Today, the digital age has created a demand for new business models to move with the growing reality; these new models are digital models. This is because we are in a time where customers have quick and convenient access to any product and service online, and to stay relevant, companies or businesses need a digital business model for complete digital transformation by adopting new technology to enable them to transform the way they do business.
To properly accommodate this innovation, most executives now have a basic understanding of technologies like Artificial Intelligence, Machine Learning, Big Data, IoT, and Digitalization/Digital Transformation
Most importantly, in digital business models, companies or businesses rely on or employ technologies that not only deliver products and services but also provide personalized and meaningful customer experiences which make digital strategies critical to brand’s success. It is important for many reasons but the overarching goal is to make businesses more adaptable to evolving consumer habits, also crucial for acquiring customers as well as retaining existing ones, it gives access to data-driven insight, since every customer interaction that happens in the digital space leaves an auditable trail of data that can be use to continuously improve offer and add value.
This is how businesses can create, deliver, and capture value in a digital economy. It is a model that leverages digital technologies to improve several aspects of a business or an organization. In other words, digital business model is basically, how a business makes money online or how a business uses the internet to exchange its products and services for profit.
In a digital environment, business models are dependent on technological progress and innovations. Therefore, building a digital business model is a constant work in progress because new technologies emerge which makes demand grows, and so should supply. In that connection, what defines a successful framework is the capability to develop, adapt, and scale
Being Digital is not just about the product/service. For example, When you create an ebook, sell it on the web and you call your business a digital business. Sure, that is a digital product but the fact that your product is delivered digitally doesn’t make it a digital business, it is not just about distribution.
There are a few other things to take into account.
Like building a website for your business, call it a platform, and you have a digital business. The website is just like a physical window shop, in order for you to create a sustainable flow of customers/partners/users you need to make it scalable. That requires understanding what models fit best for your business and the potential customers/users identified.
The things to take into account are detailed as follows:
A simple business model that delivers enough value to potential customers will get you through the first growth stages same as any digital model. If you look at a business model like Google, you think of it as a complex platform from the start. However, it took years before Google develop all the building blocks (former Google AdWords, and Adsense) to make it extremely scalable. Initially, Google was just closing advertising deals on its search pages leveraging on salespeople, just like a traditional organization.
For a business to build on any stage of digital innovation and trend, it has to leverage its growing digital infrastructure and evolve within time in other to push to another stage of growth.
It took Netflix decades to become a viable streaming platform. Before that, it was primarily a DVD-rental company in 2019, and when video streaming became technically viable, Netflix’s business model also evolved, thus making the company surf a different market (video streaming) rather than DVD rental.
It took Netflix decades to become a viable streaming platform . Before that, it was primarily a DVD-rental company in 2019, and when video streaming became technically viable, Netflix’s business model also evolved, thus making the company surf a different market (video streaming) rather than DVD rental.
When Google finally built its two primary ad platforms (AdWords, now Google Ads and AdSense) its business growth picked up together with its traffic growth. While Amazon AWS is now a company within a company because the infrastructure helped Amazon build a more scalable business model and push to a different stage of growth, probably not possible without the contribution of AWS. Yet, what would later become AWS only started to be developed in 2000 (Amazon started in 1994). And only after a few stages of hyper growth do the company goes through.
Making a digital model business successful requires mastering new ways of looking at your business. This primarily revolves around a key pillar (your customers/users) and the following few elements.
Building a digital product/service requires a mindset that goes from something scarce to something potentially unlimited.
Think of how platforms like Google have to spend billions to keep operating their digital assets by also investing in massive physical infrastructures (data centers) and those products often leverage network effects.
Banking on a digital distribution means understanding the various channels existing on the internet.
Some of the channels you might want to take into account to enhance your business are:
When the value proposition of a given service is dependent on digital technologies, then we have just one big indicator for a digital business model. Companies such as Amazon, Alibaba, Facebook, Google, etc. wouldn’t be possible without the use of the Internet.
A digital business model value proposition can often be delivered by providing the upside without the downside.
Like how Google makes you search for anything without having you to bring an encyclopedia in your pocket. They add value in ways that would be impossible without the use of digital technologies. For example, companies like Uber or Airbnb wouldn’t be possible without digital technologies.
The idea behind this model is to offer a service for free, making the user the end product. The online user provides valuable information that helps the company easily display targeted ads.
This model is employed by two of the most famous companies in the world, Google and Facebook, they are good examples of how to make use of the ad-supported and “free” business model. In the case of Google and Facebook, every user who is using the services is giving valuable information about himself. With this data, it is then easy to display ads that the companies can buy and target specific users.
This model is commonly used in the software world and it's one of the most commonly seen digital business models that allow users to get free access to a basic version of a product. This version may be somewhat limited, but the user has the option to upgrade and pay for a premium version should they want additional features.
A great example is Spotify. Everyone can use the service for free (and get advertisements) but when you want more features and higher quality, then you need to pay a monthly subscription.
This model refers to a virtual product or service. In this case, it is not a physical product you are getting but a virtual product or a service such as online video stores like Amazon Prime Video or Apple TV where you can watch a video for a certain period of time.
Another good example of this model is the freelance and gig economy platform like Fiverr, Upwork, UpCounsel, people-per hour etc where you book an individual and get charged based on the project.
Today, eCommerce is one of the best-known business models on the web. One of the first and by far most successful companies to adopt this digital business model of selling physical products online was Amazon.
This model is something we see quite often on the internet. It is a two-sided marketplace where sellers and buyers use a third-party platform to trade their goods and services. Examples of this business model are service-based Uber and product-based eBay and Etsy.
The two-sided platform needs to carefully scale demand and supply at the same time to keep both sides attracted.
We're all familiar with Netflix and Office 365. These products are good examples of the classical subscription model where a user gets access to updates, services, etc. on a monthly/annual basis. The subscription model is especially used for content, software, and memberships
Digital ecosystems are currently one of the most complex yet robust digital business structures. Alibaba, Amazon, Apple, Google, Tesla, and other ecosystem orchestrators exploit the customer with various services across several platforms. Consider what services you use from Amazon, Apple, Google, Alibaba, and other companies, and how difficult it would be to leave their digital ecosystem, and digital services and choose something else.
One of the most successful open-source examples is Firefox. The software is free to download, free to use, and open for the community worldwide to contribute. Because it’s free and a lot of people contribute it spreads fast and usually also gets a lot of free resources to improve the software.
Firefox's business strategy relies on search engines for royalties and partnerships.
Because you might not be able to exploit the software for a sustainable business model, open source isn't necessarily a business plan. Red Hat distributes Linux for free and then makes money via training, services, and hosting.
Irrespective of your brand, creating a successful digital business strategy is important in other to achieve digital success
When you leverage the power of technology to build your business, you will go through a digital transformation.
Outline what your business is, your goals and visions, and how you plan to achieve them.
Narrow your audience down to two or three buyer personas. Outline the solutions that your company will offer.
How will your company stand out among the competition? Establish what differentiates you.
Select key partners and strategic alliances that can best help contribute to serving your customers.
When developing your business model, leave room for future innovation. It’s important to ensure that your plan meets the needs of your customers.
The growing digital trends and the Fast-changing consumer habits, driven by ongoing disruption and uncertain economic times, are placing more pressure than ever on companies to adopt scalable digital business models, employing the use of an online strategy and an efficient digital business model.
Meanwhile, offline businesses that want to stay relevant invest in digital transformation, looking for ways to adapt their services to the digital environment.
By exploring the opportunities the internet presents, companies can create new ways to make their customers happy, and grow their revenue.
