leap into the connected digital economy - bearingpoint

Leap into the connected digital economy

A range of technologies such as big data, cloud computing, social networking and mobile are bringing unprecedented opportunities to companies for engaging with customers. However, many organisations are still only scratching the surface of what is becoming possible – notably, the ability to create innovative bundles of personalised services, resulting in new customer experiences that reach beyond today’s point services and apps.

The digital services revolution In a connected world, customers expect a complete, personalised and seamless experience at the

tip of their fingers. B2B and B2C companies can deliver on this promise with their ecosystem partners by bundling digital and traditional services with physical products in real time.

Driver one:45-year-old female,

account manager,single, 1 child

Driver two:21-year-old male,student,dating

Rolling 'big data'As the modern car provides a gold mine of data (e.g.

driving conditions, location, sensors, etc.), which helps manufacturers to tailor their bundles via advanced

analytics, billing within the partnership ecosystem is a complex process. For the customer, however, there is only

one monthly bill.Source: BearingPoint

Building a ‘connected car’In this example, car manufacturers can enrich their customers’ experience by

bundling services for their electric vehicle from a ‘bank’ of ecosystem partners, such

as entertainment, telecommunications and automotive services companies

Driver one bundle: Driver two bundle:

Anti-thefttracking

Automaticemergency call

Extendedwarranty

Musicstreaming

Smartnavigation

3 years all-inclusivemaintenance

Interior options Breakdowncover

Pay-as-you-driveinsurance


Musicstreaming

Breakdowncover

Engine options(electric, hybrid-electric)

Extendedwarranty

Lease-purchasefinance

Anti-thefttracking

Newsservice

Holiday rentalcar (abroad)

Body style (coupé,5 doors, cabriolet)

3 yearsall-inclusivemaintenance

Travelinsurance

Panicbutton

Tra�cupdates

Rental car days(extended range)

Styling (colour,wheels)

Car washoptions

Electric-carinsurance

Conciergeservice

Smartnavigation

Tyrecover

Interioroptions

Fast EVchargingaccess

Financial services Location services Lifestyle options Travel services Car configuration Lifecycle services

Digital services platform:Provisioning, orchestration

and monetisation

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7

The digital services revolution In a connected world, customers expect a complete, personalised and seamless experience at the

tip of their fingers. B2B and B2C companies can deliver on this promise with their ecosystem partners by bundling digital and traditional services with physical products in real time.

Driver one:45-year-old female,

account manager,single, 1 child

Driver two:21-year-old male,student,dating

Rolling 'big data'As the modern car provides a gold mine of data (e.g.

driving conditions, location, sensors, etc.), which helps manufacturers to tailor their bundles via advanced

analytics, billing within the partnership ecosystem is a complex process. For the customer, however, there is only

one monthly bill.Source: BearingPoint

Building a ‘connected car’In this example, car manufacturers can enrich their customers’ experience by

bundling services for their electric vehicle from a ‘bank’ of ecosystem partners, such

as entertainment, telecommunications and automotive services companies

Driver one bundle: Driver two bundle:

Anti-thefttracking


Extendedwarranty

Musicstreaming

Smartnavigation

3 years all-inclusivemaintenance

Interior options Breakdowncover

Pay-as-you-driveinsurance


Musicstreaming

Breakdowncover

Engine options(electric, hybrid-electric)

Extendedwarranty

Lease-purchasefinance

Anti-thefttracking

Newsservice

Holiday rentalcar (abroad)

Body style (coupé,5 doors, cabriolet)

3 yearsall-inclusivemaintenance

Travelinsurance

Panicbutton

Tra�cupdates

Rental car days(extended range)

Styling (colour,wheels)

Car washoptions

Electric-carinsurance

Conciergeservice

Smartnavigation

Tyrecover

Interioroptions

Fast EVchargingaccess

Financial services Location services Lifestyle options Travel services Car configuration Lifecycle services

Digital services platform:Provisioning, orchestration

and monetisation

BearingPoint Institute Report Issue 005

STRATEGIES

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The digital revolution is only scratching the surfaceWe are in the midst of a remarkable digital age. Today’s web, social and mobile technologies, cloud computing and big data analytics are combining to deliver unprecedented and far-reaching impact on every aspect of our business and personal lives.

