Gearing up for the race towards new digital reality

Transcription

1 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

2

3 In this study Contents Page 04 Foreword Page 06 Setting the scene Page 08 Competing together with the customer Page 12 One customer, one team, one rulebook Page 17 Adapting to the new rules of the game Page 22 Key enablers for a successful sales transformation

4 Foreword As a result of an increasingly consolidated global market and heightened competition from low-cost producers, Nordic industrial products (IP) companies are being pressured to focus on cost reductions so as to manage decreasing margins. However, cost efficiency is no longer a competitive advantage, but rather a pre-requisite for competing in this industry. As the quality of low-end products has improved over the recent years, Nordic IP companies are at risk of losing high-volume business to low-cost producers. At the same time, following customers strengthened purchasing organizations, the complexity of sales is increasing, buying cycles are getting longer, and customers are becoming more demanding. The influence of business-to-consumer sales on professional buyers behavior has also become more evident, resulting in the need for IP companies to meet the demands of more knowledgeable customers, who have higher expectations for their customer experience. This requires increased pricing transparency as well as improved access to knowledge and product information, both before and after purchase. On the other hand, new tools and technologies are opening up avenues for new service and customer offerings. Digitalization generates an opportunity for new ways of conducting business through an increasing share of products becoming connected, thereby 4 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

5 enabling the development of value-added services and the creation of new offerings through operational monitoring and data analytics. To fully understand current trends and challenges in sales within the IP sector, EY conducted a study among Nordic sales and marketing executives, and turned to the global EY network of industry knowledge. The results, on the basis of interviews with 20 companies as well as insights from global research and leading industry experts, shed light on thoughtprovoking perspectives on how companies are approaching the challenges of decreasing margins and current threats on the traditional business model, and how they are capitalizing on new opportunities. Magnus Kuchler Nordic Industrial Products Market Segment Leader Martin Cardell Nordic Automotive and Transportation Segment Leader Gearing up for the race towards new digital reality Nordic sales transformation in industrial products

6 Setting the scene As a result of an increasingly consolidated global market and heightened competition from low-cost producers, the IP industry will be challenged by new business models and major transformations in the upcoming years. The industry s decreasing margins and necessary focus on cost savings will force Nordic IP companies to question their current business models, be creative in finding new revenue streams and develop new operating models for their sales and marketing organizations. Digital is a disruptive force, destabilizing the status quo and forcing companies to take action to increase their digital capabilities in order to transform traditional business models. Moreover, the shift in customer behavior and change of current business models imply several changes in the customer journey. Each change drives unique challenges for the relationship between customers and suppliers. IP companies ability to manage these challenges will be a determining factor for which companies that will be staying in the race, successfully transforming their business to meet the new reality of tomorrow. Customer meets sales force later Change: In a digitalized context and due to the influence of B2C, a larger part of the selection process is made prior to any physical sales contact. Challenge: Proactive work on leads development and customer retention using digital tools. Increased customer expectations New value-driving propositions Change: Customers expect companies to be experts in their specific business and to demonstrate added value proactively through the development of new, innovative solutions. Challenge: Have a complete understanding of the customers value chain and potential improvement needs, then using these insights to generate value for customers through new offerings. Customer identifies need Low-end products viewed as commodities Change: As quality of low-end products has improved, customers are less willing to pay a premium price for standardized products. Challenge: Find new ways of providing additional value during the purchasing process, e.g. by increasing convenience, improving accessibility to product-related information and enabling product customization. Digital retention and lead development Research Evaluate Select Sales contact Contract Delivery cycle 6 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016 Customer, the professional buyer Change: Customers are more knowledgeable and demanding, resulting in more complexity in sales and longer buying cycles. Challenge: Transform sales methodology to suit the new type of buyer and buying process. and Increased customer focus on added value Change: Customers focus on output and value drivers more than product specifications. Challenge: Ascertain that agreements, pricing schemes and risk-sharing structures support value-based selling, and that the sales force has the capability to evidence the increased value and efficiency they can bring to the customer. Customer demand for continuous improvements Change: Customers expect suppliers to take increased responsibility during the delivery cycle. Challenge: Stay closely connected to the customer, having a thorough understanding of the installed base and the ability to generate additional revenue during the delivery cycle.

