ecommerce

B2B E-Commerce – 5 Big Mistakes to Avoid

B2B commerce may not have embraced the digital revolution quite as readily as B2C businesses did, but this initial reluctance is quickly changing as more and more B2B companies—driven by the speed of technological change and the high expectations of digitally sophisticated customers—realize that it’s simply no longer an option to do without digital. However, although today’s B2B businesses are joining the e-commerce landscape at an increasingly rapid rate, not all of them are doing it effectively. Many companies, incorrectly assuming that there’s little more to B2B e-commerce than a website and some sales software, fail to plan properly or conduct thorough due diligence; as a result, far too many B2B e-commerce efforts end up hampering, rather than helping, the companies behind them.

For B2B companies that are considering making the leap to e-commerce, understanding where many businesses go wrong is one of the most helpful ways to guard against failure. Read on for a look at five of the most common mistakes companies make in B2B e-commerce implementation, and ideas for how to avoid them.

1. Failing to outline business-specific requirements.

checklist

In their hurry to jump on the e-commerce bandwagon and get a digital platform running as quickly as possible, many B2B companies don’t spend enough time on creating a detailed list of requirements for their future e-commerce system. But shortchanging this step of the process is a very risky move. Choosing a B2B e-commerce system is not a one-size-fits-all activity, and companies that don’t think carefully about what specific things they want from their system are much more likely to end up with a platform that doesn’t quite fit; this is a mistake that could have significant opportunity and efficiency costs down the road. Instead, companies should avoid rushing this step and should take the time to thoroughly document their requirements in order to find a platform that will be viable over the long term.

2. Underestimating the importance of the user experience.

B2B businesses need to come to terms with the fact that the expectations of B2B buyers are determined by their experiences as B2C customers. In their personal lives, B2B buyers are making purchases from some of the world’s most sophisticated e-commerce sites, and they see no reason why their experience shopping for products in their professional capacity should be any different. That’s why B2B businesses must remember to keep the user at the center of all their e-commerce efforts. A strong investment in user experience design—including fully optimized mobile sites and omni-channel capabilities—is a critical step in building long-term customer loyalty.

3. Not involving the sales team.

All too often, B2B sales teams view e-commerce as a competitor that will usurp their responsibilities and cause them to lose out on their commissions; this fear is amplified by the fact that many B2B companies plan and implement e-commerce efforts with little or no input from the sales team. But in fact, when e-commerce is aligned with sales, both aspects become more powerful: sales input provides valuable customer insight that can guide the e-commerce design process, while an effective e-commerce platform helps eliminate low-value, routine tasks from the sales team’s to-do list and frees up time and energy for them to focus on more strategic selling. In other words, B2B businesses shouldn’t make the e-commerce initiative the sole province of a few top executives or the marketing team. Instead, they should open the effort up to sales in order to unlock significant value potential.

4. Underestimating organizational requirements.

organization

Many B2B businesses assume that, thanks to the power of digital technology, e-commerce will basically run itself, but unfortunately the truth is not quite that simple. Adding an e-commerce platform is more than just adding a website; it involves the addition of an entirely new channel to the business, and that new channel is going to need corresponding roles to manage it effectively. Significant internal investments are typically needed on web operations, web merchandising, customer service, digital marketing, technology, and fulfillment. Of course, it’s not necessary to build a huge team right away, but it’s important for businesses to be aware of the scale of an effective B2B e-commerce support system to avoid being blindsided by the level of organizational requirements required.

5. Not planning a post-launch investment.

As appealing as it may be, a “set it and forget it” approach does not work in the e-commerce world. To tap into new markets, gain greater traction with existing customers, and drive traffic, strong digital marketing initiatives are needed to supplement the initial e-commerce efforts. Many B2B companies only plan as far ahead as the launch of their e-commerce platform and then can’t understand why they’re not getting the revenues they projected. In addition, businesses must handle new features and site updates regularly in order to grow the e-commerce operation most effectively and ensure that the platform is always fully optimized.

internet of things

4 Important Takeaways from a New Study on the Internet of Things

IoTWorldForumHosted by Cisco in late May 2017, the fourth installment of the Internet of Things World Forum (IoTWF) brought together some of the world’s most innovative IoT thought leaders from business, government, and academia for three days of discussion and debate in London, one of Europe’s fastest-growing technology capitals.

