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  • Writer's pictureRiikka Tanner

Digital Transformation: Redesign Your Business

Updated: Jul 30, 2018

As part of natural evolution of the economy, we see new business emerging and old ones fading away. Digitalization has spiced up the process with speed and as new businesses are emerging and dying faster than ever, the average lifespan of an enterprise has dramatically shortened.

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Many startups end up as one hit wonders as they find it hard to sustain their business model and to satisfy changing customer needs by creating more of successful products. Companies do not get to control the markets as they used to by leveraging media and advertising. There has been a fundamental shift in logic where instead of you “pushing” your products and services to your customers, the market has given way to “pull” logic in which consumers and customers are in charge and demanding new services.

Scale and size do not offer companies similar protection against competition it used to. The barriers to competition are diminishing fast leaving traditional companies dealing with shrinking market shares. The beauty and challenge of everything being just one click away is just that – everything indeed, is only a click away. Getting customers to do a single purchase is relatively easy but retaining them as a source of recurring revenue is a whole other story. Customers knowing exactly what they want and how to get it, will change to another service provider the second they get offered a better deal – that is, better value from someone else than you. Digital transformation forces us to review and redefine our business constantly if we wish to stay ahead of the change curve and outlive our competition. Those companies that resist change to a point where they find themselves on a burning platform, will without a doubt face severe challenges when disruption hits their industry.

“The beauty and challenge of everything being just one click away is just that – everything indeed, is only a click away.”

There is a reason why your business exists. You have created your value proposition around certain industry, customer segments and specific needs these customers have. Right? Then all of a sudden everybody starts talking about new technology and you investigate and analyze that how will this new technology impact your current business model. Right again? Wrong. Instead what you should start thinking is how this new technology will help you create your next business model.

There are couple of useful tools to use when revising your business model, first one which is known as Ansoff’s growth matrix. The theory goes that when your business is facing declining revenue and shrinking market share, you have three different ways to try and find new growth. You can try and sell more of your current products or services to new customers. Chances are however, if you are already experiencing downward spiral on a specific product area that attracting new customers will be difficult. You can also try to sell new things to your existing customer base – a growth strategy which is very popular for many traditional, large-scale companies. Third, you can offer new services to new customers, in other words, innovate with new value propositions and extend your customer base beyond the existing one. Digital transformation, for many businesses fits to this window of the growth matrix.

“Every potential threat has also potential to help create new value elements you could offer to your customers.”

Value proposition roadmap is also a good way to assess your current situation, to identify emerging threats and opportunities as well as finding new revenue streams for your business. You start building the roadmap by assessing your current assets and value you bring to your different customers today. Then you take each item and assess the strength of the value elements in case of potential threats such as change in customer needs or behavior, or new competition or new technology relevant to your industry. Every potential threat has also potential to help create new value elements you could offer to your customers. Even rivals in traditional terms might become an important part of your new, revised business model, where each of you will have unique position in a shared digital ecosystem, partnering in some areas while competing on another.

Completing the value proposition roadmap will end up in synthesis where you review and categorize your value elements. Useful categorization suggested by David L. Rogers, Columbia Business School professor, is here below:

Core elements – to build and focus continuing innovation on, these are the source of your strength

Weakened elements – value elements that are losing impact for customers but you have chosen to reinforce and improve

Disrupted elements – those elements that have lost value for customers and thus should be deprioritized

New elements – identified opportunities which you have chosen to invest in for future growth

So yes, redesigning your business model takes a lot. It is a lot easier to stay on your comfort zone and stick to your current business model, which you know how to operate. Another challenge that companies face is that it is hard to find people who would own the process and take charge of acting on the new opportunities. To avoid ending up on that burning platform, these strategic actions are exactly what you need to take.

The good news is that companies that succeed in putting the effort to make business model scrutiny as part of their continuous strategy process are in a lot better position to predict changes, innovate and adapt to changing market conditions thus allowing them to stay ahead of the change curve and making extensive transformation programs a lot less imminent in the future.

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