7 Major areas of transformation in sales for Nordic IP companies In our interviews and discussions with sales and marketing executives from 20 IP companies throughout the Nordics, we identified three prioritized areas in which Nordic IP companies are currently transforming their business and way of interacting with customers. Firstly, the change and transformation of business models focus on the IoT and the use of monitoring and data analytics as a way for IP companies to move closer to the customers value chain. In so doing, companies generate added value by developing new value offerings and paying increased attention to the service business. Second, we notice evolution in organizational structures and capabilities. Notably, IP companies are re-aligning their business so as to fit their customers operations better, whereby they can improve their understanding of customers business and their ability in building sustainable customer relationships. Building trust in their relationship with customers is key also in the third prioritized area, which focuses on the way companies are using digital channels to interact with customers during the purchasing journey. Here, we see companies introducing e-commerce solutions that can be used to support customers decision-making process by means of improved transparency and accessibility to product-related information. Competing together with the customer Integration with customer value chain 1. Transforming business models through IoT 2. Increasing focus on the service business 3. Introducing new pricing schemes One customer, one team, one rulebook Securing organizational alignment with customer expectations 4. Moving from selling to advising 5. Adding an industry dimension to internal structure 6. Creating a holistic customer view Industrial product (IP) companies in this study are defined as capital equipment manufacturers, original equipment manufacturers and producers of manufactured materials. Adapting to the new rules of the game Driving growth through digital channels 7. Increasing convenience and transparency 8. Finding their place in social media 9. Piloting e-commerce and increasing accessibility Gearing up for the race towards new digital reality Nordic sales transformation in industrial products

8 1 Competing together with the customer Integration with customer value chain The industrial products (IP) industry is known for its strong product heritage that is defined by corporate culture, mindset and sales channels. Corporate development agendas have traditionally focused on product quality, performance and cost reduction, and the work of sales organizations has been characterized by strong customer relationships and loyalty. The majority of IP companies will transition from primarily selling products to becoming service providers. As this happens, customers will come to pay more for use and performance (Opex) instead of investing in machines and products (Capex). Furthermore, the shift away from product-oriented, solutionbased sales will lead to a change in the division of responsibility as suppliers and buyers will increasingly share the risks. By integrating into their customers value chains, IP companies will assume increased responsibility for their products throughout the delivery cycle. Some companies are attempting to climb the value chain by integrating their own and their customers R&D more tightly. These companies are able to share the cost of R&D with the customers, thus helping to confirm that product development is more tailored to their needs and expectations. The benefits of collaboration include increased customer loyalty, future sales and the ability to capitalize on knowledge. Transforming business models through the Internet of Things The Internet of Things is clearly disrupting the IP industry, as it creates new emerging business opportunities and challenges for the traditional core business model. IP companies are currently in the midst of a transformational journey to connect their equipment and components, and are under pressure to take advantage of the huge amounts of operational data that is being generated. Extracting knowledge from new data, combining it with already We have been active in the digital space for a long time, but now we can see a shift in how the majority of customers are getting connected. Head of Strategic Programmes, Leading worldwide manufacturer existing data, and transforming it into commercial value will enable IP companies to bring added value to their customers. IP companies have been gathering operational data for years, so their current challenge lies in data standardization and consolidation. Since data has often been collected without a plan for how it will later be used, clear strategic efforts that involve cooperation across departments are needed in order to bring clarity to and evaluate the potential of this data. The main challenges affecting companies ability to make use of existing data include: Large number of systems and databases used for data management Lack of data standardization Poorly managed master data Internal functional silos between departments and business units Widespread use of distributors Relevant data not being distributed to the correct internal audience Existing data collected without a pre-defined purpose Difficulty in selecting and evaluating the potential of existing data Lack of capabilities in data analytics 8 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

