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“I’m collecting data but don’t know what to do with it,” you might say.

This is a common problem. By now, most businesses understand that bringing on new technologies and collecting data is vital for analyzing trends and making informed business decisions. Some have already invested in connected products or machines, while others want to get there. However, in my opinion, many still struggle with what it means from a monetization strategy perspective.

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Why Your Digital Maturity Matters

First, let’s go over the basics. Your success with any digital business transformation largely depends on your digital maturity. This includes how well your business manages data, your digital savviness and your overall ecosystem engagement. Deloitte measures digital maturity on a high, medium and low scale, with most businesses falling in the medium maturity bucket. 

Before pursuing monetization efforts, it’s worth ensuring you’re ready. Consider this: According to the same Deloitte survey, “higher-maturity companies were two to three times more likely than lower-maturity companies to report that they were receiving the following benefits from every digital pivot: efficiency, revenue growth, product/service quality, customer satisfaction and employee engagement.”

Key Factors For Success

Most businesses can create a profitable and scalable digital monetization strategy. Yet, why do the majority of digital initiatives fail?

In my experience, as a part of the executive team for the last six years at a growing industrial internet of things (IIoT) company, it’s because people tend to get stuck on the technology. It’s not as simple as investing in sensors, retrofitting machines or installing software. You need to start the process with a business lens.

I find that most companies make two mistakes: First, they equate digital to technology capabilities only; second, they try and monetize digital solutions by themselves.

You need to slow down and bake your strategy and business objectives before you implement technology. Begin by identifying the value that solving a pain point will create, and which value pools your solution will unlock. You’ll uncover the prerequisites in terms of the technology architecture needed.

Simply put, technology is critical, but only as one of the enablers to a bigger business objective.

From there, you can build out your implementation teams, bring in expert partners and gain internal alignment from every unit within your organization. This includes senior management from operations and marketing to human resources and sales. Although leaders from all departments should be involved, this is a fundamental change in how you do business. Therefore, it must remain a CEO-driven agenda.

Advantages For Your Business And Customers

Having a sound monetization strategy is the first, most crucial element, but it’s hard work and takes a coordinated effort among leadership to get it right. 

So, you might be wondering if monetizing your value is worth it.

The answer is yes if it enables you to align interests with your customers, establish new product offerings and recover more after-market business. In my opinion, monetizing digital capabilities alone is not holistic.

Below are three practical tips on creating a monetization strategy.

1. Find a clear path toward vertical value integration.

Vertically integrated offerings take away your customers’ pain points. Data-driven insights can help not only integrate vertically but also unlock value in the process.

One example is if you’re an equipment manufacturer — you offer the capacity to build/move/produce things. The key is to create value, for example, by taking on risks associated with the repair and operations while providing this capacity with “peace of mind” for your customers. This enables value pools like minimizing downtime, reducing supply chain inefficiencies and maybe even “pay-per-use” revenue models.

Of course, you can vertically integrate without technology, but unlocking value pools while vertically integrating usually needs technologies like IIoT, big data and artificial intelligence (AI) to provide a prescriptive and structured strategy.

2. Adopt new financial models, like recurring (pay-per-use) revenues.

Selling a product outright as a capital expenditure (CAPEX) is a one-time influx of revenue. Whereas, if you’re operating in a servitization or pay-per-use model and bundling services and maintenance, what you’re selling is operating expenses (OPEX). Here you can capture more regular, predictable revenue and monetize throughout the lifetime of the customer relationship. 

I go deeper into this concept in my article on how equipment-as-a-service (EaaS) enables business outcomes. However, in general, these financial models are one proven way to monetize digital capabilities with your products/services while managing risks and creating resilient revenue streams. 

3. Improve customer relationships and intimacy.

You will only be able to monetize digital services successfully, in my experience, if you align goals and incentives with your customers. Solve a challenge bigger than giving them a technical solution.

For example, after determining unplanned downtime is a problem, an equipment manufacturer might decide to give its customers special service packages. The service package could include digital solutions and data-driven uptime/performance guarantees, consumables and spare parts. 

In this scenario, you and the customer have aligned your interests. Using value-based service options, it’s a win-win for both with continued touch points. Digital technologies and data become the cornerstone of this long-term relationship.

Get The Ball Rolling

Until now, the focus of digital business transformations was to create efficiencies and improve operations to save money. Now, the real opportunity lies in using digital services to deliver value and revenue.

However, it takes a deep understanding of your digital maturity, strengths and customers’ value pools to be successful. It’s hard work and takes a considerable amount of time and preparation.

The key is not to monetize digital technologies independently but in the context of your business strategy. Remember, if you aren’t out there going through this process, your competition will. Someone will spot an inefficiency, and where there are inefficiencies, there are opportunities.

Source : https://www.forbes.com/sites/forbesbusinessdevelopmentcouncil/2021/07/21/three-tips-for-monetizing-the-value-of-your-digital-services/?sh=7d3822911bd4

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