What better way to illustrate the realities of the disruption economy we currently live in than with the lyrics of the popularized Daft Punk song “Harder, Better, Faster Stronger.” With their “Stormtrooper” helmets and highly digitized musical style, this French duo conjures images of powerful, digital forces infiltrating our lives—the future is here, whether you’re ready to embrace it or not.
Not to be alarmist or overly somber in my use of analogies, but amidst rapid-fire market changes, and the unmistakable rise of the subscription-based economy, business of all types face unbelievable pressure to continuously monetize the disruption.
Forces to be reckoned with
At the current turnover rate, 75 percent of the S&P 500 companies from 2012 will be replaced by 2027, with the average company lifespan having dropped from 61 to 18 years over the past 60 years.
Monumental shifts such as this one, were the perhaps unexpected result of a disruptive economic landscape having left many businesses unprepared to meet its driving forces. Understanding how to fortify against, and even align with these changes, is key to thriving and even leading in a highly disruptive environment.Leaving companies most at risk are the following:
- Lack of agility, speed, and simplicity are clear showstoppers when it comes to reinventing business models – an absolute necessity in the disruptive landscape. Today, 74 percent of companies believe business complexity hurts their ability to meet goals, however only 17 percent believe current simplification efforts are very effective—38 percent are willing to pay more for simpler experiences.
- Disengagement with the end consumer is putting companies at risk for many reasons. Being able to access and leverage data from across CRM, billing, and finance for a 360-degree view of the customer and leverage a bidirectional feedback loop is essential to delivering customized, relevant offers and services – keys to staying competitive.
- Siloed back-ends and the absence of automated financial processes increases manual operations and maintenance costs while contributing to revenue leakage and a higher number of DSO (Days of Sales Outstanding).
Preparedness is key and to combat the above, companies will need to automate while simultaneously planning to sustain scaled operations if they are to achieve, repeat and maintain healthy growth.
Keeping in mind that there will be more words written on Twitter over the next two years than contained in all the books ever printed, digital businesses will need seamless infrastructure and access to constant insight if they are to ensure their survival.
The Disruption Economy: Transform to defend
An unbelievable 96 percent of marketers say the ability to make data-informed decisions is the best way to manage disruption, but only 13 percent are doing so. Addressing disruption begins with a transformation journey away from stagnation.
Implementing such a journey—as a set of strategies—must be:
- Designed to create and deliver the best value for the end customer
- Capture and monetize it
- As with any journey, you need to start with a vision—a carefully orchestrated combination of moves to either grow or protect the business—choosing to innovate and disrupt, or improve efficiency, depending on individual circumstances
To return to our musical analogy, companies would be wise to incorporate a “4 beats measure approach,” just as Daft Punk inspires: “Work it harder, Make it Better, Do It Faster, Make the company stronger!”
What it means to run harder
Create new revenue streams by evolving from a product centric approach to one that is focused on delivering services and outcomes.
To achieve this, a top-to-bottom restructuring of the company to enable an always-on approach is required. As the new revenue model is one that is subject to continuous change vs. being focused on discrete, one-time transactions – Sales, Marketing, Finance, and IT must all rethink their business processes to support the agile model.
As companies move towards selling “complete” solutions and outcome-based models, the ability to manage solution components i.e. products plus services, on a single quote, order and bill, while managing pricing based on tangible value delivered, becomes a critical asset.
Provide global payment flexibility to meet consumer demand anytime, anywhere.
Moving from physical store sales to mobile and e-Commerce platforms requires that customers be offered a diversity of payment methods to enable online purchases, including the freedom to choose between pre-paid, credit, payment-on-delivery or installment options.
In addition, companies must be prepared to manage high-volume transactions across commerce channels from online, to mobile, in-store, and field sales.
What it means to run stronger in the Disruption Economy
- Innovate and disrupt – leverage the IoT technology for real-time, usage-based services that lead the movement and define the trend. The Internet of Things will continue to have a tremendous economic impact in the years to come. With over 200 billion connected devices by 2020 for a total market worth $6.2 trillion in 2025, layering value-added services onto a connected device or product presents unlimited revenue potential. For companies or business units used to selling and fulfilling one-time product orders, this involves a radical change of business model.
- Introduce a multi-sided monetization strategy. The ideal way to not just disrupt an industry market but to build a long-term defensible position is to move to a multi-sided business model where transacting business with, through and on behalf of third parties. The more partners on the platform, the more value for end-customers. To be successful, this requires having an equal focus on both the end-customer and partner engagement—developing customer pricing and partner revenue share terms in concert.
What it means to run faster
Build agile capabilities to rapidly introduce subscriptions, usage-based and revenue-sharing models.
Developing pricing models to manage subscription, usage- and revenue-sharing options, involves more than just changing a price point. It’s all about fine tuning, in concert, all the different instruments pertaining to up-front, recurring, and metered usage fees, including entitlements, etc.
Guiding customers to the right pricing plan while keeping them informed of where they are in their subscription plan and what entitlements they have remaining.
The Disruption Economy: What it means to run better
To scale smoothly, think automation, integration and high-volume handling.
Running revenue collections, credit management and revenue recognition in a highly-automated and reliable way, may seem obvious, but many companies still struggle with this. The result is revenue leakage and a high transactional cost per revenue unit. 87 percent of finance executives believe they need to analyze financial and performance data much faster than what they are currently able to do.
Addressing this issue alone has the potential to unlock hidden opportunities to help you take the first step on the business model transformation journey, allowing you to thrive in the disruption economy.