Deep Dive: B2B for the tech generation

Can B2B leaders reimagine their business as a virtual product and offer an unimagined fusion of digital and real-world capabilities?

In this edition, I explore a radical idea—can B2B innovators reimagine their business as a digital product? Disruptors and every technology startup take this approach. Being virtual is a given. Digital founders start with a customer's needs and build a product that is both digital and revolutionary. Then they form a business to bring forth that product. Incumbent business leaders have a different mindset—legacy products exist to carry on the established business. For them, digital transformation is not about changing, but about preservation. But is that enough? Can there be more? I wonder if a better path is to adopt the process of digital founders and reimagine—or better, refound—traditional B2B businesses as a digital product. Then, through that product, offer human services and real-world solutions, provisioned by repurposed brick-and-mortar assets. Maybe, instead of digital transformation, a digital restart would make it possible for stagnant businesses to skip ahead of digital upstarts, setting new standards for customer experiences that are an unimagined fusion of digital and real-world capabilities.

B2B revolution as a four-step process

To begin, B2B innovators need a NorthStar for reimagining their business as a digital product. Looking for one, I reached out to Art Waskey, a super-experienced executive in the gas and welding distribution industry. I started by asking about trends. It turns out a new type of small distributor is emerging—a B2B business that rents and fills gas canisters from large distributors and focuses almost exclusively on the needs of small customers. By doing so, these distributors minimize capital costs and build defensible customer relationships. Then I asked about the preferences of next-generation customers—owners, users, and buyers—at the small customers these distributors serve with their new business model. Art answered with a single word—relationships. As small businesses, gas and welding customers want committed relationships with suppliers that will serve their needs and treat their business as importantly as they do their own. As next-generation businesspeople, these customers want to use digital tools to build and manage relationships, as professionals at work, with preferences shaped by their digital technologies in their personal lives.

My conversation with Art provides a starting point for applying tech companies’ virtual, product-centric process across a range of B2B industries. In this edition, I focus on next-generation owners, users, and buyers at small businesses that are served by small B2B companies, whether distributor or manufacturer. The defining concept for a yet-to-be-designed digital product is about enabling a B2B business relationship that is both professional and personal, between a supplier and customer. The virtual product must handle transactions for finding, buying, receiving, and using physical, real-world, B2B products. But that is only the start. Business relationships are built on trust, commitment, economic return, and ongoing improvements. Thus, our digital product might deliver a B2B company’s product and industry knowledge, advice, and working teams to solve problems, provide data for measuring return on investment, and offer networking with other industry professionals for benchmarking and keeping track of trends as the digital age reshapes the customer’s industry. I won’t get too specific on digital product features, but I will start where all founders start—with an idea, purpose, passion, and zeal.

Running with this mission, I thought about what I’ve heard from podcasts such as A16Z Live, Decoder, FUTUREPROOF, Techmeme Ride Home, This Week in Startups, Winner Take All, and more, and created a four-step process for refounding a traditional business as a digital product. I suggest that you apply this process first as a strategy or scenario analysis exercise. Pull a cross-functional team together, perhaps with members of your leadership team. But be sure to include next-generation members from your company and possibly your customers. Work through the process step-by-step to see what turns up. Feel free to reach out to me and I will share what I have learned from tech founders, digital startups, and other real-world B2B innovators.

Before I go any further, a shout out to the tech start-up community—I am not of your world, but I am in awe of your entrepreneurship, progress, and zeal. I seek to inject real-world businesses with your vision, methodologies, and metrics. I assume much and get much more wrong. If my newsletter makes it to your inbox, let’s start a discussion. There are not two worlds, virtual and real, but only one—the one where we all live and work. Let’s make my four-step process a starting point and see how far we can go together.

Step One: Prototype your business as a digital product

Since you are working through the process as an exercise, you only need to posit your digital product’s general features and benefits and perhaps a preliminary sketch or wireframe of the customer interface. When ready, test your ideas with digital experts, peer companies, business partners, and of course, customers. Gather their input, iterate, push further ahead, and update your prototype. I am suggesting a fast innovation process known to technology-driven innovators. You can find in-depth process advice in many places, and I suggest you might start here or here.

Whatever your product is, it is probably not a webstore. B2B webstores are about processing transactions as a first priority. Relationships are a second priority for the webstore or done by other means. I do not know of a digital product built by a small B2B distributor or manufacturer to offer a relationship-first experience for small customers. If you have an example, let's talk. I suspect that the customer interface will have elements of a dashboard (to track purchases and returns on investments), a library of videos, interactive papers, and suggested contacts (to serve as a searchable knowledge base of solutions and education), and a networking interface (so that the customer can construct a custom ecosystem of business owners, advisors, and solution providers). Whatever the design, authenticity (from a customer’s perspective) is mandatory.

