Embracing digital business models to reinvent your company
New digital technologies have disrupted how businesses deliver services to consumers and clients. While this offers opportunities for new services, products, revenue models, and increased efficiencies, companies must look closely at their business models if they hope to capitalise on digital disruption.
We interviewed and analysed a range of organisations, both start-ups and traditional businesses, to establish how companies can best plan their responses to the growing global digital disruption.
“Digital technology has changed and will continue to change how your business makes money. What is new today is the unprecedented pace of change created by a combination of mobile, digital, and infrastructure technologies in the hands of both your employees and your customers,” comments Julie A. Ask, Forrester VP and principal analyst, and co-author with Forrester VP and Principal Analyst Martin Gill in their report, “How To Embrace New Digital Business Models.”
We believes digital leaders face three key challenges:
First, eBusiness leaders must weave seemingly disparate consumer and enterprise technologies into a coherent experience. Second, they must convince their more traditional colleagues that the new opportunities that technology unlocks are worth pursuing, and may even represent the future of their firm. And third, they should understand that their competitors are doing exactly the same thing, only faster.
Digital tech is accelerating the pace of business
In a digital world, even physical products collect and transmit data. This allows companies to track how their customers are actually using and engaging with their products. Digital professionals can use this data to constantly refine and improve their products. Digital professionals would do well to learn from the likes of Nike, Tesla, and Nest.
Streamlining your supply chain and bringing your end-user closer to your company can be achieved in a digital economy. Expedia’s API allows thousands of websites to offer their customers the ability to reserve and book rooms and flights via Expedia’s booking engine. Compelling digital customer experiences create opportunities to disintermediate other suppliers.
Alibaba’s online marketplace for third parties is the first stop for many brands entering the Chinese market. Platforms such as these have the infrastructure for payments and shipping along with a ready customer base to help foreign companies to scale quickly into global markets which would otherwise be out of their reach.
Companies like Apple, Google, and Microsoft are developing platforms that allow consumers to share their health data, while individual apps are opening APIs to allow consumers to share even more data from their car, home, and financial services. More than that, artificial intelligence has advanced to the point of offering very humanlike coaching. Democratised data and AI can cut down on person-to-person interaction and help customers make better decisions.
Mobile remains one of the biggest drivers of change. While we already see mobile tech blanketing the world, Forrester believes there will be constant shifts even while e-business leaders are adapting to the current realities.
Opportunities such as location-based services, value-adds, and real-time monitoring allow companies to overcome traditional product, service, and digital boundaries.
“Digital professionals who see mobile, the Internet of Things (IoT), data, and advanced analytics as separate technology initiatives will flounder. Those who focus obsessively on delivering convenient, simple, and context-aware moments will thrive as consumers increasingly embrace connected technologies for fitness, health, entertainment, home security, insurance, travel, and more,” explain Ask and Gill.
Using digital to unlock new business models
Many firms are piloting new ways of pricing and selling their product, creating new revenue streams, and cutting costs at scale. However, to compete in the age of the customer, we suggest digital business professionals should focus on three critical questions: How can I optimise existing revenues? How can I create new revenue streams? And how can I optimise my cost base?
We also recommend that digital business executives experiment.
“Some new ventures are bound to fail, while others could well grow to become your firm’s future business model. Take General Electric, which expects to triple its software revenues by 2020, generating more than $15 billion from the industrial application of digital technology. Its belief in digital is so complete that it is divesting its $30 billion commercial leasing and lending portfolio to Wells Fargo.”
Finally, we caution digital leaders that these new business models will have far reaching consequences for their business, beyond the new product and revenue opportunities.
Digital business will demand a tighter relationship between the digital business executive and their technology management counterpart. This allows them to effectively transform how the company designs, develops, and delivers new products and services as well as the technology needed to underpin these.
New operating models will call for a new way of accounting and reporting on companies’ health. New metrics will need to be employed, and customer lifetime value, retention, and wallet share will become increasingly vital measures to demonstrate overall success as firms pivot their revenues from traditional sources to new digitally driven ones.
Most particularly, companies will need to ensure they adequately protect all the customer and product data generated in their new digital business operations.
“Your industry may not be as vulnerable to the forces of digital disruption as the media, entertainment or banking. But whether you firm manufactures high-end medical equipment or digs rocks out of the ground, digital can and probably will change the basis for competition in your field. Your firm can position itself as a leader or a follower. It all depends on how you plan your response,” Ask and Gill conclude in the study.
Forrester is an international research and advisory firm.