9 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products

10 Increasing focus on the service business Following commoditization and decreasing margins on traditional high-volume products, IP companies are increasingly being forced to seek alternatives for top-line growth. This has put the service business in the spotlight, with growth in this segment considered as the highest priority for several companies. The service segment generates higher margins than traditional products, and provides a more stable source of revenue that is less dependent on business cycles. Having a good understanding of the installed base (of equipment), and being able to manage the volume of data generated, will be essential for IP companies so as to successfully retain customers, grow their service businesses and create new customer offerings. By increasing their focus on the service business, IP companies are able to build closer relationships with their customers. This enables the development of targeted and customized offerings that differentiate companies from the competition, thus improving the potential for additional long-term business relationships. Having control of the installed base is a prerequisite for growing a successful service business. Nordic industrial and board advisor IP companies have to move quickly in order to leverage their advantage as hardware manufacturers and to avoid the risk of being outperformed by third-party competitors. The service and aftermarket sectors are attractive targets for third party niche competitors, which see the potential for high profitability. Some of these new competitors are well-positioned as they have the expertise and ability to be more agile in meeting new customer demands. 10 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

11 Industry forerunners in focus: aviation A global provider of commercial, military, business and general aviation jet engines and components recently conceived a new policy for charging their customers. According to their newly developed paying-by-the-hour logic, the company now sells its products on a per operating hour basis, which means that the customer only pays for when the planes are up in the air. The company fitted its engines with censors that provide real-time data to a centralized monitoring facility for efficient remote surveillance of engine performance. This allows the company to harness large streams of data providing valuable insights and, in turn, generating real operational value for their customers. The company now also works together with its customers to unlock new opportunities to grow and deliver more productivity beyond traditional services. Introducing new pricing schemes The development of innovative pricing solutions is considered crucial to the successful enhancement or transformation of the current business model. IP companies are now acknowledging the need to look into alternative ways of charging for services in a manner that supports the new emerging business models and accounts for the shift in risk management. Several companies have started to explore options for how they can charge for performance rather than products, but this type of value-based pricing remains still in relative infancy. Some leaders believe that the rather slow development in this area can be explained by the lack of supporting technology to enable performancebased pricing, the difficulty in setting up appropriate risk-sharing structures, and the lack of strategic direction that creates investment uncertainty. Key benefits of transformation: Real value for customers as company and client incentives are aligned Customers large fixed cost is transformed into a variable cost Maintenance costs are more predictable Offering a high-value proposition, instead of a low-cost one, reduces the negotiation period and prevents price-based tendering Ability to lock customers into its maintenance business Key considerations: 1 Is your current understanding of the installed base giving you a competitive advantage? 2 Are you able to generate knowledge from data and use this to create new innovative offerings for customers? There is a need for different competence in sales; today s salesmen need to understand the true value and outcome our products are creating for the customers. Head of Strategic Programmes, Leading worldwide manufacturer 3 4 Which risks are you willing to take in order to integrate with your customers value chain? Do you have a clear understanding of the strategic partnerships needed to consolidate and back up the changes in your business model? Gearing up for the race towards new digital reality Nordic sales transformation in industrial products

