There is a lot of media buzz around big disruptions created by new digital business models. be it Amazon or Netflix, It is important but not all business model changes have to be disruptive to create value. Business model transformations can let you reinforce your presence in your current market. But these transformations can be a bit less dramatic. It can be about combining products and services in innovative ways. Making better use of analytics, designing new economic models or repackaging your offering.
Successful business models do not last forever. Sometimes the creation of new value requires you to venture into the unchartered territory of new business models. Business opportunities or competitive threats can act as a catalyst for change. Though Digital leaders shouldn't be paranoid about their businesses being overtaken they should have an eye on their competitors and new entrants. For they may tap into the potentials of digital technologies to take their businesses to new heights.
To keep your business relevant in the digital space you need to have a good grasp of your current business model. You should be on lookouts for symptoms of business model change that should possibly ring alarm bells in your organization. Symptoms of a gradual decline in traditional revenue streams or a margin erosion due to commoditization? Are new competitors giving you a tough time emerging from unexpected places and adjacent industries? Are cheaper digital substitutes for your products or services making way into your market?
Can you choose to operate defensively or offensively?When in defensive mode companies use data and any other advantage they can muster to slow the decline of the old model. When you act aggressively you do cost cutting in operations that release some cash to support the transition.
You can go into an offensive act mode by being the first mover in rethinking the business model of your industry. You can disrupt your competitors or other industries by substituting a traditional product or a service with a new digital offering. You can use new digital business models to create new sources of revenue. You can redesign your value delivery model and boost your whole revenue generating system.
Your focus shouldn't be on technology rather how you can deliver greater value to your customers. And delivering that value in such a way that it gives you profit. To do so you need to exploit the possibilities offered by digital technology to help you get there smarter, cheaper and faster. Observe how other industries have solved similar problems or taken advantage of similar opportunities.
Multiple avenues are possible, the digital space has widened the horizon of opportunities. You will need to prioritize the options that can generate the greatest value to your customers, that is operationally hard to copy and that can provide you with a profitable economic model. You will have to lower the risk of running controlled experiments on the new model. At the same time gather the data that will help you learn and revise your assumptions. Often technology shifts that can create new opportunities for business model change are the same ones that can disrupt your existing model.
Designing, experimenting and implementing new business ideas is a task for top business leaders. It is a strategic activity, Functional heads won't have enough freedom to drive and implement a new business model across functional business silos. The implementation of a new business model requires vision, leadership, and governance. If the new model is designed to replace the old, you need to know when to shift resources and at what rate. Transitions don't happen overnight, they take their own time. If the old and new are designed to coexist, you need to carefully manage potential conflicts and resource allocation between the two.
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