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What happened to the promise of industrial and B2B growth through digital transformation? Global corporations have been spending as much as $2 trillion per year on digital transformation efforts. Industrial and B2B enterprises account for a large share of those dollars, which have been largely targeted at efforts to streamline operations in pursuit of productivity and saved costs.

Beyond relatively obvious table stakes investments, most industrial and B2B companies struggle to think systematically and creatively about the additional value digital tech could bring to the rest of their business. According to a recent survey1, 66 percent of industrial and B2B executives say they are failing to meet their digital goals. Areas of unfulfilled promise include enhanced customer experiences that drive better retention and share of wallet, and innovative services and solutions that expand existing revenue streams and create entirely new ones.

Industrial and B2B companies experience unique challenges when it comes to realizing digital’s promise – and simply copying the strategies of B2C enterprises is not the answer. The technical complexity of most industrials’ offerings and their convoluted channel models, the market power of distributors, multi-step/multi-party buying processes, the relative concentration or fragmentation of their markets, and pricing and transparency considerations all conspire to make it difficult to optimize digital connections to customers.

Most B2B companies have not competed on customer experience the way that comparably scaled B2Cs have. This is a missed opportunity.

In addition, industrials and B2Bs are typically anchored to an asset-oriented, product-out, functionally siloed operating model and mindset, and intermediated from their downstream stakeholders. Most have not had to compete on customer experience the way that comparably scaled B2Cs have. While online consumer sites have satisfaction rates that average between 65 and 85 percent, B2Bs typically score less than 50 percent. That is a significant missed opportunity, because digital natives are already beginning to disrupt their markets. Technology giants like Amazon, with its Amazon Business marketplace, and upstarts like Xometry, know how to appeal directly to customers and they increasingly are.

A common set of circumstances thus makes digital success for industrials and B2Bs more challenging. The most typical blockers fall into four major categories:

Digitizing old ways of doing things: Anyone who has driven in Boston will recognize the apt metaphor of “paving cowpaths.” Many organizations we work with fail to understand the ways their ecosystems are evolving, and how those changes define the digital capabilities that could be difference-makers in the future. To simply give old analog approaches a digital face lift is akin to paving cowpaths and risks perpetuating analog processes and ways of thinking. Having a clear perspective of how an ecosystem is evolving makes it easier to recognize and seize opportunities.

An industrial distributor we advised wasn’t sure about the impact that business management software companies – which provide specialized software to help field service contractors such as plumbers and electricians run their businesses – would have on their channel structure. Rather than ignoring this type of player, the company decided that this player would be an enduring part of the ecosystem and should be accounted in their channel strategy and capability set. Similarly, consider Watsco, a branch-centric HVAC distributor which not only digitized its branch operations to enable online sales, but prepared for a new ecosystem by establishing a ventures arm to develop software that generates accurate estimates for contractors’ customers in real time, enables field data collection from HVAC equipment, and provides access to fintech products.

Imposing technology-centric as opposed to customer-centric solutions: Industrial and B2B organizations often engage in “arms races” with peers to create tools and services like online calculators and benchmarking tools. While these solutions demonstrate technical prowess, they don’t help customers solve their fundamental problems or fulfill their “jobs to be done,”2 which is the underlying reason they choose one product or company over another. This “‘technology-out”’ mindset is culturally congenial to the ways of thinking and operating of industrials – and is prevalent in organizations that lack alignment between IT and business.

Technical superiority is only relevant when it advances a company’s overall strategy. A focus on technology as opposed to the systematic identification of important and unsatisfied customer jobs to be done invariably leads to over-spending and sub-optimal impact.

Imposing digital goals on business units that are disconnected from business impact: Some corporations seek to motivate business units with top-down mandates to meet digital targets that fail to reflect the diversity of strategic objectives that might exist within a portfolio. In some cases, the targets work against their interests. If a company is not the price leader in a market, for example, but competes on high-touch services, an online platform that facilitates price transparency could drive customers away.

To illustrate, a global materials company set a target of “50% of sales online” that is being mandated across all its business units, even though online sales are not important or even beneficial in some of the markets they serve. In this circumstance, digital is seen as a set of milestones to fulfill, rather than a means towards a desired end.

