Thanks to digitization, companies such as Google, Apple, Airbnb, and Uber are using new business models to enter traditional markets, where they are changing the rules forever. The agility of these companies is achieved through a strong focus on customer service combined with systematic deployment of the latest IT technologies and platforms.
As we will examine below, the existing players in these markets require a new set of tactics to compete with these “digital natives.”
Anything that can be digitized will be digitized.
This prediction has been floating around in the digital ether for a number of years, steadily gaining in importance. Sure enough, we are now using an ever-increasing number and diversity of applications and services, while consuming ever-larger volumes of data.
It is entirely irrelevant where the services are provided, where the data centers are located, which technologies are used, or who the provider is. The value to the user is delivered directly by the service itself and the associated delivery parameters. Users expect services not only to be available at all times on all types of devices, but also to be an integral part of their personal or business ecosystem. There is minimal tolerance for downtime or suboptimal performance – especially among personal users – and customer dissatisfaction can often result in an immediate change of provider.
Digitization offers enormous potential and new opportunities, which are helping to drive entrepreneurship in the IT industry.
In mobile apps, for instance, there is now an amazing array of innovations, many of which are integral to people’s daily lives. The potential of digitization is not only enabling people to imagine and implement totally new business models, it is also having a major influence on, and sometimes completely transforming, the systems and rules that have long held sway in traditional sectors and markets.
Companies such as Google, Apple, and Uber, for example, are turning entire industries on their head. The key drivers behind this change are a systematic and sustained focus on service, absolute commitment to flawless fulfillment of individual customer needs, and a guarantee of clear, tangible, and transparent benefits through the respective service. As for the provider, the attributes required are quality, agility, and speed – not only in terms of the offering, delivery, and support, but also when it comes to pricing.
As 21st-century digital natives, companies such as Amazon, Airbnb, and Facebook have a crucial advantage over traditional, 20th-century firms. While the latter are burdened by legacy IT structures, the former are often building on “greenfield” sites. Backed by huge injections of capital from external investors and supported by a diverse ecosystem of leading-edge providers (colocation, data centers, cloud, hosting), they have the tools they need to implement their business models with amazing speed. For traditional companies in established markets, this presents new and difficult challenges. To remain competitive, they have to adapt or perhaps find some specialty niche.
Take the automotive industry, for example. If service providers such as Google and Apple were to enter that market, the threat to traditional carmakers might have nothing to do with unit sales per se. Instead, the battle could be over who gets to define the standards for the driver/cockpit interface and who provides the services that accompany the driver. In short: Who supports the driver on the road? Will carmakers be restricted to the mechanical side of the product in the future, or will they succeed in securing and maintaining a relationship with the driver through a range of new cockpit services? Who will own which parts of the value chain?
Competing with digital natives is obviously not easy for large-scale corporations with legacy IT environments, especially when the majority of that IT is heterogeneous and monolithically structured. Action is also required on the part of 20th-century service providers faced with increasingly volatile markets, extreme price pressure, and growing competition.
The product catalog takes center stage
Every service should be geared to the respective market and end-user. This applies as much to enterprise IT (internal IT service providers) as it does to regular external IT and telecoms providers. We have therefore made no distinction in the following analysis between internal and external service providers.
The first thing we can observe – and this applies across all sectors – is the transition from the conventional, well-established build-to-order model to a more product-oriented approach, i.e., from a purely reactive posture to a proactive one. This transition is usually much easier for service providers in the telecommunications sector as their retail business is often structured on the same set of principles.
As part of this transition, the product catalog is moving center stage and becoming a major driver when it comes to competing and succeeding in markets that are being transformed by digitization.
The product catalog is like a menu in a restaurant, listing everything the provider has to offer:
- Which types of products are offered to private and business users?
- What product variants are available and to which target groups?