However, to think this digital revolution is comprehensive would be a grave mistake. Recent focus has been on front-end online services and mobile apps. Organisations are now being pushed by ‘born digital’ competitors (such as Amazon) and pulled by market opportunities. They are looking to use digital for a more fundamental transformation of their business models and value propositions, to tailor unique service offerings and customer experiences.

Future success requires going beyond the corporate boundary to engage with a kaleidoscope of ecosystem partners and service providers. Simply put, the world is changing too fast for any one organisation – however large – to do everything by itself. Enriching service offerings requires the ability to both handle complexity and reduce cost by highly automating and integrating key enabling services via a digital platform. We call this a B2B2X digital foundation, as it enables business to aggregate, orchestrate and bill ecosystem partner services (the business-to-business part, B2B) whilst creating new customer offerings (the business-to-consumer part, B2C).

Using digital to underpin and simplify these enabling services creates the space to focus on innovation, improve competitiveness and launch

IN 30 SECONDS

• We are entering the era of the connected digital economy: the convergence of technologies is creating new ways for companies to deliver services and engage with their customers

• Speed and customer experience are imperatives, no organisation can go it alone

• Companies need a digital foundation layer to orchestrate and monetise new offerings and services bundles that connect partner ecosystems to deliver new, mass-personalised, offerings to customers

• This requires changing mindsets from the very top of the organisation right through to front-line delivery

Leap into the connected digital economy to deliver enhanced customer experienceHow digital-first organisations are leveraging their ecosystem through rapid bundling and mass customisation

Leap into the connected digital economy to deliver enhanced customer experience

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game-changing value propositions. The next frontier is about how the ecosystem can be leveraged to align to individual customer needs. Consequently, organisations that still see the ‘digital opportunity’ restricted to their marketing spend1 are missing a fundamental trick – they are only scratching the surface of how digital can transform their businesses.

If customer engagement is the metric of success, partner engagement is the key lever. Time is not on any organisation’s side: in this world of instant gratification, businesses need to react faster, or watch their opportunities diminish and their customers move on. This is the new ‘moment of truth’ for customer service. Consumer trends and technology evolution move far quicker than internal product and service lifecycles, so working with a partner-based ecosystem for service bundling is fundamental.

Spinning up the digital operational experienceIn 2010, the board of Deutsche Telekom agreed an audacious move to grow into new verticals and service areas not traditionally associated with the company. Just two years later it announced a partnership with a German health insurer to deliver a new offering aimed at helping Type II diabetes patients to self-manage their condition. The product/service combination incorporates a health-monitoring wristband (similar to a sports watch) and a glucose measurement device with a number of online tools to help coach individuals better to manage the disease.

By using the industry-standard Frameworx suite of operations tools (e.g. eTOM, SID and TAM), created consultatively by TM Forum, the project could build on existing best practices by reducing safety risks and compliance issues. It could also deliver quickly – roll-out to patients was five months after the announcement. Incorporating the benefits of keeping patients healthier, the annual savings were in the order of EUR 4,000 per patient1.

Such a project would have been impossible without working with partners, building on open standards and considering digital operations – how to manage and run the service – in parallel with customer needs. According to a report by Nigel Fenwick, at Forrester Research Inc, ‘Digital business isn’t just about customer experience – it’s also a way to drive operational agility.2’ Whilst any company can create a one-off success, the challenge is to deepen the customer relationship by offering (and being able to deliver) a rapid succession of highly innovative new service

‘Digital business isn’t just about customer experience – it’s also a way to drive operational agility.’