One of the highlights of this year’s IoTWF was the release of a new study conducted by Cisco on the current state of the IoT landscape. To compile the study, Cisco surveyed more than 1,800 business and IT leaders across a range of industries in the US, the UK, and India, focusing exclusively on respondents from organizations that had completed or were in the process of implementing at least one IoT initiative.

Despite widespread excitement about the enormous potential of the Internet of Things, the results of the study highlighted the fact that getting successful IoT initiatives off the ground is not always an easy task. According to survey respondents, the majority of IoT initiatives (60 percent) grind to a halt at the Proof of Concept stage. As for companies with completed IoT initiatives, only 26 percent consider their initiative to be a complete success, while on the other hand, a full one-third of completed projects were deemed unsuccessful.

Other important takeaways from the study include:

The human factor still matters.

Technology may be at the heart of the Internet of Things, but it’s vital not to overlook the critical role that human factors like culture, leadership, and organization play in the ultimate success of an IoT project. In fact, of the four factors that survey respondents identified as the most important for successful IoT initiatives, three are all about people and relationships. The top factor, cited by 54 percent of respondents, was strong collaboration between IT and business units; this was followed closely by an organizational culture that focuses on and values technology (cited by 49 percent of respondents), and IoT expertise and knowledge both internally and through external partnerships (48 percent). In addition, survey respondents whose organizations had completed successful IoT projects described the use of close partnerships at every project stage – from strategic planning through to post-rollout – as a fundamental part of their overall success.

internet of things

And speaking of the human factor, it’s also interesting to note here that the success of an IoT project seems to be very much a matter of perception. IT executives, who prioritize things like technologies, expertise, and vendors, are more likely to consider projects successful than are business executives, who place greater importance on strategy, business cases, processes, and milestones. Thirty-five percent of IT executives who responded to the Cisco survey considered their IoT initiative to be completely successful, while only 15 percent of business executives said the same.

Support is critical.

With 60 percent of survey respondents emphasizing that IoT initiatives are much more difficult to implement in reality than anyone at their organization expected, it’s clear that a successful IoT project needs all the help it can get. Some of the main challenges that need to be overcome across all stages of implementation include time to completion, insufficient internal expertise, data quality, integration across teams, and cost overruns. Organizations that have been the most successful in implementing IoT initiatives have turned these challenges into opportunities by seeking out and engaging in strong partnerships throughout the process, as described above, in order to reduce the learning curve and bridge critical knowledge and skills gaps. Many survey respondents described the potential of these partnerships with other vendors as an important way to create connected solutions, share data, and consequently bring significant new value to industries.

Failure is a teaching tool.

One of the biggest shifts in mindset that has happened as a result of the digital revolution is embracing failure—not avoiding it. To succeed in the fast-paced world of digital transformation, businesses must become less risk-averse and use stalled or failed initiatives as a learning experience to feed and improve future efforts. Happily, the majority of businesses working in the IoT realm seem to be on board with this idea: 64 percent of survey respondents agreed that unsuccessful IoT initiatives actually had the unexpected benefit of accelerating, rather than slowing down, their organization’s level of IoT investment.

The benefits are significant.

If IoT initiatives are so hard to implement successfully, are they really worth pursuing? The answer to that is a resounding yes, as indicated by the benefits that survey respondents described as resulting from successful IoT projects. Nearly three-quarters (73 percent) of all respondents said that they had been able to use data from completed IoT projects to improve their business in some way; globally, the top three benefits named by respondents were improved customer satisfaction (70 percent), better operational efficiencies (67 percent), and improved quality of products and services (66 percent). Perhaps not surprisingly, these benefits can also help businesses boost their revenues: 39 percent of survey respondents cited improved profitability as the top unexpected benefit that IoT projects brought to their organization.

business

What You Need to Know about Choosing a B2B E-Commerce Platform

With B2B online retailing revenues projected to reach $6.7 trillion by 2020, according to research from Frost & Sullivan, it’s clear that B2B businesses no longer have the option of doing without an e-commerce platform. However, selecting the right one can be a challenge, particularly for B2B businesses that are still in the early stages of digital transformation. If your B2B business is struggling with the question of how to choose an e-commerce platform, the following tips and strategies can help:

Understand your drivers.

