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Create digital products for customers to pay for

Nowadays, new technologies are emerging in an endless stream, and the emergence of advanced means such as social platforms, Internet of Things, artificial intelligence, biometrics, blockchain, and cloud computing has enabled companies to provide value in ways that were not possible before. Smart companies are turning digital capabilities into digital products or services: using rich information to create a seamless personalized customer experience and package it into a solution.

Successful digital products or services are born at the intersection of technical means and customer needs and willingness to pay. However, it is difficult to find out exactly where such a meeting point is. To find this out, companies need to experiment repeatedly, co-create with customers, set up cross-functional R&D teams, discover bit by bit during the exploration process, and share it internally.

We surveyed nearly 200 companies and found that the internal mechanisms of many large, mature companies do not support the continuous innovation of digital products and services. From new ideas to new value propositions, it is necessary to constantly experiment, learn lessons from them, abandon them, strengthen them, reconfigure them, and then fully promote them. The internal processes of mature companies often limit their capabilities.

Constantly experimenting Toyota Motor North America has launched an innovative trading market, so that employees can share their ideas in this market, and can also compete for company funds and other opportunities to promote their own ideas. The company’s IT department has developed a “starter” application, through which anyone can publish innovative ideas and get feedback (like or dislike).

In terms of management structure, Toyota iCouncil members with company-level director-level positions (and budgets) can help people with ideas to develop business plans, allocate funds, and arrange for them to form working groups with company IT staff, eliminating the complicated approval process.

Co-creation with customers In a B2C environment, co-creation with customers usually means that companies need to first launch a basic version that can be run online, and then carefully study the response of many customers to this product; while in a B2B environment, companies can Consider asking some individual customers to identify pain points and evaluate the potential value of the solution.

Philips has invested a lot of resources in building customer co-creation workshops. Such workshops usually focus on medical service providers, payers, and patients from a hospital or suffering from the same type of disease. The number of people is 12 to 40. It is often difficult for them to have the opportunity to communicate their needs. These workshops promoted by Philips have the characteristics of cross-field cooperation, so participants can not only be limited to a certain stakeholder, but can propose ideas to improve the entire medical system.

The cross-functional R&D team can meet the needs of customers with a new solution, the premise must be that customers are willing to change, change the way they make decisions when buying, subvert the existing power structure, and take action based on new data.

The way customers expect to participate in the interaction and how they think about their needs. There are many uncertainties around these two issues. Therefore, in the process of developing digital products, R&D personnel need to constantly discover new ideas and immediately work with customers. Test its feasibility. In order to improve efficiency in this part of the work, companies need to form cross-functional teams to summarize their respective knowledge of customers from product design, product management, sales and customer service professionals, anticipate customer problems, and the solutions formed through cooperation must be better than a single department The proposed scheme is more targeted.

In large enterprises, learning does not happen naturally. People are creative and naturally hope that they will succeed. If problems occur, they tend to fix things rather than give up completely. However, to learn lessons from experiments, you need to discover which ideas are not feasible and then focus resources on projects that are more likely to succeed.

Many digital innovations are “small bets”. Only a few small bets may evolve into large projects, and most of them have to be discarded. A digital experiment is like betting in stages in a horse race. At the beginning, small bets are placed on all participating horses. As the game progresses, players can choose horses to increase their bets at different times. Wait until the game is clear, and there is no suspense before the bet. Learning to accumulate and share insights on customers can enable companies to take such betting methods and bet on digital products that customers are willing to pay for.

Jeanne Ross Cynthia Beth Martin Merkel

What technology can achieve, what customers need, and the intersection between the two is the best balance that companies need to find.

Digital technology is forcing companies to reconsider customer value positioning. The reason is simple. Today’s new technology applications are emerging one after another. With advanced methods such as social platforms, mobile applications, analytical software, Internet of Things, artificial intelligence, biometrics, blockchain, cloud computing, and edge computing, companies can use the previous There is no way to provide value.

