Alan Kelly, Director, interviews Board Member and UK Managing Partner Mark Billige about how digital transformation is disrupting business models and where digital business opportunities exist.
Alan Kelly: Digital transformation is a hot topic at the moment. Do you think this is a disruptive force for traditional business models?
Mark Billige: Fundamentally, digital transformation is all about business model impact, and answering core questions about how we create more value for our customers. So really, this is about how do we open up new revenue opportunities. Let’s be clear though– these kind of transformations are not IT projects – digital technologies are simply the enabler for these opportunities!
Alan Kelly: So where do clients find these opportunities?
Mark Billige: They lie across two dimensions: ‘Channel’ and ‘Product’. The digital age has the ability to disrupt both in different ways:
- Channel: We’ve seen lots of channel disruption. Companies either adding additional digital channels (e.g. web shops/mobile apps) to their existing routes to market or disintermediating parts of the value chain (e.g. travel agents, brokers, distributors etc.). The impact of these profound channel changes has been drastically lower costs to serve and barriers to entry.
- Product: We see a raft of changes in this dimension too. First we saw digital disruption with the digitalization of physical products such as newspapers, music etc. This has now evolved to the digital enhancement of physical products such as smart cars/homes etc. as well as wearables. Going forward, we’re seeing a trend where a digital service layer is added on top of physical products.
Alan Kelly: You make it sound simple, but how successful are companies at monetizing their digital initiatives?
Mark Billige: It’s definitely not straightforward for firms. We know from our most recent Global Pricing & Sales Study that 81% of companies have made investments in various digital transformation initiatives yet only 23% have achieved revenue growth. In general, companies spend too little time focusing on the monetization discussion or leave it far too late. Best in class companies think through the revenue model in conjunction with, rather than at the end of, the transformation process. Time and time again we see companies that have failed to recognize the full extent of benefits that they brought to their customers with their digital innovation. And so priced their offering too cheaply.
Alan Kelly: What should companies be doing to avoid falling in to this trap?
Mark Billige: It’s really all about understanding value of your products and services. We help our clients break “value” down, quantify the component parts, and how different customers perceive it. And then figure out the best pricing, marketing and sales strategies to extract it.
It’s a complex undertaking that requires careful consideration of all the elements described or they will ‘leave money on the table’. But by placing monetization at the center of their digital transformation strategy, companies can ensure the best outcome from their digital initiatives.