The first big step in choosing a B2B e-commerce platform is understanding why your business needs one. At present, it’s not difficult to find information on the broad drivers of B2B e-commerce, including the fact that the high quality of consumer experience now available in the B2C marketplace is strongly influencing buyers’ expectations of B2B transactions. Buyers are looking to replicate the same ease and personalization of their B2C experiences in their B2B decisions, as well as to achieve targeted goals like shifting their procurement process online, placing business orders from mobile devices for greater convenience, and making their sales force more strategic by decreasing manual tasks and enabling off-hours ordering. Helping customers meet these and similar goals is therefore a strong motivator for most B2B businesses.

ecommerce

In addition, it’s important to clearly define your business’ individual objectives and expectations for implementing an e-commerce platform. Broad market drivers work well as initial motivators, but in order for your e-commerce platform to fit your business well, you must be clear about what specific challenges you want the platform to address and solve. For example, do you primarily want to make transactions easier for repeat buyers in order to boost customer loyalty, or is your main objective to drive new traffic and leads to your site? Being precise about your goals will greatly improve your chances of making a smart platform investment.

Perform a realistic self-assessment.

After you’ve identified why your business needs an e-commerce solution, the next step is to assess your organizational readiness; understanding the reasons for implementing e-commerce and having the capacity to execute it are two very different things. To make this self-evaluation stage worthwhile, it’s important to be both thorough and realistic.

First, look closely at your business’ current capabilities, particularly at the personnel who are most likely to assume the responsibility for setting up the e-commerce platform and maintaining it once it goes live. You also need to clearly identify how automated e-commerce solutions will impact current processes like sales, service, and inventory. Next, assess whether your organization has or can put measures in place to effectively analyze and leverage the new volumes of customer data that an e-commerce platform will deliver. Then, you should evaluate the current technical environment of your organization, including how your e-commerce platform would integrate with pre-existing software like ERP, CRM, or accounting tools.

Ask the right questions.

Once you’ve conducted a thorough assessment of your company’s organizational readiness, it’s time for a comprehensive evaluation of possible platform solutions. Having a list of key questions to ask of each platform will help you match your business’ needs with platform functionality. Some of the most important features to analyze include whether the platform offers responsive design that optimizes content across multiple devices; whether the platform offers self-service capabilities and to what degree; how the platform handles customer-specific pricing options; what payment options are available through the platform and how customizable those options are; and whether the platform is hosted on-premise or is cloud-based.

mobile devices

Know the risks.

B2B e-commerce platforms represent a significant investment of time and money. On average, a mid-market B2B company can spend anywhere between $250,000 and several million on an e-commerce solution and can take between nine months and two years to launch it. Given these figures, it’s not surprising that many B2B companies making their first foray into the world of e-commerce are tempted to scale down and look for less costly “starter” options. But while this might make sense in some cases, it’s vital that you understand the risks associated with focusing more on up-front savings than on effective solutions. These risks include the following:

Poor integration—Choosing less expensive software options and attempting to piece together an e-commerce site may appeal to businesses that are interested in a DIY approach, but this often leads to poor integration. As a result, it can become harder to fulfill orders because the various systems required for the job don’t play well together.

Lack of customization—It’s true that a higher degree of customization will be more costly in an e-commerce platform, but businesses should remember that customization is exactly what their buyers are looking for. Generic e-commerce solutions may be cheaper, but they frequently lack the personalized experience that is essential for today’s B2B customers.

Too many sacrifices—It may be difficult to find an e-commerce solution that fits your budget and meets all of your business’ needs, but if you find yourself having to sacrifice too many of your initial requirements, it could be a sign that you need to increase your investment. You’re not actually saving money if you’re spending a smaller amount on an e-commerce platform that doesn’t effectively help your business.

Startup

How to Deal with Digital M&A

In their quest to find new ways of delivering products and services and connecting with customers in today’s digital era, many incumbents are turning to M&A—that is, buying or partnering with startups—in order to integrate a much-needed digital component into their business operations. But, increasingly, these companies are finding that the M&A process itself has been impacted by digital disruption and that digital M&A requires a different approach and different considerations than those associated with traditional M&A.

