Today’s most successful brands are adopting new technologies that allow them to transform the way they do business.

Next-generation technologies such as artificial intelligence (AI) can change the game when it comes to the customer experience. AI powered applications such as chat bots that can help answer questions from visitors to your site. AI can even recognize and answer multiple forms of the same question and can be trained to give immediate answers using your preferred voice and tone.

This type of innovation can be included in what is known as a digital business modela form of value creation based on the development of benefits for customers with the help of digital technologies.

The goal of these digital solutions is to provide significant benefits that customers are willing to pay for, and ultimately improve aspects of your organization. This can vary from how your company acquires customers to what products or services you provide.

Most importantly, digital business models use and rely on technologies that not only deliver better products and services, but also provide a personalized and meaningful customer experience. Digital strategy is crucial to the success of your brand.

Digital proposals versus digital business model

Sometimes we confuse digital offerings with digital business. The digital offer is a supplement to the existing offers, such as product pp, chatbot, control interface, etc. On the other hand, digital business models create value, bring new perspective and provide USP to customers.

Features of digital business models

How do you recognize a digital business model?

For starters, digital business models are known for the following four distinctive features:

  • Value is created with the help of digital technologies. When the service is based on digital technologies, it is recognized as a digital business model. Take Amazon, Google and Facebook, for example. These giants would not exist without the Internet.
  • The digital business model is new to the market. An example of this would be when you request transport through an application (such as Uber or Lyft) that responds to your request with a driver.
  • To become a customer, you must use a digital channel. Digital business models often rely on digital channels (like Amazon) that show ads when you search online.
  • The Unique Trade Offer (USP) is digitally created. This means that the customer is willing to pay for your products or services and many times receives revenue online.

What type of digital business model should you use?

The best course of action is to think about yours first customer profile when choosing the technology that is right for your brand. This may include things like pain points, interests, buying patterns and demographics.

According to Benjamin Tallinnexpert in digital transformation, has 11 models for digital marketing.

1. Free model (supported by ads)

The free business model is one that is used and maintained by ads from platforms such as Google and Facebook. The idea behind this model is to offer a service for free, turning the user into the end product. An online user provides valuable information that helps the company easily display targeted ads.

2. Freemium model

This model is often used and allows users to get free access to a basic version of a product. This version may be a bit limited, but the user has the option to upgrade and pay for the premium version if he wants additional features. A great example of this is Spotify – you can use it for free, but if you want higher quality and no ads, you have to pay a monthly subscription.

3. Model on request

This model refers to a virtual product or service such as online video stores such as Amazon Prime Video or Apple TV, where you can watch a video for a certain period of time. Another example of this model is the economic platform of freelance and concert activity Fiverr, where you book a person and receive a charge based on the project.

4. Model for e-commerce

Amazon was one of the first and most successful companies to adopt this digital business model for selling physical products online. Today, e-commerce is one of the most popular business models on the web.

5. Market model

This model refers to a two-way market where sellers and buyers use a third-party platform to trade goods and services. Examples of this business model are Uber-based and eBay-based and Etsy-based products.

6. Digital ecosystem model

Digital ecosystems are currently one of the most complex but stable digital business structures. Alibaba, Amazon, Apple, Google, Tesla and other ecosystem orchestrators operate the client with various services on several platforms. Due to the effects of ‘supplier locking’ that produce their ecosystems, they can sell more existing customers and attract new ones with their knowledge and data.

Think about what services you use from Amazon, Apple, Google, Alibaba and other companies and how difficult it would be to deviate from their digital services and choose something else. The locking effect is also a significant driver of future revenue. You don’t have to be an ecosystem orchestrator; you may be an ecosystem user or an ecosystem module provider. PayPal is an excellent example of a modular provider. It allows seamless payment in a variety of digital business models and ecosystems.

