Digital Transformation: Disrupting With Diversified Business Models

Paul Lewis

As a previous CFO I work with used to say frequently, “It’s all about cash flow.” Good ideas and good businesses are about making money and spending just enough to grow that money incrementally and predictably over time. “The faster we achieve positive cash flow on any particular project, the more investment money will be available to innovate again,” was a mantra I heard time and time again.

Getting to financial steady-state for new organizations and/or maintaining incremental positive growth for mainstay companies is becoming more difficult, however, because:

  • Competition from Internet/mobile-born startups are quick to innovate and can change priorities on a dime
  • Changing consumption demands from a changing consumer market will make or break product success far faster than ever
  • Explosion of massive automation techniques, like robotics and artificial intelligence, is reducing the human effect of customer service
  • Globalization and ubiquitous information sharing are creating real-time service comparison and global rating systems
  • Startup adjacent markets like bitcoin are competing with centuries-old financial markets

These “disrupters” could be summarized into one simple word: choice. Your clients want choice in products, service, payment method, company, length of engagement, etc. They are perfectly happy to replace you if they are not satisfied.

Consumers are also choosing to break up long-term and broad business relationships to create several short-term, diverse relationships. Instead of being loyal to a single bank consuming all the retail, investment, and insurance offerings available, they would rather spread their wealth across many institutions, and they will purposely and quickly move to another institution if you’re not keeping up with your side of the bargain on customer service.

Collectively, these digital disrupters are chipping away potential growth, especially if executives are relying on the traditional tools in their tool belt: Introducing new products at the same rate and incrementally improving customer service, prices, sales, and promotions.

The best way to compete with disruption? DISRUPTION!

Competing against these disrupters requires a new disruptive business strategy – digital transformation – which is largely divided into these three categories:

  • Operations and processes: Take a ground-up re-evaluation of the services you deliver to dramatically change the time to market delivery of your products (from months to hours)
  • Customer experience: Purposely identify and understand new customer behaviors and buying expectations with a consumer mindset of replaceability
  • New business models: Shift from “sell product” to “sell service” to “sell usage” to “sell outcome” to “sell network”

I’ve already written about operations and processes and customer experiences in the last couple of months, so let’s dig a little deeper into new business models.

A quick reminder in the last few minutes: The customer expectation is choice, as evidenced by competitive pressures from digital disrupters.

Many of the digital disrupters, including your digital competition, likely have a significantly different business model. We could go in depth in terms of the various characteristics of your business model, including value proposition, customer segments, partner relationships, key assets and activities, etc., which would certainly show major differences:

  • Major hotel chains have trillions of dollars worth of property, while online room rental capabilities have none
  • Big-box retailers cater to a diverse set of customer demographics, while drone-based delivery retailers focus on urbanites
  • Large manufacturers require hundreds of partners to deliver an array of complex machines, while a niche manufacturer only needs a 3D printer and time on its hands
  • Major technology companies rely on a solid brand for continued patronage, but new entrants need some samples that fit into the trunks of their car

We could go in depth on each of these characteristics, and they do need to be addressed by the executives, but let’s focus even more on the financial models of your offerings relative to customer choice and cash flow.

For the most part, your financial model (how you earn revenue and how you spend it) largely fits into this generic description:

  • Sell product or service; make money – spend money to make product or deliver service – invest profit to make new product or service
    • It’s tried and true, and you can create and deliver a variety of products and services that fit this model. The more profit made, the faster debt is paid, the happier investors become.

But what happens when your customers are looking for choice and find the exact same product or service available from your competition in dramatically different financial models, including ones that suit their particular financial needs much better? Let’s explore those other models:

