We have a rather liberal approach to the definition of “digital transformation”. Most companies that run “digital optimization” projects, enterprise software updated programs or analytics programs can easily call these projects “digital transformation”. That’s ok. However, we all know that these kind of initiatives are very close to “business as usual” and are not truly transforming any part of your business.
Then comes digital marketing, e-commerce, digital supply chains, and similar endeavors. Here, most of the time you have a bigger impact on the way you run your business. You can create new revenue streams, but you are still handling the same services and products. If you are a bank moving to digital, over the last 25 years you have probably created digital self-service delivery channels. But you are still a bank. The same is true for insurers, retailers, or automotive suppliers.
The key question is this: When will you have digital revenues on your balance sheet?
How could a retailer or an insurer or a bank or an automotive supplier ever earn digital revenues? Let’s look at a few innovative ways and how they may be a good fit for your business. The future is digital. Either you take part and claim your stake in the digital realm or competitors or new startups will do so. The choice is yours…
Content services are one way to earn purely digital revenues. A few years ago, IBM acquired The Weather Channel. This is purely a content service. Who needs this content? Certainly any business that is affected by the weather: insurance, agriculture, utilities, transportation and many more. Even retailers mesh up weather data with their sales forecasts.
Music content has became purely digital. Video content has become a whole new area of combat between Netflix, Amazon, Disney, HBO, even YouTube and others. There is very little room left for the incumbents.
What sort of content could be relevant in your industry? Who creates that content? Can you create as well as consume and distribute? Or maybe you need to acquire those players? Better to do it sooner than later, since the value of the relevant players will increase every day.
Another category of the digital revenue stream is data. What kind of data do you have? Customer data, health data, consumption data, product data? Do you really own that data? Is it clean, structured, and organized? Are you allowed to sell, rent or share it with 3rd parties? If it’s legal, if the customer gave you consent and if you have the required infrastructure, why not try to create value from it?
Retailers share their sales data with consumer research firms, all kinds of data aggregators, and they make revenues from the consumer-packaged goods companies. There are data aggregators in many industries, such as logistics, pharmaceuticals, insurance, banking, real estate and many more. How is it in your industry? Are you paying for any data sources? What kind of data do you have that could be interesting / valuable / insightful for others?
Yet another area of digital revenues could be “software as a service” (SaaS). Any business has customers and suppliers. With most of these customers and suppliers, you have some digital ties, data and / or document exchange – such as orders, invoices, and so forth. In addition, you may have some distributors or resellers. These distributors and resellers use software solutions for their selling and fulfilling activities. Whose software is that? Why is it not yours? You could be closely integrated with these channels, supporting the access and replenishing of stock, helping them with customer analytics, and much more. You could be that software provider.
If you don’t have the required software skills, you may need to partner with a 3rd party or a startup, which is providing such software or services. But you know the industry, you own the business, you have access to distributor and resellers, which a startup may struggle to reach and execute. Have you ever considered such opportunities? This may be worth exploring…
Once you are providing content, data or SaaS services to other counterparts, then you have developed a cloud environment. This is a service itself and you could easily try to monetize it.
Of course, there are very strong competitors. But they started out very small and complimentary to their e-commerce, video or e-mail services they had once provided. So, you might still have opportunities to succeed in your industry. Or you could easily partner with the global tech giants and become their reseller for these cloud related services.
One of the most prominent digital revenue categories is the so called “platform business”. Everybody would like to become the UBER of their own industry. It’s about handling transactions, and you earn commission fees from both seller and buyer. This is the very classical business model from stock exchanges and any other brokerage kind of business.
The interesting novelty is that you can now reach millions of users through a mobile app within a few weeks or months. This is unprecedented. And therefore, it captures the attention of many companies and investors.
Becoming the software platform for the construction industry is something that doesn’t come to your mind immediately. But the biggest opportunities are in non-conventional industries. Automotive supplies, agriculture and related industries are very interesting, since they are usually underserved in terms of digitization platforms.
Last, but not least, one important currency of the digital age is the “number of users”. The more users you have on your platform, the bigger the network effect will be. Microsoft could have easily developed a video conferencing platform, but they preferred to acquire Skype, and later LinkedIn. Facebook has their own messaging platform, but they were keen to acquire WhatsApp, due to the fact more people are using it more frequently.
The more users you have on your platform, the more data you collect from them, the better you can analyze them, the better you can predict their behavior and needs. How will they watch, buy, talk, search, like, vote, and much more? For B2C businesses, user / consumer / experience information is essential. You will not be able to compete without knowing enough. You must immediately start thinking about ways to get more people on your platform, mobile app, web site, social media or whatever it is you provide them, with or without a paid membership. The biggest income for you will be their data.
This is not a complete list of revenue streams, but the most common ones. You must find your way and decide which one is right for you, complementing your current business, providing the most value added, and making your business future proof. You will face many difficulties and you must answer many important questions.
Which of these models will fit you? Do you have the required skills in place to execute your plan? Are you aware of your competition? Do you have an ecosystem of startups, academics and creatives who can help you progress and succeed?
This is what we would call “real digital transformation”. We are keen to help you develop your “digital strategy & roadmap” which will guide your way to digital revenues. Good luck and looking forward.
Photos: Pixabay, Unsplash, Twitter