Despite the huge potential of new technologies, companies still need to consider which products and services can survive. Digital technology has completely changed the rules of the game-they provide ubiquitous data, unrestricted connections, and powerful processing power. Smart companies are transforming all these capabilities into digital products or services: using rich information to create a seamless personalized customer experience and packaging into solutions. Lvft, a ride-hailing company, is a good example. It uses mobile internet and cloud computing to match passengers who need to travel with drivers who can upload them to their destination. This solves the long-term pain point of passengers: I don’t know. Where is the car, when is the time, what is the fare, and which payment methods can be selected.

Successful digital products or services are born at the intersection of technical means and customer needs and payment. However, it is difficult to find out exactly where such a meeting point is. To find this out, companies need to experiment repeatedly, co-create with customers, set up cross-functional R&D teams, discover bit by bit during the exploration process, and share it internally.

We have investigated how nearly 200 companies have built and used digital capabilities. This article will select a few of them for discussion, and focus on analyzing how Schneider Electric understands and shares consumer insights through digital technology. Keep experimenting

In our research, we found that the internal mechanisms of many large, mature companies do not support the continuous innovation of digital products and services. From new ideas to new value propositions, it is necessary to constantly experiment, learn lessons from them, abandon them, strengthen them, reconfigure them, and then fully promote them. The internal processes of mature companies often limit their capabilities. It is precisely because this ability is difficult to cultivate, and companies that can explore success naturally stand out.

Because digital products or services are based on software, it is suitable for rapid testing and learning, and iterating continuously: software programmers first come up with a set of basic products that can work, push them to customers or testers, and immediately start collecting user feedback. Based on these feedbacks, the company can quickly improve the product or decide to abandon it.

Enterprises adopting this method to develop marketable digital products usually resort to different methods to encourage extensive internal experiments, such as programming marathons, special funded projects, and new institutions such as innovation centers focused on digital experiments. They sometimes also arrange young technical talents to partner with executives, reverse coaching, and share knowledge in the field of new technologies with the latter. No company can do experiments endlessly, but more experiments often yield more.

Toyota Motor North America (TMNA) promotes such experiments in different ways. The company’s current chief digital officer, Zack Hicks, previously served as chief information officer, when he launched the innovative trading market. Through this trading market, employees can share each other’s ideas, and can also compete for company funds and other opportunities to promote their own ideas. Today, this concept has been replicated across the group and the Toyota Global Innovation Trading Market has been established.

However, this is just the beginning. Toyota Motor North America’s Information Technology (IT) department has also developed a “starter” application, through which anyone can post innovative ideas and get feedback. This app is particularly beneficial for being creative but too superficial to support the idea of ​​testing. Participants can “like” the published ideas or express their opposition, and can also make suggestions to promote the deepening of the concept.

In terms of management structure, Toyota iCouncil members who hold company director-level positions (and budgets) can help people with ideas to develop business plans, allocate funds, and arrange for them to form working groups with company IT staff. Toyota North America can arrange IT support hours for new ideas within 30 hours, as well as related equipment (such as server space). Originally applying for these resources to support the need for process approval, eliminating process constraints is conducive to employees to carry out innovative work, so that they can convert ideas into product prototypes, thus proving the feasibility of creativity. Promising ideas can be pushed to specific business departments or directly enter the innovation trading market.

The vast majority of experiments initiated by Toyota North America focused on improving the customer experience. Some experiments are relatively simple and can be successfully developed in a short time. For example, there is an application that makes it easier for customers to interact with dealers when setting up their cars online. Some have promoted product improvements, such as improving driving safety through telecommunications and satellite systems, improving GPS positioning, and in-car entertainment systems. There are also some innovative experiments that directly contributed to brand new digital products.

Like Toyota North America, DBS Bank Singapore is also conducting digital innovation and testing of new ideas in different regions and levels. In terms of asset management scale, DBS Bank is the largest bank in Southeast Asia. It provides a full range of financial services to 9 million customers in markets in 18 different countries and regions. In 2015, DBS Bank had 22,000 employees, and 1,000 small experiments were underway. Some experiments were quickly abandoned, while others gradually evolved into new digital products and new features to serve customers.

