Article

24.10.2017

6 Digital Strategies: Why Some Work Better than Others

Digital technology has been roiling markets and disrupting companies for more than two decades, but despite that lengthy history, incumbents are still struggling to enact and deliver on digital transformations.

The first challenge is disruption; digitization is enabling new, disruptive models that aggressively compete with legacy models, putting material pressure on incumbents’ revenue and profit growth. As incumbents fight back with their own digital strategies, our research shows that they often trigger a second wave of competition, closer to the notion of Schumpeterian imitation where incumbents start themselves to innovate, sometimes aggressively, against the threat of entrants slashing yet more revenue and profit growth. We estimate that on average, both waves of digital competition has taken out half of the annual revenue growth and one third of the growth in earnings from incumbents that have failed to respond to digital.

The second challenge is that, even when companies do launch transformations in response to competition, the results are often underwhelming. Based on our recent worldwide survey of 2,000 incumbent companies across all major industries and countries, we estimate that the average return on incumbent digital initiatives is below 10% — barely above the cost of capital. Besides the average, however, we also witness in each sector a large spread among firms in terms of their ability to sustain growth and generate a return from their digital investments. The top-performing decile of companies achieves revenue growth that is eight percentage points higher than the industry average and a digital ROI that is 10 times that of the bottom decile companies.

Boldness is key

To understand what these outperformers do differently, we dug deeper into the data and found that the degree to which they reshuffle their activity portfolio (e.g., by selling some activities, buying new ones, or materially reallocating investments among remaining business lines)  as well as to which they adapt position in their industry value chain mattered enormously, both in achieving higher digital ROI and reversing the digital curse of low growth.

We clustered companies in two ways. First, based on the level of boldness of their corporate strategy, as measured by the degree of changes above, and extended to two measures of firm commitment to radical changes, e.g. how they are doing those changes at the expense of cannibalizing their current revenue and profit pools and how they are willing invest in digital technology. The higher the share of cannibalization and the higher the investment devoted in comparison to competitors/peers, the bolder the strategy; using our classification, we found four distinct clusters. In particular 13% of companies are part of the most offensive cluster ( which we call “big and bold”), which is composed of companies which are more radically adapting portfolio and investing significantly more than peers, with high rate of current revenue cannibalization. Further, a clear pattern is emerging: The bolder the digital strategy, the more likely the company is to have a successful digital transformation. In our dataset, bold corporate strategies were associated with significantly superior performance on all counts: revenue growth, profitability growth, and return on digital investment.

 6 strategies

We then classified companies based on the digital strategy they were pursuing. To do so, we outlined six digital strategies. The first three are primarily offensive, targeting new demand, new supply or new business models. The second three are defensive in nature, since they are aimed at improving what the firm already does.

The six types of digital strategy

1. Platform play:

One third of firms have engaged to some degree in platform strategies, in an attempt to redefine their industry’s value chain so customers and suppliers can interact more directly and benefit from network effects. Platforms have the power to radically alter the way value is distributed in a value chain. Accor, which is opening its online booking platform to independent hotels offers a good case.

2. New marginal supply:

A smaller fraction of incumbent firms (13%) were using digital technology to tap into previously inaccessible sources of supply at a marginal cost, often, but not always, in combination with a platform play. Examples include the Swedish retailers H&M and Ikea, both of which are offering an online reseller options for their own customers, allowing them to sell used, branded products to one another.

3. Digitally-enabled products and services:

Other companies, some 55%, were using digital technology to create new products or services with digital features, typically to serve new demand. One example is P&G’s Oral-B toothbrush with Bluetooth-enabled digital guidance.

4. Rebundling and customizing:

Another 60% of companies are using digital technology to rebundle their products or services to better serve their existing customers. The paywall for news content erected by the New York Times where people can personalize reading lists and organize the content they read is a good example.

5. Digital distribution channels:

Many firms – almost 60% – invest in digital distribution channels, in an attempt to make it easier for customers to access their products or services.

6. Cost efficiency:

Almost half of companies we looked at were using digital to improve their cost efficiency, typically through automation or cost scaling. In an age where operational excellence is the norm, this strategy looks like it’s aimed at survival rather than creating a source of comparative advantages.

 

We found that successful companies, especially those with a bold corporate strategy, were considerably more likely to employ one of the three offensive digital strategies. Successful digital transformations are significantly less focused on cost efficiency and more focused on new products or new customers.