12 2 One customer, one team, one rulebook Securing organizational alignment with customer expectations The manner in which new solutions are developed and taken to market currently varies a lot between Nordic companies. Some have set up a separate business unit focused on digital-enabled innovation, while others are trying to use digitalization to enhance the current business model e.g., as a way to improve maintenance. Adding digital-enabled service offerings to an existing installed base is yet another way in which companies are transforming their current business model. To be successful in sales, you need a well-thought-out sales process where the salesmen become value creators. The product in itself is less unique. VP Global Sales, Worldwide manufacturer of industrial tools and equipment In order to bring to market competitive offerings where products, services and financing are bundled into a complete solution package, companies need to eliminate existing boundaries within their organization. A general trend has been the standardization of sales processes and implementation of a global sales operation model in the effort to improve sales effectiveness and performance. The sales, marketing and finance organizations need to work together to define innovative offerings that reflect their customers value chain. Moving from selling to advising Traditionally, much of the sales work at IP companies has been conducted by technicians, whose deep product knowledge was the determining factor. Today, more professional purchasing organizations, which include other functions such as business controllers, service managers and even CEOs, are involved. This shift in purchasing power has resulted in sales becoming more complex, with an increased focus on cost and risk management rather than on the technical details of products. Today s sales force must become more of a business advisor to its customers. They need to understand the customer value chain and how the customer makes money in order to effectively communicate the increased value and efficiency that their companies can deliver. Moreover, the sales force has to supply data and experience-driven investment propositions to the more senior 12 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

13 A lot has to do with change management. To implement a new way of thinking is hard, and selling a comprehensive offering including both hard and products is a difficult road to take. VP, International manufacturer of equipment for construction and related industries resources in the customers organization, and develop business cases that support the value offered to the customer. The challenge for the sales force is to gain a deep enough understanding of its customers business to be able to identify and address issues with targeted solution propositions. One of the industrial equipment companies that took part in our study provided us with a leading example of how to understand customers needs better. The company in question investigated customer preferences by conducting deep-dive interviews with its customers regarding their key business processes; in addition, they observed the customers production lines. In result, they were able to understand more quickly what type of a sales process they should propose to the client and present suitable solutions to key customers immediately. Improving customers buying experience has been noted as a key factor that is growing in importance due to its impact on overall customer satisfaction. One company clearly expressed that a successful buying experience ends with the customer leaving the meeting with a feeling of having learned something new about his or her own business. For this to happen, the sales representative needs to have a deep understanding of their customer s business as well as their own company s products and connected services. Adding an industry dimension to internal structure To meet the needs of today s professional buyers and go-tomarket strategies for new business models, companies are re-aligning to strengthen their connection to specific industries and segments, rather than product categories. Understanding how their product is used within an industry, the drivers of the purchase, and the value that the product creates, is extremely valuable for IP companies in their dialog with customers. This knowledge also provides a competitive advantage in their ability to close deals. Another benefit of an industrybased focus is that IP companies can increase their focus on account management by providing global account teams the responsibility for customer relationships as well as account profitability. By introducing the industry dimension into the traditional functional organization, companies can: Centralize expertise functions and roles e.g., by developing global centers of excellence Reduce functional silos and local sub-optimization Drive account management at a global scale Improve efficiency in sales processes e.g., response time for tender requests Provide a more unified service experience to customers Gearing up for the race towards new digital reality Nordic sales transformation in industrial products

14 Creating a holistic customer view By standardizing sales processes and implementing technology that supports data consolidation, companies are developing a more holistic view of their customers business. In so doing, they can develop an improved understanding of customers needs and potential areas of improvement. Having a clear grasp of the customer is viewed as essential to meeting the needs of more knowledgeable and demanding customers, who expect suppliers to be able to demonstrate in each interaction a high level of engagement and knowledge of their specific situation. Several companies have recently started to implement new, or upgrade their existing, client relationship management (CRM) system functionality in order to provide one voice to the customer as well as an improved customer experience. The objective of investing in improved CRM functionality is to enhance the customer experience in more complex sales processes. By involving several different competencies and functions, both internally and at the customer site, IP companies are able to deliver veritable improvements in the customer journey. New CRM systems also have the capability to handle the new reality of big data, sales analytics and customer information from multiple sources more efficiently. Key considerations: Is your business organized so as to support customers operations successfully? Are your sales force incentives designed to secure value for you and your customers? Is your organization capable of creating offerings tailored to customers value chain? Does your deep understanding of specific industries generate a business advantage? Does your sales team have the necessary skills and competences to manage new business models and digital capabilities? Industry forerunners in focus: IT A world-leading technology and consulting company redefined their sales strategy and governance model so as to become more agile in response to market demands, and to meet the new needs of its global enterprise clients. Now, the company can concentrate on client and account needs instead of product lines and geographies. This key shift in emphasis from merely producing products to analyzing what customers actually need enabled their newly coordinated sales force to focus on account success. 14 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

