Digitalization - Driving Business Model Transformation

Value View

Digitalization: Driving Business Model TransformationReinventing business models to monetize your services

www.sap.com/contactsap

To deliver value in today’s digital economy, professional services firms must continuously transform their business models to meet client and market demands. Offering new client-centric business solutions while automating delivery processes can help firms grow revenue, increase profit margins, and satisfy clients.

But in addition to offering great opportunities, digital transformation – often referred to as digitalization – creates a perpetual disruption in the business landscape, challenging firms to continually update their business models just to stay competitive. To do so successfully, they must consider the entire business – services, products, pricing, sales, delivery, and support – embracing and taking advantage of transformation at every step.

To the innovators go the spoils

Transforming a firm’s business model may be more challenging than product or process innovation, but it also delivers superior returns. SAP Performance Benchmarking analysis showed that, while both groups exceeded average industry returns, companies with innovative business models averaged five times the premiums of product or process innovators. Business model change also delivered more sustainable returns; after five years, those with significant business model transformation had outperformed the product and process innovators 60 times over.1

Total shareholder return premium

Total shareholder return (TSR) premium is defined as the percentage by which innovators’ average TSR (median %) exceeded that of their industry peers.

Business model innovators

Over 3 years Over 5 years

Business model innovators

Product and process innovators

Product and process innovators

© 2015 SAP SE or an SAP affiliate company. All rights reserved.

8.5

5X higher

60X higher

6.1

1.7 0.1

1

Value View



77% of professional services CEOs believe that their business will be disrupted by digital transformation in the next 12 months.3

51% see the use of digital technology as a major driver of their business strategy.3

75% say that CIOs must lead digital transformation; if they do not, the enterprise will fall behind.4

How professional services is embracing the digitalized economy

A recent Deloitte Digital GmbH and Heads! Executive Consultancy study2 shows that media, telecommunications, and retail continue to experience digitalization-related disruption; they will soon be joined by professional services, banking, insurance, and real estate. Professional services executives agree:

What is digitalization?

Gartner defines digitalization as the use of digital technologies to innovate business models and provide new revenue and value-producing opportunities; it is, in short, the process of moving to a digital business.6 The Altimeter Group defines it as “the realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touchpoint in the customer experience lifecycle.”7

Three priorities for successful digital transformation

To survive and thrive in the new digital business era, savvy professional services firms focus on:

Transforming business models, combining services, projects, and products into new offerings – often including the extended partner network.

Becoming more customer-centric, delivering a consistent digital experience across all aspects of business.

Achieving operational excellence, streamlining services portfolio and leveraging standardized, automated end-to-end processes on a global scale.

“We can testify that digital transformation and constant innovation are definitely not ‘nice to have,’ but rather ‘essential to survive.’”2

– Deloitte Digital GmbH and Heads! Executive Consulting

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 2

Value View



Design and sell business solutions that solve problems and deliver the outcomes clients want to achieve

Move to new pricing models, such as subscriptions and usage- or outcome-based billing

Create reusable productized services, and deliver them across clients, regions, and markets

Personalize the selling, delivery, and billing experiences to make clients feel “unique”

Standardize and automate service delivery processes globally

Personalization and the solution experience

On a consumer level, people expect to be able to personalize everything from music playlists to new cars, entirely online. To meet these expectations in the business world, enterprises are similarly using customer preferences, habits, and context to make experiences simple, delightful, and incredibly personalized.8

For professional services firms, personalization at this level means deepening customer relationships by offering a custom solution experience, rather than simply selling a collection of underlying components. For example, a point-of-sale (POS) solution might combine a mobile register (hardware), the software to run it, maintenance service, plus a migration project to roll out the solution to all stores in a region. Bundling these components to fit the individual customer both maximizes personalization and drives margin growth by selling higher-value services.

All this requires significant change to established business models. An integrated solution business lifecycle model allows firms to design, offer, sell, deliver, and bill the right solutions for the right clients.

To provide such complete service, professional services providers need to:

Omnichannel experience

Solu

tio

n Billing Rapid Solution D

esign

Solutio

n Sal

es

Solution Discovery

Solution Business Lifecycle

Master agreementRevenue management

Business and pricing model designBilling and invoicing

Solution packagingPre-billing

Quote managementUsage rating and charging

Contract managementUsage metering

“We’re no longer selling only products or services – we’re transforming to sell offerings. It’s a usage- and subscription-based model rather than a one-off bump in revenues.”5

– Doug Curren Director of Enterprise Applications

Platform Consulting, EMC2


Value View



Learn more

To see the possibilities for digitalization and solution business, explore SAP’s Solution Business Education Series. To learn more about SAP Professional Services, visit us online.

Designing productized services: selling and billing packaged solutions

The actual components of a business solution are not what is most important to clients – what matters is that the solution delivers value by addressing a specific business problem. Because SAP serves global clients and helps extend their reach to new markets and services, it offers a consumer-like experience with a single sales and delivery model, establishing a consolidated view for every client.

hybris software, an SAP company, is a comprehensive ecommerce and billing suite that delivers B2B user experiences on par with those of top B2C websites.

It helps firms adapt to changing client needs with a unified digital experience that supports omnichannel commerce in even the most complex B2B environments. With it, you can:

Rapidly design and launch client-centric solutions, exploiting fast-moving market opportunities by quickly changing client pricing and partner revenue-sharing models.

Reduce sales administration costs by providing B2B clients with self-service capabilities to manage their organization, contracts, and installed base information. Clients are enabled to place orders or request quotations, manage contract changes, and submit service requests and incidents.

Maximize efficiency by running an integrated order-to-cash process across channels on a single platform for a low total cost of ownership.

Embracing client opportunities with transformational business models

SAP’s approach to solution business combines the hybris portfolio of proven best-in-class solutions for customer engagement and commerce with a single state-of-the-art platform and modern, integrated end-to-end business processes. SAP supports digital business transformation by:

Delivering and driving business model transformation that allows for flexible client personalization and solution packaging

Enabling business model transformation to new “as-a-service” offerings

Allowing firms to stay ahead of the competition by supporting nonlinear growth, streamlined solution business processes, and powerful analytical insights

Integrating solution packaging and selling, with service delivery and transparent, flexible billing

1 Based on SAP Performance Benchmark data and Boston Consulting Group, Innovation 2009: Making Hard Decisions in the Downturn, November 2009.

2 Deloitte Digital GmbH and Heads! Executive Consulting, Survival through Digital Leadership, March 2015.

3 Forrester, The Digital Business Imperative, March 2014.4 Gartner, Use CIO Leadership Critical Success Factors for Digital

Enterprise Transformation, September 2014.5 IDC, Monetizing Digital Transformation, an IDC White Paper Sponsored

by SAP, 2015.6 Gartner: IT Glossary, “Digitalization.”7 Altimeter Group, The 2014 State of Digital Transformation, July 2014.8 Accenture, Accenture Technology Vision 2015 – Digital Business Era:

Stretch Your Boundaries, 2015.


http://sap.sherpadm.com/event.html

http://go.sap.com/solution/industry/professional-services.html