Digital Business Models

Internet and dot com has disrupted traditional business models, innovative digital business models have enabled small organizations to beat large enterprises, and outdate their existing business models and competing metrics. 

Small organizations create, deliver, capture, and defend value to disrupt enterprises, and follow asymmetric business models to succeed.

• Developers play a vital role in this whole process.
• Digital business models offer a revolutionary perspective that goes beyond adding connectivity, features, or marketing channels to exist in products.
• Digital business models are novel ways to generate demand from new users, new products, new partners, and new markets, by practicing techniques first pioneered by Internet companies.
• Demand from new partners, new products, new users, and new markets.
• Digital Busines Models enable the whole ecosystem to thrive towards progress because whole stakeholders are linked in terms of demand generation.

For example google mobile launched App Store, generated demand, and work for app developers, app developers were able to attract users, and long-run Google was able to capture Google Ads business model in long run.

Digital business models can also defend value in other ways: In the early 2010s, Apple and Google were able not just to dethrone Nokia and Blackberry. They were able to defend their business against Microsoft and Mozilla by the thousands of developers, and eventually, hundreds of thousands of them, that developed apps for Android and iOS, but not for other platforms. The developer ecosystem that grew around Apple and Google created an "app gap" as we shall discuss later, a gap that made it impossible for latecomer players to catch up.

"Tech is an enabler and the business model is an agent".

Einstien "We cannot solve problems with the same thinking as when we created them".

Part 1 (Article has 4 parts)

Creating, Delivering, Capturing and Defending Value

Nokia Had

• Power over supplier
• Production Capability
• Software & Hardware Capability
• Brand Position
• Market Share

Blackberry

• Email Feature

Change of Competition Base

• Buying perception change from "what mobile can do" to "what we can do with mobile"
• Apple and Google brought desktop computing business model to mobiles
• Third parties to build apps for users
• Apple and Google were successful to compete with Microsoft, Nokia, and Blackberry and to create an ecosystem of thousands and millions of developers.
• That way the whole ecosystem is built around Google and Apple.
• Appl took advantage of hardware manufacturing and Google took advantage of Ads services.

To know how Google and Apple disrupted the mobile phone industry, new tools are required, like; how value is created, value delivered, the value captured and value defended in the digital World.

Key points to achieve disruption

• Start to solve a problem
• Challenge status quo - old
• Innovative business & user model
• Build data infrastructure - rapid networking news spread
• Fail fast
• Changes Fast
• High engagement
• Follow Hard Trends like AI, VR, AR
• Don't fell in love with an idea
• Take risk
• Senior management matter - like-minded passionate - Quality
• Communicate with Regulators - Proof - Convince
• Be Persist

Key Take-Aways

• The most significant change that Google and Apple brought to the mobile phone market in 2007 was the desktop computing business model with 3rd party apps.
• It was difficult to use Traditional management tools like Porter’s Five Forces model to predict competitive pressures, for which it could not predict the downfall of Nokia. Because it did not address the changing basis of competition, from better phones to better apps.
• The concept of the Business Model Canvas was first conceived by Alex Osterwalder.
• An important year that formed a milestone in the rise of digital business models is 2007.
• Understanding Digital Business Models is necessary to Describe and explain the rise of internet companies.
• Apple generates massive demand for its devices through millions of 3rd party apps available.
• WhatsApp disrupted the telecommunication services providers.
• By 2007, the Finnish company Nokia had an unrivaled global market share of 40%.
• Twitter captures value with the help of software developers, for allowing users logging onto apps built by developers with the Twitter Sign-In API.
• Digital business models are characterized by Novel ways to generate demand from new users, new products, new partners, and new markets.
• FedEx uses developers to deliver value by integrating the FedEx services through its corporate website or app.

Examples of Concepts of Creating, Delivering, Capturing and Defending Value in Traditional and Digital Business Models

Innovation is disrupting each industry from the beginning of the industrial revolutions when the first car was manufactured, people were demanding horses and preferred horse over. That they can still use horses as compared to the fast movable car. Evolution is in process and will be in process and Business models will change over time

Creating Value for Traditional Business Model

In the traditional business model in the car industry, creating value is driven by people who want to use a car to travel from one place to another place so this needs which companies tried to solve this problem they create value in a traditional business model.

Creating Value for Digital Business Model

In a digital business model regarding creating value is about creating connected cars, connected with other digital applications to make the task easy.

Delivering Value in Traditional Business Model

For delivering value for the traditional way, it will be making cars in manufacturing industries.

Delivering Value in Digital Business Model

For digital Business models delivering value is integrating cars with software and other applications, by using software developers, artificial intelligence, and integrating machine learning to navigation auto, weather updates, auto parking suggestions and to create a car combined with these tools will be delivering value for the digital business model.

