Every other article on digital transformation holds startups like Uber or Airbnb up as an example how important it is for big companies to explore disruptive digital business models. But when it comes to real examples for successful exploration of such business models in the enterprise environment, the well of information suddenly gets on the verge of running dry.
Since I find this topic highly interesting, I decided to set out on a quest for some fine examples of enterprise companies who are searching for ways to implement disruptive digital business models to find new revenue streams, address new customer groups, bind existing customers, or for any other good reason.
In this article, I’d like to share with you a few of the most remarkable cases I was able to find, namely about:
- BNP Paribas embracing Mobile
- Daimler AG, BMW and RWE building on sharing economy
- Caterpillar making use of IoT and Big Data
- Coca-cola outsourcing innovation
BNP Paribas: Adapting traditional services to millenials’ habits
BNP Paribas, one of the largest banks in the world, has a very long history of doing business the traditional way. However, in the digital era they had to face quite a critical business problem: Young people, or so call millenials, were not very keen on dealing with banks in this traditional way.
In order to become appealing to this new group of customers, in 2013 BNP Paribas launched Hello bank!, a purely mobile bank that was easily accessible via an app. At first, the 100% digital bank was launched only in Belgium and Germany, but the project became such a success that soon thereafter it was launched in France and Italy as well, with Austria becoming the fifth country in its list in 2015.
According to Xavier Dumon, marketing director for Hello bank! Belgium, this new business model helped BNP Paribas not only win young professional for the bank, but also increase engagement and reduce the churn rate among existing customers. This gives an excellent example of how an old, traditional establishment can successfully move with the times embracing Mobile and thus, creating a higher value proposition as well as effectively adapting to modern customers’ habits and need.
Daimler AF, BMW and RWE: Building on sharing economy
There is an abundance of examples that show a successful adoption of new business models based on sharing economy. Daimler AG and BMW, two large Germany-based automobile manufacturers, with their DriveNow/ReachNow and car2Go respectively are probably the first to come to mind.
The idea behind these two products is based on some simple calculations: First, it’s getting more complicated to own a car in urban areas – parking spots are getting more expensive, traffic congestion is driven by its highest, and it’s getting harder to find parking space. Secondly, less and less people are willing to really own a car due to its high maintenance costs, rethinking many aspects of car ownership [PDF].
Offering cars that can be easily found and booked via a mobile app solves these issues in a very elegant way. This business model offers value proposition to an entirely new group of customers as well as generates additional revenue streams.
Another rather remarkable example of making use of the sharing economy is offered by RWE, a large German electric utilities company. Its Innovation Hub, a new business division designed to bring innovation to the company, is exploring the way to create a platform for sharing energy leftovers.
If you consider that more and more people are choosing renewable energy sources like solar, wind and microhydropower electric systems for their home, RWE is showing an impressive forward thinking with this idea. In fact, their plans in this area are quite ambitious if I may say so: As Inken Braunschmidt, RWE CTO, put it herself, the company would like to become Uber for energy. And if RWE moves fast enough, it will certainly be the first of the kind.
Caterpillar: From making products to collecting and analyzing data
For Caterpillar, the word “innovation” meant for decades improving its machinery. Now with the launch of CAT Connect, this well-known American manufacturer of construction, agricultural and materials-handling equipment successfully rides the waves of IoT.
Originally, CAT Connect was supposed to be ‘just’ another product that would use integrated technology to enable Caterpillar’s customers to better “monitor, manage and enhance job site productivity, safety, fuel usage and equipment utilization and uptime“. This by itself is a very fine example of successful implementation of the IoT strategy. But the unbelievable amount of various data that Caterpillar found on its hands shortly before the launch of this service made them search for additional ways of using this data to increase the value proposition of the company.
For example, last year the company partnered with Uptake, a predictive analytics company based in Chicago, to launch a new analytics platform. The platform offer Caterpillar customers a way to detect in advance when their equipment will need maintenance in order to prevent catastrophic failure. In addition to that, with the launch of a new Analytics & Innovation division, Caterpiller keeps on exploring further ways to utilize data, among other things by adopting a new business model that would help sell digital data in addition to selling physical goods.
Coca-cola: ‘Outsourcing’ innovation
A very interesting strategy is pursued by Coca-Cola. The company’s core business model is about, to put it simply, producing and distributing beverages for consumers. So, in order to tap into digital transformation, Coca-Cola founded a platform called Coca-Cola Founders. The aim of the platform is to explore disruptive digital initiatives and business models safely and without slowing down or putting at risk the business processes and IT systems that are designed to serve their core business.
The main idea behind the platform is to “outsource” some of the company’s biggest business challenges to entrepreneurs in order to co-create scalable startups with them. What is remarkable is that this strategy is apparently paying off: As David Butler, VP of Innovation, mentioned in his blog article, Coca-Cola managed to co-create 15 startups that generate a 3x return of investment for the company in less than 3 years.
Why it can be difficult for large companies to innovate?
It wouldn’t be fair to claim that large companies are a bit slow on the innovation side, but this is true in many cases. Mainly, because when a new technology presents itself, something that can open entirely new horizons for a company, large companies tend to treat it as not attractive enough to pursue.
Indeed, why change something that has been working so well for so long for their mainstream customers? Besides, with new technologies, it is very hard to design a sustainable business plan, find the right resources and reliably predict the profit margin as well as ROI.
It is no wonder, therefore, that so many digital transformation initiatives fail at enterprises. In fact, a good collection of reasons is provided in this article about how to approach digital innovations within large companies.
After perusing dozens of articles and stories, I think I was able to find two common things shared by companies that have understood how new business models can benefit their traditional business and are on a successful way of implementing them.
First, it is important to understand that most likely, you’re exploring the new business models NOT for your mainstream customers, but for new ones. You might not be able to fully understand (although you better do that) who this new customer is exactly, and whether he/she is, to put it bluntly, worth the effort. But one thing is clear: New business models are aimed to a large extent at new groups of customers.
Secondly, it needs to be official. What I mean by that is you will probably need to launch a separate devision that would be busy solely with exploring new technologies and business models, experimenting with new concepts, living by trial-and-error, just like RWE, Caterpillar and Coca-cola did.
Just a thought to finish: I cannot help but draw a parallel between this second point and the much-discussed Bimodal IT strategy. Although the latter is considered to be controversial and maybe even ill-working by many IT professionals and analysts, you cannot not see how it perfectly fits into the idea of creating separate divisions to deal with digital transformation. So, maybe the opponents of the Bimodal IT strategy might want to rethink their position after all.