  • Sell product – make money THEN sell service – make money
    • Not a huge difference from the generic model, but it does create potential for new and recurring revenue. Adding the ability to sell add-on post-sale services not only creates new revenue, but also a level of “stickiness” with the customer due to the ongoing interaction. Instead of buying once and hoping they come back for a newer model later, the continued interaction keeps the brand front and center. The negative of course, is that a poor or declining customer experience will have a dramatically negative effect. It’s almost impossible to bring back a customer with a poor experience.
  • Sell product AS a service – make money over time
    • This model is the big shift from CAPEX to OPEX for all participants. For a customer, it’s replacing the financial burden of an upfront cash outlay with ongoing expenses over a period of time (a contractual term or when they stop the service). For the company, it means changing the spending model by taking on the upfront risk of product or service creation and availability, with the potential return of more profit per product over time. This model is preferable for customers looking to manage a predictable cash flow.
  • Sell product AS a service – make money based on USAGE
    • While still an OPEX model, the difference in that the burden of profitability is entirely on the shoulders of the company to create enough customers with enough usage over time to compensate for the upfront initial investment in the product creation and expenses over its lifespan. The potential return, however, is a far higher potential of profit if usage becomes popular. This model has created many cash cows. For customers, the expense is directly controllable and they can spend as little or as much as they need at their discretion.
  • Sell product AS a service – make money based on OUTCOME
    • As an extension to the usage model, the outcome model helps balance the risk between the seller and the consumer for the cost of the product. The burden of the product investment is still with the company, and the usage over time will still dictate the amount of potential profit, but that risk is now reduced with each customer interaction by jointly taking on the risk for the ongoing or end price. This is the model of “everybody roll up your sleeves” to create an average transaction price that’s lower for the consumer.
  • Sell platform services – make money from all participants:
    • This is a dramatic shift from creating and selling products to creating a network of buyers and sellers for a particular set of products or services. From the consumer perspective, and even your brand recognition as a whole, you may be seen as a provider, but this model is only about making offerings available from a variety of different sellers and earning revenue transactionally as part of the buying experience. The burden of product investment remains with the sellers. The burden of creating a marketplace (both the platform and relationships with all parties) becomes exclusively yours. The time and investment required to create these platforms will be a significant burden, and the potential of failure is significantly high. However, once the network is thriving, net new revenue can be earned by creating new and innovative value for each of the participants in the network and creating logarithmic profits by the simple organic growth of the network alone. The value for the customer, of course, is creating the ultimate venue for choice.

Just to be clear: I am not advocating a shift or a move to a new business or financial model for your existing offerings. And even if you strategically decide a new model would be valuable, I am not suggesting the various models described represent maturity or evolution. My recommendation is to evaluate your current growth against your competitors’ and your customers’ desires in order to create diversity in your business financial models to offer choice to your various customer segments. Ultimately, it’s choice that will be the winning digital transformation business strategy.

Everyone has a perspective and a point of view. Spend time reading, forming an opinion, and talking about it. Being right isn’t important. If you are never wrong, you aren’t trying hard enough.

See how IT can help organizations shift to real-time operations. Read the EIU report.

This blog originally appeared on Hitachi Data Systems Community.


Paul Lewis

About Paul Lewis

Paul Lewis is the Chief Technology Officer in Hitachi for the Americas, responsible for the leading technology trend mastery and evangelism, client executive advocacy, and external delivery of the Hitachi vision and strategy especially related to digital transformation and social innovation. Additionally, Paul contributes to field enablement of data intelligence and analytics; interprets and translates complex technology trends including cloud, mobility, governance, and information management; and represents the Americas region in the Global Technology Office, the Hitachi LTD R&D division. In his role of trusted advisor to the CIO community, Paul’s explicit goal is to ensure clients’ problems are solved and opportunities realized. Paul can be found at his blog, on Twitter, and on LinkedIn.

Amazing Digital Marketing Trends And Tips To Expand Your Business In 2015

Sunny Popali

Amazing Digital Marketing Trends & Tips To Expand Your Business In 2015The fast-paced world of digital marketing is changing too quickly for most companies to adapt. But staying up to date with the latest industry trends is imperative for anyone involved with expanding a business.

Here are five trends that have shaped the industry this year and that will become more important as we move forward:

  1. Email marketing will need to become smarter

Whether you like it or not, email is the most ubiquitous tool online. Everyone has it, and utilizing it properly can push your marketing ahead of your rivals. Because business use of email is still very widespread, you need to get smarter about email marketing in order to fully realize your business’s marketing strategy. Luckily, there are a number of tools that can help you market more effectively, such as Mailchimp.