FORRESTER RESEARCH, INC.2

Time is not on any organisation’s side: in this world of instant gratification, businesses need to react faster, or watch their opportunities diminish and their customers move on


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offerings as an integral part of the organisation’s modus operandi. Forrester calls this ‘digital operational excellence’4, without which all the digital hoopla of marketing, apps and websites stands for nothing.

Combining customer experience and operational excellence can result in richer interactions, which provide genuine, longer-term relationships with customers. In turn this drives corporate agility, marketing and experience management – with analytics-driven insight informing the offering, setting prices and making personalised recommendations. These goals are only achieved when every area of the business and its operating model changes, extending right down into processes, capability and culture.

As a consequence, whilst some organisations are already reaping the rewards of digital, others are learning just how much of an impact new, ecosystem-based models can have on their operations, across the product and service lifecycle. Often this can require stepping over a host of legacy constraints caused by inward-looking, over-complex business models, linear value chains and ill-suited IT systems. Putting both digital and partnership at the heart of the business involves cultural, capability and organisational change requiring investment beyond a one-off digital marketing campaign. So, what is the best way forward?

While no two digital initiatives will be the same, by their nature, all will benefit from a foundation of services that can be built upon. Core services in the digital foundation layer are:

• Aggregation – capabilities to enable collation and integration of new and legacy services and systems, for example linking cloud-based analytics engines with both external data sources and existing customer data

• Orchestration – the ability to execute multiple services as an ensemble, managing their operational requirements and service delivery as a unified whole

• Monetisation – the automation of account management, service catalogues, transactions and usage monitoring (and subsequent billing) of a given service bundle

DEFINING THE B2B2X DIGITAL FOUNDATION

75%Total OPEX reduction (FTE) at AAPTfollowing bundling rate, up from 14%,

and online sales, up from 0%3

Putting both digital and partnership at

the heart of the business involves

cultural, capability and organisational

change requiring investment beyond

a one-off digital marketing campaign


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In this environment, information really is power as it provides a basis for organisations to customise and personalise new service offerings. The battle is to get better data and insight than your competitors. New insights define how products and services can be bundled, tailored and extended to meet demand in a way that is unique, innovative and differentiated. In a virtuous circle, the more services you sell a customer, the more data you collect and the better insight you gain, which drives better, more accurate recommendations and personalisation.

Given that many data sources are external, it makes sense for the first partnerships put in place to be those bringing the insights the organisation needs to drive its digital strategy: for example, public and corporate sources of big data can be linked to internal and legacy data sources to provide greater insights. Then, as relationships deepen, the organisation derives greater customer insight directly from customer interactions and from the addition of new sources, such as sentiment analysis, the television schedule or weather forecasts. This analysis helps the organisation to decide where to focus its attention and skills further.

The next step is to move from approaches based on a traditional linear value chain towards a value network, using a partner ecosystem to create and deliver innovative new service bundles that blend capabilities from both internal and external sources. This needs to be underpinned by:

• Providing a common customer experience accessible through an integrated and federated service catalogue where new partners can be added, services updated and prices changed in real time (for example, Amazon)

• Removing maximum complexity from the back office, which incorporates fully automated provisioning and billing. This process uses legacy IT systems, services and data to fully orchestrate and deliver automation

• Offering great customer service across and beyond the point of sale, with issues tagged to services from each partner flagged up, swiftly escalated and transparently resolved

• Combining key digital elements of cloud-based platforms, social, mobile and big data

Achieving these goals requires a B2B2X digital foundation layer (see box, page 9) that can quickly bring new partners on board at contractual and service levels, for example combining offerings into a single service catalogue. Success in reaching these objectives also requires moving organisation structures towards the customer journey and the end-to-end service lifecycle. Partnering delays jeopardise or even nullify any planned benefits of a new service. This process has to be quick and agile.

