It’s easy to see why so many view companies like Uber, Amazon and Google as the business models of the future. They’ve redeﬁned their industries. They’ve rewired the customer experience. They’re not afraid to fail fast, learn from mistakes and make the changes necessary to stay well ahead of the market.
None of this is news to leaders of industrial and other business-to-business (B2B) companies. But these executives also know full well that what works in the consumer realm doesn’t always translate in a B2B context. Failing fast? That’s problematic in industries such as chemical processing or offshore drilling, where the smallest mistake can trigger epic disaster. Moving quickly? We’ll get back to you when our channel partners get back to us. Redeﬁning the industry? Easier said than done in a business like aviation, where many stakeholders operate in a complex, interdependent ecosystem.
The truth is B2B is different than business-to-consumer (B2C) when it comes to digital strategy, and it requires a different approach. There are many lessons to be learned from digital innovators like Amazon, and the opportunities are very real. But simple comparisons to what works for these digital standouts aren’t always useful in an industrial setting and often come off as naive or impractical, feeding the notion that digital is more hype than reality. This gets in the way of deciding how digital can, in fact, transform important parts of a business and makes it hard to create alignment around the right path forward.
Doers vs. dreamers
When it comes to strategy development, most leadership teams have both doers and dreamers. Doers are focused on the here and now. They want to cut through the digital hype and direct the company’s energy toward implementing practical digital initiatives. The dreamers tend to focus on the long term. They want to deﬁne the full set of ways digital could either evaporate the company’s proﬁt pools or create new opportunities to become the disrupter. Both perspectives are critical because both are valid. Yet when these two groups are left in opposition, the tension can be paralyzing.
An effective strategy-development process resolves these conﬂicts by striking a balance between the doer and dreamer perspectives. It should blend a practical set of near-term, high-impact initiatives with a bold vision for how the pace of digital innovation is likely to reshape the industry over time.
Getting it right starts with a few key assumptions about the opportunities and constraints of devising a strategy in a B2B world.
Today is measurably different from prior eras. Although there’s plenty of froth in the marketplace around digital technology, the conﬂuence of smart devices, low-cost networks and massively powerful cloud-based computing has simply changed the calculus of running a business at every level of the organization. In the past ﬁve years alone, data generation has soared 40-fold amid a 4x increase in connected devices. Pipe dreams such as autonomous vehicles are suddenly becoming reality. The line is blurring between products and services. Customers who have grown accustomed to ﬂawless online experiences in their personal lives expect nothing less in their business relationships. In such an environment, it is not only possible to dream big but dangerous not to.
The direction of disruption is knowable. As dynamic as the current period is, it doesn’t have to be disorienting. The contours of disruption are very often discernible long before the actual disruption occurs. Autonomous vehicles, smart buildings and the connected farm—all were visible and widely discussed decades before they began to emerge as realities. Leaders need to understand how such digital trends could affect the industry and use this knowledge to form a point of view on the future—one that can be incorporated into the company’s long-term strategic vision. The harder work is ﬁguring out how the company will get there or how to adjust when the environment changes. But deﬁning the direction of disruption removes one important variable from the digital equation.
Ecosystems make all the difference. B2B companies operate in complex business ecosystems. Think about the aviation sector (see Figure 1). Everyone in the industry can agree on what the digital future should look like: It is a model of efﬁciency with state-of-the-art air trafﬁc control systems; modern, fuel-efﬁcient aircraft; integrated IT systems; and drastically improved customer experiences. But a digital strategy that ignores the facts on the ground would be impractical. Many issues limit the pace and scope of innovation, including regulation, expensive aircraft with long life cycles, aging technical infrastructure and very real concerns about the impact of digital innovation on security. Other industrial sectors face similar constraints as companies try to resolve questions around which platforms will become standard, who owns precious data and how it will be shared. These factors offer some protection against disruption as they discourage new entrants. But they also present executives with hard choices about what a workable strategy looks like and how they can make real progress against systemic complexity.