  1. Content marketing will become integrated and more valuable

Content is king, and it seems to be getting more important every day. Google and other search engines are focusing more on the content you create as the potential of the online world as marketing tool becomes apparent. Now there seems to be a push for current, relevant content that you can use for your services and promote your business.

Staying fresh with the content you provide is almost as important as ensuring high-quality content. Customers will pay more attention if your content is relevant and timely.

  1. Mobile assets and paid social media are more important than ever

It’s no secret that mobile is key to your marketing efforts. More mobile devices are sold and more people are reading content on mobile screens than ever before, so it is crucial to your overall strategy to have mobile marketing expertise on your team. London-based Abacus Marketing agrees that mobile marketing could overtake desktop website marketing in just a few years.

  1. Big Data for personalization plays a key role

Marketers are increasingly using Big Data to get their brand message out to the public in a more personalized format. One obvious example is Google Trend analysis, a highly useful tool that marketing experts use to obtain the latest on what is trending around the world. You can — and should — use it in your business marketing efforts. Big Data will also let you offer specific content to buyers who are more likely to look for certain items, for example, and offer personalized deals to specific groups of within your customer base. Other tools, which until recently were the stuff of science fiction, are also available that let you do things like use predictive analysis to score leads.

  1. Visual media matters

A picture really is worth a thousand words, as the saying goes, and nobody can deny the effectiveness of a well-designed infographic. In fact, some studies suggest that Millennials are particularly attracted to content with great visuals. Animated gifs and colorful bar graphs have even found their way into heavy-duty financial reports, so why not give them a try in your business marketing efforts?

A few more tips:

  • Always keep your content relevant and current to attract the attention of your target audience.
  • Always keep all your social media and public accounts fresh. Don’t use old content or outdated pictures in any public forum.
  • Your reviews are a proxy for your online reputation, so pay careful attention to them.
  • Much online content is being consumed on mobile now, so focus specifically on the design and usability of your mobile apps.
  • Online marketing is essentially geared towards getting more traffic onto your site. The more people visit, the better your chances of increasing sales.

Want more insight on how digital marketing is evolving? See Shutterstock Report: The Face Of Marketing Is Changing — And It Doesn’t Include Vince Vaughn.


Sunny Popali

About Sunny Popali

Sunny Popali is SEO Director at Tempo Creative is a Phoenix inbound marketing company that has served over 700 clients since 2001. Tempos team specializes in digital and internet marketing services including web design, SEO, social media and strategy.

Social Media Matters: 6 Content And Social Media Trend Predictions For 2016 [INFOGRAPHIC]

Julie Ellis

As 2015 winds down, it’s time to look forward to 2016 and explore the social media and content marketing trends that will impact marketing strategies over the next 15 months or so.

Some of the upcoming trends simply indicate an intensification of current trends, however others indicate that there are new things that will have a big impact in 2016.

Take a look at a few trends that should definitely factor in your planning for 2016.

1. SEO will focus more on social media platforms and less on search engines

Clearly Google is going nowhere. In fact, in 2016 Google’s word will still essentially be law when it comes to search engine optimization.

However, in 2016 there will be some changes in SEO. Many of these changes will be due to the fact that users are increasingly searching for products and services directly from websites such as Facebook, Pinterest, and YouTube.

There are two reasons for this shift in customer habits:

  • Customers are relying more and more on customer comments, feedback, and reviews before making purchasing decisions. This means that they are most likely to search directly on platforms where they can find that information.
  • Customers who are seeking information about products and services feel that video- and image-based content is more trustworthy.

2. The need to optimize for mobile and touchscreens will intensify

Consumers are using their mobile devices and tablets for the following tasks at a sharply increasing rate:

  • Sending and receiving emails and messages
  • Making purchases
  • Researching products and services
  • Watching videos
  • Reading or writing reviews and comments
  • Obtaining driving directions and using navigation apps
  • Visiting news and entertainment websites
  • Using social media

Most marketers would be hard-pressed to look at this list and see any case for continuing to avoid mobile and touchscreen optimization. Yet, for some reason many companies still see mobile optimization as something that is nice to do, but not urgent.

