Last week the Syncron team returned from the Professional Pricing Society (PPS) fall conference in San Diego, California, where 492 attendees gathered to learn from some of the best pricers in the industry – and to uncover the expanding scope of pricing today. With a theme of data, change management, and the profit landscape, the Syncron team team dove head first into pressing pricing topics like core pricing skills, pricing new products, corporate strategy, procurement tactics, partnering with sales, and product uptime.
Our favorite session of the week, however, went to none other than that of Laura Preslan, General Manager of Industry Solutions in Microsoft’s Worldwide Services organization. In her role, Preslan is responsible for building industry-specific solutions that the Services division uses to make Microsoft’s customers’ wildest dreams come true. And last week, she tackled the topic of digital transformation and what companies can do to get started today.
We’ve all heard the term “digital transformation” for months now. But is this idea of digitization within our organizations just another industry fad? Preslan says no – it’s here to stay, and here’s why:
Digital transformation is the next industrial revolution and will disrupt every single industry.
This may sound like a heavy statement, but imagine a world where every company has instant insights from technology like machine learning algorithms, customer interaction bots, and other types of IoT, all built to increase transparency across every element of the organization. Well, that world is now, and this kind of data-driven innovation is here to stay.
Digital Transformation and Pricing Today
Pricing has never been more important than it is in this new digital economy, and digital transformation is the perfect vessel for propelling pricing to the forefront. As of today, we’re in the fourth run of industrial revolution. We started in 1784 with the emergence of steam, water, and mechanical production, then headed into 1870 with the division of labor, electricity, and the birth of the modern factory. 1969 brought about new electronics, IT, and computing, but now we’re in the age of a post-millennium jump, where we’re blurring the physical and digital divide – essentially blurring the lines between actual and virtual reality.
But how is this seemingly magical digital transformation so easily accessible to companies around the globe? According to R. Preston McAfee, Chief Economist at Microsoft, the equation is simple: cheap sensors plus cheap data storage plus machine intelligence. Simply put, with everything in the cloud, digital transformation is actually super affordable, on top of the fact that we already have highly intelligent machines currently computing complex ideas at lightning speed.
While it should be logistically simple to adopt this new technology, it’s certainly serving as a threat to many organizations around the globe. Look to Fortune 500 and you’ll see that the majority of companies today will not exist in any significant way in as close to ten to fifteen years. The contingency here is for organizations to capitalize on what is expected to be a $100 trillion opportunity within the next decade. And to help organizations seize this revenue opportunity, Preslan laid out the four pillars of how to begin this digital transformation today:
Gain insight into customer habits and preferences (think: beacon technology in retail stores), design individual segments (read: mass personalization at scale), and create customer-facing tools that provide relevant experiences for the digital customer. Digital customers and traditional customers are not the same, nor should they be addressed in the same way.
Recruit and retain digitally-savvy employees, and create seamless employee experiences like HR, procurement, and internal workflows. Sense, collect and process employee data so that your people can help lead innovation and make informed business decisions for your organization.
Use data and software such as predictive analytics and proactive maintenance to immediately identify issues and maximize product uptime and overall operational success. Deploy technology like digital twins to model processes before they’re even implemented, adjust pricing in real time based on supply and demand, and use insights to introduce new efficiencies based on bringing data sources together.
Transform Products and Services
New insights can drive demand, creating new service offerings, improving customer satisfaction, and driving lower cost models. Use these benefits to your organizational advantage by creating new marketplaces, brokering deals and advertisements, and selling raw information, analysis, and benchmarking data based on these insights.
“When you put these four pillars in place, you can change your business model and how business gets done,” says Preslan, as she dives further into examples of organizations who have successfully transformed digitally, like AirBnB, Uber, and Clear Bank. But, contrary to popular belief, companies founded in the cloud are not the only business models who can make this transformation happen.
For example, Rolls Royce started by investing money in a data warehouse, not even knowing what to do with that data at the time. But, through time series and motion studies on active aircrafts to move to predictive maintenance, they began to fix parts between flights, eventually realizing they could start selling Engine Uptime instead of just engines. Their messaging shifted from “you need an aircraft engine,” to “you need an aircraft engine that is functioning when you need it to function,” and they’re now positioned as a service organization.
ThyssenKrupp had a similar problem: they wanted to figure out how to disrupt the market, but they struggled due to their aging technicians and their expiring workforce knowledge. Their digital solution? Slap sensors on parts and give technicians augmented reality (AR) glasses, and move from simply selling elevators to selling “Elevator Uptime.” Now, legacy elevators from competing manufacturers are running into the same problems ThyssenKrupp once faced, and they’re starting to put ThyssenKrupps sensors into their own elevators. Talk about “what goes up must come down.”
Simply put, there are five key differences between traditional organizations and the digitally transformed:
- Where traditional business models are product-based, digitally transformed business are service-based.
- Where traditional mindsets center around selling products, digital mindsets center around selling customer uptime.
- Where traditional pricing models focus on price per unit, transformed pricing models focus on price per hour of uptime.
- Where traditional revenue generators think, “just sell more,” digitally transformed revenue generators sell both products and service.
- Where traditional profit generators come from lowering maintenance costs, the profit lever in digitally transformed organizations lies in maximized product uptime.
Digitally Transform – Today
So, how can pricers use this digital transformation to grow today? According to Preslan, it’s all in the mindset, the new psychology of success. In a fixed mindset, you know things in a limited scope, there’s no risk because there’s no chance of failure, and you stick by people most like yourself, closed off to external feedback.
But, in a growth mindset, you’re always learning and improving. You recognize that failure is good – it gives you a chance to learn. You celebrate risks, you give and receive feedback, you reflect and iterate. But, most importantly, a growth mindset allows you to embrace challenge and persist against setbacks.
Only 25% of companies today have Chief Digital Officers, but you can be a part of the industrial revolution of digital transformation today by taking charge of change within your organization and learning that digital leaders are taking over the traditional, and the opportunity is now.