Digital Business Models

Digital Business Models

A business model defines how a business makes money. A digital business model is therefore a recasting of the question in terms of what it takes to do this digitally; so far, so good. But it would be a mistake to just think of traditional business models as needing just a tweak to make them 'digital'. For a start, digital ecosystems tend to be much more: connected, real time and modular, each with huge implications on how we capture value in a business.

So what is it that makes a business model digitally robust and different from traditional contexts? This question was addressed by the authors of an article at MIT Sloan Management Review (Spring 2014). It draws on the findings of a two-year research project at MIT's Center for Information Systems Research (CISR) and posits that a digital business model has three components: 

1)    content (what is consumed)

2)    customer experience (how it is packaged) and

3)    platform (how it is delivered). 

The research team interviewed CIOs and CEOs about the challenges of operating in a digital world. They also analyzed financial performance data, looking for patterns of best practice. They concluded that a great digital business model needs to challenge the traditional physical business model that relies on places (e.g. bank branches) and people (e.g. sales teams) to delight customers. They see this challenge along three key axes: who owns the customer interface, how to re-configure business processes and how to make customer data an enterprise-wide resource. Let’s have a closer look at the components of a digital business model:

1. Content

  • When transitioning, to a digital business model especially in an industry that has not gone fully digital, it is important that the digital content exactly mimics the offline content; An example would be Tesco (retail store), which provides online services (as well as a physical store of products) that mimic the physical world; you are able to view items and read information about them, almost as you would in a store.
  • The next thing would be to also provide alternative products/services that can only be accessed online i.e. unique to the internet, but offer added value, through its utilization of the internet. Tesco have an online movies/TV store as an alternative to their physical DVD/Blurays for the price (per month) of one cheap DVD.
  • If a business model is designed to be only digital from the beginning like the DigitalMR business model then things are slightly easier. There is no legacy content to try and mimic. As an example eListen, DigitalMR’s social media listening tool, is a service that can only be accessed online, it can harvest and analyse comments from any public website on the planet: something that would be impossible to do offline.

2. Customer Experience

  • Making the products easily accessible to your customers is key. Software as a service (SaaS) seems to be the buzzword on service delivery for some time now. The service has to be user-friendly, this enables the customer to use the service on their own (with no human interaction from the supplier) and receive the “goods” that they expect and when they expect them.
  • As an example, in the case of DigitalMR, we also deliver ready-to-eat reports with insights, conclusions and recommendations if our customers do not have the skill-set or the resources to deploy the SaaS within their organisation.

Understanding how your customers use your digital platform is key to optimising the experience for them; not all customers will use your platform for the same things or use it in the same way.

3. Platform

The Platform that this service is provided on must be strong both internally and externally:

  • Device Agnostic -  if it is a website, that means using responsive layouts, so that the webpage adapts to the size of your screen (check the DigitalMR website out on your mobile device to see what we mean)
  • Web Usability – This means that before a digital platform is launched it has to be tested for usability by current and/or prospective customers. There are multiple user experience tools out there that can help a company come up with a user interface (UI) that delivers maximum business result e.g. high conversion and low bounce rates.

At DigitalMR, we can help companies to  design their digital business model in a variety of ways: by making sense of big data, harvested through social media listening and deploying online communities for customer insights and co-creation, making both enterprise-wide resources and even more exciting, combining the two platforms in order to find and engage influencers for customer advocacy.

If you are considering a digital business model extension, we would like to hear from you.


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