Digital Champions Don’t Just Digitalize, They Monetize Too. Are You One of Them?

June 22, 2018

Digital Champions digitalisieren nicht nur, sie monetarisieren – sind Sie einer?

Complete our digitalization check now  10 questions in 5 minutes: www.simon-kucher.com/dmms.
Investment in digitalization initiatives is often considerable. Unfortunately, many companies fail to monetize successfully. Our Digital Maturity & Monetization Score (DMMS) uses a benchmark comparison to help companies identify their strengths and weaknesses in terms of digital maturity and monetization and shows them the next steps toward becoming a Digital Champion.

Digitalization will continue to be a major influence on business growth, strategic direction, and financial success worldwide for years to come. According to our Global Pricing & Sales Study 2017, 81 percent of all companies have invested in digitalization initiatives in the last three years. The objective behind three quarters of these investments was to increase revenue. However, it had surprisingly little impact. Only 23 percent of these companies report that their investments in digitalization have had a noticeable effect on their revenue. This is particularly dramatic when you consider that, going forward, significant cost reductions will become less feasible, so revenue growth will have to be the main driver of future profit.

Awareness of digitization should never be one-dimensional
In order to lay the foundations for this growth, companies have to define a solid digitalization strategy to monetize their efforts. Digital maturity must always be accompanied by digital monetization (see figure 1). They are two sides of the same coin. The Digital Maturity & Monetization Score (DMMS) is a part of the method developed by Simon-Kucher & Partners that builds on this philosophy.

The DMMS shines the spotlight on digitalization. As well as providing a pragmatic self-assessment to evaluate the current circumstances, it also acts as a benchmarking tool, offering companies valuable information about how they perform in a direct comparison to their most successful competitors. By re-evaluating the DMMS over a longer period of time, companies are able to follow their progress and see whether they have caught up in the benchmark comparison or whether they have fallen behind.

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Figure 1: Example score positioning on a two-dimensional matrix with the typical spread of the ideal path (www.simon-kucher.com/dmms)

DMMS: Not only diagnoses the status quo, it also advises on what action to take

The DMMS works in two different ways, as both a score and a whole system. The score enables companies to position themselves in the DMMS matrix, as shown in figure 1. The company’s positioning is calculated from the answers to five questions, which are asked for each dimension. (www.simon-kucher.com/dmms).
Building on this audit function, the system provides a comprehensive management approach and framework (see figure 2). It is designed to close gaps in digitalization progress and always keep monetization in focus.

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Figure 2: Overview of the DMMS framework

Digital Champions aren’t born, they’re made
After completing the DMMS self-assessment, companies often find that they are either a Digital Straggler or a Digital Leader, depending on their level of prior engagement with digitalization topics. In the financial services industry, fintechs often score better on digital maturity than traditional banks and come out as Digital Leaders. Nevertheless, many of them are still not able to monetize their digital approaches effectively.

Whereas Digital Stragglers have to start by increasing their digital maturity, Digital Leaders have generally taken significant strides already. Their next step is to use their existing digital maturity and reach to generate stable high revenues and enter the profit zone with their digital services. Companies that are Digital Champions have to continually improve and defend their digital business, otherwise, there is a danger that they will become Digital Falling Stars. These are companies that have been overtaken by more innovative providers (as happened to Yahoo) and now struggle to not fall even further behind with their already monetized products and services.

First get reach, then get rich
Striving for the necessary level of digital maturity and then finding the right time to start with monetization – this is the core principle of the DMMS. Digital Champions, such as Facebook or Google, demonstrate how you should first build up massive “reach” and then “get rich”. Other companies, such as Airbnb, are following in their footsteps. Among financial services providers, PayPal is a good example of how to do it right.

In order to grow and expand your reach in the era of digitalization, a few new rules have to be followed. In the past, it was all about selling more products. Today, it is about getting as many customers as possible to use your platform. Only when customers use your platform and not your competitor’s will you have direct digital access to sell to the customer and acquire valuable data on usage behavior. User-friendliness, simplicity, and relevance are only some of the important factors in winning the battle between platforms.

Now monetization needs to be addressed. Remember, that even if “get rich” comes second, the get-rich strategy needs to be defined from the start. Selecting the right monetization model is an important second step. Subscription, freemium, and many other innovative models have to be considered. “Getting rich”, i.e. generating stable revenues and profit, depends on whether you can overcome the up- and cross-selling challenges of the digital world.

Rate and manage the monetary side of digitalization with the DMMS
Evaluate your DMMS at www.simon-kucher.com/dmms and find out where your company is currently located on the digital maturity vs. digital monetization matrix from figure 1. Alternatively, contact our industry experts for a comprehensive audit.