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5 Business Model Shifts To Monetizing Digital Transformation

By  Erik Raper Erik Raper  on 2016-06-09 12:07:48  |  Featured in  Financial Services
Erik Raper
Posted By Erik Raper
in Financial Services
on 2016-06-09 12:07:48

Monetizing.Digital.Best.Practices.2016.jpgThe phrase "digital transformation" in business today inherently refers to change in the way businesses have to engage customers to deliver in an entirely new fashion.

Increasingly they are expected to provide services-led experiences in terms of the way they engage with products and services. A large part of this is about leveraging the ecosystem to amplify the experience, but most challenging is the associated "business model shift" that all companies embarking on their digital transformation journey will have to undergo. It involves a completely new vision for the company that is cross-domain and impacts every division, but it could take various forms.

IDC believes that an organization's ability to make money from any of these business model shifts is directly correlated to its digital maturity across a number of dimensions.

Based on information and data from IDC customers, surveys, public sources of data, and anecdotal evidence gathered by analyst-client interactions, IDC explores five business model shifts with associated case studies to help demonstrate best practices in digital transformation in the IDC white paper, Monetizing Digital Transformation Blending the Physical and Digital Worlds to Generate New Revenue Streams. IDC interviewed eight organizations to assess digital transformation maturity, and their focus on billing and revenue management as part of their efforts in this space. 

Monetizing.Digital.5.Business.Shifts.jpgIDC's research revealed multiple paths to digital transformation, with 5 Digital Transformation "Business Model Shift" stages being:
  • Subscriptions: Moving from physical product to a subscription service leveraging usage-based pricing models as opposed to a traditional product approach. The subscription model needs to be effectively built into the product (depending on whether it is user based or transaction based). Use dynamic pricing models as a competitive differentiator to enhance the customer experience.
  • Ecosystem First: Taking an "ecosystem first" approach to delivering new products and services to market with a focus on partners and third-party stakeholders. Reassess the traditional "make-sell" enterprise orientation to one more dependent on developing the ability to engage multilaterally with the external ecosystem (e.g., customers, markets, partners, competitors, regulators) to engage new markets that were previously inaccessible.
  • Customer Experience: Delivering an entirely new customer experience through a variety of channels with a focus on ecommerce.Gain insights by analyzing consumer data to ensure that your organization can deliver the ideal omni-channel experience based on a highly personalized engagement approach with the end customer.
  • New Markets: Targeting an entirely new market, with a new set of customers, that brings a different level of scale and volume that had not been dealt with previously. Ensure a clear approach to the way that revenues are recognized, allocated, and reported across business units and to shareholders based on the new business model compared with your traditional business. This will help to improve existing business processes and systems that may be ill-adapted for new businesses with different scale that require greater levels of automation for the customer engagement and revenue management processes.
  • Developing new Go-To-Market Strategies: Creating a new customer relationship based on "service experience" as opposed to the underlying product that may disintermediate channel partners or distributors in the short term, but absolutely require them for the longer-term value proposition based on a shared revenue model. Ensure that partners are incentivized to play a part in the new business model based on referral fees linked to the number of new customers that are signed up or retained as a result of their direct or indirect activities. New partner recruitment might be required and a clear strategy on whether the customer will be billed by the partners or not is critical to get right upfront.

Read Also: Why Digital Transformation Needs a Data-Driven Culture

While, as IDC reports, very few companies surveyed could actually say that they have completed their digital transformation journey, there were clear best practices for digital transformation emerging, including assessing capabilities and stage of maturity in digital transformation, enabling dialog among business and technology executives about goals and actions relative to digital transformation initiatives, identifying key areas of digital transformation capability that require strengthening and establishing standards for pursuing digital transformation initiatives.

Read Also: What KPI Framework Benefits Digital Transformation?

The Result: Digital leaders must take a hard look at themselves and their teams and assess whether they have the "right stuff" to hone and synthesize all of the ingredients of digital transformation. 

IDC believes that most organizations will find themselves wanting with regard to managing and leveraging the five disciplines. Many will attempt to transform through a series of initiatives targeting specific digital competencies while losing sight of the interplay and synergies that are needed for true digital transformation. 

Finally, every organization's digital maturity is directly linked to its ability to manage the disruption that one or more of these five business model shifts would have on the organization and ultimately on monetizing digital transformation over the long term.

Monetizing digital transformation demands a clear understanding of the underlying business model shifts potentially required for any organization undertaking this journey.

For more information on digital transformation today and IDC's views on monetizing digital transformation in banking, retail and more, view IDC MaturityScape: Digital Transformation in Banking. International Data Corporation (IDC) is a leading global provider of market intelligence, advisory services, and events for the information technology, telecommunications and consumer technology markets. 

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Erik Raper

Erik Raper

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Erik Raper heads Paragon’s Marketing and Advisory Services teams across focused industries. In this role, Mr. Raper leads his team to bring deep industry experience, rigorous analytical capabilities and a pragmatic mindset to clients’ most complex business problems. Mr. Raper’s team of marketing and strategy professionals work with Paragon’s Industry Leaders in the development of key go-to-market solutions which align to Paragon strengths and are essential to achieving clients’ business imperatives.

Before being appointed to his current position, Mr. Raper has served several key roles at Paragon including Director of Strategic Solutions Sales, Vice President of Strategy, and leader of Advisory Services. Mr. Raper guided the development of a suite of straight-through-processing (STP) solutions that focused on delivering business value–expanding Paragon’s Fortune 500 clientele and establishing the foundation for the firm’s brand platform: "Improving the Way Work Gets Done."

Prior to his appointment at Paragon in 2004, Mr. Raper spent seven years with Prudential Financial. As a vice president, he was instrumental in leading Prudential through a major operations and technology re-engineering in support of the company’s initial public offering. Preceding his employment with Prudential, he spent seven years with AT&T in various Marketing and Strategic Planning positions.

Mr. Raper holds a B.A. in Marketing from Columbus University, Metairie, Louisiana.

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