Digital transformation became an existential imperative for organizations striving to prosper in today’s continuously evolving market. Yet, capturing the value of technological advancement can come as a daunting challenge. Businesses face a defining fork in the road. How do you support new growth vectors and adequately allocate resources to meet strategic objectives? What are the efficient ways to measure your digitization efforts? And how do you restructure and change while being committed to your core business model?
In this article, we will take a closer look at digital transformation business models so that you can confidently reset your organization’s DNA and benefit from a future-back approach to change.
Types of Business Transformation
Today, businesses deal with complex, interconnected, and interdependent challenges that highly rely upon different stakeholders and agendas. Business transformation models reflect this reality, demonstrating how companies change in accordance with specific transformation factors. They greatly contribute to a better understanding of how companies can swiftly navigate changes and adjust their operations to the market’s requirements. Below are four key types of business transformation that characterize organizations on their business development journeys:
- Slow-motion transformation. This type of business transformation is designed to foster a long-term vision of change, with organizational leaders crafting a strategy to reach defined goals in the future. Slow-motion transformation requires continuous learning and commitment that should persist in the chosen period. Cultural changes and corporate turnarounds serve as prime characteristics of this model.
- Sprinted transformation. When the company starts challenging the status quo and designing dynamic changes, it is the right time for sprinted transformation. Businesses typically implement corporate restructuring or introduce new strategic initiatives to meet the internal need for change. In this way, one of the significant challenges for the organization is to support the commitment to radical changes while making a positive impact on its operations.
- Negotiated transformation. External forces and evolving market demands usually drive this type of change. In this case, companies are likely to respond slowly to new external conditions and show significant stakeholder management efforts. Negotiated transformation is a long and multidimensional process that requires solid analysis and skillful preparation of the business.
- Hijacked transformation. The current business landscape is prone to dynamic, disruptive changes that often go beyond one’s predictions. Political and economic instabilities or the entrance of new competitors are typical examples of rapid, unpredictable shifts that directly impact organizations’ functioning. One of the greatest managerial challenges in this scenario is to swiftly navigate the company’s adaptation to new realities while remaining effective along the way.
Business transformation relies highly on specific circumstances and an organization’s goals. Yet, the company’s ability to swiftly adapt to the new reality and stay relevant to its customers can serve as a baseline for its future growth. Modern digital transformation business models offer a much-needed solution for these multidimensional challenges and can be a way out for entrepreneurs who are trying to find their competitive edge.
Digital Business Models: Values and Characteristics
In the current business landscape, business transformations are driven by a number of factors. The ever-changing nature of technology, the globalization of markets, and the need for businesses to remain agile and responsive to customer needs are just a few driving forces behind business transformations. As companies attempt to keep up with the hectic pace of change, they are often forced to re-evaluate their strategies, operations, and business models. This can result in major changes to the way businesses operate, which can be both challenging and disruptive. However, by being prepared for change and embracing it, companies can use transformation as an opportunity to improve their competitiveness and position themselves for long-term success.
Crafting a reliable business model transformation can be a daunting task, as it requires a comprehensive understanding of the current business model and what should be changed to meet the new business objectives. The process also involves identifying the right partners and suppliers and developing new transformation methodologies and policies. A company undergoing a business model transformation needs to carefully consider all aspects of the business in order to make the transition successfully. With the right approach, business model transformation can help organizations unlock new growth and create a lasting competitive advantage.
Digital Business Models
Digital business models offer a much-needed response to these challenges. Relying on top-notch digitalization tools, they help organizations hone their competitive advantage and use technology for continuous growth and progress. In addition to better monetizing assets and providing customers with access to new technologies, companies can improve their value proposition and safeguard their differentiation in the long-term perspective.
Over the years, digital transformation business models have come to bring unprecedented value for worldwide organizations as they offer:
- Increased outreach. With a digital business model, you can reach a global audience with ease. There are no geographic boundaries.