- What are the respective performance parameters, contractual terms,
A product catalog should also allow the provider to quickly adapt existing products to new market conditions or bring new products to market with the shortest possible lead times – especially when this is crucial to staying competitive. The product catalog is directly related to the service catalog, which contains all the services that are currently available and can be ordered and delivered on the basis of the product catalog.
Not all product catalogs are the same, however. Companies that already use a more product-oriented model can have very different types of product catalog, each constructed with different goals in mind. In one company, that goal might be to reduce complexity for customers, while in others it might be to streamline the order process, provide better cost transparency, or achieve greater standardization.
Another area in which organizations differ is in the choice of tool. Many companies use Excel to create a product catalog that can then serve as a template for implementation or configuration of the service tool landscape, e.g., end user portal, service monitoring, helpdesk, CMDB, and billing systems. These catalogs are often created on an annual basis, as even a small change in the product offering can sometimes require major modifications to data interfaces, UIs, and workflows.
Less common is the deployment of specially developed, database-driven solutions that often require costly annual maintenance. Much more prevalent is the use of multiple catalogs that appear with different semantic roles in the various tools that make up the service tool landscape. These catalogs are usually integrated with each other through high-maintenance, high-cost interfaces.
Looking to the future, what companies need is a centralized product and service catalog that serves as an enterprise-wide master on which all the external systems in the service tool landscape can be based.
The product catalog should serve as a centralized data hub for products and services, supplying information to wherever it is required, be it an end user portal, a service monitor, ERP system, CMDB, or helpdesk. This catalog-driven model covers the entire end-to-end process and provides a central database for all participating roles.
However, the product catalog alone is not the only thing we need. Taking a product-oriented approach requires the adoption of industrial production principles, such as standardization, modularization, version management, and variable vertical integration. This can only be achieved when the product catalog is created with the aid of a consistent methodology that allows providers to plan the production of their services in the same way carmakers plan the building of their cars.
Using this type of methodology is particularly important in product management, since the resources required to deliver a service are usually a hybrid mix of conventional, outsourced, and cloud-based IT.
Through careful modularization and disassembly of a product into its component parts, and through the application of variant management, it is possible to bridge the gap between marketable units and the resources required to make and deliver them.
This enables product managers to assemble new products quickly and easily based on readymade modules – just like using Lego – and adapt existing products to suit changing market conditions.
A consistent methodology is especially important when combining classic IT services with telecommunications services and then marketing the finished article as a single, standalone product. Without such a methodology, it is utterly impossible to combine multiple service components from these disparate industries to create an integrated offering. The service provider thus becomes a service broker, assembling offerings – the product catalog – from a range of internal and external resources. Gone is the old model of “plan-build-run,” replaced by “source-make-deliver.”
The tried-and-proven bE_Methode® is a best-practice methodology that provides the ideal platform for building product catalogs using industrial principles. It also serves as the basis for the standardized FNT ServicePlanet software package, which enables users to generate new services by means of rule-based instantiation based on predefined products. FNT ServicePlanet not only fulfils the central role of a product catalog, it is also fundamental to the entire service tool landscape through the service catalog that is generated. Provisioning is controlled with the aid of status models and workflow engines. Functions such as lifecycles and versioning, as well as offer and contract management, enable easy management of the product and service catalog as a coherent, integrated whole.
As outlined above, successful introduction of a product catalog requires not only organizational and software changes but also a suitable methodology – which obviously necessitates some investment. It is important, therefore, to be able to quantify the return on that investment.
The following three indicators are typically used when calculating ROI:
- Cost reduction through standardization and consolidation of products in a central catalog. Typical reduction: 10–30%.
- Reduction in service deployment time – from days to minutes.
- Reduction in time to market for new products – from months to weeks.
In summary, traditional 20th-century companies can only keep pace with the challenges of digitization if they successfully transition from project orientation to product orientation; become a service broker; implement a product catalog-driven approach based on a consistent methodology. Only then can a 20th-century service provider become a digital service provider for the 21st century.