B2B Digital Target: 50 Percent.

50 Percent.

That's what an increasing number of B2B CEOs are putting forth as their goal for a percent of total company revenue that is transacted digitally. 

In some cases, it's a BHAG (Big Hairy Audacious Goal) meant to set the bar high for employees.  Other leaders are already fully committed. Grainger's CEO has already stated this goal publicly and invested in a complete digital transformation, including new offices for Grainger's digital team in downtown Chicago. 

Whatever the maturity level and commitment, it's clear that 50 Percent is where the bar is being set for the future of B2B digital Business. 

THREE REASONS WHY:

• Boards of Directors - They are increasingly asking CEOs "what are we doing about digital?" and expecting strategic business answers and plans.
• Customers - The consumerization of B2B is here.  B2B customers expect the same ease of finding and buying products/services on the job as they do at home. And, this is an increasingly important factor in customers' decision about with whom they do business.
• Financial - Self-service and self-sale offer significant cost efficiencies in both delivery and growth opportunities. Even 2-3% or a few dollars of savings quickly become quite significant as digital continues to expand in high-volume areas of interactions.

WHAT WILL IT TAKE?

This is the core question CEOs are asking digital leaders.  And many are struggling to find the answer.  It's not like B2B companies have just been sitting on their hands...Forrester projects B2B online revenue to reach $560B by the end of 2013.  But these companies also realize that the efforts and approaches most B2B companies have employed to date will not get them to the 50 Percent target.

Three of the biggest areas of change all center around current focus areas that must evolve:

• Marketing -- Digital is often seen as primarily a marketing, communications or sales support tool.  This one-way mentality misses the opportunities to create new engagement and value for customers.
• Transactional -- The majority of digital investments today are in initiatives that are directly related to a purchase.  This makes sense because these investments are easier to justify and deliver returns more quickly.  But customers spend only 5% of their time making a purchase, so clearly companies need to think more broadly about customer interactions.
• Technology -- Companies have a history of buying a new technology to solve a business problem.  Today, an increasing number of leaders (especially IT leadership) are recognizing that technology enables digital business capabilities, and should not be the starting point or primary focus. 

Of course, all of the above remain critical for success...but companies are realizing that these are parts of a greater whole...an ecosystem if you will...that is needed to fundamentally perform at an entirely new level.

LEAPING TO 50 PERCENT

Many companies start planning for 50 Percent by trying to figure out out how to scale their existing organization.  This is often unsuccessful for a couple of reasons: 

1. The capacity and capabilities needed in the future are often dramatically different and won't map well to existing organizational structures and processes.
2. People. Silos, sandboxes, personalities, fear of change and human nature quickly make it difficult to have the required dispassionate conversations about tomorrow without interpersonal or political implications.

Instead, we recommend that companies follow a simple approach that starts with the end in mind to prioritize strategic planning and then work backward to define the path forward (a maturity model) to reach 50 Percent.

1. Strategy: Clearly define your (digital) business strategy...what 50 percent would look like for your organization
2. Capabilities: Clearly define what your organization will need to do operationally to deliver 50 Percent and the functional elements of each.  Capabilities might include eCommerce Operations, Business Intelligence, Brand & Experience, and Enterprise Program Management.  These are not technologies...they are people and processes.  Keep in mind these capabilities will need to be highly integrated beyond the digital team.
3. Roles & Responsibilities: For each of the capabilities, articulate the types of roles required to deliver that capability.  So, eCommerce Operations might include roles like Demand Management Manager, Product Content Manager, Director of Sales Support, Inventory Director, Sales Liaison, etc.
4. People: The previous steps will help provide the foundation for a more reasoned discussion about current resources, operational maturity and appropriate milestones, adoption (especially by sales) and timing to guide growth.

50 Percent is likely a BHAG for most companies today. For some companies that tomorrow may never come.  But there's little doubt that the growth and success of B2B organizations will continue to be increasingly influenced and driven by digital capabilities.  And with the ongoing acceleration in the pace and scale of change of digital, the runway to get ready is getting shorter.

The Next Big Thing in Digital: People

"Change or Die"  

That was the not-so-subtle assessment recently made by a senior executive regarding the impact of digital on the future of his business. But he wasn't referring to disruptive new digital technology, a new mobile app, a competitor's new website or even the consumerization of his industry, although all were top of mind.

He was talking about his company's culture. And his view—albeit dramatic—succinctly captures the biggest (digital) business challenge facing companies 2013.