Capturing Value for Traditional Business Model

Capturing value for traditional this model will be selling cars to distributors worldwide.

Capturing Value for Digital Business Model

Capturing value for the digital business model will be not only selling cars but sell premium applications along with car and payment services based on software usage.

Defending Value for Traditional Business Model

Defending value in the traditional car business, it will be it is brand equity brand image and brand value.

Defending Value for Digital Business Model

In the digital business model value is defended by developer circles and networks.

___________________________________

Part 2

Asymmetrical Business Models - Creating An Unfair Advantage

Apple

Ios - Software platforms connecting app developers with suers, apple offer carriers to data-heavy usage in return get a range of accessories with subsidized rates.

Apple Network Effect

• More devices
• More Apps
• More Users
• More Device Companies
• More Demand for Apple Phones

Apple Traditional Business Model

• Create Value - Unique Products
• Deliver Value - Devices own apps
• Capture Value - Hardware sales
• Defend Value - Brand

Apple Digital Business Model

• Create Value - 1.5 M Apps
• Deliver Value - 3rd party apps and accessories
• Capture Value - Hardware sales
• Defend Value - Developer Ecosystem

Google Network Effect

• Playstore
• App Developer
• Users base of 2 billion
• Ad revenue for the app developer
• Adword
• Nearly impossible to copy of Developed ecosystem

Facebook Network Effect

• Ad business
• Users
• Developer
• Smartphone platform
• Telecom operators - Free-Net
• Handset makers - Pre-installed App
• Connecting 1 billion users
• Social Users

Facebook Traditional Business Model

• Create Value - News & Social Exp
• Deliver Value - FB - Messenger
• Capture Value - Ads
• Defend Value - User Reach

Facebook Digital Business Model

• Create Value - 3rd Party Apps
• Deliver Value - 3rd Party Apps
• Capture Value - User Profiling
• Defend Value - Developer Eco System

Amazon Traditional Business Model

• Create Value - Discover Buy Goods
• Deliver Value - Online Store
• Capture Value - Revenue Commission
• Defend Value - User Reach

Amazon Digital Business Model

• Create Value - Services to control my life
• Deliver Value - 3rd party apps - web & kindle - Echo - Dash
• Capture Value - User Profiling
• Defend Value - Developer + Affiliates AWS

Xiaomi

Only for fans, minimum profit, building a brand for having a loyal user base. and comfortable power experience of Home IoT connected with mobile phones.

5% Global smartphones - $40 Billion

Xiaomi Traditional Business Model

• Create Value - Quality and affordable phones
• Deliver Value - Online Only
• Capture Value - Revenue
• Defend Value - Only for Fans - Flash sales

Xiaomi Digital Business Model

• Create Value - Home IoT
• Deliver Value - Mobile Apps to connect with Home IoT
• Capture Value - Device revenue
• Defend Value - Exp Roaming - addicted user experience

Tencent Traditional Business Model

• Create Value - Free Call Message
• Deliver Value - Wechate App
• Capture Value - Ads
• Defend Value - User Base

Tencent Digital Business Model

• Create Value - 12 Million Apps
• Deliver Value - WeChat App
• Capture Value - eCommerce and Payment Platform
• Defend Value - Develop Eco System

Asymmetric Business Models

• Reducing the price of one element to increase the overall demand for the main product
• Easy Development Apps generate demand for Apple
• Free Android License for maximum app generation
• Amazon affordable devices - eCommerce Traffic
• Complement is identified
• decrease the price of the element
• Complement is bundled with the core product
• Provides unfair advantage towards competition
• Google Android - Competitors thought google moving for Hardware
• Apple launched App Store - Telecom thought Apple moving towards media business, ringtone

Take Take-Aways

• Apple was able to grow and defend the sales of iOS devices by using a combination of network effects between users, developers, network operators, and accessory makers.
• Apple’s ability to deliver a superior User Experience to its users, The visionary leadership of Steve Jobs, and The unique combination of a browser, music player, and phone in a single device for the first time.
• The most popular smartphone operating system in terms of units sold is Android
• Google’s core business is Advertising.
• Apple’s iOS and Google’s Android capture value from Facebook because Facebook is a killer app that drives demand for iOS and Android.
• Amazon is a well-established online retailer. Amazon works with mobile affiliates to, Allow affiliates to resell Amazon goods from within their apps, Amazon acts as a superior buyer of goods on behalf of the affiliate, Offer distribution and delivery on behalf of the affiliate.
• Amazon defends value through, Its network of developers that are web and mobile app affiliates, Its network of developers producing apps for Kindle and “skills” for Echo, Its AWS business that acts as a negative IT cost to the Amazon business
• Xiaomi defends its extended device business through “experience roaming”, mean "Services interoperability across devices, so that services roam seamlessly from device to device".
• For Xiaomi, smartphones are The means to acquire a user base for selling their own products under its Mi brand.
• When the price is reduced by gas, more people will buy cars.
• Taking Average Revenue Per User into count, WeChat users are seven times more valuable as compared to a WhatsApp user.
• WeChat delivers value through its ecosystem of 12 million apps
• A central concept in asymmetric business is the economics of complements. mean "When you reduce the value of the complement, the demand for the product increases", "When you reduce the value of the product, the value of the complement increases", "The value of the complement is inter-dependent on the value of the product".
• A functioning Asymmetric Business Model needs to fulfill the following condition, "A company has identified a complement in a different industry", "A company commoditizes that complement", "The complement is bundled with the core product of the company".

