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2019-01-29

Digital business model – to have or not to have, is not the question

2019-01-29
Do we really need to have digital business models? What is the difference compared to the ones we have always had?

In a recent blog post I referred to the book “Digital business model” by MIT CISR, which describes the digital landscape and what it holds in a structured and easy to apply manner, and also answers why it is crucial to switch to a digital business model.

The digital economy crave digital business models as does digital transformation. Most, if not all businesses are or will be affected. If you want your business to survive and thrive in the digital era you will have little or no choice but to adapt. So if you have not already, start your journey towards your new business model!

Easier said than done maybe. But a bit easier if you go about it the same way you eat an elephant...one bite at a time. 

So where to start? What could be the first bite?

MIT gives us a bunch of questions that we need to address and discuss in order to reach a new and functioning business model, fit for the digital era. The questions are gathered under 6 different headlines, each addressing a vital step on the way.

Summary of the 6 steps towards a digital business model:

1. Digital threat and opportunity

  • To what extent will your business revenue be put under threat by the digital transformation within the next 5 years? Think percentage. This will help you to allocate enough budget and resources. And will also get you started on your business model transformation path.
  • And equally important, the mapping will reveal what opportunities to pursue.

2. Business uniqueness

  • What makes your organisation stand out? What is you world class feature? And how can you turn that into success with digitalisation?

3. Competitive advantage

  • Which competitive advantage do you excel at? Note – it has to be one or more – otherwise you will have to start making some business surgery to fix this challenge.
    • Platform – how your value proposition and brand is delivered to your customer (internally as well as externally)

    • Customer experience (CX) – digitized interactions with your customers across multiple channels, ease of communication/input, interfaces

    • Content – products and information

4. Connecting with the help of APIs, IoT and mobile

  • Build a robust mobile strategy, examples of successful ones:
    • Mobile first – make sure all innovations are available and launched on the mobile channel.

    • Targeted segment – make unique offers for different segments

    • B2B2C – find and connect to end customers directly if you don't already.

    • Multichannel – integrate across your channels, this will give you an improved CX.

    • Brand enhancement – try to increase engagement from your customers by offering useful (and free) brand enhancing services.

5. Core capabilities

  • Where are you at and which position are you aiming for? What is your primary domain in the market, and how can you make your organisation the go-to choice? Theses are questions of reinvention. Two crucial strategic tasks to succeed at:
    • Becoming “two-handed”, by innovating and cutting costs simultaneously

    • Build a digital culture and structure – shared values, beliefs, traditions, and assumptions about digital – that will guide behaviours

6. Leadership

  • Do you have the leadership to make it happen? You can apply below three changes for a successful transformation:
    • Single out the cultural elements needed for change then demonstrate and reinforce them repeatedly 

    • Communicate the transformation both internally and externally

    • Make transformation choices from the top down, set timelines and KPIs, pick key people to lead the change

 

After having finished all steps you will be able to formulate a new digital business model, and determining which of below your organisation comply with and what to aim for:

  • Omnichannel (excels at CX)

    • Banks, retail, energy companies

  • Supplier (excels at content)

    • Insurance via agent, TV via retailer, mutual fund via broker, software via supplier

  • Modular producer (excels at platform)

    • PayPal, Kabbage, Swish

  • Ecosystem driver (excels at CX, content and platform)

    • Amazon, Fidelity, Tripadvisor

Hard work and determination

However digital transformation is not an easy task, it demands hard work and determination. But embarking on that journey will make you well suited for the digital era, able to benefit from is vast possibilities.

Written by Susannah Eriksson