This lack of a sense of urgency seemingly ignores the fact that more than 80% of the highest growing group of consumers indicate that it is highly important that retailers provide mobile apps that work well. According to the same study, nearly 90% of Millennials believe that there are a large number of websites that have not done a very good job of optimizing for mobile.

3. Content marketing will move to edgier social media platforms

Platforms such as Instagram and Snapchat weren’t considered to be valid targets for mainstream content marketing efforts until now.

This is because they were considered to be too unproven and too “on the fringe” to warrant the time and marketing budget investments, when platforms such as Facebook and YouTube were so popular and had proven track records when it came to content marketing opportunity and success.

However, now that Instagram is enjoying such tremendous growth, and is opening up advertising opportunities to businesses beyond its brand partners, it (along with other platforms) will be seen as more and more viable in 2016.

4. Facebook will remain a strong player, but the demographic of the average user will age

In 2016, Facebook will likely remain the flagship social media website when it comes to sharing and promoting content, engaging with customers, and increasing Internet recognition.

However, it will become less and less possible to ignore the fact that younger consumers are moving away from the platform as their primary source of online social interaction and content consumption. Some companies may be able to maintain status quo for 2016 without feeling any negative impacts.

However, others may need to rethink their content marketing strategies for 2016 to take these shifts into account. Depending on their branding and the products or services that they offer, some companies may be able to profit from these changes by customizing the content that they promote on Facebook for an older demographic.

5. Content production must reflect quality and variety

  • Both B2B and B2C buyers value video based content over text based content.
  • While some curated content is a good thing, consumers believe that custom content is an indication that a company wishes to create a relationship with them.
  • The great majority of these same consumers report that customized content is useful for them.
  • B2B customers prefer learning about products and services through content as opposed to paid advertising.
  • Consumers believe that videos are more trustworthy forms of content than text.

Here is a great infographic depicting the importance of video in content marketing efforts:
Small Business Video infographic

A final, very important thing to note when considering content trends for 2016 is the decreasing value of the keyword as a way of optimizing content. In fact, in an effort to crack down on keyword stuffing, Google’s optimization rules have been updated to to kick offending sites out of prime SERP positions.

6. Oculus Rift will create significant changes in customer engagement

Oculus Rift is not likely to offer much to marketers in 2016. After all, it isn’t expected to ship to consumers until the first quarter. However, what Oculus Rift will do is influence the decisions that marketers make when it comes to creating customer interaction.

For example, companies that have not yet embraced storytelling may want to make 2016 the year that they do just that, because later in 2016 Oculus Rift may be the platform that their competitors will be using to tell stories while giving consumers a 360-degree vantage point.

For a deeper dive on engaging with customers through storytelling, see Brand Storytelling: Where Humanity Takes Center Stage.


Julie Ellis

About Julie Ellis

Julie Ellis – marketer and professional blogger, writes about social media, education, self-improvement, marketing and psychology. To contact Julie follow her on Twitter or LinkedIn.

The Future of Cybersecurity: Trust as Competitive Advantage

Justin Somaini and Dan Wellers


The cost of data breaches will reach US$2.1 trillion globally by 2019—nearly four times the cost in 2015.

Cyberattacks could cost up to $90 trillion in net global economic benefits by 2030 if cybersecurity doesn’t keep pace with growing threat levels.

Cyber insurance premiums could increase tenfold to $20 billion annually by 2025.

Cyberattacks are one of the top 10 global risks of highest concern for the next decade.

Companies are collaborating with a wider network of partners, embracing distributed systems, and meeting new demands for 24/7 operations.

But the bad guys are sharing intelligence, harnessing emerging technologies, and working round the clock as well—and companies are giving them plenty of weaknesses to exploit.

  • 33% of companies today are prepared to prevent a worst-case attack.
  • 25% treat cyber risk as a significant corporate risk.
  • 80% fail to assess their customers and suppliers for cyber risk.

The ROI of Zero Trust

Perimeter security will not be enough. As interconnectivity increases so will the adoption of zero-trust networks, which place controls around data assets and increases visibility into how they are used across the digital ecosystem.

