The time for business model innovation

 

The latest developments in digital technologies consisting of information, communication, computing, and connectivity have provided businesses with new opportunities for business model innovation. Therefore, businesses are undertaking their digital transformation by creating digital business models to take advantages of new possibilities of using digital technologies to trigger changes in the value dimensions. Digital business models are different from traditional ones because first product and services are produced at an almost zero marginal cost, second value is determined in use, and third digital businesses use digital platforms to provide benefits for the member of the ecosystem including multiple organizations and individuals. Business executives are transforming three elements: digitally-modified business, new digital business, and digital globalization of the business model pillar.

Companies are focused on adding new revenue streams by using the digitally delivered services, content or information to extend their traditional products and services. For example, ProSiebenSat.1 Media Se, a German TV broadcaster used digital technologies to develop innovative product such as video-on-demand and services such as gaming content that resulted with earnings of 484€ million from their digital products or 19% of its total turnover in 2013. WebKinz, for example, provides the young owners of its stuffed animals with a code to join the online platforms where kids can adopt computer versions of their pets and in addition to creating joy for kids it is also generating additional revenue by selling aggregated data to other marketers. In the new digital businesses element, companies are developing new business models to reshape their boundaries through digital technologies. In a study about an automotive organization that is going through the digital transformation process, Mocker and Fonstad (2017) found out that AUDI is transforming their traditional business model of manufacturing and selling vehicles towards sharing economy to become the producer of digitally connected car products and provider of premium car mobility services. Furthermore, Tesco, the UK’s leading online grocer, transformed their business model from physical stores to an ecommerce platform by using the existing supermarkets as warehouses to deliver online orders. This digital transformation enabled Tesco to make sales of $520 million with profits of $600,000 in the year of 2012.
Globalization and access to emerging digital technologies are enabling firms to transform their operations from multi-nationals to truly global. Organizations are moving towards global business services model in order to reduce costs, improve service quality, simplify processes, transfer knowledge, share best practices and to be more aligned in the new business environment. The global shared services benefit companies mainly in areas like finance and human resource, but also in core capabilities like design and manufacturing. Ericsson, for example, transformed their finance and accounting structure from independent units to one integrated global network of shared services to reduce costs through standardization of services and processes, to take advantage of local adaption and decentralization, to increase consistency of its financial information, and to respond to the increasing demand for financial and accounting talent and competency. Therefore, the shared service model can bring many advantages for organizations by making business more efficient and effective.

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