7. Sharing Model / Property Access Model

It’s all about “sharing”, but in a professional sense. This approach allows you to pay for a product, service or offer for a certain period of time without actually owning them. Renting a car (eg Zipcar), an apartment (eg Airbnb) or even industrial equipment are examples.

Due to the consequences of ownership and the resulting revenue you can generate, this was one of the most destructive business models. Instead of just creating costs, the car can become a source of money.

8. Model of experience

Adding value to elements that would not be feasible without the use of digital technologies. Tesla, for example, has revolutionized the automotive sector by incorporating digital services and even a digital ecosystem into its vehicles, which is now a major driver of its business model.

Another approach to the experience model is to mix several experiences to build a new customer-oriented ecosystem.

9. Subscription model

We are all familiar with Netflix and Office 365. These are excellent examples of the traditional subscription business. On a monthly / annual basis, the user receives access, updates, services, etc. Subscriptions are especially popular for content, software and membership.

10. Open source model

One of the most successful open source examples is Firefox. The software is available for download, use and contribution to the global community. Because it is free and many people contribute, it spreads quickly. It usually attracts a lot of (free) resources to improve the software. Firefox’s business strategy relies on search engines for copyright and partnerships.

Because you may not be able to use sustainable business model software, open source is not necessarily a business plan. Red Hat distributes Linux for free and then makes money through training, services and hosting.

11. Model for generating hidden income

Customers may not always be able to see revenue generation at a glance. Other value streams may occur as a result of data collection and analysis. We know that there may be hidden business models at the core of platforms and digital services. As we saw with the example of Mozilla, where the open source browser earns money from licenses to integrate other search engines.

It is crucial for businesses to understand their potential and whether there are additional opportunities to combine an existing business model with another to generate additional revenue. However, covert money production can have the opposite effect when working with data and unfamiliar customers. Cambridge Analytica is a fine example of such a reaction, which has had serious consequences for both organizations.

In addition, there are several other business models.

  1. Club Affinity – cooperation with other organizations
  2. Automation services – automation services that people traditionally perform
  3. Digital business model of packaging related products are packaged together.
  4. Crowdsourcing – contributions that reward and direct users for their contribution (usually money or charity).
  5. Digital business model for converting data into assets – application of advanced technologies to old industries
  6. Digital brokerage business model – instead of using a broker to deliver a service or product

The chances of success are plentiful as digital becomes the new normal. However, knowing your destination is crucial before choosing a digital business model and embarking on our entrepreneurial journey.

How to create a digital business strategy

Regardless of your brand, creating a successful digital business strategy is critical to success in 2021 and beyond.

When you use the power of technology to build your business, you will go through what is known as digital transformation. There are so many exciting and new technologies that keep coming up, making building a digital business model a necessity for your strategy.

“Every industry and every organization will have to transform over the next few years. What comes to us is bigger than the original Internet, and you need to understand it, get involved with it, and understand how to transform your business. ” – Tim O’Reillyfounder and CEO, O’Reilly Media

4 important dimensions for creating a digital business model:

  1. WHO is your target customer and what are his needs?
  2. WHAT is the value proposition and which products does it generate?
  3. HOW is the value proposition delivered?
  4. WHY is the business model profitable?

5 steps to develop your strategy:

1. Prepare a detailed business plan.

Outline what your business is, your goals and visions, and how you plan to achieve them.

2. Identify your target audience.

Narrow your audience to two or three personalities of the buyer. Outline the solutions your company will offer.

3. Develop a strong value proposition.

How will your company stand out from the competition? Find out what sets you apart.

4. Identify key business partners.

Choose key partners and strategic alliances that can best contribute to serving your customers.

5. Leave room for innovation.

When developing your business model, leave room for future innovation. It is important to ensure that your plan meets the needs of your customers.

Power your business model with Simplilearn

Gain powerful digital leadership skills to create successful business models with Simplilearn’s Postgraduate Digital Transformation Certification Program in collaboration with Purdue University.

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