Work 4.0 – Contemporary Approach To Developing Digital Solutions And Business Models
The data growth rate is projected to be about 30% every year until 2025. One major data supplier will be the Industrial Internet of Things (IIoT). But it is not about collecting these huge data sets, it is about using the data to generate additional value for customers.
The usage and leverage of data is a completely new area for most companies. The key questions these companies should ask here are how to make sure that
- We create real value for the customer,
- We learn fast enough to make sure we are ahead on the learning curve, and
- We will earn money with these new offerings.
Therefore, it is necessary to evaluate the way we work today and to adjust to the current and future implementation challenges not just with new technological knowledge, but with a different mind-set and culture.
Below, we will show you some principles that will help you to stay ahead.
Business Models: What Is It And Why Is It Important?
“In the future, competition will not take place between products and companies, but business models”
(Gary Hamel, originator of the principle of core competencies)
To fully grasp the potential of IIoT and digital solutions, you should look at the whole business model that makes your offering attractive to the customer.
We define a business model in 4 core dimensions:
When we change at least two dimensions simultaneously then we call it a business model innovation.
Digitalization, IIoT And Industrie 4.0 Offer Potential For Innovative Business Models
Digital services based on data from the usage of machines offer the opportunity to create innovative business models that create unpreceded customer value. This customer value leads to differentiation and profitable growth.
Product companies can create new value through digital services (WHAT) that lead to new value chains (HOW), different cost structures and potential for revenue models such as pay per use or performance dependent remuneration (WHY).
Value proposition: solve changing customer needs
For decades, the car industry focused mostly on differentiators like horse power, top speed, sportive steering or comfort and leather seats. But people especially in urban areas benefit less and less from such features. In addition, they are less willing to pay for owning a car than for using it. This opened up opportunities for car sharing companies which offer to find, open and drive cars simply with a smartphone. This was enabled by IIoT. Capturing data from car usage now allows not only to build cars that better fit to customer needs but also to offer additional new services that solve additional customer needs.
Different revenue streams and profit engines
Services based on acquired data gives you the opportunity for new revenue streams like pay-as-you-go or performance based contracting, where you link the profitability directly to the value created for your customer.
The Importance Of Time-To-Market, Customer Orientation And Know-How
The classic implementation process typically starts with an analysis phase, diving deep in all aspects of designing and producing new products or services. For new IT services often just the vendor selection process alone takes 3 to 6 months. Specification, design, implementation and test takes several more months. But as this kind of innovative services are new not only to your organization but also to your customers, this entails a major risk: The possibility that your digital solution is not suitable for your customers. Once this is realized, money was already spent and a lot of time has passed.
Therefore, it is vital for companies that developing new digital services is done in short iteration cycles with close customer interaction. With each cycle you and your customers will learn more about which services create real value and when customers are willing to pay for it. At the same time, the company needs to learn how to develop and continuously improve such offerings.
Concepts For Realization
Fortunately, we have tackled these problems in several projects and created an approach for customer-centric business model design and implementation.
Customer centricity and thinking in business models
It starts with a customer centric mind-set and the willingness to listen to customers and learn about their problems. Approaches such as design thinking put the customer at the center, ensuring a fit of the proposed solutions with the real need of the customer. Using the St.Gallen Business Model NavigatorTM facilitates business model thinking and offers a systematic approach to design and implementation. Furthermore, a focus on business models ensures that your monetarization is in place and will be validated during the development process. In the end, who wants a solution that doesn’t pay off?
- Ensuring an efficient implementation
Fast and iterative cycles are key to ensure validation of your assumptions along with a steep learning curve. In short: experimentation and short feedback loops are crucial to not only develop a solution fast, but to develop the right solution for and with your customer – and that with the appropriate speed. This also involves IT solutions that can be adapted quickly to match the fast learning cycles of these experiments.
- Integration of technical and methodical knowledge
It is essential to establish the methodical knowledge and the capabilities for this kind of service design and implementation within your company. Then you can leverage your existing knowledge to create new digital services together with your employees and your customers.
Digitalization, Industry 4.0 and IIoT enable you not only to create new and attractive offerings to delight your customers, but also force your employees to think and act in a new way. Customer-centricity, Business Model thinking and working in iterative learning cycles will prepare your company and your team for the future. Thus, Work 4.0 is not only a matter of creating more flexible ways of working, technical know-how and big data competences, but also of adapting the culture and the way of thinking of one’s company to these emerging changes.
The real challenge, however, lies not in the mere understanding of these aspects, but in their implementation in your own company. This is the only way to quickly build up own capabilities and gain important experience with these new procedures. With the support of the right partners for such an approach, companies can simultaneously develop innovative business models and successfully manage this transformation.