenues from existing models? Importantly, how can enterprises create new business models with digital? Enterprises need to be able to find a way to build revenues via new customers and new offerings.

The first step in the process is to ask a new question. The old ones have already been answered by your peers. There may be a lot of existing data and assets that can be monetized in completely innovative ways. This is far more than leveraging technology (including mobile and analytics), but requires thinking in terms of how existing resources can be leveraged to build revenues in completely unique ways. The following could serve as some guidance in this matter:

• Customer Intimacy: Looking at customer experiences and needs vs. what the market is currently offering is essential. In several instances, the customer is not even articulating clearly about their needs. But an enterprise needs to think in terms of how the future of industry will look like, and how they can offer unique experiences that will either lead to building new channels or reduce customer churn.
• Pricing models: This requires thinking around how new pricing models can be looked at that can build scale and volumes vs. driving value. What are the underlying resources that are being exchanged and what kind of innovation possibilities exists around pricing models. Some examples of this are as a service model, outcome driven model, leasing, offering something for free (in order to sell something else) etc.
• Evaluation of the underlying offering: In a digital world, the possibilities of what can be offered are many. Enterprises need a re-look at what is being offered to customers, in the context of insights coming from various sources including insights on customers (say blending sensors and analytics), competition, and the new possibilities that can be built including partnerships, bundling of solutions etc.
• Leveraging new channels: Digital presents a variety of ways to take an offering to market. Understanding the various channels and go to market, together with innovations that can be done on top, will serve as potentially new ways of building revenues.

New monetization strategies requires re-imagining the business model in ways that can leverage physical and digital resources in newer ways. A digital think tank should be put together comprising of functional heads from key functions, who act as thought leaders and are assigned the responsibility of putting together a strategy and execution plan.

It is imperative that digital strategy and execution plans are an intrinsic part of a company’s strategic plan. Even more important, is to continuously measure and refine the plan such that it aligns with an enterprise’s overall strategy for market share and growth.