{"id":1104,"date":"2020-06-23T08:50:40","date_gmt":"2020-06-23T08:50:40","guid":{"rendered":"http:\/\/janbosch.com\/blog\/?p=1104"},"modified":"2020-06-23T08:50:45","modified_gmt":"2020-06-23T08:50:45","slug":"better-all-the-time","status":"publish","type":"post","link":"https:\/\/janbosch.com\/blog\/index.php\/2020\/06\/23\/better-all-the-time\/","title":{"rendered":"Better all the time"},"content":{"rendered":"\n
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Image by Gerd Altmann from Pixabay\n<\/figcaption><\/figure>\n\n\n\n

In last week\u2019s post<\/a>, I mentioned our framework describing the transformation that companies go through when going digital. I also discussed one of its four dimensions \u2013 the business model dimension. In this post, the focus is on the product upgrade dimension.<\/p>\n\n\n\n

As shown in the figure, we\u2019ve identified five steps or phases in the \ntransformation from a traditional to a digital company. In the first \nstage, the company focuses on selling a physical product. It\u2019s sold \u2018as \nis\u2019 and except for warranty issues, the company spends no time or \nresources on it once it has left the factory. The product may well \ninclude electronics and software, but these subsystems are treated in \nthe same way as the mechanical parts.<\/p>\n\n\n\n

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Evolution of product upgrades as part of the digital transformation.<\/figcaption><\/figure>\n\n\n\n

As a second step, many companies set out to offer their product as a \nservice to certain customer segments. This often starts as a mechanism \nto expand the clientele. Especially potential customers that don\u2019t need \nthe product all the time or that have issues financing the capex may \nneed a service offering in order to become customers. In this step, the \ncompany often starts to offer periodic upgrades to the product software \u2013\n predominantly to protect itself from unwanted downsides. In service \ncontracts, there typically are service level agreements (SLAs) and \nsoftware upgrades can be used to decrease the risk of violating these \nSLAs and avoid the associated penalties.<\/p>\n\n\n\n

In the third step, the company has, from a business perspective, \nstarted to offer complementary services around the product. Frequently, \nthe quality and appeal of these services can be improved if the core \nproduct has updated software functionality. In this case, the company \nupgrades the software in its products not only to protect from any \ndownside issues, but also to create an upside in terms of additional \nrevenue from complementary services. As a simple example, an automotive \ncompany may upgrade the software to provide an API for querying the \nlocation of a vehicle that can be used by complementary services to \noffer more relevant information for the context in which the vehicle and\n the driver may find themselves.<\/p>\n\n\n\n

Once we reach the fourth step, the business model often has started \nto be based on the KPIs that the customer cares about, such as churn, \nfuel consumption or number of successful transactions per time unit. \nThis means that the company generates revenue when it improves these \nKPIs by taking a part of the additional revenue of its customers. By far\n the easiest way to positively drive KPIs is to deploy new software \nversions in the product and consequently, in this stage, there are \ncontinuous software updates. Here, the company may also start to deploy \nupdated electronics or mechanics as a mechanism to improve KPIs. For \ninstance, in automotive, for the longest time people have talked about \noffering customers buying a two to four year old car an upgrade of the \nelectronics in the car to provide the \u2018headroom\u2019 to roll out new \nfunctionality that can be monetized.<\/p>\n\n\n\n

Finally, the concept of a physical product is completely replaced \nwith its digital alter ego. In this case, all parts of the product can \nbe upgraded on a periodic basis, with software being the most frequent \nand mechanics the least frequent. Even replacing the complete physical \nproduct is done as part of the continuous improvement of the digital \nproduct. As an example, although Apple most certainly makes the money on\n the physical product, from a user experience perspective, there\u2019s a \nconstantly improving experience that has small upward bumps when \nreplacing the phone with a new model, but by and large, the improvement \nof the product is a continuous one.<\/p>\n\n\n\n

Concluding, the digital transformation is a complex, multi-dimensional challenge that affects all parts of the company, including the way products get upgraded. Although this may seem like a technical challenge, it\u2019s the business strategy that (should) drive the architecture and technology decisions that either allow for or prohibit the product upgrades discussed here. With business models increasingly moving from transactional to continuous, the product that\u2019s being monetized by the business model needs to become continuous in terms of it constantly improving the user experience and value delivery to customers. One can\u2019t exist without the other!<\/p>\n\n\n\n

To get more insights earlier, sign up for my newsletter at <\/em>jan@janbosch.com<\/em><\/a> or follow me on<\/em> janbosch.com\/blog<\/em><\/a>, LinkedIn (<\/em>linkedin.com\/in\/janbosch<\/em><\/a>) or Twitter (<\/em>@JanBosch<\/em><\/a>).<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

In last week\u2019s post, I mentioned our framework describing the transformation that companies go through when going digital. I also discussed one of its four dimensions \u2013 the business model dimension. In this post, the focus is on the product upgrade dimension. As shown in the figure, we\u2019ve identified five steps or phases in the … Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"generate_page_header":"","footnotes":""},"categories":[4,10],"tags":[],"_links":{"self":[{"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/1104"}],"collection":[{"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=1104"}],"version-history":[{"count":1,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/1104\/revisions"}],"predecessor-version":[{"id":1106,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/1104\/revisions\/1106"}],"wp:attachment":[{"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=1104"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=1104"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=1104"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}