“Digital Hesitation” is a technology business book that examines why most B2B companies need to reach the full potential of their digital transformation efforts. It also discusses, in detail, the specific actions they need to take on the eight toughest challenges we see at the TSIA. This business book on digital transformation was written from the perspectives of a dozen experts who interact with and advise the world's top technology companies every day. It covers high-level issues like influencing the board to fully commit to digital transformation and specific topics like the next generation of sales and services operating models.

In an era where business models can shift almost overnight, it’s essential to understand the impact of digital transformation (DT) on your industry. Companies like Blockbuster and Hertz are stark reminders of what happens when businesses fail to adapt to digital disruption. The rise of Netflix, Uber, and Amazon didn’t just hurt their direct competitors; it revolutionized entire industries. 

But what was going through the executives’ minds at these companies as their business models were being disrupted? Did they realize the gravity of the situation, or did they believe they were just losing a few orders?

Today, almost every company is a tech company, navigating the relentless wave of digital transformation. When digital transformation marches through an industry, the results can devastate complacent companies. Digital capabilities fundamentally change how customers buy and consume your products and services. Imagine a bank without a mobile app or a large retailer without an e-commerce site today. 

Even business-to-business (B2B) companies aren’t exempt. Can you picture enterprise tech providers without the ability for customers to scope, price, and place complex orders online? Or industrial equipment providers that don’t use predictive analytics to eliminate customer outages?

For this reason, our book, “Digital Hesitation,” targets technology and industrial product companies serving business customers—commonly referred to as B2B companies. While there are lessons for companies in other industries, our focus is on the B2B industry. This blog will highlight some of the key findings from the first chapter of “Digital Hesitation” by J.B. Wood, Thomas Lah, and the TSIA research team, including:

• What Is Digital Transformation?
• The Evolution of B2B Business Models
• Your Key Takeaways

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What Is Digital Transformation?

Digital transformation is integrating technology into our everyday lives, creating an expectation from customers of digital solutions to their problems. This means companies must change how they do business and reimagine products and services for the digital age.

“Can you imagine being a bank without a mobile app today? A large retailer without an e-commerce site? Digital capabilities upend the way customers buy and consume your products and services.” - “Digital Hesitation.”

Ask yourself: How can you digitize your business’s customer experience? Can you offer better digital solutions for your customers? Digital transformation can be challenging to define, as its execution can look different in every industry. However, there are some critical steps that all senior executives should take if they want to be digital transformation leaders.

The Evolution of B2B Business Models

In 2013, we published “B4B: How Technology and Big Data Are Reinventing the Customer-Supplier Relationship,” predicting the evolution of B2B business models. The B4B model categorizes companies into four levels based on their offerings: Basic, Complex, Optimize, and Outcome. 

Most traditional B2B companies operate at Level 1 or Level 2, selling products (hardware, software, systems) to be operated by the customer, who assumes all the risk of turning their purchase into business outcome return on investment (ROI).

Today, this model is evolving. Most technology and industrial companies are moving toward Level 3 and Level 4, offering the technology as a subscription and actively managing customer use to increase adoption and ROI success. This shift entails significant changes:

• Recurring revenues: Companies shift from up-front transactions to recurring subscriptions.
• Customer outcomes: Customers can stop subscribing if they don’t get the promised outcomes.
• Digital connectivity: Suppliers must be digitally connected to customers via their products.

Related: What Your Digital Transformation Strategy Could Be Missing

Wave One: Digital Transformation

The first wave of digital transformation for most B2B tech and industrial companies involved moving to recurring revenue models and getting products more connected. Companies began selling technology as a service and implementing cloud-based solutions for business applications. While some companies are still navigating Wave One, we now have case studies and healthy patterns to follow for this transformation.

Related: Digital Hesitation: Is It Killing Your Company?

Wave Two: The Next Challenge

“Digital Hesitation” explores why many companies in Wave One of digital transformation are underperforming and focuses on what’s coming next. Wave Two of digital transformation is about reimagining the customer’s path to value. Companies must remove friction from their growth engines, develop offers that deliver measurable value, reduce service costs, and defend profitable price points by linking them to business outcomes.

Fast-growing tech companies demonstrate the following capabilities, which are critical for Wave Two of digital transformation:

• Low-Friction Land and Product-Led Growth (PLG): Allowing customers to use technology with minimal up-front commitments, using the product platform to unlock more revenue.
• Transform Data into Insights: Gathering meaningful telemetry on customer usage, applying analytics, and providing business insights to help customers climb the value ladder.
• Fully Digital Customer Experience (DCX): Enabling customers to digitally engage with a company across the entire customer life cycle.
• Clear Links to Business Outcomes: Connecting product and service capabilities to specific customer business impacts.

These capabilities will deliver superior customer experiences and improved customer business outcomes, making your company’s growth frictionless.

Wave Two of digital transformation is already happening and moving faster than Wave One. This time, it’s about automating the entire customer experience, upending how customers buy and consume complex products and services, and confidently assuming the financial risk of your customers’ use of your solutions. Companies must combine product features and digital customer experiences into a single platform, creating a seamless journey leading customers to specific business outcomes.

Related: The Intricacies of Digital Transformation with Deloitte

Your Key Takeaways

• Adapt or fall behind: The examples of Blockbuster and Hertz underscore the critical need for companies to adapt to digital transformations within their industries. In today’s tech-driven world, even B2B companies must evolve to meet new digital demands, such as enabling complex online transactions and leveraging predictive analytics to avoid obsolescence.
• Gather unique insights: “Digital Hesitation” provides unique, data-driven insights from TSIA’s extensive analysis of non-public data from hundreds of leading technology companies. This research highlights the best practices that work, offering a valuable resource for companies looking to navigate the complexities of digital transformation effectively.‍
• The importance of continuous evolution: The transition from traditional B2B models (Levels 1 and 2) to more advanced models (Levels 3 and 4) focusing on subscription services and outcome-based solutions illustrates the ongoing evolution in business models driven by digital transformation. Companies must adapt to survive the first wave of digital changes and prepare for the second wave, emphasizing customer value, seamless digital experiences, and a solid linkage to business outcomes.