CPQ for Quick Wins in Digital Transformation
Learn one of the quickest ways to save cost and increase profitability in your digital transformation shift.
January 10, 2020
Gartner defines digital transformation in terms of new digital models for businesses and digitization of services by the public sector.
“Digital transformation can refer to anything from IT modernization (for example, cloud computing), to digital optimization, to the invention of new digital business models. The term is widely used in public-sector organizations to refer to modest initiatives such as putting services online or legacy modernization. Thus, the term is more like “digitization” than “digital business transformation.”
Organizations seek to digitally transform in order to be stronger competitors in an economy that is in constant flux due to quickly evolving technologies. Paradoxically, the rapid pace of technical innovation compounds the challenges of the digital transformation, as well as being the source of the intelligence and tools to overcome these challenges.
Wikipedia defines Industry 4.0 as the trend towards automation and data exchange in manufacturing technologies and processes which include cyber-physical systems (CPS), the internet of things (IoT), industrial internet of things (IIOT), cloud computing, cognitive computing, and artificial intelligence.
Salesforce frames the 4th industrial revolution (IR4) around the theme of “Connected”. IR4 is a new era of connectivity that is driving digital transformation. Setting digital transformation goals of connecting data sources, people, systems, and customers is how the 4th industrial revolution will play out for manufacturers.
The same thing that propels the digital transformation powers IR4; rapidly evolving technology. It is just applied in specific scenarios around supply chain automation, system integration, and robotics and fundamentally changing the way products are made. These converging technologies are being applied to the challenges of manufacturers in order to cut costs and accelerate business growth.
Different companies and industries would define digital transformation success in particular ways. Let’s do a quick comparison of two divergent industries:
In the world of insurance for instance, companies are looking to streamline and improve the customer experience, while in the background applying big data, machine learning, and case management to sell products, mitigate their risk, and process customer claims.
However, for a product manufacturing company, digital transformation looks somewhat different. The commonality would be the goals to improve the customer experience. However, manufacturing has a different set of challenges around applying software, AI, IoT (Internet of Things) and other non-physical entities to the very physical output of fabricating a tangible good for sale.
One could cite dozens of industries and their use cases for digital transformation and there would be many differences but one theme that will rise above all – the customer experience.
All the best known digitally-driven businesses like Uber, Amazon, and Netflix, obsess on creating a simple and technology-enabled experience that aims to know you and your needs to allow for a self-service model that feels like you were assisted by a concierge. The same consumers that enjoy these conveniences are now the buyers in the B2B eCommerce marketplace and are demanding similar experiences.
Pivoting from being a traditional product company to become the “Amazon of Industrial Valves” may seem abstract and impossible. Product companies have a notorious set of challenges related to product variability and customization. It may seem daunting to tackle digitizing an experience which may be highly complex and very manual today.
Connecting the right people, processes, and technology allows companies to optimize the configuration, pricing, quoting, ordering, and manufacturing of complex products.
Deploying a configure, price and quote (CPQ) solution is a relatively affordable method to digitally transform with technology that is easily deployable from the cloud today. The right solution will allow a company to reinvent the buying/selling process to modernize the customer experience – that key tenant in modern digital transformation.
Visual configuration as part of CPQ is incredibly important for many manufacturers. Again, people are expecting a buying experience where they can preview what they are buying without long waits and long talks with sales people.
When the business units are connected in terms of both process and technology, it becomes infinitely easier to automate various aspects of the product life cycle, including on the manufacturing floor.
Let’s quickly cover examples of how teams and processes can be better connected with the aid of the right CPQ solution:
The point of CPQ is to take a complex product with many options and make it easy to purchase. A customer should be able to working with a sales person using CPQ to get the right product, or that CPQ solution can be directly exposed on the website so that customers can self-serve.
Real-time configuration allows customers to get immediate pricing feedback and choose the right options. Configuration issues or challenges are highlighted so that they can be addressed before the order goes to production. Being an active part of product configuration has added benefit of the customer’s ability self-identify upselling opportunities because they can visualize their product for their particular situation.
When a buying experience is controlled by robust business rules to allow for easy configuration, selling and configuration responsibility can be passed to distributors or partners – essentially connecting your them to your shop floor. Be careful during vendor selection however, as this idea of omni channel selling or B2B2C selling can only be achieved with a solution that allows for a safe and controlled embedding of your configurator in your websites.
When orders are coming in fully formed by sales people, distributors, or by the customer themselves, we have a complete set of data representing order that we can use in other systems
Accounting will love having order convert and their line-item detail data automatically flow into their invoicing and/or ERP systems. Automatic order creation and change management dramatically reduces the load of Accounting in terms of data entry and will increase accuracy and cash flow due to tighter billing practices.
Introducing CAD and design automation into a CPQ solution can save countless revisions, design cycles, and inter team communications between Sales and Engineering.
When your CPQ software has the capability to generate accurate CAD drawings immediately from the business rules being triggered by a sales person using a visual configurator, the need to create custom engineering drawings for order can drop more than 80%. This allows Engineering to focus their expertise on enhancing or creating new products rather than wasting time on transactional work to support sales.
When it takes hours, days, or even weeks to have a backlogged Engineering team generate drawings, it extends the sales cycle, puts deals at risk, and stresses Sales and Engineering staff. Engineering should have the benefit of automated design and CAD, so that they can be virtually generating CAD drawings to be included in estimates, email communications, and CRM.
With product configuration being controlled by robust business rules and augmented by visual configuration and CAD automation, CPQ has all the necessary data to push an order and related requirements to the manufacturing floor. Imagine a scenario where the Production team is notified an order is finalized via a workflow. The team is confident that they are getting an order they know that can build because configuration was guided and controlled at its inception. With document automation, they get order details like BOMs, cut sheets, assembly instructions, CAD drawings, blueprints, and shipping info sent to them so that they can build 100% to customer specification.
DJ is a long-time marketing consultant and technologist, helping companies with marketing strategy and marketing technology. He loves telling stories about applied technologies and the impacts it has on buyers.