Differentiate with digital

The Digital Bolt-On Conundrum

Nigel Fenwick
Vice President, Principal Analyst
May 16, 2015

What’s the difference between a digital bolt-on and transformative digital disruption?

In the two years I’ve been on the road talking with executives around the world about digital business and delivering keynotes on digital transformation, I’ve been most frequently asked about bolt-on vs. transformation; what’s the difference?

A digital bolt-on is a digital project that is added to the existing business model that might improve the customer experience in a small way, but doesn’t fundamentally change how value is created for, and/or delivered to, the customer. For example, when a company updates a website and provides customers an electronic ordering platform, they are not changing the existing business model; they are simply providing an alternative channel through which the customer can buy products. The value proposition remains the same: buy and experience our product and you’ll gain value from the experience. Digital (in this case an online sales channel) has been bolted to the existing business model in much the same way a teenager bolts a spoiler onto an old car to make it “go faster”.

Digital transformation by contrast, uses the opportunities created by emerging technologies to fundamentally change the way the customer gains value from their experiences. Transformation requires you to think “what is the outcome my customer wants?” And you need to ask this question in the context of your customer’s desires. For example, John Deere sells a lot of farm equipment, but when asking this question they come to the realization that farmers actually want high yields to achieve their desires around profitability (corporate farming) and financial security for their family (for the few family farmers left). Owning a piece of equipment may be a means toward achieving the outcome, but it’s only part of the equation. Farmers have a whole “ecosystem of value” – the products and services that they bring together to achieve their desires. By rethinking their business around helping farmers increase yields, John Deere has been able to create new digital products and services that create new sources of value for their customers.

Digital transformation is not a new digital marketing campaign or website refresh, it’s a strategic rethink of your business model and value proposition requiring a compelling digital vision.

If you’d like help figuring our how to “transform” your business, contact me. And you can follow my daily updates on digital business on Twitter @NigelFenwick.

Image source:  http://nigel.im/1KUQfsD

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