The 7 Business Benefits of Digital Transformation
Benefit #3 of 7 – Product & Service Innovation.
Welcome to our continuing blog series focused on The 7 Business Benefits of Digital Transformation.
But being digital also has profound implications on WHAT a company is actually selling and servicing. The rapid evolution of digital tools and digitally enhanced product lifecycle management (PLM) methods has accelerated the pace of innovation, and new, digitally connected solution offerings have significantly altered customer expectations of value and performance.
I would like to focus on a just a few areas of digital Product & Service Innovation that are creating dramatic changes in how companies perceive products and services, and how they create faster enhancements to meet rapidly changing customer demands.
- “Smart” Offerings
- The Pace of Innovation
- Offering Optimization
The rapid rise of digitally connected objects in the physical world (Internet of Things / IoT) is transforming how companies think about products and services, leveraging opportunities created by new levels of connectivity to create “smart” offerings. Enterprises can no longer consider physical products complete without first thinking about additional features enabled by sensors, data streams and ubiquitous wireless networks. For example, in the near future a smart home scale will efficiently determine your weight, but it will also be able to deliver trend analysis and correlate weight readings with other variables like activity levels and food consumption. Your light bulbs might become energy-efficient sentries to your home, able to intelligently illuminate based on motion in the home and external light sources, even alerting homeowners of suspicious motion patterns while they are away.
Beyond physical products, service offerings cannot be considered complete without an understanding of how they interact with their human participants and the physical world around them. For example, IoT technology is used in transportation services where RFID (radio-frequency identification) tags are now placed on items moving through supply chains. This improves the management of inventory while also reducing working capital and logistical costs. According to McKinsey, insurance carriers have begun installing tracking devices in customers’ cars to better ascertain policy risk based on how a car is driven as well as how far and to what locations. Greater visibility into actual risk variables helps align pricing to relevant behaviors rather than basing premiums on more generalized (and outdated) proxies such as age, gender or place of residence. The result is to reward safer drivers with a better insurance deal, which benefits them as well as society, as a whole, by providing monetary incentives for everyone to drive more safely.
Many marketing teams today are constrained by outdated or overly customized technology, and have become unable to respond to rapidly changing market conditions or offer customers the solutions they really want.
There’s probably no better example of the incredible human value that IoT can deliver than in health care. For example, in Boston Medical Center’s neonatal intensive care unit, nurses receive critical alerts on smart phones about their patients' real-time medical conditions—including changes in heart rate and oxygen—via sensors on tiny wristbands that are placed on newborns, allowing nurses to get to patients' bedsides more quickly. And this is just one example. BMC employs IoT across its hospital to dispense and change medications automatically through its wireless network, update electronic medical records faster and ensure that blood samples, medications and other sensitive materials are refrigerated at the appropriate temperatures.
The pace of innovation in the digital age is another critical topic to discuss. Innovators, by definition, get to the marketplace first; ergo, speed matters. A recent study by the Boston Consulting Group found that extended development cycles were the most-cited obstacle to generating positive returns on innovation, and companies considered to be “fast” innovators were almost 20 times more likely to be disruptive to an industry compared to their slower counterparts.
Increasing the pace of innovation provides a range of business benefits including the following:
- Maximize revenue by capturing greater market share faster
- Increase margins by minimizing pricing pressure early in a product or service’s life cycle
- Create more barriers to entry by being first-to-market with foundational, disruptive capabilities that become difficult to match or leapfrog
- Reduce the cost of failure by avoiding overinvestment in lengthy development cycles that ultimately do not pan out (i.e., fail fast!)
The backbone of speed is a modern data and process management platform that interconnects all innovation-related functions and supports rapid deployment of new business processes. Cloud-based technologies offer dramatic opportunities to accelerate innovation by avoiding or minimizing lengthy (and costly) IT development activities such as business rules definition, custom code development and regression testing. Vlocity, built natively on the Salesforce Cloud platform, takes the concept of speed even further with industry-specific Cloud software designed to rapidly configure and deploy new business processes across multiple channels. What used to take years can now be delivered in weeks. That’s right – from years to weeks. At Indiana University Health Plans, Vlocity was used to transform their entire Small Group broker portal in just 13 weeks. Finnish telecom provider Telia deployed a new B2B sales service and quoting platform with Vlocity in just nine weeks. And what might be a software process deployment speed record, the City of Boulder deployed a new housing enrollment portal with Vlocity in less than one week after struggling for 10 weeks with outdated tools.
Cloud-based technologies offer dramatic opportunities to accelerate innovation by avoiding or minimizing lengthy (and costly) IT development activities such as business rules definition, custom code development and regression testing.
While the latest digital technologies will get new products and service functions to market faster, nothing can replace the value of rapid marketplace response and adaptation, which is why offering optimization is so critical to successful innovation. Savvy digital leaders know how to harness market feedback on a real-time basis to continuously enhance their offerings to meet ever-changing market conditions. Successful innovators are less concerned with acknowledged imperfections in new offerings than gaining that indispensable preliminary insight and feedback that fuels innovation. For example, companies can employ a wide array of rapid “A/B” testing of different product and service bundles to determine which ones yield the greatest customer response.
As product and service recommendations become increasingly personalized, it is also important to ensure that bundles and pricing can be adjusted in real time. Many marketing teams today are constrained by outdated or overly customized technology, and have become unable to respond to rapidly changing market conditions or offer customers the solutions they really want. Modern digital solutions today provide robust tools for product configuration, pricing and quoting (CPQ) that can be used by marketers without the need for new system customization. Vlocity, for example, recently deployed our industry CPQ cloud at TELUS, a major telco in Canada, and accelerated the speed of new offer introductions by 80% by allowing marketers to easily configure new bundles and pricing tiers, optimizing offers at a product bundle and pricing level.
The cornerstones of achieving new Product & Service Innovation in the digital age include the following:
- The ability to conceive of new data-driven, connected offerings
- Rapidly bringing innovations to market
- Quickly adjusting to changing market conditions
Underlying each of these requirements is an agile, modern data and process management platform as well as a cultural mindset to “lead with speed.” Companies that succeed will act like disrupters, fearlessly advancing solutions that embrace connected technologies alongside a comprehensive strategy for generating innovation. And this last part can’t be taken for granted. As much as industry watchers understandably emphasize emerging technologies and their appealing promises of amazing speed and connectivity, it’s ultimately the people within a given enterprise who will incubate, test and advance Product & Service Innovation. This mission begins with leadership giving its employees practice in “innovation thinking,” developing ways to harness cutting-edge ideas, challenge orthodoxies (and lengthy decision-making processes) and ultimately align this newly cultivated mindset of innovation with a company’s products and services to create more value for the customer. In the digital economy, true innovation effectively deployed within a business model is always a harbinger of customer value and, ultimately, company success.
Companies that succeed will act like disrupters, fearlessly advancing solutions that embrace connected technologies alongside a comprehensive strategy for generating innovation. And this last part can’t be taken for granted.
I hope you enjoyed this discussion on New Product & Service Innovation. I would love to hear your feedback. Our next blog topic focuses on Business Benefit #4 of 7 – Customer Loyalty & Advocacy!