It seems that we’re capable of buying a subscription for nearly anything today. What was once a pricing model limited to magazines, newspapers, utilities and telecommunications services has expanded to encompass just about any product a consumer or business can dream of. This transformation has been seen across B-to-C and B-to-B industries with diverse offerings, ranging from printing services to beauty products. It’s evident that every day businesses are recognizing the benefits of subscription-based pricing and taking the steps to adapt to this industry shift.
Companies no longer have a choice. They either adapt to consumers’ needs or meet their demise. Blockbuster is a well-known example of this. It failed to recognize the evolving landscape and refused to change its model. This enabled more agile companies like Netflix to swoop in and completely take over the market. However, as this digital disruption swiftly moves in, businesses must understand that this is all easier said than done. IT framework and billing models are a key component to this transformation, and companies must be savvy enough to keep up.
In order to duplicate the success of household names like iTunes and Netflix, there are some barriers that must be overcome first. Brands must accept that in the wake of the digital transformation there’s a likelihood that what the business does will shift. For B-to-B companies in particular, going from selling products to offering subscription services can have a dramatic impact on how business is conducted. Products must be built as connected services, and business must be organized around the customer, not the product.
The transformation also impacts how revenue is recognized. Traditional companies are familiar with the seasonal revenue spikes that come with an upfront, order-based revenue model; however, with subscription-based services, the revenue is generated more evenly over the course of the year and can impact how the broader company is managed over the long term.
Finally, a very important aspect of the digital transformation is the core company’s relationship with various stakeholders in order to incentivize new business models. To drive continued success, businesses must take an “ecosystem first” perspective to deliver new products and services to the market, with a focus on partners and third-party stakeholders. In doing so, they can ensure that their product won't grow stale or lose customer interest.
Checking Off Boxes
Several pillars comprise digital disruption, and it’s a matter of checking these boxes to ensure your company is meeting the essential standards to compete in today’s increasingly digital, subscription-based landscape. Here are five key elements of digital disruption, along with the steps needed to achieve them:
- Subscriptions: Today’s business model hinges on subscriptions and usage-based services instead of one-off purchases. By building dynamic pricing models, businesses can leverage competitive differentiators to get ahead within their industry.
- Ecosystem first: Bringing new products and services to the market with a focus on partners and third-party stakeholders helps to vary offerings to create a more competitive marketplace. By including partners within the monetization model, brands have the ability to engage new markets and expand their business.
- Customer experience: It’s important that businesses approach digital transformation with an omnichannel mind-set. Enterprises must analyze customer data to ensure that their organization can deliver a comprehensive omnichannel experience based on highly personalized engagement with end users.
- New markets: Part of the nature of the digital transformation is that businesses are able to pursue new verticals that may not have previously been available to them. It’s necessary that a clear approach is taken in the way that revenues are recognized, allocated and reported.
- Developing new go-to-market strategies: Some partner companies may not be amenable to the concept of transforming their business models to a service-based revenue model. To alleviate these concerns, it’s critical to ensure that partners are incentivized to play a part in the new model based on revenue sharing.
As detailed, it’s evident that digital transformation is far from simple. With several moving parts, it can be challenging for a traditional business, whether B-to-B or B-to-C, to make the dive into this fast-paced, digital landscape. With this in mind, it's imperative that those driving innovation are aware that the transition is a process and may not begin all at once. It must, however, be measured and monitored closely.
Success is a Spectrum
IDC created a maturity scape to help business track where they stand within the digital transformation. Ranging from “Ad Hoc” to “Optimized,” IDC defines success as an enterprise that is “aggressively disruptive in the use of new digital technologies and business models to affect markets,” adding that “Ecosystem awareness and feedback is a constant input to business innovation.” IDC reports the business outcome of an optimized company is the “ability to remake existing markets and create new ones to its own advantage, making it a fast-moving target for competition.”
While having an optimized organization is ideal, it’s necessary that businesses set themselves up for success with the underlying IT framework that makes it possible to facilitate sophisticated subscriber management and billing structures. In order to succeed, a business must have the capabilities to rapidly launch customer-centric subscription offers that help them differentiate from the competition; exploit fast-moving market opportunities by quickly changing customer pricing and partner revenue-sharing models; and ramp up efficiency with billing and revenue management solutions that integrate into broader transaction infrastructures.
Monetizing digital transformation begins with a clear understanding of the shift of the underlying business model. B-to-B and B-to-C companies must take the time to evaluate the five key pillars that are critical to the digital transformation. Doing so offers the potential to become the next iTunes or Netflix of the world. Now is the time to transform. Companies that wait risk a competitor disrupting their market first.