Four Asymmetrical Business Models

Xiaomi

The first example how Xiaomi sells affordable smartphones with minimum price and capture value by offering additional integrated devices with mobile phone applications, to automate the home, automate car, to receive weather updates, and other useful applications.

Amazon

Amazon is also following the model of the asymmetric space is creating an ecosystem of its products around and selling its services to the user like cloud services, E-Commerce services, producing apps like Kindle, and skills for an echo.

IBM

IBM is offering cloud services on minimum price as a tactic to onboard users initially and then offer premium services afterward changing is process model from hardware to software and trying to capture the market before it's created like for blockchain, it's transitioning from selling processes to IT-based solutions.

Microsoft

Microsoft which bring our services like one drive and official communication tools, it has freemium services for those who cannot afford and premium if anyone wants to adopt Microsoft official communication to use, he can convert to a paid customer some Microsoft is following an asymmetric business model to extend its user base.

___________________________________

Part 3

Developers - Decision Makers

• Developers are new decision-makers, act upon as influencers regarding the purchase of new software, or onboarding of premium software services.
• In 2013 IOS and Android captured 95% market share of mobile OS
• In 2020 IOS and Android captured 99% market share of mobiles OS
• 20 companies failed in between 1990 to 2010 before the hype of Android and IOS. They failed because of customer satisfaction and small addressable markets. 
• Android and IOS emerged desktop computing to mobile with friendly user experience
• Opened for any software developer to contribute, directly to millions of users
• Android platform was designed for the needs of developers rather than the needs of handset makers
• Microsoft acquired Nokia Mobile business
• Microsoft was unable to compete with Android for having millions of independent developers network
• Blackberry also faced a decline in sales
• IOS and Android are the main targets for App developers
• Apple facing a shortage of professionals to fill roles to contribute to the ecosystem of developers
• Developers are moving towards AR, VR, Data Science and Machine Learning Tech

Type of developers and revenue streams

• Hobbyists - Fun
• Explorers - Looking for future opportunities
• Hunters - Revenue Generation Subscription
• Guns for Hire - Revenue generation for commissions
• Product Extenders - Product extenders
• Digital Publishers - Use software to monetize digital content
• Gold Seekers - Raising funding
• Enterprise IT - Organization efficiency and reduce cost

Key Take-Aways

• Symbian was a popular mobile operating system for mobile devices that came before Android.
• Software is becoming essential to compete in the industry after industry which has coined the term “Software is eating the world”. 
• The term “software developer” is used abundantly these days. A software developer is an innovator and engineer who is involved in the design, development, and testing of software code.
• In the space of the last 10 years, Android and iOS have dominated over 20+ now-dead mobile software platforms. What characterizes the domination of iOS and Android is that they were the first mobile platforms to Include an app store, Be designed with developers in mind, and Be offered at no cost to handset makers.
• The most popular primary mobile platform among professional developers globally is now Android.
• The largest share of professional developers is found within the following domain of development Desktop apps.
• As a developer, the highest likelihood of being above the ‘app poverty line’ lies within the Cloud domain.
• Today, software developers within an organization are typically responsible for Influencing the purchasing decisions made by the CIO or head of engineering.
• In 2016, iOS and Android accounted for approximately 99% share of smartphone sales.
• Apple and Google were the first to launch mobile operating systems whose primary customers are Software developers.
• One of the key challenges for Apple’s iOS going forward is, "The high-end of the market is growing slower than the total market, so their market share is gradually shrinking.
• Developers are segmented to make better software decisions taking into account outcomes and goals.
• The predecessor to Apple’s Swift programming language is Objective C

Segments of developers, what drives and motivates, and general characteristics

Hobbyists

Hobbyists developers are those who pursue the software development field make digital projects as a hobby and fun. They do not expect revenue as a primary source from the project.

