Blog: Structured approach to realize commercial potential in the digital age

To harness the potential of the digital era, manufacturing companies are increasingly developing and launching digital services to complement traditional product and service offerings. Despite the immense commercialization opportunities these companies have in their reach, commercially viable growth of digital revenues continues to be a challenge.

The environment in which modern manufacturing companies operate today has changed to a broad ecosystem of customers, partners and suppliers, accompanied with various system-, service-, and platform providers. In this non-linear and non-stagnant environment, the relationships are much more complex, forcing companies to re-think their role and adopt new, innovative strategies to deliver value within that system.

The commercialization process for traditional, tangible products and services is more straightforward than it is for products and services that are fully digital, or when they contain and combine digital elements. This is due to the fact that assessing the perceived customer value for digital infused products and services is not as straightforward. Various mechanisms and interdepencies are ruling the complex network, and the participants perceive value very differently.

DIMECC, Melkki and their partners are supporting the development by Intelligent Industry ecosystem. The focus areas of Intelligent Industry ecosystem are intelligent autonomous systems, data sharing in a value chain and factory environment, advanced analytics, new business models, and human-machine collaboration in an artificial intelligence -enabled world. Together the ecosystem partners form a shared vision of the direction in which the world is evolving.

Capturing customer value and changing transactional sales into continuous customer relationship requires flexible and adapting pricing model

In order to start thriving and releasing commercially viable digital products and services in the ecosystem, companies need to re-redirect their focus on their pricing models and cost structures.

Changing a pricing model requires a change in the strategic thinking about customer relationship – traditional pricing for physical product is based on periodic or episodic interactions, while digital services require the thinking based on frequent and on-going data-driven relationships with clients and users. Pricing should be based on monetizing the value for the customer and user.

The key questions to find out are: a) what value (economic, functional and emotional) do customers perceive, b) what would be the impact of different sales and delivery models, and c) how will revenue be affected by different price levels?

Typical value drivers are for example reduced effort, time savings, gained information, risk reduction, availability and/or ease of access, connection, integration and configurability, quality, stability and responsiveness. In our experience the feature – value – benefit matrix is a useful tool when designing new solutions and developing different pricing hypothesis.

Tuukka Ihalainen, Partner at Melkki