Creating separate digital solutions within functional silos: Digital, by definition, is a horizontal capability – it should cross traditional organizational boundaries and permeate a business’s entire operating model. Yet many industrials are organized around functional power centers and potentially misaligned incentives that can discourage the collaborations that are necessary to optimize digital solutions and encourage siloed digital solutions. The marketing department, for example, experiments with social media, but sales and branch operations remain stubbornly analog; though new software provides greater visibility in order-tracking, sales reps fail to promote it with their customers. To succeed, digital efforts must be coordinated across the organization and across functions.

At its root, each of these blockers turns on the failure to align a company’s digital transformation efforts with its overall strategy and goals. Companies can avoid these blockers by changing their way of thinking from one that is primarily “initiatives-driven” to one that is “outcomes-driven.” The first area of focus for digital change should be on the concrete results that leaders want.


Creating an Outcomes-Driven Design for Industrial & B2B Digital Transformation 

An outcomes-driven design for digital transformation connects a company’s digital efforts to its overall business strategy. It flips the script from a one-size-fits-none approach, in which digital initiatives lack customer or market-back input to guide them, to one that is holistic, intentional, and trackable. This is such an important insight that we would argue that leaders shouldn’t even talk about digital strategies—only business strategies that digital can help enable. 

In an outcomes-driven approach, digital initiatives are anchored on a portfolio of priorities that are explicitly tied to measurable outcomes such as revenue growth, operational efficiency, and talent retention and that have clear implications for the company’s operating model and foundational capabilities.

Graphic showing the difference between initiatives-driven digital design, which includes taking on many digital initiatives that typically end with a disconnected set of outcomes, and outcomes driven digital design, which allows organizations to end with a focused set of digital priorities by first agreeing to clear and measurable outcomes for the business.

Effective digital priorities follow a pattern. Most critically, they focus on customers’ jobs to be done and clearly defined business outcomes. We recommend companies follow five steps to achieve this focus. 

1. Define target customer or stakeholder archetypes. Who are the customers or stakeholders that the digital priorities are being designed for and what is most important to understand about them? This may sound simple and intuitive, but generic digital initiatives are rife in the industrial world. Part of the reason for that is the segmentations that they do have for their customers typically lack the nuances required for effective need identification and digital solution design. Neither all flagship accounts nor all small-sized accounts behave in the same ways, for example. 

In our work with “ChemCo,” a multinational chemical company, we helped BU leadership identify and differentiate their target customers. Then we broke them down into three major archetypes: Flagship Accounts, Mid-tier Customers with a hunger for growth, and Small Regional Enterprises, taking careful note of how much revenue and EBITDA they account for, where they are on their own digital journeys, whether they innovate with ChemCo or not, and what their current customer experience feedback is like. Most companies have this information readily at hand, but few use it to define their digital priorities. 

2. Map the business outcomes the digital transition is intended to achieve. Being explicit about the intended business impact will ensure a) that solutions are specifically designed for that goal, and b) that the connection to results is tangible and measurable. For example, a customer-centric digital solution could be specifically designed to retain an existing customer, increase their share of wallet or profitability, acquire new customers, or increase profitability. 

Because of value chain dynamics, ChemCo had been experiencing pressures on price from their major accounts. Without digital, even more revenue would be at risk. To retain them, their digital solutions would need to at least maintain parity with the market. But they faced a different challenge with their mid-sized accounts, from whom they hoped to gain greater share of wallet. To achieve that, they would need a fundamentally different set of target solutions to meet their desired business outcome for each customer archetype. 

A young hispanic engineering student calibrating the equipment in his shop class with his laptop

3. Identify which customer jobs to be done, if addressed, would lead to the intended outcomes. Customers’ jobs to be done have nothing to do with digital in and of themselves. B2B customers don’t value convenience simply for the sake of convenience; they are looking to increase the productivity of their stretched-thin procurement departments, for example. Applying a jobs-to-be-done lens to industrial environments can yield powerful insights into customers’ decision-making systems and the different jobs of emerging players in shifting ecosystems. 