- Lower costs. Digital business models are often less expensive to operate than traditional brick-and-mortar businesses. You can eliminate or reduce costs associated with physical businesses, such as rent, inventory, and staff.
- Flexibility. Using a digital business model implies that companies can quickly adapt to changing market conditions. You can swiftly modify your offerings, pricing, and promotions to meet the needs of your customers.
- Scalability. Digital businesses can be easily scaled up or down to meet evolving customer demands. You can quickly add or remove products and services as needed.
- Higher margins. Digital businesses often enjoy higher margins than traditional businesses. As there are no physical goods to produce and no costly overhead expenses, you can optimize your revenue streams and increase operational capacity.
- Faster speed to market. Leveraging a digital business model, you can bring products and services to market in a more efficient manner. There is no need for costly manufacturing or distribution processes.
In a nutshell, digital business models have many benefits, including the ability to reach a global audience, increased efficiency, and flexibility when it comes to unpredictable risks. They also provide opportunities for customization and personalization and can be adapted to changing markets and customer needs. Additionally, digital businesses can scale quickly and are often more agile than their traditional counterparts.
Before analyzing the four crucial characteristics of digital business models, let’s explore the concepts of digital offerings vs. digital business models. Although they are often used as interchangeable notions, digital offerings refer to products or services designed to complement a current business model of an organization. For example, an app for a product or customer service chatbot – these digital offerings supercharge business functioning and open up new areas of technological growth. Meanwhile, digital transformation business models embody technology-driven operational strategies that have four primary characteristics. Below is a list of these distinguishing features:
- Cutting–edge digital technologies generate value. When the value proposition relies on technologies, a company will likely use a digital transformation business model.
- Products and services are new to the market. Organizations deploying digital transformation models are new to industries and clients, so their novelty sets them apart from the competition and serves as a characteristic feature.
- Customer acquisition is achieved via digital means. In contrast to traditional businesses that often require a physical presence first and foremost, adopters of digital transformation business models deploy digital channels to engage with clients.
- A unique selling proposition cannot exist without modern technologies. Digitally native companies monetize their assets online and harness the potential of technologies to further their business growth.
Digitally native companies are built from the ground up with a digital-first mindset. Because they are online and have access to vast amounts of user data, they are able to make decisions based on detailed analytics and insights. This approach allows them to be highly agile and responsive to changes in the market or user behavior. Finally, digitally native companies tend to have a highly user-centric approach. They are focused on delivering a great user experience through their products and services. This includes everything from the design of their websites and apps to the way they handle customer service.
Digital Business Models: Types
A digital business model is a plan for creating value through digital technologies. It provides a higher level of customer engagement and enables companies to be more nimble in their approach to business. Additionally, it can be an effective strategy for targeting and delivering personalized content and services to clients. Here are several most widely spread digital business models:
- Ad-supported model. Under this model, companies offer free products and services while providing access to customers’ information to third parties, mostly for advertising purposes. The widely-known adopters of this approach are Google and Facebook.
- Freemium model. It implies that businesses provide customers free access to a basic version of the product while also creating its paid version for more intricate purposes. The latter has a wider range of features and resources and delivers an enhanced customer experience. One of the greatest examples of this model is Spotify, which requires clients to pay a monthly subscription for additional ad-free services.
- On-demand model. Customers using the on-demand model gain access to virtual products or services for a limited period of time. Online streaming platforms, including Amazon Video and Apple TV+, deploy this strategy to improve customer retention and optimize expenses.
- E-commerce model. As one of the most widely-spread digital business models out there, e-commerce enables companies to sell goods via online platforms. Over the years, businesses such as Amazon and Walmart have gained momentum and revolutionized the shopping experience for millions of customers.
- Marketplace model. Third-party platforms like eBay or Etsy are many and varied. Bringing together sellers and buyers from all over the world, they serve as a uniting point between demand and supply.
