I am often asked to speak with organisations around how to embrace the unpredictable and rapidly changing business environment that digital transformation (DX) inevitably creates.
However to answer this, there is a bigger question…in the future, what will you sell, and to whom?
Let me explain…
When we talk about DX we often talk about connectivity and leveraging technologies like IoT and AI to create new business value. This in turn means connecting many things, people, assets, buildings, cars, even cows….so much so that analysts predict one gazillion connected things in the next 5 – 15 years.
So, what happens when everything is actually connected, what is the implication of this, how does a business differentiate itself when everything is smart? Where is the profit coming from, as connectivity does not necessary mean profit. The traditional Telco services for whom you would naturally assume are reaping the benefits are seeing their industry profit share fall, yet we see content creators and aggregators share start to increase.
What about other industries, the automotive industry over the last 15 years saw very little change, a few new players and some changes to the supply chain, however, today this same industry competes in a far more complex landscape, where they connect with new OEM’s, consumer electronics, energy companies, mobility and more. And let’s not forget, these industries are consumed entirely differently than ever before with more informed customers, and the omnichannel’s for which consumers engage.
So what we learn, is that whilst connectivity does not actually create profit in its own right, what it does create is a shift in industry boundaries, in fact the boundaries are even disappearing and instead we see industry patterns in ecosystems. So back to the question, what will you sell and who is your customer?
So how do you answer this, you first start by understanding your ecosystem, and you need to do it from a customer lens and walk your product through your customers ecosystem. Let’s use an example – you sell tractors to a dairy farmer. You could sell your tractor as is, or better yet, you could add connectivity to the tractor which is pretty cool – we can track the tractor and gain insights through it’s real time and historic positioning, we now have a smart tractor. However if you were to better understand how your smart tractor fits in a wider customer ecosystem, it gets more interesting, for example;
- Your customer has more than a tractor on their farm, in fact many more equipment types that could all benefit from connectivity, to the customer and perhaps to each other, now we can moved from one smart tractor, to a system of smart farm equipment. The customer value from this is around asset management, predictive and prescriptive maintenance, equipment utilization, cost analysis and much more.
- Is this still just important to your initial customer, or are there new customers, or could you create a new economy for your customer to share equipment across many farms and lower the overall cost of ownership or usage for example?.
- Let’s not stop there, what are the other systems within your customers farm, perhaps virtual paddocks, logistics, milking systems, irrigation systems, how does your smart tractor collaborate to find value or opportunity within these systems?
- What about other things, people, animals, buildings – they are all in your customer ecosystem and are all potential areas for opportunity exploration and collaboration.
Where you can demonstrate the greatest impact on ecosystem performance you will capture the greatest value, so instead of seeing the product sale, the tractor, as the entirety of the customer engagement, what if it became the start of delivering new services to your customer across their ecosystem. We are told the spend on an asset like a car or tractor is significantly more than the purchase price during its life, so do you really want to sell tractors?
Knowing your ecosystem is not just about finding a roadmap for digital monetisation, but also creating new partnerships, channels and collaboration opportunities. Innovating in a silo doesn’t work, collaborating across and ecosystem does work. Remember the automotive industry would not have predicted it would be a key partner of the energy industry 15 years ago, yet here we are with EV’s.
So, to be competitive and to differentiate you need to be customer led, get to know your ecosystem, and you will be amazed at who your customers of the future may be, and what you will be selling!