For companies committed to transforming and adapting, the key is to make sure that their strategy really is transformational and not just a bundle of cost-cutting measures. Our data shows that, while digital attackers often enter markets with a platform-based business model, only a handful of incumbents have done so. In effect, incumbents are losing because they’re playing defence. For companies looking to successfully ward off digital disruption, they have to play offense.

 Source: Harvard Business Review
Article

07.12.2020

Scale-up concludes mega contract in the midst of the coronavirus crisis

The Antwerp-based scale-up IPEE transforms ordinary toilets into innovative products. BNP Paribas Fortis is more than just the financial partner. IPEE have already come into contact with the right people via the bank’s network several times.

“The traditional urinal has no brain. The infrared eye simply detects that someone is standing in front of the urinal. The result? A lot of wasted water and misery”, says Bart Geraets, who founded IPEE in 2012 together with Jan Schoeters.

The scale-up devised new measuring technology that makes it possible to detect through the ceramic of a urinal when someone is urinating or when the urinal is blocked. With this innovative technology, the scale-up designed urinals that use half as much water and toilets that can be operated without touching them.

Sleek design

“IPEE is an atypical scale-up that innovates in a sector where little has changed in the past few decades”, says Conchita Vercauteren, relationship manager at the BNP Paribas Fortis Innovation Hub.

Jan Schoeters: “At first we mainly focused on durability. But we soon felt that with non-residential applications, the potential water saving is subordinate to the operational aspect. We had to be able to offer added value for each stakeholder in the purchasing process.”

We opted for sleek designs to appeal to architects and end users. The simple installation attracts fitters and maintenance people see the advantages of the sleek design - that is easy to clean - and toilets that do not overflow.

New investors

Until 2015, Schoeters and Geraets, along with Victor Claes, an expert in measuring methods and originator of the IPEE technology, put their energy into product development and market research. The financing came mainly from money that they collected in their network of friends, fools and family.

They had to go elsewhere to obtain the funds for production and marketing. Geraets: “We had a product, but it wasn’t ready to sell. To take that step, we needed investors.”

Looking for new investors was a challenge. Schoeters: “We aren’t software developers and we don’t work in a sexy sector. So we miss out with a large target group of investors.”

The young scale-up attracted the attention of Ronald Kerckhaert, who had sold his successful company, Sax Sanitair, at the end of 2015. “He pushed us to think big, more than we dared ourselves. And he never headed for an exit. His express goal was to put our product on the world market”, says Schoeters.

Growth path

IPEE has achieved impressive growth since then. The product range was expanded and new sectors were broached: educational institutes, office buildings and hospitals. The technology is now used by Kinepolis, Texaco, Schiphol and Changi Airport (Singapore).

“We very soon turned to Asia, because new technology is embraced more quickly there”, Geraets explains. The IPEE technology is distributed in Singapore - where the scale-up has its own sales office - China, Thailand and Vietnam, among other places. About half the turnover comes from abroad, although the coronavirus crisis will leave its mark this year.

Supporter

“My biggest headache is achieving healthy growth”, says Bart Geraets. One advantage for IPEE is that in coronavirus times, hygiene stands high on the agenda. The scale-up's  touchless toilet facilities meet that demand.

At the same time, the shortage of water and the need to use water sparingly is very topical. Geraets: “We notice that in these strange times we are gaining an even bigger foothold. In the midst of the coronavirus crisis we concluded a contract with the world’s biggest manufacture of toilet facilities. Now it’s a matter of further professionalising our business, the personnel policy and the marketing.”

The company’s main bank is an important partner here. Schoeters: “It is more than just a financial organisation. We have already come into contact with the right people via the bank’s network several times. Our bank feels more like a supporter that is also putting its weight behind our story.”

Article

10.09.2020

Export plans? Make sure you talk to our experts first

To prepare your international adventure properly, ask yourself the right questions and talk to people who have done it all before: partners, customers, fellow exporters and experts.

BNP Paribas Fortis listens to the questions asked by international entrepreneurs and offers reliable advice. "A lot of exporting companies ask for our help when it's too late", Frank Haak, Head of Sales Global Trade Solutions, says.

 

Entrepreneurs with little export experience are often unaware of the bigger financial picture. So what do they need to take into account when they set up a budget for their export plans?

Frank Haak: "Budgeting and pricing are affected by a lot of crucial factors: working capital, currency exchange risks and currency interest, prefinancing, profit margins, insurance, import duties and other local taxes, competitor pricing and so on. We always advise customers or prospects to start from a worst-case scenario. Quite a few companies are insufficiently prepared for their first international adventure: they see an opportunity and they grab it, but quite often disappointment and a financial hangover are not far away.