When global management consulting firm Bain & Company recently interviewed leading European M&A executives, three-quarters of respondents said that digital disruption had strongly impacted their M&A strategy, even to the point of requiring a complete strategic overhaul. However, very few executives described themselves as prepared to meet this challenge; only 11% of interviewees self-identified as either “mature” or “advanced” on the digital learning curve.

So what do incumbents entering the world of digital M&A need to do if their efforts are to be successful?  A recent article from Bain & Company breaks down the process into the following four critical steps:

  1. Identify an explicit M&A strategy.

startupCompanies that have the most success with digital M&A are extremely clear about the precise role that digital M&A will play in supporting and enhancing their overall corporate strategy and objectives. A good place to start is by evaluating how the established value chain of the industry in question has been distorted by digital disruption, and then working out the specific ways that M&A would help the company to gain a strategic position within the new value chain—by enabling digital customer engagement, for example, or by protecting the company against the business models of digitally disruptive competitors.

Key questions that companies can ask themselves about digital M&A strategy include the following: Are both offensive and defensive M&A moves are being considered? Is the screening approach for digital targets forward-looking and value-based? What steps will be taken to help the company fill the role of thoughtful parent for the acquired digital company?

It’s also important for companies to be aware that M&A strategy is not a one-off solution. Rather, it’s an integral part of a global growth strategy, and is therefore something that needs to be consistent and repeatable.

  1. Be smart about corporate financing.

There’s no question that digital assets are expensive—many companies would say too expensive—so it’s important for companies to understand how a digital acquisition will affect their equity profile and the growth-value profile of their stock. Ideally, a digital acquisition will signal to the market that the acquiring company is committed not only to adapting, but also to becoming a digital leader in its industry; such a signal should serve to influence the market perception of the company and consequently its price-to-earnings (PE) ratio.

However, the question of how to finance a digital M&A deal remains a tricky one. The high price of the targets limits an acquirer’s ability to use stock (in order to avoid exposing existing shareholders to a high dilutive effect), but a cash-only deal could result in overvalued goodwill and future write-offs for the company. Acquiring companies must be prepared to evaluate and consider all potential financing solutions, including adapted payment terms or deferred payment mechanisms.

  1. Look to the future when doing due diligence.

timeIn some ways, digital M&A due diligence is a reverse version of traditional due diligence. That is, rather than evaluating the past business performance and current competitive status of a target, digital M&A acquirers need to look ahead, evaluating what the future success of the business model is likely to be under different scenarios, and screening the target before value has been monetized.

To help with this task, successful digital M&A companies build a strong community of external experts to serve as a vital connecting link between the company and the digital ecosystem it wants to be a part of; these experts provide invaluable diligence support in areas where objective assessment is challenging. Some areas that require particular attention in digital as opposed to traditional M&A include the capability of the acquirer to serve as a strong corporate parent and the scalability of the people, technology, and business models of the acquired assets.

  1. Use a “scope” model of merger integration.

In the vast majority of cases, digital acquirers are most successful when they approach digital deals with a “scope” mindset instead of a “scale” mindset. (Scope deals, as their name implies, increase a company’s scope through the addition of new products, customers, markets, or channels, while scale deals add similar products or customers, thereby increasing a company’s scale.)

Part of the reasoning behind this is that scope deals, for the most part, require only selective integration, thus preserving the autonomous, unique identity of each company and avoiding the problems that can arise when two highly different corporate cultures attempt to fuse. Nevertheless, smooth integration tactics, such as instituting cultural exchange programs between companies or including digital acquisition leaders in central governance forums, are a good idea even in scope deals.

digital marketing

This Is a Look at the State of Today’s Digital Market

digital marketingToday’s digital economy is evolving so rapidly that it can be difficult to keep up with the latest insights. Different organizations are dealing with the effects of digital transformation differently. That’s why regular surveys like Digital Pulse, conducted by the global executive-level recruitment consulting and advisory firm Russell Reynolds Associates (RRA), have such a valuable role to play in painting an accurate picture of the current state of the market.

