The Rise of the Digital Business Model
Claudia Pilgrim, ICP-MKG
Business Intelligence Architect | Data-Driven Digital Strategist at Capital Consulting Group, LLC
Digital Business Models: How to Redefine Your Company in a Digital Era
Digital has changed how we live, work, and do business. Amid this transformation, many organizations struggle to adapt to new business models and technologies. Digital Business Models (DBMs) provide companies with a powerful framework for thinking about their future in a digital era.
Today's business leaders must embrace being apprised on tech and data advances. But more importantly, be willing to examine and adapt toward business models which are more agile, transparent, and dynamic.
In this issue of #DigitalAnalytics Monthly, we'll define and look at the impact of digital business models on:
Key Components of Digital Business Models
What is a Digital Business Model???
Digital business models enable companies to use digital technology to increase their value, reduce costs, and drive growth. They are defined by an ecosystem of people, processes, technology, and data working together to create a more efficient, effective, and profitable business.
Digital business models have become much more common in recent years as organizations have moved away from traditional product-centric models to ones focusing on customer experience and value.
Larger well-known companies who’ve utilized digital business models are: Amazon, Uber, and Netflix, who leverage what Gary Fox calls the on-demand economy. The on-demand economy is characterized by its ability to deliver services anytime without customers needing to interact with employees or physically visit brick-and-mortar locations.?
Digital technologies facilitate easier communication, efficiency, cost-effectiveness, and responsiveness for companies.?
Key Components of Digital Business Models
When it comes to digital business models, there are several key components that borrow from traditional business models but bring in digitization:
Assessing Digital Business Models For Your Company
There’s been much hand-wringing about organizations needing to change their business models. Some companies have made changes, while others have not.?
But how do you know if your company needs to change??
The first step is to take stock of what's happening in your industry:
??Has there been an influx of new competition??
??Is there a new tech trend everyone is talking about??
??Are there new regulations that could affect your business model??
If so, then it's time to do some research quickly (...psst, we can help).
If a lot has changed in the last year, you should consider how those changes will affect your business model.?
For example, if a regulation has changed or your competitors have made changes to their business models, which gives them better access to new markets, you may need to rethink your strategy.
How To Develop A Digital Business Model
While the how varies from company to company and your industry, we’re going to give a few broadstroke starters for your consideration:
?? Identify your company's strengths and weaknesses
?? Define the core competencies of your business
?? Identify the target audience based on data analysis
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?? Revisit the core values of your business, including what makes you different from competitors and why customers should choose your products or services over those offered by others
?? Check the mission statement for your organization you’re looking for if it defines its purpose in clear, concise language.
The Digital Model Shift
Digitalization has changed how we think about business, making the old ways of doing things ineffective. Companies have been working towards adapting their approach to digital since the 2010s.
So why then are so many businesses still struggling to make this transition? The answer is simple: they lack a digital strategy to guide them through it.
Digital business models combine traditional business practices with new technologies and processes. In a world where everything is connected, digital business models help businesses succeed.
And what we know is more companies are re-evaluating their models to compete in the digital landscape.
The Necessary Change
Being in a digital economy, consumers are constantly connected and informed across digital platforms. They have access to information and opinions at their fingertips and can make decisions based on what they learn. As a result, companies have seen consumer behavior change dramatically over the past several years.
The Census Bureau of the Department of Commerce found 2.8% of all retail sales were made online in 2021. Conversely, the second quarter of 2022 saw online sales make up nearly 14.5% - or $257 billion - of all retail sales in the U.S.
Take a moment to think about the type of data consumers generate on a daily basis and how YOUR industry could leverage the insights to better position pricing decisions and demand predictions.
Technology will continue to evolve and because of its rapid changes companies will face new challenges regularly but with new challenges comes exciting opportunities to adopt and put into practice digital business models to stay competitive. This shift in company adaption to consumer behavior necessitates business innovation in order to respond to consumer trends.
Optimizing Your Existing Business Model
While digital transformation is currently forcing companies to rethink their business models, it is not a silver bullet. Digitalization offers new opportunities, but also brings numerous challenges.?
The key question is how to optimize your existing business model to stay relevant and ahead of market demand.?
Here's how::
? Analyze where your current business model is falling short and why it's not working as well as it should be
? Determine your company's goals for the next year and beyond so you know what changes need to be made before implementing any new technology
? Identify areas where you can use automation, such as tasks done by multiple employees that can be automated using software or streamlined
? Consider efficiently designing workflow processes with the right technologies and systems?
? Use automation tools, which allow you to scale up or down depending on customer and market indicators, without hiring or firing people based on demand fluctuations
Embracing Tech
Disruptive technologies challenge existing ways of doing things, often with innovative solutions. Examples include 3D printing and artificial intelligence (AI), which have disrupted both manufacturing and retail.
When a company embraces disruptive technologies, they do so by adopting them into its operations. You can integrate new software with existing systems or make new products based on the technology.
For example, Amazon has used AI to develop its voice assistant, Alexa. It has also used 3D printing to reduce manufacturing costs and make its products more accessible to customers.
By 2023, Gartner predicts blockchain platforms to be scalable, interoperable, and capable of supporting smart contracts and cross-chain functionality. Additionally, they will support confidential private transactions.?
Embracing disruptive technologies enables you to be more flexible and agile, leading to more opportunities for your company. It will also allow you to explore new ideas, reinvent old ones, and develop new ways of doing things that may not have been possible.
Digital business models are essential to company survival in today's economy. Organizations must be willing to redefine the incorporation of becoming a digital entity, embracing new ways of thinking and working. This will require organizations to think about how to use technology to create value for their customers and employees while being more responsive to organizational changes.
If you are looking for more information on how to implement digital business models for your organization send me a DM or let’s get on a call so we can get started.
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Navy Veteran|Empowering Businesses to Harness the Power of Digital Transformation and Drive Marketing Success
2 年Great article...let us not forget that leadership must make a shift as well and there is the conversation of Change Leadership-Training for the Future.