A Layered Approach

Companies that embrace trust as a competitive advantage will build robust security on three core tenets:

  • Prevention: Evolving defensive strategies from security policies and educational approaches to access controls
  • Detection: Deploying effective systems for the timely detection and notification of intrusions
  • Reaction: Implementing incident response plans similar to those for other disaster recovery scenarios

They’ll build security into their digital ecosystems at three levels:

  1. Secure products. Security in all applications to protect data and transactions
  2. Secure operations. Hardened systems, patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud-operations security framework
  3. Secure companies. A security-aware workforce, end-to-end physical security, and a thorough business continuity framework

Against Digital Armageddon

Experts warn that the worst-case scenario is a state of perpetual cybercrime and cyber warfare, vulnerable critical infrastructure, and trillions of dollars in losses. A collaborative approach will be critical to combatting this persistent global threat with implications not just for corporate and personal data but also strategy, supply chains, products, and physical operations.

Download the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.



How Digital Transformation Is Rewriting Business Models

Ginger Shimp

Everybody knows someone who has a stack of 3½-inch floppies in a desk drawer “just in case we may need them someday.” While that might be amusing, the truth is that relatively few people are confident that they’re making satisfactory progress on their digital journey. The boundaries between the digital and physical worlds continue to blur — with profound implications for the way we do business. Virtually every industry and every enterprise feels the effects of this ongoing digital transformation, whether from its own initiative or due to pressure from competitors.

What is digital transformation? It’s the wholesale reimagining and reinvention of how businesses operate, enabled by today’s advanced technology. Businesses have always changed with the times, but the confluence of technologies such as mobile, cloud, social, and Big Data analytics has accelerated the pace at which today’s businesses are evolving — and the degree to which they transform the way they innovate, operate, and serve customers.

The process of digital transformation began decades ago. Think back to how word processing fundamentally changed the way we write, or how email transformed the way we communicate. However, the scale of transformation currently underway is drastically more significant, with dramatically higher stakes. For some businesses, digital transformation is a disruptive force that leaves them playing catch-up. For others, it opens to door to unparalleled opportunities.

Upending traditional business models

To understand how the businesses that embrace digital transformation can ultimately benefit, it helps to look at the changes in business models currently in process.

Some of the more prominent examples include:

  • A focus on outcome-based models — Open the door to business value to customers as determined by the outcome or impact on the customer’s business.
  • Expansion into new industries and markets — Extend the business’ reach virtually anywhere — beyond strictly defined customer demographics, physical locations, and traditional market segments.
  • Pervasive digitization of products and services — Accelerate the way products and services are conceived, designed, and delivered with no barriers between customers and the businesses that serve them.
  • Ecosystem competition — Create a more compelling value proposition in new markets through connections with other companies to enhance the value available to the customer.
  • Access a shared economy — Realize more value from underutilized sources by extending access to other business entities and customers — with the ability to access the resources of others.
  • Realize value from digital platforms — Monetize the inherent, previously untapped value of customer relationships to improve customer experiences, collaborate more effectively with partners, and drive ongoing innovation in products and services,

In other words, the time-tested assumptions about how to identify customers, develop and market products and services, and manage organizations may no longer apply. Every aspect of business operations — from forecasting demand to sourcing materials to recruiting and training staff to balancing the books — is subject to this wave of reinvention.

The question is not if, but when

These new models aren’t predictions of what could happen. They’re already realities for innovative, fast-moving companies across the globe. In this environment, playing the role of late adopter can put a business at a serious disadvantage. Ready or not, digital transformation is coming — and it’s coming fast.

Is your company ready for this sea of change in business models? At SAP, we’ve helped thousands of organizations embrace digital transformation — and turn the threat of disruption into new opportunities for innovation and growth. We’d relish the opportunity to do the same for you. Our Digital Readiness Assessment can help you see where you are in the journey and map out the next steps you’ll need to take.

Up next I’ll discuss the impact of digital transformation on processes and work. Until then, you can read more on how digital transformation is impacting your industry.


Ginger Shimp

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she's also earned her Connoisseur's Certificate in California Reds from the Chicago Wine School. She holds a bachelor's degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University. Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube's 10 EDU Gurus, Ed Shimp.