Our experts have years of export experience and the BNP Paribas Group has teams around the world. This means that we can give both general and country-specific tips. Let's say a machine builder wants to design and manufacture a custom-made machine. We recommend including the machine's reuse value in the budget: can this machine still be sold if the foreign customer suddenly no longer wishes to purchase it or if export to that country becomes impossible due to a trade embargo or emergency situation?"

 

What type of companies can contact BNP Paribas Fortis for advice?

Frank Haak: "All types! Entrepreneurs are often hesitant to ask for advice. Sometimes they are afraid that it will cost them money. However, the right advice can save them a lot of money in the long run. For example, we recommend a letter of credit or documentary credit to anyone exporting goods to a foreign buyer for the first time. This product is combined with a confirmation by BNP Paribas Fortis to offer the exporter the certainty that it will receive payment when it presents the right documents and to assure the buyer that its goods or services will be delivered correctly."

 

The consequences of not seeking advice: what can an exporter do in case of non-payment without documentary credit?

Frank Haak: "If you are not receiving payment for your invoices, the counterparty's bank can be contacted in the hope that it advances the payment on the customer's behalf. However, we shouldn't be too optimistic in that respect: the chances of resolving the issue without financial losses are very slim. Once you have left your goods with customs, you usually lose all control over them. Hence the importance of good preparation: listen to and follow the advice of your bank and organisations such as Flanders Investment and Trade (FIT). It will protect you against a whole host of export risks."

 

BNP Paribas Fortis

  • is the number one bank for imports (approx. 40% market share) and exports (approx. 25% market share) in Belgium (according to the statistics of the National Bank of Belgium): it offers advice/financing and can help you to discover new export markets through trade development;
  • is proud that Belgium is one of the world's 15 largest export regions and is pleased to give exporters a leg up, for example by sponsoring the Flemish initiative ‘Leeuw van de Export’.

 

Source: Wereldwijs Magazine

Article

01.05.2020

The conversation manager: essential and permanently online

Coordinating a company's social media strategy is a task in itself. Who will you use to handle this? And what about involved customers who suddenly get too involved?

Because of social media, the role of a traditional marketing manager is evolving more and more towards being a conversation manager: someone who facilitates consumer communication. This includes communication between customers themselves and communication between the customers and the company.

Some key tasks in the conversation manager's job description are:

  • Uniting and activating ‘branded fans’, as they will recommend the brand to friends and family.
  • Listening to what people are saying about your company and seeking their active contribution to your products and strategy.
  • Creating content worth distributing in order to encourage discussions.
  • Managing these discussions.
  • Ensuring your work is very customer-oriented and customer-friendly through customer care, i.e.by responding faster and providing more than what the customer is expecting.

Some companies are big enough to hire a full-time conversation manager. In other cases another employee will take on this role part-time. A third possibility is using a specialised company.
Caroline Hombroukx, conversation manager at content marketing company Head Office:

“No matter which option you go for, communication in social media must come across as personal. There is definitely a reason why large companies such as Telenet and Belgacom have created a fictitious person to deal with their customers; Charlotte and Eva respectively. The conversation manager also has to know the company and its social media strategy very well. It may therefore be an advantage if someone in the company itself takes on that role. That person is right at the source and so can distribute information, take a quick picture and post it online, etc.

This task is not for everyone. A conversation manager must have experience with social media, have fluent communication and writing style and must be empathetic, positive and solution-oriented in his or her dealings with customers. Prior training is not a luxury, because the employee must be very aware of the company's content strategy. The audience is varied and unpredictable. You have to decide time and time again whether certain content is or is not suitable for your target group. It is also not a nine-to-five job: the online world keeps on turning even at night or at the weekend."

The advantage of hiring a conversation manager from an external company is that in principle the expertise is present. In that case the challenge is to know the company to such an extent that the customer has the impression that he or she is talking to a real employee.

Getting angry is out of the question

Traditional marketing and advertising are a one-way street. If they do not work, they are a waste of money. However, they are not likely to result in angry comments. A company venturing out on Facebook, Twitter or other social media, can be sure to receive comments and reactions. Including negative ones. Caroline Hombroukx:

“On social media the consumer is suddenly right next to you banging the table. It is important to respond well to that. Getting angry yourself is out of the question. You need to respond by showing that you understand and you are taking the question or complaint seriously. Everyone following the discussion must see that the company is providing a quick answer and is trying to find a solution. If a mistake has been made, you can acknowledge this openly and honestly. You can also show the problem as something positive: as an opportunity to improve your brand, product or service. Of course you must find a suitable solution in the end. If the person sharing the complaint becomes too negative, you have to try and divert him or her to a private channel: a private message on Facebook, a direct message on Twitter, an e-mail or a phone call."

