Seventy-nine percent of strategy leaders expect their business models to fundamentally change as a result of digital technologies. Digital business models reflect how an organization creates, delivers and captures value based on four key dimensions:
Value proposition. The value customers derive from a product or service.
Customers. The customer segment served by the product or service.
Capabilities. The physical and digital assets, people, culture, information sources and strategic partners that deliver the value proposition
- Finance. The revenue and cost models that capture economic value.
Yet few organizations perform business model assessments as a regular management exercise. Instead, they wait until major economic changes or disruptive competitors force change. In the context of digital transformation, it’s better to conduct a business model analysis to identify strengths, weaknesses and opportunities, and from them explore more effective strategies to create value.
As part of the analysis, assess gaps in the existing business model in core and noncore markets; assess environmental shifts likely to drive major industry changes; prioritize the most promising opportunities to develop future capabilities, leverage firm assets or to build technological capabilities.
Twelve digital business value model:
Examples of digital business models that may enable the organization to capture identified sources of value include the following:
Build a repeat customer base by charging a subscription fee for continued access to a product or service that is traditionally purchased ad hoc (e.g.,, Netflix, Ipsy, Dollar Shave Club).
Razor and blades model
Sell the base product at low cost while selling add-on or complementary components at a higher margin (e.g., Amazon Kindle, Nespresso, Sony PlayStation).
Sell an interconnected and interdependent suite of products and services that increase in value as more participants (buyers and sellers) engage with them (e.g., Apple, Google, Samsung and their app developer communities).
Provide temporary access to goods or services for participants in the rental and sharing economy (e.g., Airbnb, Spinlister).