Developing digital creates new service offerings that enhance the brand promise and delight the target market by offering enriched customer experiences. It is up to the organisation to layer genuinely value-added experiences on top of those delivered by its partners and create innovative ways to charge for them. Failure to do so increases the chances of a supplier deciding it can optimise its profits by cutting out the middleman and selling cheaper goods and services direct to end customers. Note that organisations can ‘white label’ their own services and service bundles, providing the foundation for autonomous company brands. This strategy is familiar to the financial sector: MBNA is a market leader in white-label credit cards, for example. Organisations can also find completely new revenue models such as freemium and subscription-based.

Seven steps to digital successAs examples such as Deutsche Telekom show, organisations cannot simply ‘do’ digital by themselves, rather they depend on increasingly rich, flexible, relationships to improve their B2B2X digital foundation constantly. On top of this, speed

3. Create bundles that add genuine

value1. Adopt a data-

driven approach

2. Leverage the ecosystem


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The advantages of rapid delivery using external partners are tempered by the need to be competitively priced, which can reduce margins. The organisation should be monitoring the ongoing margins and costs of its bundled service portfolio so it can tune specific bundles, bring in new partners, take certain elements in-house and, if necessary, decide to end the life of services that no longer deliver an adequate return.

How can success be measured? The ultimate litmus test is mass personalisation: to be able to create an offer instantaneously that appeals directly to an individual. Mass personalisation requires continuous innovation: organisations need to add relevant new services from ecosystem partners and create attractive new offers targeted at individuals on an ongoing basis. This means changing traditional approaches to customer segmentation. Clearly, the faster this cycle can take

place, the better – any time wasted is a lost opportunity to generate value.

Constantly changing market dynamics – from demographic shifts to new fashions – create

a moving window of opportunity for the organisation to create and deliver new service bundles, which need to be personalised to succeed. Speed is of the essence to take advantage of opportunities: there is no point in creating something for a market that has already moved on. A key enabler, therefore, is automation of processes and partnering, which includes the abstraction of business rules and dependencies that surround an offer from one partner to the next. This automation is designed to fully orchestrate the business lifecycle and its monetisation.

Service bundles need to be delivered with a baseline assurance of service stability, performance and avail-ability. Building on top of this, services can also be tuned according to changing behaviours and information avail-able from the market: for example, from social networks. By delivering services internally and to other organisa-tions, companies gain first-hand experience of the skills, knowledge and other expectations they can place realis-tically on their suppliers, as well as honing best practices around service provisioning, upgrades and maintenance.

Every stage of service delivery, from marketing through to sales and then customer service, needs end-to-end ownership of the service bundle to safeguard against reputational damage. If something goes wrong it is not enough to say to a customer, ‘Sorry, that is an external service, so there is nothing we can do.’ From the custom-er’s perspective, the service bundle provider should be fully responsible for all the elements of the service it is selling.

Service bundling recalls the age-old question of whether to ‘build,

reuse, rent or buy’ proprietary technologies or to use open standards and platforms. Standards enable faster innovation and exploitation of the ecosystem but, by definition, choosing open technology means everyone can do it. Proprietary implementations lock in customers and give short-term advantage, but this comes with the risk that the technology will be incompatible with new standards as they emerge. Therefore the key is to create flexible digital architectures that can scale and evolve as the industry matures. Smarter digital businesses may provide an API on to their services, such as that recently announced by car hire company Uber5.

4. Recognise the need for speed

5. Give services as you receive them

6. Balance proprietary with open

7. Monitor margins against costs

and agility can only come from collaborating with partners, as no single organisation can innovate or create new capabilities quickly enough.

Against this background, where should organisations start? We see the secret of success being based on the pillars below.


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Is your organisation geared up for the connected digital economy?Whilst many companies still see ‘digital’ as a one-off social media campaign or the design of a pretty website, genuine digital success reflects an organisation’s ability to create meaningful customer experiences, deeper engagement and enhanced value, delivered on an ongoing basis.

We are entering the connected digital economy: technological innovation refuses to slow down, customer expectations rise and ‘born digital’ competitors harness the full potential of their business models. Failure to keep up can result in rapid loss of market share as illustrated6 by the high- profile casualties such as Blockbuster, EMI or Kodak.

