B2B buyers today expect digital buying experiences. This requirement will only grow as digital natives become the decision-makers at the organizations you serve. While the businesses that adapt to new technologies will be the ones that succeed, the unfortunate reality is that with digital transformation also comes significant risk. According to research by BCG, 70% of digital transformations fail.
One of the biggest mistakes I see companies make is trying to boil the ocean — attempting to do everything, all at once. In my experience, companies that find success do so by boiling one small pot of water at a time.
Take Amazon, for example. The company wasn’t always a giant machine capable of filling any and all consumer needs in two days or less. Amazon began with books. Over the years, it expanded to third-party commerce, Amazon Web Services, Prime and more. Amazon took an iterative approach, which enabled the company to be quick to learn, adapt and expand.
For digital transformations to work, you need to prioritize learning and validating your business model at every juncture. The best way to do that is by getting to market quickly and strategically through a phased approach.
How to Validate with a Phased Approach
In a recent Forrester Consulting study commissioned by Nautical, the majority of respondents spent over $3 million launching their online marketplaces. What’s more, 66% of respondents took over six months to get their marketplaces off the ground. That’s a significant investment to make before understanding if the business model will work.
To set your business up for success it’s critical to understand that digitization is a process, not an event. You can’t go from phone calls to an online marketplace overnight.
While every business has a final vision for its digital transformation, you won’t get to that vision on day one. A phased approach allows you to:
- Break down your end goal into smaller steps
- Understand the requirements at each stage of the journey
- Validate your business model with feedback along the way
Having a vision is great, but don’t spend years and boatloads of budget before ensuring you’re providing your customers with what they need.
4 Steps to Success: The Digital Transformation Success Matrix
The final vision of a digital transformation is often clear. What’s less clear are the specific, smaller steps that lead you there.
While each business is unique, I like to break down the journey into four main steps: validation, pilot, production, and rocket ship.
This four-phase approach can apply to any digital transformation your company is executing — from digitizing your sales to adding drop-shipping capabilities to adding a third-party marketplace. The intention is to learn as much as possible before finalizing your new capabilities and launching publicly.
Let’s say your goal is to digitize transactions that currently exist completely offline. Here’s an example of how you’d execute using the success matrix.
Step 1: Validation
The goal of the validation phase is to understand your objectives and develop your baseline capabilities. The first step might be to digitize internal processes, like order management. Meaning, when your customers call in, put their order in the system of record rather than writing it on a piece of paper.
The ideal outcome of the validation stage is internal adoption (a huge challenge for many) and increased efficiencies. Plus, it will allow you to quickly iron out any wrinkles in the process.
Step 2: Pilot
At this stage, you want to put the new capabilities in the hands of a select group of real customers.
If you’re digitizing sales, try testing out self-service online transactions with a few invite-only customers. Ideally, these are customers you have an excellent relationship with, and they understand they’re working with you to create a frictionless experience they’ll benefit from in the future.
The goal is to get honest feedback from these customers so that you can refine the product before introducing it to a broader audience.
Step 3: Production
The goal of the production phase is to launch digital transactions broadly, so all your customers can benefit.
With steps one and two done, the public launch of your digital transformation should be relatively seamless. While no launch will be perfect, you’ll be equipped with the learnings from the validation and pilot phases, and your customers can enjoy friction-free transactions.
Step 4: Rocket Ship
When thinking about the vision for your digital transformation, it’s easy to get carried away with all the possibilities at hand.
While you don’t want this to slow you down from launching, once you’ve launched the minimum viable product (MVP) you can start thinking about the next steps to optimize your digital offering. The goal of the rocket ship phase is enhancement. This is where you can start thinking about things like turning on monetization levers and expanding your product assortment.
Once you digitize, the sky’s the limit — from drop shipping to introducing a third-party marketplace to offering your platform as a service. But first, get crystal clear on what you’re trying to achieve and then implement a phased approach from there.
The Benefits of a Phased Approach
Validate your business model quickly
A vision without customer feedback is useless. By getting your new product into the hands of customers as quickly as possible, you can identify mistakes and understand how to improve.
The purpose of digitization is always to remove friction in the buying process. Validating your business model through customer input allows you to adjust the project if doesn’t align with the needs of your users.
De-risk unknowns by getting immediate feedback
Following a phased approach, you can anticipate and mitigate risks internally before they have material consequences. Phased digitization sounds the alarm on weak points before they impact your customers’ experience.
Accelerate learning and iteration
A phased approach allows you to rapidly identify failures — and fix them just as quickly. At each phase, your job is twofold: Listen to user feedback and apply it to reduce friction in the buying process.
While iterating might seem like it will slow you down, it actually has the opposite effect. It shortens the launch process because you never have to go back to the drawing board. You know what’s failing before it fails and what’s working before it’s officially put to work.
Ensure your business model aligns with financial goals
It’s one thing to ensure your digitization efforts are working technically. It’s another to ensure they’re contributing to your bottom line. A phased approach gives you greater insight into the key performance indicators that track the correlation between digitization and revenue.
What’s more, you don’t want the business to grind to a halt because of a technical issue. A phased launch keeps your business running as usual so that implementation glitches don’t impact sales.
Digitization is a process, not an event
Your buyers are changing. To stay competitive and relevant, you need to change with them.
The most effective way to do this is through a phased approach. By breaking down your vision into iterative steps, you can learn, validate and mitigate risk. This is a critical approach to staying aligned with your business goals and delivering the buying experiences your customers expect.
Ryan Lee is the Founder & CEO of Nautical Commerce, the complete B2B commerce platform. Ryan has an extensive background in commerce, fintech, and logistics. Before founding Nautical, he launched Apple Pay internationally, served as an exec at Visa, and led product at Turvo and a fintech startup. Ryan is skilled at developing and driving a full-stack cloud technology vision and strategy to increase revenues, grow the client base, and achieve efficiencies in a results-oriented way. His company, Nautical, enables companies to undergo digital transformations using its multi-vendor technology.