If you are having trouble picturing even a smidgeon of your business as a product, think about the customer practitioner that is the NorthStar for all that you do—a mechanic, chef, contractor, machine shop owner, owner-operator, procurement professional, engineer, fleet operator, facility manager, safety professional, or whoever is most relevant for the communities and industries you serve. Find the digital products your customer uses at work, school, or continuing education, at their hobbies, and at home. Start there and pull features and benefits into your product prototype. Mock it up as a storyboard and test it.

Step Two: Form a community to help design your product

I have written before about the community practices of technology product managers and how B2B innovators might use them. Here, I will only repeat that establishing and nurturing a community from the very beginning is an essential practice in the world of virtual products. Unlike real-world, asset-based businesses, virtual products can tweak their customer experience at any time by writing new code. This is one of the chief advantages of refounding a traditional B2B business as a digital product. The product can be easily updated as experience grows, keeping pace with change and offering customers ownership of the product as active community members.

Step Three: Pitch your product and raise seed capital

Cash flow is perhaps the primary method for funding growth and innovation at small B2B businesses. Private equity is an option but requires owners to cede at least partial control of business decisions. Going public may be possible, but it requires that the small business has already established a growth trajectory. Friends and family may contribute capital in exchange for ownership, employment, and a return on their investment. Those are the options, and they bring a mindset that sets the frame for pursuing profits, growth, and wealth.

It’s different in the technology startup world. A new business starts with a founder’s idea. After making some progress, the founder seeks seed capital to help the early-stage business gain traction and time. Founders may pivot their business through early experiences, and seed capital investors encourage clever direction and product design shifts. By seeking seed capital, founders get funding, but they also get advice from experienced early-stage investors—people with a point of view on what works and what doesn’t. As you work through this four-step process, you must seek seed capital. You must test your ideas with the early-stage investor community. You will be judged on your passion and ability to bring together co-founders with equal passion and complementary experiences. Your customer and industry knowledge is essential, but more important is how you plan to create a product that will achieve a competitive advantage. Profits and sustainable growth come later. The pursuit of seed capital is about testing, nurturing, and advancing your ideas.

Step Four:  Reinvent strategy and “growth hack” your product

Growth hacking a business has become a “thing” in the technology world, and as it has become a trend, the term is overused. As I understand it, growth hacking is correctly implemented an entrepreneurial, product-centric approach for growing revenue. Growth hacking is not classical segmentation, targeting, positioning. It’s about A/B testing product features. It’s about making sure that the inevitable bugs of a virtual product are identified and fixed. It’s about adding new features because, as the customer base becomes experienced heavy users, they want more unique and better experiences, features, and benefits. But most of all, growth hacking is an unrelenting focus on the digital product. The product is the brand. The product’s customer experience is paramount. Business strategies are second to product success. Growth hacking creates a focus and a clear path to making innovations.

I will learn about growth hacking and report new findings and innovation stories in future editions. But from what I have learned so far, growth hacking provides a different approach than traditional B2B strategies, which are business strategies at heart. Business strategies seek to protect the business, and product strategies are but one sub-strategy to achieve success. Others include brand strategies, channel strategies, and information strategies—all designed to execute the business strategy. But there is something pure and powerful in elevating the product strategy to the highest echelon of strategy in the digital age. Product strategy is what matters. The digital product of startups is not a means to an end. It is the end, the goal, the purpose, the reason to be. Traditional B2B companies have much to learn from this approach.

Ideas for innovating B2B

There is immense power to be gained by committing to the thought exercise of refounding your business as a digital product. If you are a small B2B business serving small customers, I suggest that you take relationships and your mission and work toward designing a digital product. If you are in a different situation, you may need to find another founding concept. Either way, let me know what you are up to. I would be happy to help.

Beyond what I suggest above, I offer three essential practices for accomplishing the work ahead:

1. Get Vistage-like help from tech founders. Vistage is about CEO-to-CEO advice. I suggest you seek founder-to-founder insights. Recruit tech founders as your advisors. You have something to offer because they will gain the necessary knowledge about the challenges and opportunities of real-world companies. Look here for a platform that helps tech founders find co-founders and use it to your advantage. Or seek out technology and startup company networks that exist in almost every city.

2. Operate like a skunkworks. Way back when, IBM put a team far away from its corporate headquarters to design and launch its personal computer business. Physical distance is essential for limiting interference. You may not need to travel far, but it is helpful for human cognition to carefully choose the place and people you work with, especially when creativity and new mindsets are essential.

3. Make your CEO the brand. This is a common practice among technology startups. I suspect that the reason is partly ego. But it also puts a very personal face on the company for its customers and the investment community. It creates accountability. If the CEO is the brand, the CEO is personally on the hook to create customer value.

Join the journey

If you set out to apply my four-step process and refound your business, please reach out. If you are a builder and founder in the technology start-up world, please reach out. Let me know what you think about my process and what you learn through its execution. Let me know what you learn from each other. Together, we can kickstart the B2B revolution! Share your thoughts in the comments section below. If you prefer, reach out directly at mark.dancer@n4bi.com.