Business Digitalization

Digitalization is a megatrend that is changing the earnings logic and value creation of enterprises. All servitization is a consequence, not a cause, of digitalization. The challenge lies in applying existing technology to business activities across traditional industry and organizational boundaries.

At Aalto EE, you will update your knowledge of the latest digitalization tools and principles of development, learn to utilize and create simple pilots, network with various actors, prepare to become a leading company in your business ecosystem, upgrade your competitive strategy from the digitalization perspective, develop your own digiskills and gain comprehensive knowledge of various methods of promoting digitalization in your organization.

Digitalization makes product and service development open

Digitalization accelerates processes, enabling more efficient resource allocation to the pursuit and development of core business activities. It makes it easier for a company to show how vital it is to customers, by bringing product and service development - which is traditionally internal to organizations - into the ecosystem-based arenas of consortium and joint development.

The key issue concerns transforming seller-buyer relationships into partnerships."

Physical spaces for creative, joint development, and urban and cloud technology platforms, form the basis of such arenas. Open programming interfaces seamlessly interconnect various databases and systems.

The technical term for this phenomenon is ‘API ecosystem’. From a strategic perspective, the phenomenon can be a business ecosystem, an industrial ecosystem or a digital ecosystem. In all such cases, the key issue concerns transforming seller-buyer relationships into partnerships. The purpose of an digital ecosystem, for example, is to materialize product and service innovations, whereas a business ecosystem breaks down corporate hierarchies. Ecosystem members engage in building a platform's capacities, in mutually dependent interaction characterized by both competition and collaboration (cf. Amazon WebServices). Such capacities include joint research, innovation and demonstration projects, for example.

User-driven pilots enable agile business development

Businesses have noted the benefits of fast and agile user-driven pilots in business development, particularly in the case of services. This has resulted in the emergence of startups inside companies. Where companies previously built services around a product, products are now being merged with services through digitalization.

The platform economy is easing entry into global markets

Thanks to the platform economy, services and products are being effortlessly scaled up for the global market and rapid market penetration of so-called traditional sectors is being achieved. Uber, Airbnb and Zadaa are good examples of this. This is markedly different to a traditional, more gradual market entry process. The markets are being redistributed by new innovations.

The question remains one of who is paying and to whom."

Together with applications and network interfaces developed for consumer use, the transition of markets and marketplaces to digital platforms is accelerating retail, reducing transaction costs, creating a more real-time picture of demand and supply, and reducing the need for inventory. In practice, a producer of a product or service receives a customer order or service request without multiple intermediaries. This is transforming value creation mechanisms in the service or product delivery chain and creating a mechanism-change and design challenge, when ensuring that money flows as before between actors and customers within the value network.

The question remains one of who is paying and to whom. The service must meet both user needs and the service provider's business objectives. Digitalization requires that an organization truly digitalizes both its business activities and business model.

Industrial development phases 1.0-4.0

The challenges of business digitalization concern cyber-physical systems, the interconnection of production tools and - in activities such as servicing and marketing - data gathered from devices and the marketing of such data. To this picture, the current product and service development trend is adding the various phases of the customer experience and path being measured, and the end user's participation in product and service development based on the data generated.

Cyber-physical systems are fueled by data. In digitalization, competitive advantage arises from how an organization is able to utilize the data it collects in support of its current business and, when creating brand new services and products, the information latent in such data and the critical data mass.ization, competitive advantage arises from how an organization is able to utilize the data it collects in support of its current business and, when creating brand new services and products, the information latent in such data and the critical data mass. (Source: Christoph Roser http://www.allaboutlean.com/industry-4-0)

Digitalization and company brands

Business activities will become more data-related. The core business of some companies may be based on data sales and acting as a data broker or a provider of data integrator services. However, to make a profit businesses will still have to market and sell their products or services.

As digitalization enables easier scalability regardless of the marketplace in question, it is also becoming easier to manage, create, and maintain multiple product or service brands simultaneously. The flip side of the coin is the need to produce new and interesting content when developing and maintaining a brand, since customers compare products and services via digital applications and various online services. A transaction can occur in an instant, before a company is even aware that a customer exists.

Digitalization is reducing the predictability of consumer behavior."

Although digitalization is reducing the predictability of consumer behavior, tools such as artificial intelligence could help companies to reach customers, when geared towards using customer data stored in marketing and sales clouds (chat bots).

A successful brand needs a great story and the company’s willingness to stand behind the content of the story. A successful brand is emotionally evocative; an outstanding brand invokes strong feelings and lowers the barrier to identification with a product or service. The service owner or product manager is familiar with the product's features, possibilities and limitations. Channel strategies segment the market and marketing tools do the heavy lifting, but transactions occur via channel-independent marketing, i.e. under the human-to-human business concept.

Service design and the Quadruple Helix

Digitalization has alerted many companies to the fact that product or service development can no longer be fully managed within an organization's own product development unit. Ecosystem-based joint development, through which a company harnesses a small part of its product or service IPR for development activities, is more productive. By agreement, an organization can also utilize the resources and tools of other organizations operating within the ecosystem.

Digitalization has created demand for service design solutions. Under this technology-driven mega-trend, it is difficult to compete using traditional competitive factors such as product features and prices, unless a radical innovation, such as the iPhone was in its day, is involved. The customer experience is the new competitive factor, for which a competitive edge and stronger market position are being sought through service design solutions.

Asking customers is more effective than brainstorming in an internal team, or assuming that you know what different customer segments value or need. Combining the Lean principles with the Quadruple Helix brings the customer’s business development into the core where, as a starting point for business, the customer experience is reflected in channel-independent service design and planning.

What should businesses take account of in their operations?

From the business perspective, it is worth focusing on the acquisition of digitalization competencies (creating an ecosystem, container technology, ESB, SaaS, micro services, QH4-user-driven product and service development); digitalization of a business and business model; minimum viable product development; weighing up a business idea from e.g. the proof of concept and proof of business perspectives; utilizing existing and collecting new data; participating in ecosystem, consortium and collaborative projects; and the corporate culture and its connection with the customer and his or her experience.

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Sami Lehto

Senior Program Manager

+358 10 837 3728

sami.lehto@aaltoee.fi