Many of ChemCo’s smaller regional accounts, for example, depended on ChemCo’s expertise but were concerned that they weren’t receiving the same level of attention as their larger customers. Through journey mapping, we helped ChemCo translate that insight into jobs to be done, such as “help me have more autonomy over my product development process” and “help me anticipate scale-up production challenges.” If ChemCo could help them increase their independence or get more access to chemical knowledge and ability to troubleshoot issues, they would likely purchase more from them given their desire to not be customizing formulas all the time in favor or more efficiently running their regional business. The result was digital solutions that gave these accounts greater access to ChemCo’s insights and expertise. 

4. Define solutions or experiences in terms of their strategic orientation (threshold vs. differentiating). Once a company has a clear picture of their customer archetypes and jobs to be done, and their own desired business outcomes, digital solutions can be ideated and designed. Idea generation is rarely a challenge and typically leads to a plethora of potential digital solutions in the areas of product discovery, purchase and ordering, delivery, and aftermarket service. 

Yet a common challenge is discerning the strategic orientation of those proposed solutions. We find it helpful to sort them into two categories – threshold (or table stakes) and differentiating. Differentiating solutions address priority customer jobs to be done, while increasing the likelihood of achieving a desired business outcome, whether that be increased share of wallet, market share, or profitability. Table stakes solutions, on the other hand, are necessary but unlikely to make a meaningful difference in its customers’ jobs to be done. They’re necessary and important, but by future industry standards over-investment in them would be wasted effort. 

Asking questions about the innovation “headroom,” or how much room there is to innovate, for a given type of solution can help define its strategic orientation. For example, is this job to be done important to the customer? Is it largely unsatisfied? Is it likely to improve our value proposition incrementally or is there a need and a potential for significant innovation? Are competitors and start-ups all pursuing similar initiatives such that in the future the offerings will be table stakes? 

ChemCo, for instance, could see that its competitors were moving toward online purchasing via their own portals and integrations like EDI (electronic data interchange), as well as order tracking and visibility tools. While some differentiation could be gained from these capabilities near-term, the strategic advantage would quickly fade as competitors also adopted them. Those solutions were thus deemed table stakes. Contrast this with a digital solution that increases the reliability of a product. While such tools might not be visible to the customer, ChemCo leadership agreed they could make a meaningful difference in their ability to fulfill their jobs to be done and so should be prioritized as differentiating solutions. 

5. Define the necessary changes to the organization’s capabilities or operating model. For digital solutions to work, they must be incorporated into an organization’s broader operating model. Companies that do this well take the time in advance to assess the long-term implications on their operating model, enabling capabilities, and digital foundation.

One key implication is business model compatibility. Digital priorities can frequently come into conflict with existing elements of a company’s business model.

One key implication is business model compatibility. Digital priorities can frequently come into conflict with existing elements of a company’s business model. Common issues include changes to fulfillment models, sales operations, and business rules such as price transparency. These should be proactively identified and sorted.

Another implication is the talent required to execute digital. We often see companies agonizing over whether to assign internal talent with no digital experience to initiatives or hire digital talent from outside with no knowledge of the company. Digital has its own culture and ways of working that leaders must accommodate if they take the external route. If they decide to use internal talent, they will need to be trained in foundational yet underestimated capabilities like master data management, product data, and information systems.

For ChemCo, the acceleration of the digital buying experience entailed a corresponding acceleration of the need to post product catalogs and collect product data. To keep up, ChemCo augmented its capabilities in master data management. Also, sales personnel had to be made aware of the initiatives and bought into them so they could communicate about them with their customers. Some of this required significant change management.


Digital continues to hold great promise for industrial companies. With the right leadership, priorities, and operating model, it can be a powerful enabler of a company’s overall strategy.  An outcomes-driven approach can help leaders bring their portfolio of digital initiatives into alignment with their customers’ jobs to be done and their own broader business objectives. It can also be utilized to stop projects or initiatives that are off-strategy. 


About the Authors

Rob Bell is a Partner at Innosight and a co-leader of the Industrials & Technology practice.




Ned Calder is a Partner at Innosight and a co-leader of the Industrials & Technology practice.




Freddy Solis is an Associate Partner at Innosight.