• eCommerce? Who owns the P&L? What about channel shift? 
• Omni-Channel? Is store operations ready to use retail locations as showrooms for online sales?
•  Social Media? Are you ready to abandon lengthy review and approval process?  Is legal? 
• Mobile Aps? Is your company ready to be a software developer?
• Sales? Will your reps share customer relationships?  And lists? And Compensation? 
• Global? Which region gets investment first?  US?  EMEA?  Emerging?  And what about China? 
• Customer-centric? Are your BU leaders willing to transform to portfolios that cross multiple brands and product lines? 
• Industry Leader? Are you ready to make strategic 2-3 year investments?  Create entirely new businesses? Disrupt old ones? 

While these are common digital business challenges, the answers lie in people, legacy organizational structures.

“People focus on technology, but it’s just an enabler.” 

So said William Lynch, CEO Barnes & Noble speaking at a Forrester conference in 2011. While his keynote address was about the transformation of Barnes & Noble from a traditional book company to a digital business, clearly the biggest challenge was organizational change, not technology.

A recent McKinsey survey echoed this, finding that six of the eight "Most significant challenges faced in meeting digital business priorities" were organizational or resource issues, not technology. The single biggest challenge was "Organizational structure not designed to take advantage of priorities" (52%). 

And while 51% noted "lack of technology infrastructure and IT systems" as a key challenge, only 14 percent say their company's IT functions are spearheading new digital-business efforts. In fact, one-third said IT is supportive but lacks the capabilities, one-quarter say these executives to deliver on goals, and another 25% said IT executives was "are not engaged at all."

Two years ago we wrote about the Three Forces Shaping the Digital Future Fragmentation, Convergence and Acceleration.  We were (mostly) writing about dramatic changes in technology, but those same forces are the same that are driving organizational challenges today. 

Fragmentation -- The acceleration of digital innovation is creating need for new talents, experience and management.  With no clear owner (or under-resourced capabilities), multiple initiatives are randomly springing to life across BUs, markets, and services.  Brands racing ahead of IT to purchase content and commerce platforms.  IT deploying communications and marketing platforms with little business participation.  Marketing struggles to keep pace and justify its value beyond customer acquisition. 

Convergence -- Organizational silos.  No phrase creates nearly the eye rolls and knowing nods as this.  Business operations exist largely as they have for decades...driven my discrete markets, channels and product lines.  In tomorrow's customer-centric, Omni-channel digital marketplace, companies struggle to determine ownership and operations.   

Acceleration -- The pace of innovation and change will increase.  As examples: 

• Mint.com’s user base has ballooned 5x in three years and today more than 70% of users are accessing their accounts mobile devices.
• Harvard Business Review reports that digital already influences of 50% of purchases, and will soon reach 80%.
• Accenture reports that from 2010 to 2011 feature phone ownership dropped 20% while smartphone ownership grew by 25%.

Companies that continue to focus on finite projects, short-term KPIs and the latest shiny object will continue to fall further behind.

"We're in the middle of a global eCommerce roll-out
and we don't even know who owns this on the business side."
-- Enterprise Architect of leading consumer manufacturing company.

Gartner recently predicted that "Through 2015, 80% of multichannel implementations will fail, because retailers will retain product and channel-centric strategies." In our experience, it's easy to expect similar success rates as likely in the B2B space as manufacturers and distributors struggle with channel conflict, lack of scalable product management and pricing, disruption of direct sales and a technology-centric approach to business needs.

Despite the current dire predictions -- or perhaps because of them and the consequences of failure -- executive leadership is increasingly raising their bets with significant strategic investment and commitment,

• Digitizing the Business: The expanding influence of digital on the core business has lead many executives to rely on traditional business disciplines such as Enterprise Governance, Business Architecture, Change Management and Program Management to lead the transformation of the organization.  While the change is triggered by digital capabilities, it is driven by business strategy, planning, alignment and management. 
• Innovation Islands: Some executive leaders have determined that Digital business is so significantly different from their traditional business, they are choosing to establish new locations for the Digital business.  A leading B2B distribution company recently opened new offices on a floor of a consulting firm with the goal of completely redesigning the business from the ground up. The head of digital strategy at Discovery Communications recently spoke about why all digital operations are run in Chicago offices, far away from the corporate headquarters in Silver Spring, Maryland, following the lead of Barnes & Noble that did that same. 
• New Co: In an increasingly common decision, the CEO at a traditional financial services organization decided to create an entirely separate company focused on digital business innovation, new revenue creation and market disruption.  Interestingly, first indicators are that companies least prepared for digital transformation seem to show the highest interest in this most dramatic approach.

In the coming year the digital world will undoubtedly be filled with breathless headlines about Omni-channel, apps, cloud, social media, local-based services, big data, showrooming, near-field communication, and the latest-latest-great.  But the key to success is that companies will need to embrace the grand irony of digital to keep pace in 2013 and beyond...your culture and people will be increasingly be the greatest factor in digital business success. 

The Theory of Everything (Digital)

In response to the continuing question of:

"What is Digital Strategy?"