Every year, RRA surveys more than 1,500 senior executives across a broad range of industries and geographic locations. The goal is to deepen understanding of how digital changes are impacting organizational talent and leadership needs.

The Digital Pulse survey focuses on areas like digital strategy development and execution, organizational structure, and obstacles. As a result, the survey helps industry professionals navigate digital transformation and maximize its positive impact.

The third annual installment of Digital Pulse was issued in 2017. Read on for some key highlights and takeaways.

Survey Overview

To ensure that survey data was as accurate and meaningful as possible, Digital Pulse 2017 limited its respondent base to senior executives working at companies with some level of digital strategy. Of the respondents, 48 percent were C-level executives (CEOs or other chief officers reporting to the CEO), 33 percent held the position of VP or director, and 19 percent were senior or executive VPs.

To ensure a balanced perspective, the companies selected varied considerably in size, location, and sector. Nearly half of responding companies had more than 5,000 employees (37 percent had more than 10,000, while 10 percent had between 5,000 and 10,000). Additionally, 37 percent had fewer than 1,000 employees (14 percent had between 250 and 999, while 19 percent had between 10 and 249, and 4 percent had between one and nine).

Companies were based primarily in Western Europe (37 percent) and North America (28 percent), with smaller proportions of respondents hailing from regions including Central and Eastern Europe, Australia, South Korea and Japan, and the Middle East. Respondent company sectors included the consumer industry (25 percent), financial services (18 percent), industrial (18 percent), technology (12 percent), and health care (11 percent).

Survey Highlights: Digital Strategy

Many other studies have demonstrated the importance of strong support from executive leadership when it comes to implementing digital strategy. But even though many CEOs are stepping up to the plate, findings from Digital Pulse 2017 reveal that there is still a disconnect between digital strategy creation and execution at many companies today.

According to respondents, the CEO is responsible for setting the digital vision and strategy at 40 percent of organizations. On the other hand, 14 percent of respondents gave this responsibility to the Head of Marketing, and 10 percent to the Head of Digital. Furthermore, 67 percent of respondents cited the CEO as the biggest advocate of digital transformation at their organization. Almost all respondents (91 percent) said that their CEOs are visibly supportive of the company’s digital vision and initiatives.

Fortunately, 60 percent of respondents felt that the appropriate leadership was setting the digital vision for their organizations. Despite this, however, only 47 percent were confident that their companies had the right team in place to ensure that the digital strategy was effectively executed.

As to the nature of the digital strategies themselves, the findings from Digital Pulse 2017 confirm the impression that most organizations are continuing to focus intensively on customer-centric digital initiatives. For example, 77 percent of respondents cited new tools and systems for customer experience and engagement as a key focus area. Additionally, 71 percent cited customer and operational data collection, and 70 percent cited the development of new marketing channels.

Survey Highlights: Organizational Structure

organizationDigital transformation doesn’t just have an impact what today’s companies do and how they do it. It also affects how companies themselves are organized. Increasingly, companies are working to boost flexibility and agile decision-making by embedding digital talent across the organization.

According to survey respondents, 39 percent of companies are still working under the traditional centralized model of one team working under one leader. However, an impressive 45 percent of companies have moved to a hybrid organizational model. This features key digital operators embedded in dispersed business units as well as a centralized digital team.

Under digital’s influence, organizational relationships are changing, too. A successful digital transformation requires solid partnerships not only with the executive team, but with other critical departments across the organization. Marketing and IT were cited as key partners for digital by 87 percent of respondents, platforms/technology and data analytics by 86 percent, and sales by 68 percent.

Survey Highlights: Barriers to Success

The rapid pace and sweeping scale of digital transformation has led to a talent shortage in key digital fields. Given that, it’s not surprising to find that talent issues are one of the biggest obstacles to digital success for many organizations. Of survey respondents, 50 percent indicated that a lack of digital expertise and skills were the main thing holding their companies back from an effective digital transformation.

Structural issues are also a problem. For example, 49 percent of respondents cited organizational inertia (or change resistance), and 47 percent cited functional silos (or departments unable to cross-collaborate) as significant barriers.

