Monetizing your digital transformation

The “Digital Revolution” is turning 70 yet the complexities of digital transformations still overwhelm decision makers. To ease executives when it comes to monetizing this process, we boil the entire digitalization universe down to just two top-line topics: Product & Channel. 

Looking back on hundreds of recent industrial-monetization projects we see persistent trends. Sure, the nomenclature changes, but challenges are consistent and the strategies to solve them are sound. Therefore, industrial leaders only need to consider two axes when thinking through monetization in the digital context.makers. To ease executives when it comes to monetizing this process, we boil the entire digitalization universe down to just two top-line topics: Product & Channel. 

Axis 1—Product: The accelerating rate of technology makes this an exciting area to explore, but executives must decide between adding digital elements to existing products or creating net-new digital offerings. 

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Simon-Kucher & Partners' Adam Echter

(We occasionally witness a third option, convert physical products to digital products. This upended media industries in the late 90s and struck fear in the hearts of executives everywhere. Today, we calmly reflect on the rarity of this occurrence, that industrial businesses have been largely unscathed, and embrace the fact that plasma-cutting tables and liquid-ring vacuum pumps won’t be digitized any time soon.)

Digitizing existing products can be intimidating but the vast majority of industrial firms have already integrated some degree of sensors, controllers or software into their traditional products. The process is underway. Seen through the lens of just two choices (and assuming that you’ve already advanced one) we seek to strip away the anxiety associated with the larger process of digitalization and remind that these challenges are nothing more than classic product packaging-and-pricing questions that we are well prepared to tackle.

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Figure 1 highlights the conceptual migration from analog to digital PRODUCTS

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Axis 2—Channel: Channel has proven the laggard of interest and understanding but is poised to be a major disruptor in the industrial space. Said another way, channel is simply the way in which a company interacts with their end-users. Industrial businesses historically use some combination of outside sales, inside sales, manufacturer’s reps, and distribution partners to access their customers. There is no “right” or “wrong” channel. Each comes with pros and cons.

What changed with digital is that new channels were created, efficacy of traditional channels has been challenged, and customer’s purchasing expectations shifted.

Industrial executives today face common challenges: Should we create an eCommerce portal for our end-customers? Can I removed outdated participants of my distribution chain and capture additional value?

Unlike the product innovations many firms were quick to invest in, channel disruption is the domain of agreed mutual ignorance to avoid the hard conversations around disrupting entrenched business relationships. To the chagrin of many, the tide has now shifted and ignorance has become an increasingly difficult strategy to maintain.

To calm the nerves of tenuous channel partners, industrial leaders need to recognize this is not a seller-driven change, it’s a purchaser-driven one. Industrial-purchasing preferences have finally caught up to the consumer-purchasing preferences that individuals inside firms experience in their daily lives. This is driving demand for self-service websites, 24/7 customer service, and multiple paths to engage industrial companies. Even in fast-moving industries, established relationships don’t disappear overnight, but the value of these relationships has been forever altered and must be addressed.

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Figure 2 highlights the conceptual migration from analog to digital CHANNELS

Collectively, this thinking gives decision-makers a framework to view the entire universe of top-line digitalization challenges. We have yet to meet a digitalization challenge that we have not been able to deconstruct into this thinking to help lower concerns and get teams working toward solutions.

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Figure 3 an integrated framework of top-line digital challenges

Positioned accordingly, we believe industrial leaders can distill the top-line challenges of the nebulous world of digitalization to these straight-forward and addressable topics. Each has a body of work behind it and best practices to solve the specific challenge. Our hope it that readers can identify the degree to which they have evolved their businesses and can now better define the path ahead using this quick blog piece as a guide. 

Best of luck in advancing your top-line efforts. 

Adam Echter is a senior director with Simon-Kucher & Partners.