Rethinking Your Value Chain In Today’s Digital Business Ecosystem

Martin Mrugal

Part 2 in the “CFOs Rethink Business” series

With the global ubiquity and upward progression of the digital economy, the corporate mandate and frequently (over)used phrase “every company is a tech company” has become a misnomer. Now, no company qualifies as a technology company, as the traditional lines that previously defined the industry at the advent of the dot-com era have become obsolete. More coders and developers work at Goldman Sachs than at Twitter and LinkedIn combined.

Entry points (and barriers to entry), previous competitors turned into cooperative partners, and shifting lines of products and services have blurred into an amalgamated business ecosystem. Every executive at every company, whether you’re with SAP, Starbucks, Southwest Airlines, or a local shoe store, is working towards the same goal – anticipating and meeting customer demands in today’s tech-centric, mobile-enabled world. New socioeconomic and macropolitical dynamics require businesses to be quicker, and better, at adapting at scale.

Compete on customer experience

For the average consumer and end user, a brand is a brand. If the customer experience isn’t better than the rest, then it’s on to the next. If the customer experience is consistently better than the rest, you can go from being yesterday’s online bookstore to today’s largest Internet retailer and global conglomerate. Amazon is arguably one of the most beloved brands in this new economy.

There is a stark contrast between the simple, seamless service that falls in the hands of the end user versus the complex, high-stakes business decisions required to get it there. A recent white paper developed by the Aspen Institute’s Cyber & Technology Program states that a company founded in the 1960s had a 92% chance of continuing their business five years later. A company listed in the 2000s, however, only had only a 63% chance of surviving the next five years. Market sectors, along with previously successful business models, continue to expire at much faster rates.

So how do successful companies not only keep business operations afloat to continue meeting growing customer demands but build brand affinity and customer loyalty? According to futurist Roy Amara, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” Strategic leaders today need to evaluate the tradeoffs for short-term and long-term digital adoption strategies simultaneously, working closely with their peers in the C-suite.

Learn from your customers through an open-sourced ecosystem

The most successful companies today are those that imagine their core product lines and services as only the entry point to the customer experience. Building and forecasting against connected ecosystems mean new, open-sourced approaches to customer engagement. That means focusing on core competencies, outsourcing the rest, but also “giving it away.” In an open, digital ecosystem, many companies offer their products for free in exchange for the opportunity to collect insights from their customers. By giving it away, companies can build stronger relationships with customers that often lead to the sale of follow-on products and services.

Don’t benchmark against outdated product lifecycles

The value of your products no longer ends at the warehouse door. With Internet of Things (IoT) technology, you can interact with your customers throughout the product lifecycle. Build sensors into products, deliver ongoing value to your customers, and drive loyalty with a better customer experience.

But don’t let perfection be the enemy of the good. Take a page from Silicon Valley and expect to iterate constantly when it comes to fielding new offerings. Offering a minimally viable product at first, followed up by adaptive innovation based on input from actual customers, helps you understand how it can evolve to become exactly what the market wants.

Companies are getting larger and more complex every day. Complexity raises operational challenges that will only cause headaches, lackluster growth, and competitive obsolescence without an understanding of where your company plays in the value chain, and how it can grow, in the digital economy. The world is evolving, and businesses are transforming along with it. Ultimately, understanding where technology is useful in a digital supply chain – and where it isn’t – is critical for the modern corporate leader to understand. The value of your organization stems from viewing your business as a connected ecosystem because the customer experience doesn’t start and end with one product or one touch point.

Join the Aspen Institute and SAP for a C-level roundtable conversation

The Aspen Institute and SAP invite you for an intimate, C-level roundtable conversation, exploring how companies succeed in today’s evolving digital economy. You’ll hear from peer leaders and strategists—from the Fortune 100 to the bestseller lists—about companies who are leading the way in digital transformation. To join us, register here.

In the next blog in this series, we will explore how finance can support customer-centricity in the digital economy.

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Martin Mrugal

About Martin Mrugal

Martin Mrugal is the Chief Innovation Officer and Head of Customer Experience at SAP. His responsibilities include overseeing the Chief Customer Office, Product Centers Of Excellence, Industry and Value Engineering and Solution Engineering (pre-sales) organizations.