As I’ve said many times since the beginning of the year, digital transformation is on its way, the rocket has been launched but most businesses don’t know how to land it. As a reminder, Arthur D. Little says that most businesses are “somewhere on their way” and Cap Gemini Consulting that ony 7% of businesses are digital expert while 56% have started to work on their digital competences but still don’t get any ROI. Even the C-suite when decided to make change happen and armed with goodwill often seem to be lost in the middle of nowhere with some certainties about what they’re looking for and lots of doubts about how to find it.
“Digital transformation is new business models based on customer experience”. That’s the most commonly accepted definition of digital transformation and, even if as a summarized one it’s necessarily limiting for such a broad matter, it gives a pretty good view of what’s at stake. Yet, it may be harmful to anyone taking it at face value.
Digital transformation does not start with business models
So we’re seeing businesses in search of the famous business model that will save them. Let’s take two minutes to really understand the situation. People (most of times executives and managers), immersed in an environment they’ve only been knowing for a little time and only from an conceptual standpoint, trying to invent new business models which are also conceptual and theoretical as long as don’t try to make it work in the real world.
Guess the result : it’s flying hard, thinking hard, having a high level brainstorm but at the end nothing lands. And everyone stays lost, like in weightlessness in the middle of nowhere, thinking that they’re close to something but never touching it. So the result is a vague vision which execution is delegated to others who themselves try to make it land…hoping that suddenly someone in the chain will have a stroke of genius and make things tangible.
Let me tell you something. (Almost) nobody ever invented a new business model from scratch. Never. Neither in the digital era nor before. This approach is too theoretical and far from reality.
What people invented is offers, products and, most of all, services that – hopefully – were supposed to meet someone’s needs and find their market. Among all these ideas, some did actually word and created a new business model…afterwards. People build offers, services and from the nature of the service derives a new way – or not – to organize production, delivery and the value chain. When it happens, then we have a new business model.
Business models are a byproduct of the offering
Business models are unconsciously and simultaneously built with offerings and are post-rationalized to be industrialized if the offerings meet their market. When they don’t everything (and even a good business model coming with a wrong understanding of the market) is thrown away. But when one finds something that works, the business model can be endlessly replicated on many similar offerings and markets.
Since everybody’s focusing on Uber, do you think that its founders wanted to create a new business model and invent the “uberization” of business ? Even if they’re very brilliant guys, it would be a very hasty analysis. They started with the idea to solve a problem, to meet a customer need. Doing this they imagined a new may to bring together an offering and customers that never had a chance to meet before and, on their way, they fixed an experience issue through the application, the customer journey and the selection of drivers that provided a better service than taxis. The new business model was the result, not the starting point. They did not start saying “oh…let’s find a new place in the value chain”. Uber tried to uberize nothing in the first place. They actually did it but as a result, not as a goal.
I see lots of businesses focused on moving along the value chain without any consideration paid to the existence of a customer need or experience chain. So they invent models that can’t land and become operational by lack of customer demand. These are solutions looking for problems, while we already have enough problems looking for a solution to invent ones that do not exist.
I can’t help mentioning this great post from Thomas Guyon (in french but hopefully Google Translate sometimes does miracles). I full agree with what he writes. All the new tools, methodology canvas and magic wands used today to help entrepreneurs to invent and bring business models to life work very well to explain existing successful business models afterwards. Not to create new ones from scratch.
New successful digital experiences don’t always require new business models
“New business models relying on new experiences”. The sentence is clear if we take one minute to understand it : the experience comes first, the business model second. Business models derive from experience and not the other way around.
So starting from the business model is useless. Everything must start from the customer.
But that’s not all. Digital transformation can result in new experiences without any new business model. Let’s consider the airline industry and how it’s been digitizing in the last ten years.
â€¢ online booking
â€¢ online checking
â€¢ paperless boarding cards
â€¢ paperless end-to-end customer journeys
â€¢ new servicing channels
â€¢ new experiences on the inspirational part of the customer journey
â€¢ use of digital channels to deliver services that used to be physical, but without changing the model (online press, streaming videos on wifi…)
â€¢ ground staff and flight crew equipped with tablets and applications helping to better serve the customer, anticipate his needs by knowing him better and being able to fix problems here and now.
There’s been no change in business models (at least from a digital standpoint) but no one can say that the airline digital experience did not improve over the last 10 years. That’s the evidence that one can digitize through new experiences without changing his business model.
Bottom line : one should better start from the customer and employee experience, start with real needs instead to losing his way in business model invention. When one has an idea that works, the business model follows.