Stepping into digitalization

Pilot projects allow companies to develop and test new digital services without disrupting their existing business models

Four phones with the Vipps app open.

Photo: Olav Mellingsæter / courtesy of DNB
Vipps, a pilot project developed to satisfy young bank customers, is now the leader in mobile payment.

Jennifer Vessels
Next Step—Silicon Valley & Oslo, Norway

In 2015, the International Data Corporation predicted that the top 30 percent of companies in all industries would be seriously challenged by an innovative competitor within three years. Today, only two years later, this seems conservative as Telsa, Uber, and others overtake the automotive industry; Amazon dominates retail globally; and born digital startups penetrate all traditional markets.

For business leaders, the question is no longer whether to implement a digital strategy but when and how to do so. With the rapid pace change, the best time is while traditional business continues to be strong and can support investment in small alternative offerings or business models.

For example, in the early 2000s, Net­flix invested 15 percent of returns from their highly profitable DVD delivery business into pilots of a video-streaming service. Two years later, when Apple and Amazon entered the Video-on-Demand market, Netflix was prepared to retain and even increase the loyalty and satisfaction of their customer base through DVD and streaming options.

Keys to success when starting a digitalization initiative
1. Leadership commitment to change, evolve, and expand into a digital future

2. Understanding of customer needs today and in the future through workshops, focus groups, and data analysis

3. Clear definition of initial target market for new digital offerings

4. Dedicated (autonomous) team focused on design, prototype, and product development as well as user adoption

5. Customer experience, feedback, and loyalty in target market segments

Starting with pilot projects
While digitalization provides access to a broad range of customers, the most effective approach is to start with a well-defined pilot project that addresses the specific needs of a small homogeneous target audience. This increases the success of customer adoption and minimizes the challenge of managing global customer expectations and priorities.

In 2006, when Adobe’s Creative Suites was the standard for creative agencies and marketing departments, the as-a-service model was tested with small business and home office users, who previously could not afford expensive perpetual licenses. By selecting this unaddressed market, Adobe was able to freely test options, gain feedback, and delight a new set of customers—without impact on their traditional customer base.

Focusing on underserved markets
For many business leaders, the greatest obstacle to digitalization is their concern that by offering new digital options, they will disrupt their current revenues. By defining and addressing the needs of an underserved market, companies can enhance their market position; experiment freely, allowing for possible failure without damage to market image; and generate incremental market share and revenue from a new market segment.

While the market definition can be determined by company size or type of location (as in the case of Adobe), leaders of B2C organizations might look to a particular population demographic (age, profession, education level, or location) for digital dominance.

In 2010, Norway’s largest financial institution, DNB, recognized that the younger generation was not interested in the bank’s traditional banking, lending, or corporate and real estate investment services. In focus groups and interviews, millennials confirmed they were most interested in easy ways to manage their money, including options to pay on the go from their mobile phones. To address this need in the Oslo market, DNB established an internal autonomous team to develop, pilot, and gain customer feedback from a mobile, peer-to-peer payment service called Vipps. Two years later, Vipps is now the leader in mobile payment—used not only by young consumers but also by a large percentage of the Norwegian population for retail, business, and peer-to-peer transactions.

Investing today to maximize results
Across all industries, customers demand access to a range of digital services. To maximize continued successful growth, business leaders should focus on the following:

• Committing to exploration and development of new services and business models

• Understanding customer needs and future directions

• Identifying underserved market segments in which to explore digital offerings

• Building the team to design, develop, pilot, and gain feedback on digital solutions

• Continually enhancing customer experience, adoption, and value

Timing is everything: by investing today’s returns in development of new digital offerings and revenue streams, your company can maximize tomorrow’s results in current and new markets.

This article was provided to The Norwegian American by Jennifer Vessels of Silicon Valley and Oslo. She is CEO of Next Step, which has led digitalization for Adobe, Autodesk, Avinor, Nevion, Posti, ShoreTel, and more. She can be reached at jvessels@nextstepgrowth.com.

This article originally appeared in the Nov. 3, 2017, issue of The Norwegian American. To subscribe, visit SUBSCRIBE or call us at (206) 784-4617.

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