Explorers

Explorer software developers are those who develop software digital projects for expecting to capture future opportunities, by showing software projects as a skill set to the potential Hire, investor, or collaborator.

Hunters

Hunters are those software developers who make software projects to generate revenue following the subscription business model.

Guns for Hire

Guns for hire are those software developers who make software projects to generate revenue in terms of commissions.

Product Extenders

Product extenders are those software developers who work to increase features of the software product and extend its workability.

Digital Publishers

Digital publishers are those developers who monetize digital content and use software to achieve this goal.

Gold Seekers

Gold seekers are those software developers who work to make software projects to generate funding.

Enterprise IT

Enterprise software developers are those who make software projects to increase the efficiency of the organization and to reduce costs.

___________________________________

Part 4

Software Innovators to Resellers

• Amazon, Apple, and Google were able to attract millions of developers for having frictionless and permissionless working criteria for developing Apps
• Oracle and Brew required long contracts to develop Apps for their platforms - were thousands of developers
• Developers are engines of Digital Business Model

Developers Crate Value

Apple is able to offer millions of apps for extending features of a product

FedEx is extending product features by offering eCommerce integration functionality

Developers Deliver Value

Help to deliver the product in new markets

A role of distributor or reseller

Uber works with developers to integrate with new Apps and services to increase its customer base - Hotel & Airlines

Amazon incentivize developers for affiliate selling physical and digital products via games and apps

Developers Capture Value

Data Brokers

Ability to generate revenue

Twillio can generate $100 Million yearly revenue by providing API and services helping developers to integrate call and message functions with Apps

Twitter offer suite of a tool kit for the developer to collect user data by third parties

Facebook works with many services to login using Facebook identity services to harvest more user profile for better targeting

Developers Defend Value

IOS and Google were the first to manage network effect

Nokia, Microsoft, and Mozilla were not able to compete because of late, despite investing Billion of dollars 

Develops as Product Extenders

Apple - More than 1 million apps, could not have built or imagined that much features

Key Take-Aways

• Developers can innovate without permission – they can just download an SDK, read the documentation, and start building code on top of that platform.
• SDK stands for in the software industry "Software Development Kit".
• Developers extend the iPhone by building apps for every imaginable user need and niche.
• The notion of the “app gap” describes The vast divide in the number and the quality of apps available for iOS and Android versus the latecomer platforms of Microsoft and Mozilla.
• Developers are tomorrow’s innovators because they add value to Apple’s business model by Building iOS apps that Apple would never risk building.
• Walgreens, the largest drug retailing chain in the United States, works with developers to boost sales of its digital print services. Developers earn a commission with every photo order that’s placed through their app.
• Uber – the transportation services company – is one of the strongest internet brands and also acknowledged as the biggest disruptor of traditional taxi services. Developers can extend the Uber product by Building a “request-a-ride” button within their app.
• The company Twilio has built a multi-million business based on APIs. Twilio offers basic telecom services like calling and texting for a small fee to developers.
• Automatic.com is using developers to extend its product. Automatic.com helps developers connect to Modern cars.
• Amazon launched its affiliate program for web developers in 1996.
• Developers are important in the Value creation part of the business model.
• Developer offering is a leading indicator to assess how prepared a company is for the digital future.

Paypal Creating, Delivering, Capturing and Defending Value

From the Inception and starting of Paypal, software developers are the core pillars for Paypal.

Create Value

Paypal creates value by providing services to control financial transactions globally maintaining transparent systems to receive products and pay to vendors.

Deliver Value - third party integration

Paypal third-party integrations, third parties like e-commerce websites, online stores, and vendors helping buyers and sellers by playing the role of mediators who made the transparent transactions possible.

Capture Value

Paypal Capture Value by receiving commissions from the transactions that happened between buyers and sellers online using their API and software.

Defend Value

Paypal defends value having a vast number of software developers circle globally, which is hard to compete and copy. For having initial adaptability from the starting of the dot com bubble, Paypal providing transparent transaction workability at a global scale.

Conclusion

The success of digital companies is based on harvesting and selling user data. Governments use the internet to monitor, manipulate, spy, change public opinions, and undermine the freedom rights of citizens. Virtual Avatars are managed by organizations to represent projections based on the history of intersections; companies use this information to monetize.

Identity is ours, whether given by family or other institutions but the data that comes from its intersection in the world is owned by someone else.

Digital Business Models will have to make the user be the owner of his data and ability to control which information to share with others depending on the situation.

The success of such initiatives will help world regulatory bodies to prepare regulations according to emerging technologies and transform systems to achieve Transparency structures.

In this privacy critical time, a lot of companies are working to enable Dot Com to Trusted & Distributed systems by maintaining the integrity of user privacy.