15 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products

16 16 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

17 3 Adapting to the new rules of the game Driving growth through digital channels Digital marketing is nothing new. All IP companies interviewed for this study are present in the digital space, but many of them are simply mirroring their traditional marketing strategy on digital platforms, rather than fully embracing the capabilities and opportunities that digital marketing can provide. With cost reduction in mind, many IP companies are focusing on using digital to reduce spending on marketing. However, these companies are missing out on the advantage of developing their digital marketing capabilities: reaching customers, end-users and distributors more easily while using fewer resources. Compared to traditional channels, revenue from online sales is still very limited within the IP industry. Yet, the importance of e-commerce functionality is rising due to commoditization and as customers demand increased transparency and openness in pricing and product information. Therefore, the importance of using digital channels to meet the needs of both potential and existing customers is becoming more evident. Self-service portals within the e-commerce functionality offer one handy way of providing both knowledge and customer support. With an increased focus on digital channels, the integration of sales and marketing channels becomes more important for successfully supporting emerging business models, and providing customers with a comprehensive multi-channel experience. We must develop tools and develop the capabilities of the organization to serve users and buyers better digitally. Corporate professional, Nordic IP company with global business Increasing convenience and transparency Today s professional buyers are increasingly searching for information online and conducting a thorough research before interacting with sales people. This has the effect of postponing interaction with the sales force to a much later phase in the customer purchasing journey. As a result, IP companies must trust their digital channels to take on the role of the traditional sales force. Furthermore, IP companies must strive to demonstrate more of their industry expertise and product knowledge before the sales interaction starts. Therefore, the content provided by, and the customer experience delivered through, digital channels are essential for successful early customer retention and lead generation. With the increased usage of digital channels, IP companies are able to boost both convenience and transparency during the purchasing process, thereby building even more trust in the relationship with their customers. IP companies are currently improving the functionality of their digital channels by tailoring content to specific industries and application areas, whereby they can reach both potential and existing customers more efficiently. Importantly, today s businessto-business customers are not searching for information about products. Gearing up for the race towards new digital reality Nordic sales transformation in industrial products

18 SEM Digital marketing Branding Social media Application development Web design marketing Content marketing Search engine optimization Video production Companies need to find ways to lock in the customer exactly at the precise moment when they need the product. VP Communications, Leading global provider of specialized products and engineering solutions Rather, they seek answers to their needs and challenges, and expect to find a solution that meets their specific needs. Since many IP companies are targeting a wide array of customer segments, the marketing language on the digital channels needs to be adapted to both market and geographic-specific requirements. A first step in transforming digital channels into the knowledge hub sought after by customers appears to be the separation of the There is sales potential within social media. You just need to define in what way and to whom. VP Global Sales, International manufacturer of equipment for construction and related industries corporate website, which targets investors and potential employees, from the website for business units, which target customers. Launching industry-specific, targeted websites is considered key to improving the customer experience and increasing traffic, as well as establishing an expert position in a certain area within a certain industry. Companies believe that there is great potential in tracking and analyzing customer behavior on their digital channels, both to understand customers needs for information better and to develop customized marketing messages. Several companies have started to pilot marketing automation on a small scale, often starting with a specific segment, and are convinced that there are great benefits to reap should they get this initiative right. Finding their place in social media In general, social media is still mainly used for corporate branding and recruitment purposes. However, a few companies have also linked it with sales activities. Social media platforms have started to get more attention as sales and marketing tools, and some companies consider social media channels important for getting closer to customers and, especially, for reaching end-users. Some companies we interviewed also mentioned leads generated through social media channels, but such occasions remain rare. In our research, we have detected two main tracks for social media activities among Nordic IP companies. The first is the corporate branding track, which targets a wider audience. The second is the product or application-related track, which targets end-customers. 18 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