Business

Spotlight on B2B Strategy in a Digital World

There’s no question that B2B companies have a lot to learn from B2C innovators when it comes to devising and implementing digital strategy. However, the subtleties that distinguish these two realms from each other are often overlooked in favor of simplified, direct comparisons (which tend to ignore the fact that it isn’t always possible to translate what works in the consumer sphere to a B2B context). The truth is, while there are certainly important lessons and opportunities to take from groundbreaking B2C companies, B2B nevertheless requires a different approach to digital strategy in determining the transformational path that is best suited to an industrial setting.

So how can B2B companies get digital strategy development right? According to a recent article from global management consulting firm Bain & Company, the first step is to understand some of the following key assumptions about what it means to do business in the B2B world today.

The difference between current and prior eras is measurable and dramatic.

e-commerceIt might be tempting for B2B businesses struggling with digital transformation to buy into the comforting notion that the buzz around digital technology in the marketplace is more hype than anything else, but it’s hard to ignore the fact that businesses today have changed at every organizational level due to the confluence of technologies like smart devices, low-cost networks, and powerful cloud-based computing. We now have four times more connected devices than we did just five years ago, leading to a corresponding 40-fold increase in data generation. There is no longer a clear line between products and services, and the boundary between individual customers and business customers is becoming equally blurred. Against this backdrop, dreaming big is not only possible, but it’s essential to a business’ very survival.

Disruption follows knowable directions.

The rapidly paced and dynamic changes that characterize our current era are certainly disruptive, but they don’t have to be disorienting. Actual disruption rarely comes out of nowhere; most often, there are discernable signs along the way. Innovations like smart buildings or autonomous vehicles, for example, were visible and widely discussed long before the technology was in place to make them a reality. In such a climate, it therefore becomes the job of digital leaders to read these trends, understand the impact they could have on the industry, and transform that insight into an actionable perspective on the future. It’s not an easy task, but the ability to define the direction of disruption means that there is one less uncontrolled variable to deal with in the digital equation.

Ecosystems must be taken into account.

airportThe complexity of the business ecosystems within which today’s B2B companies operate must not be overlooked. A digital strategy that favors an idealistic vision while ignoring the facts will ultimately prove to be unworkable. In the aviation industry, for example, it’s not difficult to imagine a best-case digital scenario, where integrated IT systems support state-of-the-art air traffic control systems and cutting-edge, fuel-efficient aircraft while also driving dramatic improvements to the customer experience. But pragmatically, the pace and scope of innovation is limited by many factors, including regulation, the expense of replacing aircraft before the end of their life cycle, and concerns about how digital innovation will affect safety and security. When it comes to digital strategy, therefore, leaders and executives have difficult decisions to make about how to achieve real progress in the face of systemic complexity.

Profit pools are shifting.

tractorIt’s not clear when, but ultimately, digital innovation is going to change which players in our economy are making the most money—as well as the ways in which they are making it. In the agricultural sphere, for example, there is a great deal of speculation as to whether the profits currently going to traditional equipment makers will ultimately be diverted to the producers of connected machines and the cloud-based infrastructure that runs and supports them. Consequently, B2B companies across all industries are struggling to figure out how to tap into the most profitable segments of their changing sectors to avoid being left behind.

So where does this leave the B2B leaders responsible for digital strategy? According to Bain & Company, the biggest challenge involved in building a strong, enduring digital strategy lies in striking the right balance between vision and pragmatism. To achieve this balance, Bain recommends three key principles:

Narrowing the field of vision—To keep digital initiatives actionable, it’s important to define both the company’s starting point and their long-term digital destination, then determine what investments are necessary to get from one to the other. Concentrating on a clear road map like this helps avoid the chaos that can come from trying to do too many things at once.

Making gradual progress with stepping stones—The general rule of thumb for any complex task is to break it into smaller, more manageable pieces, and digital strategy development is no exception. Companies should focus on moving step by step, launching one wave of initiatives and assessing its impact before moving on to the next.

