1. Digital transformation is changing business
models — including revenue models
Rapid advances in cloud computing, connected devices, mobile,
social media and data analytics are prompting many companies
to reassess fundamental aspects of their business, including
what products and services they sell, how they deliver these and
how they need to organize to support their operations. Digital
technologies are facilitating the introduction of new products and
services, and are providing new ways to develop recurring revenue
streams after an initial sale. A recent Economist Intelligence Unit
survey reveals that almost 80% of companies are seeing changes
in how their customers access goods and services, and more than
51% are in the process of changing how they price and deliver
their goods and services.1 Subscription-based revenue models are
gaining in popularity, while micropayments such as “freemium” and
pay-per-use models are also becoming more prevalent.
Integrating digital technologies into product development and sales
operations requires companies to adapt their pricing strategies,
sales processes and distribution models. Selling digital products
and services demands a different set of skills and proceeds on a
different cycle to traditional goods. New organizational structures
are needed to manage these operations.
Finally, the distribution of goods and services via digital channels
(e.g., cloud) raises signifi cant issues for revenue recognition and
customer privacy that must be resolved. While these challenges are
substantial, companies need to be able to manage them in order to
serve their customers in the future.