Impact of digitalization on B2B businesses

The digital transformation of manufactured goods and software (B2B business) is in full swing. Everyone is talking about Industry 4.0. This refers to the digital transformation, especially in relation to products and production processes. New technologies from the cyber world are linked to traditional production systems from the physical world. Among others, manufacturers in mechanical engineering or plant construction, automotive suppliers or providers of industrial software solutions are busy digitizing value chains. New applications such as “predictive maintenance” (machines predict maintenance needs before they are created) use networking to help make the entire production process more effective.

The hype surrounding the topic of Industry 4.0 should not hide the fact that the digitization of the B2B business is still in its infancy. Especially the interface to the customer is neglected. Often, the benefits of product-based innovation do not find their way to the customer because they are not yet backed by the right marketing and sales processes. Roland Berger and Google Germany conducted a survey of 2,745 sales representatives in B2B companies to understand the status of digitalization initiatives in sales. The answers suggest that B2B vendors sometimes underestimate the strategic importance of sales or are unable to effectively implement the transformation process in their organizations. 

The following article examines diverse providers in the product and system business, as well as the way digitalization impacts on the way they handle deals. These are mostly medium-sized companies or independent units of larger groups in areas such as mechanical engineering, components, process technology or industrial software. These companies – usually with sales ranging from a few million to a few billion euros – sell larger quantities of similar products and speak for themselves

A wish and reality

B2B providers have recognized the importance, but are not yet ready to change: results of Roland broad and partially anonymous clientele. They could benefit from the benefits of digitization in sales, but they do not yet. The last turn of the century is not quite finished yet for these providers: their formerly hardware-centered products have developed very fast to integrated solutions with a high software component. Product and system specialists still think very strongly about the technology and the product and hardly on the sales side. Although many operate an online channel, often without having it properly built into the sales organization. Many interviewees consider digitization in sales to be crucial in the long run. Companies have the opportunity to make new contacts with customer companies, to exchange information about products and to obtain information on purchasing and decision-making behavior. The race to use them has already begun. Anyone who does not change can harm the competitive position in the long term. At the same time, the market environment, customer requirements and product are developing rapidly.

Market: new players set traditional companies under pressure 

The demands of the competitive environment are changing: new digital players – mostly from the B2C business – are already claiming parts of B2B sales. They use their experience in customer handling and operate with their own business models, for example as online-only distributors (Alibaba) or as aggregators of offers (eg “Who delivers what?”).

Customers: decision-makers higher requirements

The so-called Millenials are the new decision-makers on the customer side. In the USA, 46% of those who influence B2B decisions are under 35 years old, in Germany the figure is only slightly lower. Their information, communication and relationship behavior differs significantly from that of the previous generation. They prefer to inform themselves on the internet (“googling”) rather than in person at the contact person in sales or in the catalog. They communicate mobile via different social media tools, they are always responsive and expect answers at any time. They settle networks and relationships via social media platforms of any sort. With their experience in online shopping of consumer goods, they already have high expectations for the convenience of shopping. These change their professional decision-making behavior. If they have an assignment, questions like “How easy is it to do business with the company?” “Do I have to wait for months for my product?” How reachable is the company? ” are as important as detailed product specifications.

Product: the change in digital technologies flows fast

In the digital world, it is no longer enough to develop good products. More and more functions of the product are no longer realized by hardware, but by software within the product. The latter is embedded, but increasingly platform-independent. To a certain extent, software distribution requirements are added to the requirements for B2B physical product distribution. In addition, disruptive or improved technologies are penetrating the market more and more rapidly (e.g., Adoption Time Phone vs Facebook, etc.). The sales department has to be able to react with very high flexibility.

How much potential is there in the digitization of sales? So far, most companies in the B2B business spend only a fraction of their marketing and sales budgets on digital channels. That is why the marginal utility of any investment is still very high. Every euro spent on additional advertising via digital channels is well spent. For example, we calculated that using Google. Other investments in digitization are also having significant success very quickly. For example, companies that use sales tablets that access their product portfolio and customer data can increase the total value of their sales by 69% in six months.