19 Companies should use digital channels to communicate more with their customers and use customers insight and knowledge so as to improve their company and products. Project Manager, Leading global pump manufacturer problems proactively before they occur on a larger scale, thus giving the organization time to prepare for and react to issues. In addition, social listening opens up the possibility for more targeted marketing towards specific customer segments and geographical regions. Industry forerunners in focus: construction The objective of corporate initiatives in social media is to build an online presence that supports the image of the knowledge company, and communicates information on a higher level. For its end-customers, companies have started to build online communities to enable knowledge-sharing among peers. There is also a trend towards using films and animations increasingly on social media channels. Such content demonstrates product value through the sharing of case stories, which bring the digital channel to life and make it more authentic and accessible. However, most companies are still at an immature stage when it comes to gathering and using the data generated on social media to understand their customers needs better and to create new ideas for product development. A few companies are actively listening in to get a better grasp of the way their products are used and the customer experience, with initial results being generally positive. Social listening has enabled these companies to detect potential One of the international manufacturers of construction and mining equipment is known to uphold a corporate culture that respects traditions and well-tried practices. However, they also use social media channels to connect with customers and to build their brand proactively. The company now aims to support customers at all stages of the buying cycle, from raising awareness to consideration, selection and, finally, acquisition. This was achieved by defining an innovative, clear social media strategy that is aligned with business goals, thus assuring that all efforts have a clear purpose and operate as part of a bigger picture. In the process, four pillars were identified social listening, customer support, promotion and thought leadership that are now executed upon and allow the company to develop stronger customer relationships. Gearing up for the race towards new digital reality Nordic sales transformation in industrial products

20 Piloting e-commerce and increasing accessibility Buying online is becoming more and more common within the sector, which is likely to continue as new, more online-centric generations enter the market. For the spare parts business, in particular, e-commerce is considered to be a disruptive factor that will change the market. Some companies have started to experiment with using e-commerce channels, especially in markets where they have not reached success using more traditional channels. Other companies are still evaluating how to best take advantage of e-commerce, and question whether they should develop their own in-house solutions, or rely on support solutions provided by distributors or third parties such as Amazon. We would like to promote more of our knowledge before the buying process starts, and thereby attract the customers. Marketing Manager, Leading worldwide manufacturer The user functionality of e-commerce within B2B is clearly trending towards the functionality of B2C solutions, resulting in higher requirements for both user-friendly ordering and customized packaging of solutions. Developing and refining the customer experience within the e-commerce channel is considered to be an important area of future investment for IP companies. There is a vast amount of knowledge within IP companies. When applied to the customers industry dimension, this knowledge becomes a valuable good to current and potential customers. Several companies we talked to mentioned the possibility of using the e-commerce channel as a way of distributing or selling knowledge in a controlled manner. Such examples include giving customers the possibility to access webinars, e-learnings, web applications and white papers online. Subsequently, the 20 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

21 Future e-commerce platforms will be an all-in-one solution where customers are able to do anything from finding product-related information to getting real-time customer support. VP Communications, Leading global provider of specialized products and engineering solutions e-commerce solution would not be used only as a portal for purchasing, but also to educate and interact with customers by providing detailed, product-related information and instant support offered, for example, by technicians during the purchase or design journey. Companies are also using e-channels to create lock-in effects by enabling customers to adjust or customize standardized products directly within the channel. This brings about added value for the customer, and enables companies to charge a premium price as compared to commoditized products. Key considerations: 1 Do you tailor your marketing messages to suit specific customers needs during the purchasing process? 2 Is your sales team able to generate digital leads and execute on them? 3 Have you identified products strategically suitable for e-commerce? 4 Does your strategy for social media support your overall business goals? 5 Are existing social media discussions currently favoring your products and services? Gearing up for the race towards new digital reality Nordic sales transformation in industrial products