The critical capability is still execution, not just finding and bringing partners on board, but being able to manage them as part of a cohesive whole to deliver on brand promise. However real-time bundling also brings risk; buying-in B2B2X digital foundations may require long-term contracts and not every new bundle is guaranteed to deliver results. However by organising around ‘hunter’ initiatives to proactively create new product and service bundles, ROI rewards will be high.

As well as a change of mindset and culture within siloed business functions, organisations right up to board level need to think and work in a more entrepreneurial fashion. We do not use the term ‘business transformation’ lightly: it is clear that companies need organisational structures that actively consider how to build the digital foundation and the role of partnering to enrich their service offerings and customer experiences. Whilst this process may be hugely challenging, as it involves the potential re-definition of strategic assets and may cannibalise existing revenue, all other options are increasingly limited.

The digital journey has passed the threshold where it needs to become the norm, rather than the exception. A key metric of future success will be based on how well – and how often – an organisation engages its partners and customers to launch innovative services tailored to customer needs by bundling together key elements from different partners.

The critical capability is still execution, not just finding and bringing partners on board, but being able to manage them as part of a cohesive whole to deliver on brand promise


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• Digital success reflects the agility of an organisation to respond quickly to events by bundling products and services from multiple suppliers and partners in a unique, innovative and differentiated way

• Key factors include the development of a full ecosystem of partners to increase the ability to bring rapidly on board new offerings into a service catalogue, delivering new sources of value and a richer experience and relationship with the customer

• Bringing together an ecosystem of partners from different industries can deliver new value – packaging a new offer by integrating previously separate value chains disintermediates competitors and creates uniqueness and differentiation

• While any organisation can create a one-off product and service bundle, it is hugely challenging to innovate systematically and consistently over time

• To enable the digital customer experience, every area of the business that delivers the brand promise needs to adopt digital operational excellence. People need to learn to ‘trust the machine’ by using big data to drive algorithms and accelerate decision-making.

• Organisations need to balance speed-to-market with cost and risk, requiring executives to think and act more entrepreneurially

• The ability to extend digital into ‘mass personalised’ bundled services – the tailoring of a service to create a customised offering and experience aimed at the individual customer – is a key success metric

KEY TAKE-AWAYS


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About the authors

Angus WardPartner, BearingPoint, London

Angus leads digital services in the UK, including big data. He is currently helping clients to digitally transform their business model via cloud-based solutions that provide orchestration and monetisation services across their partner ecosystems. Angus brings over 25 years of experience in helping clients achieve complex transformations across aerospace, manufacturing, telecoms, natural resources, utilities and government executive agencies.

[email protected]

Eric is the regional leader for France and Benelux as well as the firmwide lead for the Digital Customer Management service line. He has co-created a customer excellence award (Podium de la Relation Client) coveted every year by the largest French firms and has co-authored a book on ‘customer paradoxes in the digital world’.

[email protected]

Eric FalquePartner, BearingPoint, Paris

Project teamAndrew Thomson

AcknowledgementsThe authors would also like to thank David Mantle, Iris Hauk, Ludovic Leforestier and Tanja Schwarz at BearingPoint.


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Notes and bibliography1. ‘Home | Research and publications

| Case study, handbook 2014’, TM Forum, Morristown, NJ, USA, web, Annie Turner (ed), 10/13, http://bit.ly/1rj78Gp

2. ‘Report | The future of business is digital’, Forrester, Cambridge, MA, USA, web, Nigel Fenwick, Martin Gill et al., 10/03/14, http://bit.ly/1B2l9cx

3. AAPT Business Transformational Case Study, Ovum, London, UK, White Paper, PDF, Martin Gandar, 04/11, http://bit.ly/!pBv4zv