An enthusiastic, understanding response also works well if the consumer is sharing something positive about your brand, company or service. Thanking the consumer strengthens the bond between the company and the customer. Caroline Hombroukx:

"The dialogue with the target group is an opportunity to improve your product or operations through constructive criticism. Make customers feel involved. It creates a strong relationship. If you are publishing a magazine or starting a poster campaign for instance, you can let customers choose the best layout or title from three options posted on Facebook, for example. Everything that engages customers can only strengthen their commitment."

Social media dos and don'ts

  1. The consumer is always right (even when this isn't the case).
  2. Be open, honest and friendly.
  3. Use a personal style.
  4. Respond quickly to any questions or reactions.
  5. Stay positive and be understanding.
  6. Do all you can to engage your customers.
  7. Come up with a free gift every now and then.
  8. As a brand, try to avoid political topics.
Article

02.04.2020

Social media and e-commerce: opportunities and risks

The huge popularity of social media brings new opportunities, but has resulted in some new stumbling blocks as well. What are the most recent trends? And how should you respond to them?

Social media such as Facebook, YouTube, Twitter, Instagram, etc. seem cutting edge, but the principle is as old as the hills: word of mouth, sometimes abbreviated as WOM in marketing. Even in the heyday of the mass media, positive recommendations from neighbours, family and friends remained important to a company's success. Newspapers, magazines and television advertising were the first channel introducing a new product to consumers, but word-of-mouth turned out to play a decisive role in what matters most: consumer behaviour. Consumers shared experiences and thereby affected the behaviour of their fellow consumers. Today, more than ever, they do so through social media.

Consumers persuading consumers

Social media are the contemporary, more sophisticated and super-fast successor of old-fashioned word-of-mouth advertising. They are a catalyst. Social networks allow people to exchange views, share experiences, express their dissatisfaction, etc. more quickly than ever.

In addition, more and more consumers are opting for a "social search" over search engines such as Google to find information. They consciously do not search the entire internet, but approach their friends on Facebook or contacts on LinkedIn or Twitter. It speeds up the search and makes the result more reliable. The idea is that if X thinks it is good/nice/beautiful, we will probably think it is good/nice/beautiful too. There is also the option to ask questions and really discuss the product or service you need information about.

Consumers talk about all sorts of products (offline and online), from new detergents to new car models. And it is not just young people who are sharing their experiences about products and brands. Young and old, male or female: everyone does it. All these recommendations between consumers are worth gold.

We can illustrate this with an example: computer manufacturer Dell assumes that 25% of its customers choose their brand after it has been recommended by another user. The average purchase value per customer is about 210 dollars. Based on this amount, the value of every recommendation is estimated at 42 dollars. The more consumers Dell can convince to buy its products, the more money it makes.

However, the reverse is equally true: bad word-of-mouth advertising can have devastating effects. Particularly in this age of social media, a bad reputation does not take long to spread.

Social media in 2014

Perhaps Facebook will no longer exist in ten years' time, but it will most certainly have been replaced by something else. Social media are here to stay. It is therefore important for companies to build a good social media strategy. They can start by thinking about which channel they want to use for which content and objective. What do you need to take into account?

  • Content (the message to the consumer) is still the key part, but the importance of segmentation is increasing. The audience is varied, so not all content and every channel is suitable for everyone. As a company, it is best to divide your target audience into sub-target groups. You can then choose specific content and a channel per sub-target group.
  • Create real-time content: define a number of key moments in the year in advance and use these wisely. The World Cup, back to school, the summer holidays, etc. are all events that happen regularly and companies can respond to in a clever way. The trick is to find a good link between the key moment and your product. Be creative in this respect. If a school bag brand presents its content at the end of August, it will have to use an original approach to avoid coming across as predictable. 
  • Social media are predominantly a mobile story: most consumers are switching to smartphones and tablets. It is no coincidence that the four best-known social networks are also in the list of most popular mobile apps: Facebook, YouTube, Instagram and Twitter. In any case, your content (both on the website and on social media) will have to be mobile-friendly. 
  • The importance of customer care is only increasing. Consumers will now use social media more than ever to find information, ask questions and make comments.

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