22 Key enablers for a successful sales transformation In our discussions with sales and marketing executives, it has become clear that companies are at different stages of their transformation journey. Rather than waiting for the market to recover, companies are now experiencing new customer demands and the impact from disruptive factors, therefore taking different actions to transform their business. What will distinguish successful companies from the ones running behind, and what will be the key enablers for transforming sales so as to keep up with the new reality? Enabling growth through new business models Companies that are able to capitalize on change and adapt to the new rules of the game consider themselves as service providers. They are not waiting for someone else to take the lead; instead, they work actively to set new industry standards, and are not afraid of looking for inspiration and learning from other industries. With regards to innovation, leading companies make efforts to identify and develop solutions for thus far unmet customer needs by successfully leveraging their in-depth knowledge and understanding of customers business and specific industries. Having this knowledge enables them to engage with customers earlier on in the value chain, share insights that differentiate them from competition, and drive improvements for customers sales, operations as well as R&D. Switching from product to solution-oriented selling requires a shift in mindset, and a novel way to approach sales. When companies possess a thorough understanding of the value their products and services are creating, they can also adapt business models and pricing schemes in alignment with customers business as well as the commercial benefits they deliver. Furthermore, leading companies align their incentives with those of the customers, and, by forming partnerships, work together to beat the competition. These companies understand the value of strategic alliances and increased customer collaboration, and have been able to demonstrate added value generated through co-creation. Building an organizational structure that supports new business models and secures required capabilities within sales In order to meet the requirements of the increasingly demanding and knowledgeable customers, transformation leaders see the need to join forces internally. In this way, they can develop value-added offerings that become competitive on an even more global market. Leading companies are striving to harmonize sales processes and reduce functional silos, and drive enforcement of global account management. Their ambition is to align their own organization with the customers, since that is the only way they can deliver on customers ever-growing expectations. In addition, IP forerunners realize the need for new skills and competence within their sales function, and are looking outside their own industry when recruiting. They are aware of the effort necessary to change a company s culture and mindset, and consider change management as a key enabler for successful growth in the service business and introducing new business models. Companies that are in the forefront also believe in tailoring marketing messages, and are actively developing their digital marketing capabilities to improve lead generation. Companies that capitalize on change are using e-commerce channels to increase customer loyalty and to build stronger customer relationships. What s more, they see potential in social media, and use this source of insights to improve their understanding of specific markets and customer segments, to analyze how their products and services are being used, as well as to influence brand perception and improve their dialogue with end-customers. Lastly, industry leaders are integrating their sales and marketing channels in order to support emerging business models and to provide a multi-channel experience to their customers. 22 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

23 Having a digital palette supporting emerging business models and sales operations The companies ahead of the competition are embracing the opportunities arising from digital disruption. Indeed, they do not take their own existence as service suppliers for granted rather, they are continuously assessing and adjusting their digital road map and related capabilities. Integrating digital in company strategy and operations is one way of turning digital visions and ambitions into concrete initiatives and actions. By mapping out the right path to follow and assigning responsibility for important milestones, companies are able to muster the clarity and resources needed for a successful transformation. To leverage on big data and the potential business benefits from IoT, companies need to get the basics right. Notably, companies that are able to capitalize on change gather data with a welldefined purpose. They draw value from having a good control and understanding of their installed base, and use these insights to strengthen existing business models as well as to develop new, innovative value propositions. A thrilling journey ahead To conclude, with their strong product legacy and history of successful product development and innovation, Nordic IP companies have abundant opportunities to turn their insights and knowledge into new value propositions using digital as an enabler and driving force for change. To successfully reach the finish line, it is time to clearly state their future ambitions, identify winning partners and make some bold decisions. Finally, future leaders need to accept that failures will be part of the winners game, but standing still will leave them out of the race. Gearing up for the race towards new digital reality Nordic sales transformation in industrial products

