Digitalization – Paradigm Change in Business Model Requires Paradigm Change in Capabilities

At this day and age, customers are expecting a customized service – not a choice of a least ill-fitted service package.

When subscribing to services, whether as a consumer or an organization, it is hard to accept less than near real-time service activation.

As an example of unsatisfactory services, my mobile operator seems to be missing a bandwagon of service customization, as the only available service options are hard-bundled packages of talk/sms/data and I’m able to make only one change per month to my services portfolio.

  • The telecommunications industry was a forerunner in introducing service subscriptions. Today they should also evolve into providing customized, customer specific, changing and proactive services.

  • Sooner or later competition will drive change.

On the other hand, as a good example, my energy company is offering today a wide variety of energy options, optimizing services and alerts.

  • They seem to realize that free choice of ecological options, proactive optimization and incident management services give great customer experience and build loyalty.

  • Every touch point then is an opportunity for new revenue streams.


New Set of Capabilities Required on the Road to Digitalization

Businesses are radically transforming into service businesses. Many industries are affected by digital disruption. Companies are aligning within service ecosystems.

Along with the adoption of IoT, even the most traditional industrial manufacturers selling physical investment products as well as for example energy and transportation companies are transforming into output-based and performance-based service businesses. – Driven by software and data.

In the chart below, World Economic Forum has described how the potential of connected products and services is unleashed. 

Near-term challenges are linked with operational efficiency and launching new usage-based digital services. The long-term challenge is the efficient and scalable end-to-end automation and effective monetization of connected ecosystems.

To harness these opportunities in digitalization, companies need to develop new skills and capabilities.

New business value will be created with the increased ability to make automated decisions and take actions in real time based on potentially massive volumes of data from connected products.


New Challenges in New Service Business Models

As a former CFO, I do understand the origin of the complexity in monetization of these new usage- and performance-based revenues streams. Business agility requires continuously evolving service offering, mix of products and dynamic pricing capability. Performance and usage-based charging models require transparency and speed. Also, there are often several partners involved in delivering services under wide service contracts.

Are You Struggling in Quicksand of Complexity with Your Service Offering?

Current operational and financial systems are not offering support for handling continuous flexible and variable services. Therefore, there is usually a massive manual effort in the back office, which takes time and energy, introduces costs and creates room for mistakes.

Are you as a service provider struggling with practical problems in monetizing digital services?

Maybe you recognize for example the following issues:

              1.   Manual complexity in current ERP environment is starting to eat up
                    customer experience and operational efficiency.

              2.   Costly and incomplete modifications to current operational systems
                    are blocking digitalization development.

Intelligent Automation to Overcome Complexity in ERP

Service providers need more capability from their business systems than the traditional operational systems offer.

New usage-and output based pricing models and new IoT business opportunities are demanding new capabilities. Speed of change calls for flexibility.

I would definitely encourage service businesses to look beyond ERP, when

  • offering services (instead of selling physical products)

  • offering innovative services (XaaS)

  • offering services with existing and/or new partners (ecosystems)

  • starting with IoT data enabled business models or IoT data selling

  • looking to launch new usage and output based business models

I also encourage to look beyond patching up ERP with manual Excel spreadsheet supported processes.

As I have been tackling with these issues in my past as a CFO, it has been very interesting to recently learn that there actually exists a technical solution for end-to-end process orchestration and monetization for service providers of the digital economy

  • even in context of complex service contracts

  • and in cooperation with the traditional ERP systems

Start Sooner, Not Later

The World Economic Forum is predicting that by 2030 there will be no products. You won’t even own your underwear – all products will have become services.

Don’t fake it until you make it. – Build scalable business system support early on.


This blog was originally published Jan 10, 2017 as a guest blog for Good Sign Solutions.

Good Sign’s Solution – a rule-based automation for monetization of connected services.

Good Sign Software is a business system for Service Providers enabling new usage and performance based value propositions, flexible pricing schemas and automation of labor intensive data collection, validation and moderation for billing and financial transactions.