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Monetising digital ecosystems to drive future profitability

  • Posted by Max Speur
  • November 23, 2015 2:49 PM GMT

Its now hard to imagine life before we had computing power at our fingertips, instant access to information and truly global communications, but the changes brought about by the digital revolution are far from over. In fact, the digital world is about to expand wider and further and, in doing so, fundamentally reshape the way we live, work and do business.

As industries are challenged and transformed, a significant range of new technologies are being harrassed to deliver change, with the most essential technological element of all being connectivity itself. Without ubiquitious and reliable connectivity, the full potential of these new technologies will not be realized or the advantages from combining the in novel ways gained. This places Communication Service Providers (CSPs) in a highly strategic postion at the centre of teh digital relvolution, provided they are agile enough to leverage their position and grasp the opportunities presented.

The scale of the opportunities is huge. Connectivity not only opens up new market and technological possibilities, but also presents entirely new possibilities as it transforms they way whole industries buy, sell, and work.

Take the manufacturing industry, for example, it is being transformed by 3D scanners & printers, increased automiation, and robotics. The industrial revolution saw increased standartization being utilized to achieve economies of scale, delivering lower prices and higher profits. In contrast, the digital revolution uses and increases the advantages of the industrym such as scale production abd lower costs, but combines these with the advantages of the artisan - delivering products more tailored to individual needs. The industrial age required scale - with big factories, big workforces, a big network of suppliers and sophisticated logistics. The next evolution of manufacturing will be empowered by supply chain innovation, more fluid and globally sourced workforces, and localization of design assembly and fabrication - which could even become domestic when 3D printing has matured.

Retailing is likewise poised for yet more seismic change. E-commerce has been one of the big success stories of the last fifteen years - delivering completely new retail goliaths such as eBay and Amazon - which makes it easy to forget that the vast majority of retail is still conducted offline. The march of e-commerce will continue, but additional change will be driven by a shift from multichannel retailing, as well as the use of much wider datasets to transform buying experiences.

Retailers will gain a wider understanding of their customers by moving from using point-of-sale data to using a combination of data gleaned from non-buying as well as buying behaviour. This wider dataset will be used to redesign store and online experiences; innovate, improve and personalize products, and even transform pricing approaches better in order to maximize wallet share and physical or digital footfall.

The media industry is yet another vertical grappling with the new realities of the digital age. On the positive side, digital distribution is a fraction of the cost of older technologies and delivers a global, connected market. The challenge here is redesigning business models as artists seek more control, and more revenue, from their creations, as well as more protection from theft.

Taylor Swift is not just a talented performer but also a shrewd businesswoman who understands the redefined roles and shifting power in the digital ecosystem. She removed her music from the Spotify catalogue in late 2014, and tackled Apple for not paying musicians dring a three-month trial of its new streamng service. Speaking to Vanity Fair she provided new insight into Apple's behaviour which revealed its adaptability and rapid realighment to shiting business realities. "Apple treated me like I was a voice of a created community and that they actually cared about," she said. "And I found it really ironic that the multibillion-dollar company reacted to criticism owht humility, and the start-up with no cash flow reacted to criticism like a corporate machine."

What Taylor Swift grasped was that success as a digital service provider is determined not just by providing an easy-to-use, easy-to-understand, and compelling service to customers but also by providing the product that meets customer needs. This means attracting the right ecosystem partners who can supply products that customers want.

Like Taylor Swift, the best partners understand both their value to this proposition and their USPs. Thus they will only work with companies that treat them fairly, because its now easier than ever for them to "jump ship" and partner with others.

As the industial advantages created by the requirement for scale combined with the cost of market entry dwindle, key advantages of successful companies in the Digital Age are rapidly becoming their ability to collaborate and source; their knowledge of and relationship with their customers; and compliant, trusted and easy-to-use transactional capabilities. The secret sauce of digital success turns out to be the ability to monetize emerging opportunities, using the right business models and pricing approaches.

As we have seen, there are two sides to the digital opportunity and successful companies must be adept at both. Firstly, they will need to design, manage and monetize the customer experience; but they will also need to design, manage and monetize the partner experience. Understanding customers is one element of success, finding the righ ideas, goods or services at the right price for customers is another. However, success cannot be achieved at the expense of suppliers, as attracting the best suppliers will require them to feel they are treated well, and are paid sufficiently to fairly reward their efforts.

Today, without a doubt, CSPs need to transition to becoming Digital Service Providers (DSPs) by revamping its offerings both in retail and enterprise segments. The transition and changing dynamics within the industry is so rampant, we are not far from when we will see a DSP replacing a bank. This stands as a golden opportunity for CSPs to become Digital Commerce Enablers (DCEs).

CSPs are well-placed for this role because of their investments and experience in charging, their trusted relationship with customers, and their ability to control, define, and support a high quality of customer experience. They are also used to dealing with regulatory compliance issues that will need to be addressed, including key trust enablers such as data protection.

Success in the digital world will depend on having a vision, but it will also require the right enabling infrastructure to deliver against these new relationships, business models, and opportunities. Although CSPs will need to transform their infrastructure to support new opportunities, they shouldn't fear this process. They can move rapidly towards digital commerce enablement, and in a far less risky manner, by judiciously leveraging legacy systems and supplementing these with any new capabilities required. Bridging between the old and the new can be achieved by using pragmatic strategies such as orcgestration, which delivers rapid ROI without the risk and disruption associated with traditional rip-and-replace approaches to transformation.

Just how the move from steam power to electricity transoformed factories, so the move from the industrial to digital world will transform the ecosystem and how it is supported. Software change will be required; but a pragmatic approach can deliver the key advantages of speed and agility while minimizing the risks and costs associated with previous attempts to realign and automate supporting infrastructure.

Gas from the electric company? What about financial services from the phone company or grocer?

Historically, we bought phone calls from the phone company, water from the water company, gas from the gas company and financial services from the bank. But jsut as communications providers have branched out into content provision and ICT, so digital service provision is on the verge of shaking up whole new verticals.

We have already seen Apple reinvent the music industry (with the iPod and later with iTunes) and the communications industry (with the iPhone and the Apple Watch). But other sectors are now poised for similiar transformational change, as digital technology enables disruption in industries such as banking and the utility market. New types of company will enter the financial services industry, including CSPs, OTTs and online retailers such as Amazon providing payment services. The utility market faces similar disruption from non traditional players entering to supply business, consumers and smart cities.

What digital technology offers to companies is a mechanism to enter and disrupt entire verticals. All that is needed is a good business strategy, a brand, complelling marketing and the poweful capabilities delivered by a clever digital strategy - such as an easy way of buying (via a well-designed user interface) and a revolutionary channel strategy that helps reshape the market (with digital technology doing the heavy lfiting).