4. ‘Report | The future of business is digital’, Forrester, Cambridge, MA,

USA, web, Nigel Fenwick, Martin Gill et al., 10/03/14, http://bit.ly/1B2l9cx

5. ‘Business | Uber opens up its API – and creates a new platform’, VentureBeat, San Francisco, CA, USA, web, Barry Levine, 20/08/14, http://bit.ly/1ueFqgj

6. ‘Can Darwin teach us how to adapt to the era of the digital customer?’, BearingPoint Institute Report: Issue 004, London, UK, web, Erik Campanini and Kyle Hutchins, 04/14, http://inst.be/004NVC

• Seven principles for fast-changing industries: lessons from the CIME

sectors, MIT Center for Digital Business, Cambridge, MA, USA, PDF, Gregory Gimpel and George Westerman, 01/13, http://bit.ly/XYydDc

• Addressing customer paradoxes in the digital world, Pearson Education France, Montreuil, France, French language: 1st edition, Eric Falque, 27/07/12, http://amzn.to/1rsfvzP

• Darwinism in a consumer-driven world, Pearson, London, UK, Kindle: 1st edition, Erik Campanini and Kyle Hutchins, 25/04/14, http://amzn.to/1oeiLJR

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LEADERSHIP TEAMPer Jacobsson, BearingPoint Ludovic Leforestier, BearingPoint Mike Kronfellner, BearingPoint

ADVISORY BOARDDr Jonathan FreemanManaging Director, i2 media research ltd & Senior Lecturer, Goldsmiths, University of London

Steven E Permut, PhDAssistant Dean and Director, Executive Education, Senior Lecturer in Management, Yale School of Management

Prof. Dr Fons TrompenaarsFounder and owner, THT Consulting

Dr Victor VroomProfessor of Management and Professor of Psychology, Yale School Management

EDITORIAL COMMITTEE Doug Armstrong, West Monroe PartnersRobert Bosch, BearingPointNick Dussuyer, BearingPointEric Falque, BearingPointAnna Lindholtz, BearingPointJean-Michel Huet, BearingPointMichael O’Dwyer, BearingPoint Sergey Tkachenko, BearingPointKai Waechter, BearingPoint

PRODUCTIONMichael Agar, Michael Agar DesignTanja Schwarz, BearingPoint Jon Collins, Inter OrbisChris Norris, CopyGhostingAngelique Tourneux, BearingPoint

About BearingPointBearingPoint consultants understand that the world of business changes constantly and that the resulting complexities demand intelligent and adaptive solutions. Our clients, whether in commercial or financial industries or in government, experience real results when they work with us. We combine industry, operational and technology skills with relevant proprietary and other assets in order to tailor solutions for each client’s individual challenges. This adaptive approach is at the heart of our culture and has led to long-standing relationships with many of the world’s leading companies and organizations. Our global consulting network of 9200 people serves clients in more than 70 countries and engages with them for measurable results and long-lasting success.

www.bearingpoint.com

About BearingPoint InstituteAt the BearingPoint Institute, our ambition goes beyond traditional ‘thought leadership’. We aim to contribute original ideas to the science of business management whilst equipping decision makers with practical advice gained in the field and through our research projects.

www.bearingpointinstitute.com

Share your thoughtsEvery change we make at the institute is with our readers in mind. Please share your opinions with us so we can work to make these reports as good as they can possibly be. Visit inst.be/feedback or just send an email to [email protected]

ISBN: 978-0-9576165-6-1 (Print edition) - ISBN: 978-0-9576165-7-8 (Digital edition)© 2014 BearingPoint Holding BV. All rights reserved. Printed in the EU. The content of this document is subject to copyright. Changes, cuts, enlargements and amendments, any publication, translation or commercial use for the purpose of trainings by third parties requires the prior written consent of BearingPoint Holding BV. Any copying for personal use is allowed and only under the condition that this copy right annotation will be mentioned on the copied document as well. All information supplied in this document is correct, to the best of our knowledge, at the time of publication.

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leap into the connected digital economy - bearingpoint

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