- Ecosystem model. Recently, the market has seen the rise of corporations offering a comprehensive spectrum of customer experiences. Several market leaders, including Amazon and Google, created digital ecosystems that provide customers with various services across multiple platforms. As there is no need to opt for other vendors, which is also known as vendor lock-in, clients remain fully engaged and continue using a wide range of products and services while staying loyal to a particular company.
- Subscription model. Similar to the freemium model, this subscription model guarantees access to products and services on a monthly-annual basis. It is typically used to offer content, software, and membership benefits. Netflix and Microsoft 365 are prime examples of this type of model.
- Open-source model. Under this model, companies create free products and offer free services that are open to community contributions. In this way, the value is generated through mutual efforts while the company generates revenue from royalties and search-engine partnerships. Linux and Firefox leverage the open-source model to spread their products and services and gain profits via training and software hosting.
Digital transformation business models serve as a gateway for companies to adopt cutting-edge technologies and confidently change their operational capacity amid uncertainty. Yet, opting for a suitable business transformation methodology can be a tricky endeavor. Nevertheless, below are some common recommendations that may come in handy for your organization’s choosing the suitable digital transformation model.
How to Choose the Right Digital Business Model
The best digital business model for a given company will depend on a large number of factors, including the nature of the business, the products or services offered, the target market, and the company’s strengths and weaknesses. However, there are a few essential tips that can assist you in choosing the right digital business model:
- Redefine your business goals. What are you trying to attain with your digital business? Do you want to increase sales, reach new customers, or improve customer loyalty? Be clear about your goals from the start, as this will help you choose a business model that is better suited to achieving them.
- Research your target market. Who are your potential customers? What do they want and need from a digital business? What are their buying habits? Understanding your target market will help you choose a business model that is more likely to appeal to them.
- Analyze your company’s strengths and weaknesses. What are your company’s core competencies? What do you do better than your competitors? What are your weaknesses? Understanding your company’s strengths and weaknesses will help you choose a business model that plays to your strengths and mitigates risks of inefficiencies.
- Test and refine your chosen digital business model. Once you’ve chosen a digital business model, it’s vital to test it out and continuously refine this model along the way. Try different approaches and see what works best for your company. Being prepared to change course if needed and staying open to new ideas are great tools for ensuring that your organization can adjust its business model in unpredictable scenarios.
Many factors play into crafting a successful digital business model, but a few key things to keep in mind are your target market, value proposition, and monetization strategy. First, your company may need to have a clear understanding of who your target market is and what needs or wants you can fill for them. Second, your value proposition sets you apart from your competition and needs to be compelling enough to get people to choose your product or service. Finally, you need to have a plan for how you will make money – will you charge for your product or service, run ads, or use a freemium model? These factors should be considered when creating a digital business model for growth.
As companies move more of their operations online, digital business models are becoming increasingly popular. They enable businesses to reach a larger audience and tap into new markets. Additionally, digital business models are often more efficient and allow for a higher degree of customization. With the digital transformation sweeping across the world, more businesses will likely become digitally native. By understanding the landscape and keeping up with the latest trends, you’ll be in a position to capitalize on new technology opportunities and safeguard a competitive edge.
Intetics is a fast-growing, full-cycle software development company providing technology services and solutions to technology partners all over the world. We offer the industry’s best infrastructure and configuration management, technical supervision, and top-notch governance. Additionally, Intetics attracts and hires the world’s top talent for custom software application development. Focusing on innovation and delivering the highest quality product to our clients is our primary goal. Interested in learning more about strategies for crafting a top-notch digital business model? If you are looking for opportunities to expand your team and gain valuable insights into cutting-edge technologies, don’t hesitate to contact us.
What Are the Types of Business Transformation?
Depending on internal and external factors and its pace, a business transformation has four primary types:
- Slow-motion transformation.
- Sprinted transformation.
- Negotiated transformation.
- Hijacked transformation.
What Is Business Model Transformation?
Business model transformation is a process of redesigning an organization’s business model to bring new value to customers and stakeholders. The purpose of business model transformation is to improve the organization’s performance by making it more customer-centric, agile, and profitable.