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Strategy

The Three Essentials of B2B Digital Transformation

Joerg Niessing, INSEAD Senior Affiliate Professor of Marketing, and Fred Geyer, Senior Partner, Prophet |

The most common question we hear is, “Where do I start?” The answer is, “Where it makes the most sense from a customer’s point of view.”

Today we are witnessing a profound shift in how B2B leaders use digital to consume information, make informed buying decisions and engage with suppliers. Covid-19 has accelerated this shift, which will not abate when the pandemic recedes. Although the shift is easy to see, addressing it isn’t straightforward.

B2B leaders are searching for pragmatic ways to grow their business in a world that has been turned upside down by recent events and the disruptive power of digitalisation. From B2B growth leaders’ perspective, reports of the latest data advance and the launch of every new technology miss the point. To them, riding each new wave of technology is not only impossible but also imprudent, particularly in a time of constrained resources when every investment must be carefully scrutinised. B2B growth leaders want to know how to effectively apply the technologies that are most relevant to their customers, their industry and the unique growth challenges they face.

Technology at the service of customers

Our research into 20 case studies of B2B digital transformations and interviews with 1,000 B2B transformation leaders indicate that successful transformation leaders start with the customer. They take a step-by-step approach tailored to their organisation and their market to become more customer-centric, agile and digital. The most common question we hear from executives feeling the need to go digital is, “Where do I start?” The answer is, “Where it makes the most sense from a customer’s point of view.”

Companies that leverage digital technologies and data to create value for their customers will create value for themselves. Our research identified three transformational shifts that have helped successful B2B companies leverage digital technologies, build competitive advantage and achieve profitable growth.

The digital selling shift: Engage customers and sell more effectively

This starts with taking sales and marketing out of their silos and pooling them together. The standard arrangement, in which sales “owns” the customer relationship and marketing provides messaging and content, is too cumbersome for the digital age.

As companies move through the various stages of the digital selling shift, marketing becomes increasingly intertwined with sales, to the point that certain legs of the sales journey are essentially automated. The best sales staff are thus freed to focus their attention on the most promising leads. This is happening in full force in the pharmaceutical industry, where a digital-first approach is now common in at least three crucial phases of drug sales: premarket conditioning, launch sell-in and post-launch market development. The shift is also well underway in industries such as commercial insurance, which have a large potential customer base, moderate regulatory exposure and generous amounts of customer data.

The digital experience makeover: Innovate and enrich customer experiences

Once prospective clients have been found and converted via digital tools, the natural next step is to use digital to make their interactions with your company as smooth and painless as possible. But the mainstream B2B mindset tends towards silo-based thinking, e.g. maintaining strict separation between customer service and billing departments. From the customers’ perspective, this produces needless replication of steps, such as having to lodge separate queries for each task when all their needs could theoretically be managed through a single digital dashboard.

Resolving customer pain points such as these is a good start, but a mature digital experience makeover will go well beyond this to provide a customer experience that exceeds expectations. For example, global building materials company CEMEX created a one-stop-shop digital offering called CEMEX Go, encompassing order placement, shipment tracking and invoicing for its main products.

The digital proposition pivot: Offer data-powered solutions rather than individual products and services

Finally, B2B companies should extend digital transformation to the core of their business – the basic value proposition they offer to customers. The best way to do this is to pivot from thinking in terms of specific products or services, to prioritising increased revenue generation through data-powered solutions.

Digital offerings can deploy a host of new technologies – IoT, AI, blockchain, etc. – to capture and capitalise upon customer data, for the benefit of both B2B companies and their clients. For example, packaging manufacturers have started using radiofrequency information technology in labels and containers, producing a cascade of efficiencies throughout the supply chain in many industries. Incumbents in the medical device sector, by contrast, have been slow to pivot to a digital-first proposition. They now find themselves locked in tooth-and-nail competition with much smaller insurgents, whose digitally augmented products can be delivered at a much lower cost.

Four basic steps

Within each of these transformative shifts, we have seen that B2B leaders take four basic steps to build the momentum and capabilities needed to transform their companies into agile, customer-centric digital organisations:

  • They define where to play by uncovering underserved customer needs through customer profiling, segmentation and journey mapping that reflects the intricacies of B2B procurement and solution deployment.
  • They determine how to win through digital selling, customer experience and innovation strategies that address the needs of multiple decision makers and influencers.
  • They navigate what to do via agile sprints (rapid prototyping and piloting) and by taking a test-and-learn attitude to everything they do.
  • They decide who to win with by building customer data and experience development teams and by setting up transformation management offices to coordinate their work.

Successful digital transformation puts people first and last

The evidence is clear: Customers and employees are the key to successful digital transformation. They deserve the attention that many managers instead devote to technology selection. We have discovered that digital transformations succeed by putting people first – and last. Every transformation project must begin by understanding customers’ needs, and no transformation project can be completed until the challenges of employee learning, development and motivation are addressed. Success lies in achieving ever-increasing levels of customer-centricity, in which employees learn from customers every step of the way, and customers recognise that the company is increasingly attentive to their needs.