Organizing along pathways—When digital activity is carefully coordinated along a handful of key pathways, companies have the best chance for building and keeping momentum. Operations, products and services, and the customer experience are some of the most important focus areas, and concentrating on these will help companies integrate digital initiatives into the foundation of their business.

digital disruption

How to Disrupt Yourself – A Guide for Incumbents

Despite what a number of highly persistent myths would have us believe, the digital revolution will not inevitably lead to the demise of traditional incumbents, those longstanding “analog” companies that predate the revolution. On the contrary, it’s perfectly possible for established incumbents to not just survive, but thrive in the digital age. To do so, however, they must be willing to embrace the challenging task of disrupting themselves, before someone else does it for them.

business modelOne of the most important aspects of self-disruption is identifying and implementing new business models, but for many incumbents who have been well served by traditional, unchanging business models for decades, this is easier said than done. How can companies know what alternative business models would best suit them, and how can they ensure that the new model is implemented successfully? These questions have been asked so often by incumbent leaders that it’s given rise to a new term: “the incumbent’s conundrum,” coined by the World Economic Forum’s Digital Transformation Initiative.

For incumbents struggling with this puzzle, a white paper from the Digital Transformation Initiative offers a helpful guide to five of the most common and useful approaches to business model disruption for incumbents. These include:

Build.

For incumbents who are willing and able to take on the challenge, building a brand new business model can be the best way to ensure maximum control and minimum cost in key strategic markets. This approach is best for companies who can demonstrate clear links between digital transformation opportunities and their core business, who have the opportunity and resources to hire the necessary talent to design and implement the business model, and who operate in markets where the inflection point has not yet been reached. In choosing the build approach, incumbents can leverage critical tools like algorithms and machine learning to create new products and services, and can drive innovation through incentive competitions or gaming mechanisms.

An excellent example of an incumbent that achieved a successful digital transformation by building a new business model is General Electric (GE). Once focused on selling industrial hardware and associated repair services, GE radically overhauled its business model in 2011, moving away from pure sales to an outcome-based business model that uses big data and analytics to optimize asset performance and operations. The company has come so far in terms of its digital capabilities that it recently announced the goal of becoming a top 10 software company by 2020.

Buy.

buyingWhen incumbents are unable to build new business models themselves—whether because the market inflection point is too close, the right talent is not available, or the digital transformation opportunity is too different from the company’s core activities—the next-best option is often to buy another company. Acquiring a digitally disruptive startup, particularly at the moment when it is about to gain significant market traction, helps incumbents minimize the investment needed, gain an edge on the competition, and maintain their strategic ownership of a particular market.

After such an acquisition, large companies often choose to maintain the entrepreneurial spirit of the startup by not insisting on its full integration into the acquiring company, but rather keeping it somewhat independent from core operations. For example, when the IT company Cisco bought Meraki, which now constitutes its cloud network business, the acquisition was successful due to the strong separation that Cisco maintained between the innovative young company and the core activities of the “mother ship.”

Partner.

It’s not always strategically important for incumbents to own the digitally disruptive startups they are seeking to leverage. Sometimes, a partnership provides the best opportunity for incumbents to learn more about the market, the partner’s business model, and emerging opportunities, while keeping open the possibility of a deeper partnership or an acquisition in the future. However, to see successful results from this approach, incumbents must be ready to have a flexible and open mindset about what the partnership will look like and how it will function. Digitally native disruptors are often interested in non-traditional partnerships such as “coopetition,” which conventional companies may be less familiar with.

Invest.

investingIf all that an incumbent requires at the moment is to connect more closely with the right skills and capabilities, investing in promising startups is an entirely appropriate option. This allows the incumbent to have an eye on the future by maintaining a stake in the startup, while not undermining the startup’s agility, velocity, and willingness to experiment. These qualities can sometimes be hindered in partnerships or other relationships where the setup is too focused on internal governance and reporting.

Incubate/accelerate.

This approach may seem at first to be similar to investment, but incubation and acceleration typically represent a closer relationship between the startup and the funding company, while investment involves more external innovation and corporate independence. In an incubation scenario, more corporate internal capabilities, resources, and infrastructure are deployed to the startup. This approach also allows incumbents to disrupt themselves from within via internal incubators, which encourage and facilitate “intrapreneurship” on the part of existing employees. But whether the incubator or accelerator is internal or external, it’s important for benefits, incentives, and the strategy and vision to be clearly outlined.