At DBS Bank, the depiction of customers’ consumer journey alone has produced many new ideas worth further testing. The so-called depiction of customer consumption journey is to carefully examine the entire process of customer interaction with the bank. The designer of the product or service has to think of himself as a bank customer. At this moment, it is at a critical moment. For example, it is about to decide whether to apply for a credit card or apply for a mortgage. Designers sometimes imagine a client, with a name and surname, complete age and occupation information, and then use the information of this hypothetical client to complete the full application process. They will consider such a customer’s thinking, his emotional changes, and various concerns. This kind of experience, which can be obtained by thinking about oneself, can help banks design experiments aimed at real customers.

Judging from the current performance, DBS Bank has achieved success through continuous experiments and exploring customer experience. In 2016 and 2018, DBS Bank was twice named the best digital bank in the world by Euromoney magazine. In 2018, Global Finance also rated DBS Bank as the best bank in the world.

The author reviewed the digitalization work of nearly 200 mature companies from 2014 to 2019.

They interviewed 740 large companies and conducted a mini-case study of 27 companies in conjunction with Boston Consulting Group (BCG), each of which conducted three interviews. The interviewees were senior business executives or IT executives, and those involved in the implementation of digital strategies Staff.

They also conducted two large-scale questionnaire surveys in 2016 and 2018. The survey targets were 171 business leaders and 150 executives of large mature companies.

Plan with customers

Whether new business opportunities can be found determines whether the enterprise is leading or lagging behind. Normally, startups, digital giants, smart competitors, and aggressive laymen can redefine an industry, and those who fall behind can only catch up. However, under the pressure of striving upstream, every company has miscalculated customer needs. In our research, the heads of many companies (especially in the B2B field) have admitted that some of the selling points of products that they think are particularly valuable, customers seem to wait for a while to realize. If companies work together with key customers to innovate collaboratively and cultivate insights into customers, then once the above false assumptions appear, they can quickly discover and correct them.

In a B2C environment, co-creation with customers usually means that companies need to first launch a basic version that can be run online, and then carefully study the response of many customers to this product; while in a B2B environment, companies can consider inviting some individuals Customers identify pain points and evaluate the potential value of solutions.

The experience of Royal Philips is very representative. The Dutch technology company engaged in diversified business was previously known for its lighting products and audio equipment. Five years ago, Philips sold many of its business units in order to better focus on medical and health products, such as x-ray machines, electrocardiogram equipment, CT scanners, etc., so as to reposition itself as an enterprise providing medical solutions. But the effectiveness of all these efforts depends largely on whether the company’s customers (many of them are medical companies) are willing to buy and use Philips products.

Medical equipment companies usually have some inherent habits that are reluctant to change, and even from outsiders, the benefits of change are obvious. For example, the use of remote monitoring devices allows some patients to go home to recuperate, so that they can recover faster and have more efficient treatment, but the hospital will reduce direct income by vacating the bed early. This is only one aspect. In the entire medical system, medical service providers (such as hospitals, medical practitioners), payers (insurance companies, relevant government agencies), patients, and policy makers have different demands. The resulting complex situation also hinders Philips’ transformation. .

Because of these challenges, Philips invested a lot of resources in building customer co-creation workshops. These workshops are named HealthSuite Labs and are promoted in several phases. The purpose is to understand the most pressing problems of customers and to propose solutions in a targeted manner. In other words, to find out what products or services customers are most likely to buy. Manu Varma, the project leader of Philips’ Wellcentive and Hospital to Home, told us: “What is the customer’s challenge? In fact, we are not always clear. They are not necessarily aware of themselves.” HealthSuiteLabs is a company and customer The mutual consultation process of mutual understanding.

Such workshops usually focus on medical service providers, payers, and patients from a hospital or suffering from the same type of disease. The number of people is 12 to 40. It is often difficult for them to have the opportunity to communicate their needs. “In the past, we opened the patient and closed the patient, but it wasn’t until I started to promote HealthSuite Labs that I met the first patient.” It was Mark Van Meggelen, who was based in Philips. The head of the Healthcare Information and Connected Care department in the Netherlands, he believes that “patients are not receiving the best support.” These workshops promoted by Philips have the characteristics of cross-field cooperation, so participants can not only be limited to a certain stakeholder, but can propose ideas to improve the entire medical system.