Digital transformation is not a choice. Failure to transform in the face of the evolution of data and digital technology makes B2B companies more vulnerable to existing competitors and to unforeseen insurgents. The choice is whether to take an industry-leading position in terms of digital selling, experience or proposition to benefit the customer and drive uncommon growth or to try to respond to competitive developments through an ad-hoc approach.

In our book, The Definitive Guide to B2B Digital Transformation, we deal more fully with the where, how, what and who steps for each of the three transformational shifts. We feature rich case studies and best practices from companies including Maersk, Michelin, Adobe, IBM, Salesforce.com, Johnson & Johnson and Air Liquide – all businesses that are putting customers at the heart of their digital transformations to drive uncommon growth. 

Joerg Niessing is a Senior Affiliate Professor of Marketing at INSEAD. He co-directs the Leading Digital Marketing Strategy and B2B Marketing Strategies programmes at INSEAD.

Fred Geyer is a Senior Partner at Prophet.

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Comments
Eric ,

Joerg & Fred I agree with what you wrote as Global Chief Digital Officer of Michelin, we started with customers and employees with a program called Engage. I like what you wrote, however I'm convinced (after 5 years) that 95% of the digital transformation is about people and 5% about technology. So we clearly need to put lots of emphasis on the change management, transformation. As we said at Michelin, it is not because you own a formula one car, that you know who to drive it. The same principe applies to the digital transformation and you should not under estimate the change management challenges.

Fred Geyer,

We've come to the same conclusion. The technology first paradigm of digital transformation leads to failure. In the book we state that leaders have to put people first and last. By first we mean customer needs must drive transformation - technology must serve customers. By last we mean that every effort is incomplete without thoroughly thinking through employee enablement through the tools of change management, talent development, governance and cultural change.

Patrick Giry-Deloison,

Agreeing with Joerg and Fred's conclusions and observing a number of organisations, I now tend to believe that it makes more sense NOT TO CHOOSE a technologist for your CD/TO role. As an engineer myself, I'm comfortable in saying that technology is the easy part (or at least you will always find experts to buddy with), whereas the "people" part (as in "customers", "employees", "partners", "suppliers") is awfully complicated. The fascination for tech (and I do sometimes falter) is the best way to put the cart before the horse and crash the project from Day 1. Unfortunately some leaders, and their boards, get carried away by techy buzz words, and forget the fundamental rule of business transformation: if it does not serve the customer(and society) don't do it!

Joerg Niessing,

Thanks for the comment. Completely agree.

Labas,

Maybe for large companies is about people but for small is about understanding the the power of digital technologies and their out put, then is about it technologists inside the company, and the last is about people. In small companies knowledge is missing, not the will of the people.

Serge,

Joerg & Fred, some great observations above. As a Chief Digital Officer with two global digital transformations behind me (both involving tens of thousands of people), I think you’ve succinctly picked on some of the critical factors. However, I also feel there is a number of other, often unrecognised practical challenges that, unless tackled, lead to these programmes ultimately delivering a fraction of what they set out to do. This is a far broader topic than this comments section will allow but some of other key considerations should include:
- Answering the question: what are we in the business of/why do we exist (note, this is a very different point to what we do today)? Without clarity on this, focus will naturally always shift to trying to do more of what we did yesterday. And yet, this is a very tough question to answer, especially for established companies – I’ve spent many, many hours in board meetings in passionate discussions on this topic;
- Once the above is agreed upon, the next question is ‘what does success look like’? How do we measure it? Over what period? This also helps identify gaps that exist, whether in technology, skills, data, partnerships etc, which of course need to be addressed.
- Creating ‘digital culture’ across the organisation, which comes in two parts: developing digital mindset and deploying new ways of working. Without this, there may be some isolated successes at a product/service level, but there will be no transformation. It is worth underlining that this also MUST be accompanied by new/updated metrics/KPIs – without this, there will be no change in behaviours.
- Partnerships: no company has all the skills and technology it needs and having an effective partnering strategy to bring in best-in-class ‘modules’, at speed and at scale, is critically important.
- Innovation: a critical, but poorly understood aspect of digital transformation, often leading to negative ROI. “Innovation” is typically used to describe attempts to develop anything new. In reality, however, there are three very distinct categories here:
o Incremental innovation, which uses new technology to enhance/optimise/improve existing products and services;
o Expansive innovation, which leads to new products in adjacent areas, based on data insights, access to customers etc;
o Disruptive innovation / moonshots, which attempts to create new business models, often based on un-articulated customer needs.
Why does this matter? Because each category requires a very different approach to execution, including different skillsets, metrics, timelines, levels of investment, re-integration of new products into the core business etc.
- Stakeholder management: as a final point here, bringing all stakeholders (and especially investors) on a journey and having alignment is critical. And yet, particularly with listed companies, this doesn’t happen often enough, which results in constant battle between prioritising short-term results/pleasing the market and having a considered approach to transformation.
So, while I do believe there are some excellent points raised in this research, I wanted to highlight some of these practical considerations to not only driving successful digital transformation, but making it stick.

Joerg Niessing,

Thanks for the comment Serge. You right on all your considerations. In particular your points on Partnerships and Innovation. As you most likely have seen in our book we address these as well but not in length. But this was planned as there is only so much you can focus on. Thanks again for your valuable comments! Best

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