Are you selling or living digital transformation?
November 09, 2022
November 09, 2022
Do you remember the old adage about the village cobbler’s children? Their father was a shoemaker yet they had no shoes. He’s too busy making them for his customers to supply his own family’s needs.
I was reminded of this recently as I discussed digital transformation on our XaaS Files podcast. Technology companies might be unlikely stand-ins for village cobblers but hear me out.
The technology industry has been talking a lot about digital transformation the last few years. The idea certainly got a boost from the pandemic as everyone scrambled to lay in infrastructure for work-from-home and put as much consumer-facing business online as possible.
Tech firms are drivers of digital transformation for virtually every industry they serve. But is it perhaps easier for them to sell digital transformation than to do it themselves? Are they metaphorically cobblers with shoeless children? On a recent episode of the XaaS Files podcast, I talked to Thomas Lah, executive director and executive vice president at The Technology & Services Industry Association (TSIA) about their newly published book, “Digital Hesitation: Why B2B companies aren’t reaching their full digital transformation potential.”
Thomas made an unexpected observation in researching the book.
“All these tech companies are talking about digital transformation and how they want to help their customers through digital transformation,” Thomas said. “But our observation was that these tech companies themselves really need to lean into the full potential of digital transformation.”
Think of Digital Hesitation as an inability to completely explore and embrace all you can do and become for your B2B customers in a connected world. It might not be unique to tech companies, but it’s a fascinating place to explore the idea since they are the loudest proponents of digital transformation.
Thomas thinks about digital transformation in two waves. The first is the move to the cloud. That brings efficiencies and maybe some changes in the product or service offering, shifting from transactional revenue to recurring or subscription-style revenues as you increase the linkages with the customer base. Thomas observed that some tech companies get stuck here because they either don’t realize they’re changing the business model at the same time, or they don’t embrace all the possibilities that are opened from having this more intimate relationship with customers.
“And the second wave is about these companies becoming masters of value realization and again, pulling these new levers of digital transformation,” he said.
That idea that the second wave of digital transformation – the one that eludes some technology companies – is to become a master of value realization dovetails with one of my own observations: Many tech companies view themselves as masters of complexity. They talk a lot about complexity. They may sell the idea that they can take on the complexity of their customers’ infrastructure needs and hide it from them. But, fundamentally, they view themselves as monetizing complexity.
“You know, simplicity is the business model,” Thomas said. “And in the book, we make this assertion that complexity kills.”
All these tech companies are talking about digital transformation and how they want to help their customers through digital transformation, but our observation was that these tech companies themselves really need to lean into the full potential of digital transformation.
Thomas Lah / TSIA
In reading the book, I was struck by one of the examples Thomas used to illustrate this difference in mindsets. Amazon pioneered B2C simplicity with one-click purchasing. On the B2B side of the house, Thomas pointed out that companies can get up and running with Amazon Web Services in just a few clicks. That contrasts with the pain of dozens of clicks – and maybe a few meetings – with other tech companies.
Both AWS and these other tech firms are selling digital transformation. The difference is that the operating model for one is all about the technology-enabled speed of value creation for the customer. Thomas notes that not everything in the B2B space can be reduced to an app on the phone and a couple clicks, “But they should be looking constantly for areas where they can make it easier for the customer to actually do business with them.”
The book offers several examples of how this more intimate digital relationship with customers can benefit both parties, such as healthcare equipment companies taking the data produced from their equipment’s use to offer management services to the hospitals using that hardware. That’s incremental revenue for the vendor and an opportunity for the hospital to use precious IT resources on patient services rather than maintaining equipment.
Ironically, tech companies are involved in creating those relationships. In that example, the healthcare company is creating those new services via the cloud, networks, edge compute and other services they’re buying from tech firms. And that brings me back to the cobbler’s children having no shoes. What more could these innovative companies be doing if they leaned further into their own digital transformations in addition to selling the idea to customers?
It's a great book and I enjoyed talking with Thomas. Check out the full conversation here for ideas on realizing the full potential for your digital transformation.