24 New business models and sales Waiting for market recovery Sensing shift Strategy and vision Managing decreasing margins mainly by focusing on cost savings Planning for and anticipating normalization of market conditions Starting to question sustainability of current business model Having a product-centric value proposition Charging customers on the basis of capital intensive payment models Using traditional channels for customer interaction Focusing on responding to customers needs Experiencing market shift Acknowledging disrupting elements affecting market Sensing new customer demands Addressing decreasing margins by evaluating alternative revenue streams Shifting focus from product to application Combining products and services in the value proposition Organization and capabilities Having functional silos between marketing and sales Having a high degree of local adaption to sales Marketing products via catalogs and fairs Using digital marketing channels for corporate branding and recruitment Organizing sales on the basis of product categories Working account on the basis of a local level Marketing products in traditional and digital channels Digital capabilities Gathering customer insights and data Wishing to capitalize on big data but is lacking capabilities

25 transformation readiness Taking action Capitalizing on change Understanding potential and added value from service offerings Developing vision and strategic direction for new business models Striving for increased customer proximity and collaboration Prioritizing to improve customer experience Integrating services into the value offering Evaluating new pricing schemes in order to charge for use and output Fostering collaboration between sales, marketing and services functions Reflecting customer s segments in organizational setup Applying industry dimension to internal structure Have centralized expertise functions Working to improve efficiency in sales processes Piloting e-commerce for certain products or segments Acknowledging need for new skills and capabilities within sales Marketing offerings on the basis of application or industry Using social media to build communities and interact with end customers Considering themselves as service providers Working to set new industry standards Looking for inspiration and learning from other industries Identifying and developing innovative solutions to unmet customer needs Engaging with customers early in their value chain Working to improve customer experience Adapting business and pricing schemes to customers business models Building pricing schemes on the basis of value delivered and business benefits Integrating own value chain with customer s value chain Establishing strategic partnerships Harmonizing sales processes Developing collaboration between sales, marketing, service and finance functions Driving global account management at scale Using marketing automation for lead creation Using e-commerce channels to increase customer loyalty Using social media for active listening and controlling of brand perception Experimenting with digital capabilities to drive business and increase customer value Creating models for capitalizing on end-user relations and insights Gathering data with well-defined purpose Integrating digital in strategy and operations

26 About EY Advisory Services and the industrial products sector Increased market volatility, rising energy costs, global competition and rising commodity prices are a part of everyday life in manufacturing companies. In these days, continuous improvement is required in the supply chain, productivity and market consolidation. At EY, we do our best to help your company seize the opportunities and tackle the challenges related to globalization, competitiveness and growth. We have extensive experience in helping manufacturing companies that operate in a wide range of fields. We also provide service for all types of industrial product companies. Our experienced industry professionals have the latest insight in what is happening next in your industrial sector. We work in seamless global teams to address your needs, from strategic acquisitions, supply chain and risk management, and new technology implementation to audit, reporting and tax issues. Simply put, we at EY help Nordic industrial companies to outperform global competition. A special thanks to Kristin Oltander and Henning Verner for the research and creation of this study. 26 Gearing up for the race towards new digital reality Nordic sales transformation in industrial products 2016

27 Contacts Sweden Magnus Kuchler Nordic Industrial Products Market Segment Leader Sweden Martin Cardell Nordic Automotive and Transportation Segment Leader Denmark Henrik Lau Customer and Strategy Leader Denmark Norway Martin Vatne Nordic Customer and Strategy Leader Finland Peter Sikow Nordic Industrial Products, Forest, Paper and Packaging Leader

28 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made EYGM Limited. All Rights Reserved. EYG no: GBL ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com Photos: Thinkstock Page 4-5: Photographer: ogergo, Collection: istock Page 10: Photographer: filrom, Collection: istock Page 16: Photographer: Purestock B16006nordic