COVER STORY OF THE MONTH

New Digital Revenue Streams

According to the IDC study, “One-third of the top 20 firms in industry segments will be disrupted by new competitors within five years,” and that it’s a matter of “transform or perish.” The report also states that 80% of CIO’s will have a plan in place centered on using information to drive business against competition. While digital transformation is crucial to drive growth, it is also predicted that “70 percent of siloed digital transformation initiatives will ultimately fail because of insufficient collaboration, integration, sourcing or project management.”

It is virtually impossible to achieve success in digital transformation without support from the leadership and the functional teams within an enterprise. It is a known fact that a company’s strategic vision is only as good as the people behind it. It is imperative therefore to ensure that the team that champions digital initiatives should be able to translate that vision to all functional stakeholders in a manner that they are completely able to get on-boarded. The job is only done when the functional stakeholders see a personal win in the success of such initiatives. Getting a good set of champions for digital is paramount to its success.

Once the team is in place, what is the best way for enterprises to navigate a digital transformation. One of ways could be to use a three step process that we could call AIM.

The first step is to Assess the current state. While every step in the process is important, this is probably the most important as it sets a foundation for creating a digital vision. At this stage it is important to:

• Analyze the existing business models including a complete inventory of the underlying assets in this model and how they interplay. What are the key strengths that is ensuring adoption of products or services in the marketplace – is it skilled people, is it IP, cost, scale, some underlying assets etc.
• Analyze what the ecosystem looks like – complimenting players, key competitors, partners, vendors, new entrants etc. What their expectations are, how they are being reached, how do they interplay – essentially get a complete understanding of every important element.
• Analyze and further validate what the customer states and their subtle requirements. What kind of experiences may excite them. How much are they willing to pay as premium for value delivered, and what are the socio economic factors in the target geography
• Assess and have a good understanding of the enterprise’s own culture, principles and values

The next step is Invest. It is important at this stage to:

• Invest time and effort in visualizing a new business model. This could include taking the output of the analyze stage and further visualizing a new future that the enterprise could create in collaboration with its ecosystem including distributors, investors, partners, communities and perhaps even competitors. In today’s world, everything can be made into a platform – music, taxis, software even money. API’s are not really meant only for software geeks or developers but could potentially anyone with a passion for digital innovation could use API’s to solve practical problems and add value. Completely new asset classes could potentially be created by exposing assets or resources via API’s. This could lead to new forms of revenues, facilitate open innovation and even help enterprises reach newer geographies and segments. Sometimes there is no need to reinvent the wheel – even existing products and services could be taken to market in completely new ways by orchestrating them to perfection and creating new user experiences.
• Invest in defining the monetization model: What is the targeted business model looking like – will it be subscription based, freemium, marketplace, experience based, on-demand etc.
• Invest in creating a pilot: Operating pilots of the various initiatives by investing a small amount of capital would be the next step. This will mean that the core team has the mandate, funding and freedom to experiment, learn and change with minimal supervision.
• Invest in doing a sanity check: A constant sanity check in terms of the success of the pilot versus its ultimate targeted outcome is required in order to not get carried away with the success of individual pilots.
• Invest in continuous communication and collaboration: Collaboration and investing in communicating with the ecosystem will need quite a lot of time and effort, to get them onboard and ensure that they see value in the initiative. Together with the internal teams it will be important that each stakeholder feels a part of the initiative and takes pride in its success.

Measure is a very important activity. Defining and reporting the key metrics from time to time will enable early identification of potential issues, and tweaking or making amendments in time as required. This will need some change management as these new KPI’s could be new to the enterprise. The metrics themselves need to be set initially, to not only capture additional revenue or profitability, but also perhaps include aspects such as number and quality of interactions, the strength of the network, changes in relationships, new sets of customer segments etc. Measurement must also be done internally to understand where employees are on a scale relating to adoption and measuring the new skill sets that are being acquired. Managing and measuring risks and proactively identifying ways to mitigate risks is imperative to the success of the initiative.

New revenues with Digital is an intrinsic part of corporate strategy. It is expected that by 2018, 67% of the CEO’s of Global 2000 enterprises will have digital at the center of their corporate strategy. Differentiation and loyalty will only be achieved when an enterprise continuously innovates and makes itself relevant in this highly changing world. This requires a lot of commitment. Established business models requires constant re-evaluation in a disruptive age. An enterprise which creates a nimble, self-sustaining and durable process is the one likely to be closer to staying most relevant. Willingness to question long held beliefs that govern existing business models, and maintaining a positive outlook to embracing change is a fundamental step to creating a new approach.