Business Model Innovation a Game Changer for Digital Transformation!
Companies are charging forward in their Digital Transformation Journey, more than two thirds of them failing due to lack of understanding of the "secret sauce" underestimating the complexity of things that really matter, focusing on strategy, technology or delegating transformation to your CIO or CTO, amazing how many companies start at the wrong end and lead with technology.
There is a working recipe, for that "secret sauce" reach out to me, I've held many Digital Transformation Discovery workshops advising executive teams jointly with the top management consulting firms, and yes I worked in projects that failed, I can tell you how and why, so if you want to avoid the same land mines, let me know, advise is free, engagement is not!
It is important that before you waddle waist deep into an ugly swamp full of crocodiles all bitting at the same time you ask for help, let the people who have gone through the journey guide you, without help, the path quickly turns ugly and costly.
Companies need to use Business Model Innovation to their advantage, remaining relevant, competitive and being able to introduce new services and price plans is the key to success. After all, if you go from selling widgets to services if you can't bill for what you are doing as a service you are toast!
Thus Effectively, Efficiently, Elegantly designing and introducing usage-based business models is an important LEGO piece of the huge puzzle you are building.
Your businesses will be faced with complex value chains, being able to bundle and unbundle these products/services are going to be of paramount importance in the transformation journey.
There are many examples from various sectors, let's illustrate a few to give you an idea of the complexity you'll face, below are two examples of high complexity Business Models and value chains:
On-Line Services Commerce
The most complex sectors have a high risk to return rate relative to endpoints on the value chain (seller/buyer).
Most people are not aware that online credit/debit online/in the store is one of the most complicated processes. In some cases, eight or more different companies are involved in getting your card over to a bank from a website or point of sales and back again. Everyone takes a cut.
Sometimes the smallest cut is taken from the ones who provide the most value (Visa, MC, Amex, DSC). If there’s a breakdown anywhere it all stops, and hell breaks loose.
- shopper<>merchant<>payment service provider<>card processor<>merchant bank<>bank processor<>Visa/MC/AMX/DSC networks<>issuing card bank
On-Line Travel Industry
The sector that has the most complex payments, is the online travel industry, which pivots off the card payment model as it’s apart of it. Booking a ticket and getting payment may take up to 20 different middlemen.
- shopper<>online travel site<>global destination service<>airline
- Is the ticket is there, check for funds
- shopper<>online travel site<>global destination service<>card processor<>merchant acquirer<>bank processor<>Visa/MC/AMX/DSC networks<>issuing card bank
- Funds are there, book ticket and collect money
- shopper<>online travel site<>global destination service<>airline<>book ticket
- issuing card bank<>airline reconciliation agency<>Visa/MC/AMX/DSC networks<>merchant acquirer<>online travel site<>shopper confirmation
Air travel Industry
- A huge volume of digital booking events
- Errors due to manual processing
- 8-12% Revenue Leakage
- Collect data from hundreds of sources
- Correlate internal and partner booking events with billing data in real time
- Fully automate all events across global eco-system
- Accurately capture revenues for every transaction
- Capture fine-grained details on customer behavior
- Fuel new customer-centric business models
- Drive down manual effort and errors
Capture millions of Euro annually that previously were lost
Usage Data Platforms which were designed to handle billions of transactions real time with the utmost complexity for Telcos are perfectly designed to handle the usage events of today's enterprise usage based economy.
As illustrated on the above complex value chains its important to highlight that the platform you choose is able to handle multidirectional events and value chains, not just linear or unidirectional, you need to be able to go back and forth.
Without a cutting edge Usage Data Platform, Business Model Innovation will be impossible to achieve, I often state that Digital Transformation is like building LEGO´s with your children, even with the manual, if you are missing a key piece, the structure you are building will not be stable or unfinished, in business that small LEGO piece its extremely important, lets face it big companies are not very good a dealing with small companies, often it is that small sensor for IoT or that bit of software that makes/breaks a project, or brings it to a halt.
By 2020, IDC estimates that 55% plus of all organizations will be digitally transforming changing markets as we know them and reimagining the future through new business models and digitally enabled products and services. By 2023, 95% of all entities will have new digital KPI sets — focusing on product/service innovation rates, data capitalization, and employee experience — to navigate the digital economy. To get to this maturity efficiently, organizations need to consider modern usage intelligence tools which can handle the complexity, transaction volumes in an agile and dynamic manner.
Usage intelligence broadly describes applications which capture, aggregate and analyze how much of a feature/resource is used. Accurately tracking usage is critical in consumption-based business models such as utilities (power, water), telecommunications (voice, text, data), and Infrastructure as a Service ( IaaS - compute, data storage), but many innovative companies are finding that understanding customer usage can lead to data-driven product insights, enhanced customer experience, entitlement automation, and new business models.
By 2022, IDC estimates that over 50% of software revenue will come from the subscription/consumption business model, with most of this revenue coming from SaaS applications. However, many companies still have multiple older monetization systems in place or rudimentary methods that cannot easily support new business models and pricing is being managed manually and it can take weeks to introduce, Homegrown/spreadsheet solutions that manage monetization functions like usage, pricing, and revenue recognition are also relied on, which further constricts efficiency, innovation, and scale. Today's SaaS-based monetization systems include the latest technology (ML/AI) and easily integrate with your existing systems to provide fast time to value.
Reach out if you have questions or need advice on your Digital Transformation journey and foremost your Usage Based Commerce!
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