Figure out how to make money

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Step #4 in digital transformation sucess is to figure out how to make money. Providing a cloud-enabled service has ongoing costs for software development, maintenance, servers and so on. If you don’t have the revenues to cover these, you’ll be running at a loss. And that usually spells the end of your digital product.

Many “smart devices” for consumers have fallen into this trap, caused by having a one-time purchase price that didn’t cover the lifetime costs of the service. Those devices have been discontinued or became “dumb”. Anyone stuck with an unresponsive Samsung Smart TV? Older Sonos speakers? Amazon Echo Look?

To avoid this problem, the common monetisation models you see today are subscriptions and pay-per-use. Those provide sustainable revenues to keep your digital service up and running. Selling advertising is another model, but that’s a fundamentally different business model from selling your product or service.

So, make sure you understand what you digital service will cost you on an ongoing basis, and how you will cover those. Look how much it costs to start up. Incremental cost per user may be low, but the fixed costs may be higher than you expect.

What are your thoughts on this topic? Please share them!

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