Digital Value Creation
“Digital ecosystems and innovation-driven digital growth to create and sustain a superior customer experience.”
Digitalization is in full swing. This decade will be characterized like no other by the further development, dissemination, and use of digital technologies, services, and products.
Technological progress in conjunction with social change opens up a multitude of growth opportunities while at the same time representing a threat to established business models, services, and products. On the one hand, digitalization gives rise to completely new products and services that were technically impossible in the past; on the other hand, market entry barriers can disappear, leading to the replacement of current products and services. Digitalization is the source of strength for innovative companies that are willing to change for the improvement and development of their entire business model or to offer completely new services and products without regard for their industry, size, and market position.
The opportunities for generating digital growth are virtually unlimited, whether through the use of new technologies, business models, methods, processes, or many other innovations. Maintaining the necessary overview and setting the right priorities are not always simple matters, and the impact of the coronavirus pandemic has not made it any easier.
Nevertheless, certain features that are hallmarks of successful digitalization are now becoming apparent and proving more forcefully than ever before their ability to drive growth. Even though technology is a strong driver of digital transformation, the most significant challenge is in empowering the organization to initiate, shape, and drive digital transformation toward a common goal. Achieving this requires the following:
- First and foremost, the “Why?” must be answered –> there is no such thing as bypassing a sustainable corporate, business, and digital strategy!
- The organization must be prepared for digital change and actively implement the change. –> People and culture side of transformation!
- The transformation must center around current and new customers so that the new digital values are consistently developed in a common effort (–> customer excellence, marketing, and sales + co-innovation).
- Risks must be reduced.
- The success of the actions must be secured.
- Work must be supported by a lean startup approach: quickly create, test, and evolve new products, services, processes, and business models (MVPs, prototypes) in collaboration with customers (digital engineering).
- Use the tools of trend scouting, start-up scouting, and incubation to systemize and manage digital transformation –> innovation management.
One very clear development is the accelerating disappearance of linear business models and their replacement on digital markets by ecosystems and platform economies.
But what are the levers that will lift the traditional world into the modern, digitalized world? From Detecon’s point of view, the following drivers in particular are predestined to create sustainable digital added value.
From the business model perspective:
- Changeover from hardware-centric to service-centric business models: The existing product will be expanded to include digitally supported services. Instead of household insurance, for example, customers will buy a security package (such as assistance service with smart home technology) encompassing the entire house.
- Software-driven business: Software will change products and services, make them measurable and scalable to a high degree, and turn supply chains into tech ecosystems.
- Data thinking/Data-centric business models/Applied AI: Data and algorithms will be the foundation of new business models, whereby the business side and data scientists should work together at an early stage to review feasibility. Example: Making IoT data usable along machine landscapes, incorporating them into planning cycles in a smart factory, or offering them on industrial platforms.
- Platform economy and ecosystems: The great challenges of digitalization leave no roles for lone wolves to play. They will be replaced by ecosystems and platforms for the exchange of data and services. Example: A smart city with all its embedded IoT scenarios such as intermodal mobility and digital facility and energy management can be successful as a whole only if previously closed, discrete systems of processes and IT solutions merge to create ecosystems thriving on suitable platform architectures.Similarly, a central platform for the collection and exchange of mobility data, navigation, and contract and billing services would be the most efficient enabler for a smart mobility ecosystem.
From the customer perspective:
- Customer centricity: The starting point for all digital activities is always the needs of the customers. Customers and users must always be the focal point and the collaborating partners in driving forward the development of solutions as agilely as possible. Topics must not overshoot the market and should effectively address the right target groups so that they generate growth. (Example: The digital journey in automotive aftersales)
- Customer experience: Products and services with a “Wow!” effect inspire customers and generate loyalty, convincing them emotionally of the added value they experience.
From the innovation perspective:
- Establish a culture of innovation: What can be done to guarantee that the entire organization thinks and acts innovatively over the long term? What governance for innovation and business units makes this possible?
- Trend scouting: How can emerging trends or disruptive technologies be identified and evaluated at an early stage to ensure your own successful and sustainable economic activity and avoid shocks?
- Methods and tools: What measures will ensure that employees and customers are always working with state-of-the-art tools and the latest methods, developing and testing them in cooperation with customers? Work principles such as co-innovation, design, and data thinking, the use of OKRs, and agility principles should be part of everyday work.
- Digital engineering: How do you determine feasibility at an early stage and gather customer feedback about functions? Prototypes and proofs of concept must be user-centered and demonstrate possible solutions tangibly. The goal is to keep prototypes simple while modeling all relevant functions. This guarantees feasibility, positive feedback from users, and accelerated implementation.
- Time-2-market – speed matters: How can you create or exploit an early adopter advantage? The probability of decisively developing or dominating a market is much higher for early adopters than for followers. Recognizing relevant ideas and topics at an early stage and agilely taking them all the way to implementation are essential tasks.
Clearly, successful digital value creation always requires (in addition to these components) a holistic end-to-end view ranging from initial ideas and innovations to the digital strategy that has been developed to implementation and operation, possibly in collaboration with ecosystem partners. Moreover, acting according to these concepts will not be possible without clarity at an early stage concerning the (digital) competencies that must be developed and expanded among employees – possibly in a training and education academy – to secure success on a market where the influence of software and data on value creation is continuously spreading.