Cross-functional R&D team

Many innovative ideas fail because the product R&D team that put forward these ideas still follows the old procedures. From their own perspective, data and thinking conclusions, they make the best products, and then hope that the sales staff hold the products Find customers, and expect other support teams to retain customers. But the reason why a new solution can meet the needs of customers must be that customers are willing to change, change the way they make decisions when buying, subvert the existing power structure, and take action based on new data.

The way customers expect to participate in the interaction and how they think about their needs. There are many uncertainties around these two issues. Therefore, in the process of developing digital products, R&D personnel need to constantly discover new ideas and immediately work with customers. Test its feasibility. In order to improve efficiency in this part of the work, companies need to form cross-functional teams to summarize their respective knowledge of customers from product design, product management, sales and customer service professionals, anticipate customer problems, and the solutions formed through cooperation must be better than a single department The proposed scheme is more targeted.

ING Direct Spain, a financial service organization in Spain under the Dutch ING Group, relies on a cross-functional R&D team to ensure that the company’s new products can directly respond to customer needs. At the early stage of product definition, they put together people with different functional roles. These functions include product management, marketing, company operations, information technology, credit risk management, and operational risk management. They bring different perspectives to the team and encourage members to question each other’s assumptions. This mutual doubt can reduce the risk for the company, otherwise it will be easy to cause problems. For example, the support cost of the designed product is too high, the company can not bear it, or not only no one applauds after the product is launched, but complains.

This cooperation between departments also helps Spanish INGDirect control the complexity of its business within a reasonable range. Werner Zippold, the company’s former chief operating officer, told us in an interview: “Any idea, as long as it can survive the stage where the team members question each other, at least ensure that it is well-thought-out and has operations and IT departments. Participation in the product definition stage will be able to cope with complex situations in the future operation.” Let the front and back-end experts inspect the products in the research and development stage. The resulting solution is simple and powerful, and can accurately focus on the customer’s demand.

Knowledge sharing within Schneider Electric

Schneider Electric is a French company with assets of 26 billion US dollars. The company was founded in 1836 and has been producing steel and electrical equipment for a long time in history. Today the company provides solutions for the intelligent management of energy. Schneider’s customer needs meet corporate capabilities

What digital technology can achieve, what customers need (willing to pay for it), only to find the intersection between the two can create a successful digital product. Deutsche Electric’s digital transformation has a large span, which is largely because the company’s internal mechanisms are conducive to the acquisition of customer information and knowledge, and this part of knowledge is shared within the company. The main channel for the company to obtain customer information is experiment , Co-creation with customers, and cross-functional R&D team.

But this skill of Schneider Electric was also obtained after some twists and turns. At the beginning, the company’s leaders believed that installing sensors on major electrical equipment and then connecting the equipment to the Internet would be able to tell customers their energy needs and energy consumption characteristics. According to this idea, the product development personnel of the company’s 48 business units set out to work with customers to try to understand their expectations, needs, and challenges. Various business lines provide funding for these early work, there are many ideas, but they lack coordination and overall awareness. Michael MacKenzie, vice president of the Schneider IoT Technology Platform, recalled that period: “At the earliest, each business unit had its own product roadmap, and the needs were at their disposal. The idea was limited to a certain In the sector, success is only partial success and sometimes failure. Whether it is decision-making or learning, it is carried out in a micro environment.”

Schneider’s early experiments achieved some success, but overall, this way of being driven by different business lines did not achieve the desired goal. Although there are many linear partial solutions, they do not contribute much to the company’s revenue, nor have they established a strategic ability to replicate and utilize. “Everyone in the company seems to want to digitally transform existing products. For a time, everyone is engaged in innovation and looking for various types of technological innovation startups to cooperate.” Cyril Pey, Vice President of Internet of Things and Digital Products at Schneider Dyrka (Cyril Perducat) concluded: “This has led to intricate partnerships. Various cloud computing vendors have stacked beds, and interconnection agreements are also varied. Wherever digitalization is concerned, this is not the case.”

