Five cornerstones of digital strategy for B2B companies

During recent years, digitalization has finally emerged as the key strategic driver on B2B companies’ management agenda. Most industrial companies are focusing on the Industry 4.0 program and running proof-of-concept programs with Internet of Things (IoT) and Robotic Process Automatization (RPA) solutions.

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B2B companies are thus waking up to the same disruptive forces that changed the playing field in most B2C industries ten years ago. Luckily they won’t need to sail in uncharted waters, as they can learn from front-runners in consumer industries that had to make similar transformations earlier.

I believe the following are the cornerstones of a successful digitalization strategy:

1. It must generate business benefits and financial value. Digital strategy, as all strategy, is ultimately the responsibility of CEOs and business owners, even though IT professionals still often set the digitalization agenda and drive individual ventures because the subject-matter is considered technical. However, it is important to remember that digital strategy is all about customer and business benefits and creating financial value, not about the successful delivery of IT projects.

2. It must be customer-centric. All business cases for change need to start by specifying the customer problems the company intends to solve. They need to analyze how customer experience will be affected at the numerous touchpoints where customers interact with the company. The success of all projects needs to be measured by customer-related KPIs. Too often, digitalization is seen as a back-office IT systems exercise and there is a failure to realize that even internal projects can cause changes at the customer interface. No project should be approved without customer validation.

3. It must be agile. You will most likely need to speed up the cycle of internal development processes. As digitalization initiatives affect a wide range of internal and external stakeholders, it is important to move ahead steadily, and in small increments. This “fail early and fast” mentality is often challenging for B2B companies with heavy processes and slow decision-making, but paramount for success in the digital age.

Agility is much more than a project management methodology. Agility should be applied to all aspects of an enterprise from organizational culture and management systems to cross-team relationships and budgeting processes.

4. It must improve the process. When planning for digital operational excellence, the driver should be process improvements, not the technical tools. When considering IoT or RPA systems, for example, there are no comprehensive off-the-shelf products that will digitalize your operations. You will need to tailor a solution to specifically suit your processes and cause the largest operational improvements. You will need to understand where automation and digitalization can bring the most value, and only start looking at the technology after the business case is clear.

Much can be learned from the e-commerce storefronts opened by old brick-and-mortar retailers who concentrated on online channels and marketing, but neglected to align their internal organization and supply chain accordingly. Too often digitalization means a pretty external frontend, with poor internal end-to-end processes supporting delivery.

5. It must incorporate ecosystems thinking. Digitalization transcends the boundaries of your company. You will need to integrate your processes and supporting systems much more closely with both customers and suppliers. A number of companies are being transformed into platforms where they own the customer relationship, but the services are provided by a wide variety of partners. This requires changes in the business model (e.g. managing strategic alliances and creating joint earning models) as well as in the operating model (e.g. opening APIs).

 

Toni Heinonen works as a Senior Manager in KPMG’s Global Strategy Group. He has 17 years of experience in management consulting, ranging from growth strategies and M&A to large-scale transformation projects. Toni has worked extensively with technology, media, telecoms, consumer services and other industries that have been heavily disrupted by digitalization.

Outside of his work, Toni enjoys jogging, outdoor activities with his dog, playing musical instruments, and photography.