Pillar 3: The Imperative to Innovate (B2B Digital Transformation)

Markus Saalwächter

the_imperative_to_innovate_in_b2b_digital_transformation The imperative to innovate in B2B Digital Transformation

How does a B2B business position itself to prosper in the era of hyper-connectivity? By selling more (more than your nearest rivals anyway). By innovating faster. And by experimenting with new sales strategies and business models.

Nobody knows yet what the “new” disruptors will look like, so businesses need to have an appetite for change, and a willingness to get it wrong, perhaps even most of the time. For every Uber or Airbnb there are hundreds of start-ups that disrupted very little but the sleep of their investors.

Businesses are motivated as much by the fear of failure as the promise of success. The shock and awe of the demise (or near-demise) of Kodak, Nokia and Blockbuster convinced businesses to invest billions in digital transformation projects.

However, digital transformation has become such a buzzword, that a new complacency is creeping in. We are on the cloud, so that must mean we are agile. Or: We have learned the lessons of the past; we are committed to our digital journey.

The past taught us that iconic names that seem impregnable today will one day be destroyed. Digital disruption wiped out more than half the businesses listed on the Fortune 500 at the turn of the millennium, and that turbulence is far from over.

53% of customer loyalty is driven by the sales experience — more so than by the brand, product, service and price combined

In what it calls “a gale warning” to business leaders, one analyst predicts that roughly half of S&P 500 companies will drop out of the index over the next 10 years. In other words, corporate destruction — creative or otherwise — is accelerating (and that’s without counting the economic aftermath of the health crisis in early 2020).

The operational intricacy of even smaller B2B businesses can make the sector hostile to change (as it was for a long time) or too slow to respond to it. By the time the oil tanker has reversed course, the competition has sailed on and disappeared beyond the horizon.

DXPs give B2Bs performance and agility to manage their digital strategy

Digital transformation is a cultural change for the entire business. You need the entire ship to be agile and maneuverable, not just your cargo of e-commerce.

Hyper-connectivity means unpredictability; the only certainty is change itself. Agility means that you move quickly — and as one.

A new generation of systems called Digital Experience Platforms (DXP) has emerged to give B2B the performance and agility it needs to manage its digital strategy.

All the nitty-gritty of your daily operations has to be in sync with the backend, just as product development, IT, marketing, and senior management have to reach decisions from a single point of view.

A new generation of systems called Digital Experience Platforms (DXP) has emerged to give B2B the performance and agility it needs to manage its digital strategy.

The definition of what a DXP should do and look like is not fixed, which is why Gartner’s description of it is very broad. To the analyst, a DXP is “an integrated set of technologies, based on a common platform, that provides a broad range of audiences with consistent, secure and personalized access to information and applications across many digital touchpoints”.

The Many Routes to a Digital Experience Platform

There is no well-defined functional scope for a DXP, and there is a mix of approaches on the market. Some vendors offer comprehensive platforms with a huge range of built-in functionalities, others opt for a modular approach with a single interface and architecture.

Some businesses regard the ambiguity of what a DXP should do natively as an invitation to build one from scratch. Self-build approaches such as microservices and headless content and commerce seem to offer an easy route to sales and innovation.

For B2C this might work, but B2B requires complex integrations because so many processes and business partners intersect with its activities. Unless you are a Google or an Amazon, it is unwise to develop your own DXP.

Other businesses make the opposite mistake and throw in their lot with “big name” vendors offering ambitious all-in-one solutions. These suppliers are capable, but this is seldom the decisive factor.

What persuades senior management is the air of competence conveyed by brand allure and high prices. The vendors themselves believe their own hype and become a little too convinced of their own infallibility.

A modular DXP is relatively straightforward to implement, and agile in its reponse to market and technological change.

It was this corporate hubris that lay at the root of the disastrous bromance between SAP and Lidl. The all-powerful SAP HANA Enterprise Resource Planning system needed to be tweaked to accommodate the retailer’s inventory pricing structure.

This seemingly modest requirement led to a seven-year long cascade of increasingly Kafkaesque and costly projects until Lidl had had enough – and had spent enough: €500 million, not counting the cost of now reverting to the old inventory system. Lidl’s error of judgement was to have blind faith in SAP, and to never really question whether SAP’s unwieldy and monolithic system was suitable for its needs.

The cost of monolithic all-in-one Digital Experience Platforms can certainly be prohibitive, but that is not even their main disadvantage. Monoliths are too inflexible to deliver innovation. “Experimenting” with new business models is not even an option, because the cost of a failed experiment (and you will encounter failure on the way) would bankrupt you.

Other Digital Experience Platforms adopt a modular approach. A single architecture manages and orchestrates the experience, and a single interaction layer unifies the UX across a range of functionalities which may not necessarily be native to the platform.

A lot of these functionalities, such as content management, e-business capabilities and even personalization are offered by advanced off-the-shelf e-commerce solutions, but even on their own turf, so to speak, these tools run up against the limitation that they were originally conceived to serve narrower needs, without focus on complex B2B requirements.

Even the best of these e-commerce suites lack powerful capabilities to create highly customized and content-rich websites and apps, beyond the catalog and checkout process. Interoperability and extensibility are key components of a DXP, ones that are often overlooked because they do not directly affect business users.

However, what is at stake is critical: how to interoperate with existing business systems in a fast, sustainable, cost-efficient way, without having to build everything every time.

Photo by Ramón Salinero on Unsplash