In order to effectively promote, Schneider needs to integrate product development and achieve knowledge sharing across the company. Pedica created an internal company’s Digital Services Factory (DSF), responsible for finding business opportunities and using this new shared digital platform to develop new products.

Schneider’s digital service factory is responsible for gradually advancing the product concept. It roughly goes through the following four stages: the creative stage, the incubation stage, the industrialization stage, and the final large-scale operation stage. In the creative stage, the DSF team needs to evaluate various new ideas and find similarities that are repeated, because these similarities can be applied to multiple business units to create greater value. Early in the creative stage, the company’s product team will work with major customers to develop

Investigate whether the product concept is feasible. Those who are not commercially viable, immediately stop; the most promising market, the company can arrange the person in charge of business products to do the next step. When a product concept enters the stage of industrialization, Schneider usually requires customers to provide funds for the pilot product, thus greatly improving the conversion from the initial customer enthusiasm to the final income. At this stage, the cross-functional team will work closely with the customer to ensure that the product can fulfill the previous value proposition and allow the customer to realize its benefits. Carlos Javaroni, Schneider’s vice president of IoT strategy and business design, once said: “We have received very positive customer feedback on several occasions, but this is not enough for them to pay for new products. ”

Schneider has noticed several times that the company’s previous customer contacts cannot make purchase decisions when it comes to more strategic energy management solutions. For products that require the decision-making of the customer’s top management, Schneider has set up a small team composed of more experienced and professional sales personnel. These professional sales staff have become a rare member of the product development team. They help Schneider develop new products step by step according to the needs of customers.

All this has accelerated the speed of product development. Before Schneider’s new product development, it will go through a long and rigorous research and development stage, and the promotion of major innovations is also prolonged. Now, on the contrary, the new digital product life cycle begins with clear customer needs, during which it has experienced the most basic product model development, which is tested and used by customers to verify its feasibility; then it is continuously improved, expanded and developed Related Products. Through iterative development and collaborative innovation (abandoning old IT methodologies and traditional product development methods at the same time), Schneider compresses the time from the concept to the industrialization stage of new products from 2 to 3 years to 1 year.

By the end of 2018, Schneider already had about 40 digital products, including asset management services (maintenance demand prediction), energy management services (supporting top management business forecasts and cost budgets), and enhanced remote monitoring of professional machinery and equipment Wait. In addition, there are 20 new products coming soon.

Like other large traditional companies in digital transformation, Schneider’s digital products currently only account for a small portion of the company’s total revenue and profits. However, compared with traditional products and services, digital products are growing faster. Over time, they will create more profits for the company. Perhaps more importantly, Schneider did not sit back and watch competitors seize opportunities for digital development. By identifying the entry point and discovering areas where customers have a willingness to pay, Schneider took the initiative to embrace digital transformation and made money from it.

In large enterprises, learning does not happen naturally. People are creative and naturally hope that they will succeed. If problems occur, they tend to fix things rather than give up completely. However, to learn lessons from experiments, you need to discover which ideas are not feasible and then focus resources on projects that are more likely to succeed. For enterprises, what customers need and don’t need, once they are clear, they should also design the necessary processes, organize team members, and let everyone share relevant information.

To build an insight into digital technology capabilities and customer interests, it is necessary to subvert traditional management practices and personal habits and achieve corporate culture changes. It is a very unfamiliar concept for people in traditional enterprises who have risen to the highest leadership positions all the time through repeated “testing and learning” to develop products. The R&D cycle of pharmaceutical companies is about 10 years. It takes 5 years for a car manufacturer to develop, test, and launch new products. These long-cycle R&D activities involve huge resource allocation. Such strategic plans are “big bets.”

Many digital innovations are “small bets”. Only a few small bets may evolve into large projects, and most of them have to be discarded. A digital experiment is like betting in stages in a horse race. At the beginning, small bets are placed on all participating horses. As the game progresses, players can choose horses to increase their bets at different times. Wait until the game is clear, and there is no suspense before the bet. Learning to accumulate and share insights on customers can enable companies to take such betting methods and bet on digital products that customers are willing to pay for.

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