Space B: New offerings and customer groups

 

Space B: organic growth by digitization

It is almost inevitable that digitization of manufacturing, logistics, service and market channels creates new business opportunities. Flexibilization of production, for instance, can open a path to mass-customization at acceptable costs. This is one of the fundamental ideas of industry 4.0. The extent to which it can be realized depends on the underlying processes, i.e whether the whole process can be steered digitally.

In most cases it is more advisable to collect initial practical experience with complementary product features and services, not within core processes. Many industrial companies have reached this state. At least technical data sheets or customer self-service platforms are already a standard. Many companies are thus experienced in digitization of offerings or customer interaction.

In addition, applying new technology can expand the variety of offers. Sensors, for instance, are available in such high quality and low cost that the costs of manufacturing systems are not significantly increased. The implementation of sensors can help manufacturers access data from real operating situations. These data are a treasure for further development. Products can be improved and complementary services developed such as remote maintenance or optimization of product use.

Digitization and e-business concepts can be a good way to get easy market access to customer groups which are similar to existing customers. Automated sales processes - i.e. online configuration tools - can lead to business with customers who previously would never have been addressed because they were looking for very affordable solutions which could not be offered through classical, human-based sales channels.

In most cases, both directions of development go hand in hand. New product features and services result in offerings to new customer groups which had not been addressed before. When this development succeeds, organic growth is the consequence.

Advantages of space B strategies

Space B strategies are a viable way with almost no serious obstacles. In most cases core processes will be affected only marginally, so that only little risks will arise and enough freedom for experiments can be given. Space B strategies cannot be realized for free, but investments can be limited to a reasonable amount. Most companies have knowledge and experience with space B strategies. Therefore they feel quite comfortable with these strategies.

Risks of space B strategies

Risks of space B strategies can be limited as long as companies choose an iterative instead of a ballistic approach. Unfortunately – especially in Europe – there is a certain automatism towards ballistic planning. The board of directors sets targets for return on investment of projects which can hardly be realized by digitization projects. The Controlling department requests dedicated project and resource planning over two years and the unit director can accept anything but experimentation. In such a situation persons responsible for the project are forced to plan in a manner that can never be adequate, which limits the project and leads in many cases only to second best solutions. In short: project budgets will be increased dramatically, useful variations will be excluded and milestone reports become the main driver of the project instead of a trailblazing goal. This kind of procedure can be useful, but only applied to safe and clearly defined processes. Wherever companies try to explore innovations it can be guaranteed that the project will not achieve all that it could have. Particularly because space B strategies can be managed without an unbearable risk, sufficient leeway should be left for experimentation.

The highest risk of a ballistic approach is to develop solutions far from customer needs that provide no significant value, neither to customers nor to the company. Therefore a customer-oriented perspective should be followed right from the start. Customers should be involved in the development in every step. This leads to early feedback and early and inexpensive corrections that in the end will lead to an inspiring solution.

Success factors in space B:

Space B projects benefit from certain openness of results. While experimenting with digital potential new, unforeseeable opportunities will show up inevitably. Therefore it can be useful to agree on objectives for space B projects but to leave space for refocusing and define certain milestones when refocusing should be discussed.

Customer orientation and learning by experimenting are the essential factors. Both are closely related to each other. Experimenting should include customers as much as possible. LEAN DIGITIZATION ℠ includes customers in the development process, similar to the lean startup approach. Customers will be confronted with solutions in an early stage of development. That is different to the classical lean management approach. New concepts like Design Thinking deliver adequate methods for it. Customer feedback does not have absolute value but is considered as one source of information like many others. It is this relativization of customer feedback which is crucial for innovation processes like digital transformation. The scope will not be restricted too early. Customers are very good in judging existing products and services but not things that are so new that there are no experiences at all with them. Before being launched, even an iPad would have failed compared to a well know notebook in a conventional market survey. It was the tactile perception that led to success.

Overview: digitization strategies

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published: December 10, 2018, © Uwe Weinreich

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