What is digital business

Digital business models

1. What are digital business models?

As with traditional business models, the customer or user focus is decisive for success in digital business models. Here, too, it is about answering a few essential questions in order to create the greatest possible added value for the customer and thus to achieve the maximum turnover for your own company:

  • Who is my target group?
  • What are their needs and how can I create completely new customer needs?
  • With which product or service do I best fulfill this?
  • How do I generate the greatest possible turnover and profit with it?

However, digital business models differ from traditional ones in one decisive feature: the use of new technologies. If you look at well-known and successful digital business models such as Uber and Airbnb, it is noticeable that the actual business areas are not new: taxi driving and renting living space existed before the digital age. But what has changed: The world's largest taxi company no longer owns its own cars and the world's largest accommodation provider no longer has its own holiday apartments. Both Uber and Airbnb have become orchestrators of digital platforms, on which they bring suppliers and consumers together and make the processes as lean, simple and transparent as possible for everyone involved. The key question is: How does a digital business model become successful? Before going into the success criteria, the following should first give an overview of the most popular digital business models.

2. Types of digital business models and monetization models

Due to their diversity, digital business models cannot be categorized directly - they are often combinations of several variants. In the following we have listed the most important digital business models and monetization models.

E-commerce

Our lives are radically simplified by new technologies - this applies to both private and business environments. The best example of this is e-commerce: we are already used to online orders being delivered free of charge the next day or the same day. Customer needs have changed dramatically with the new technologies. Internet giants such as Amazon, Apple or Zalando react to this and create an extraordinary customer experience through the latest functionalities and an appealing design. E-commerce is particularly popular in the B2C area. In the meantime, however, many companies from the B2B sector are also following suit and, in addition to their offline channels, offer an online shop in order to remain competitive. The time has now come, especially for small and medium-sized companies, to keep up with this trend and create additional digital sales channels.

Digital platforms

The economy of the future will increasingly take place in digitally networked ecosystems - digital platforms will thus become the central business model for both B2C and B2B companies. Platforms are online marketplaces where supply and demand are optimally brought together and orchestrated in order to best meet the needs of both sides. Today, customers increasingly want personalized offers that often consist of complex product services. Companies can meet these demands through the right partnerships with other providers and digital platforms. This also means: not every company has to set up its own platform right away - it is more important to position it correctly within the digital ecosystem.

Free

The best example of a free model is a free app. The user can download and use them free of charge. Free apps are financed through advertisements and the re-use (often also sale) of customer-related data.

Freemium

The term is now firmly anchored in our general language and describes a business model that is made up of the components “Free” and “Premium”: Users can use the basic product free of charge. However, they only have access to additional and usually more attractive features when they pay for the premium version. The music platform Spotify, for example, monetizes according to this model: Spotify provides a free version with limited functions and offers additional advantages via a paid, monthly subscription.

Sharing economy

Renting instead of selling: More and more companies have recognized the potential of this disruptive business model and the growth market related to the sharing economy. Digitization and the cultural change triggered by it, especially among the younger generation, mean that today benefits are often more important than ownership. German automobile manufacturers, among others, have responded successfully to this trend: With their car sharing models, they are already achieving double-digit growth rates - a plus that has long since ceased to be achieved by selling cars. In industry, too, the principle of the sharing economy leads to more agility and flexibility and thus to a considerable increase in efficiency.

Subscription

This business model is based on a paid subscription: By paying a fixed (monthly) amount, the user or subscriber receives a pre-defined offer. With this business model, a long-term customer relationship is easily established and a regular incoming cash flow is generated. The decisive factor is to regularly offer the customer new added value - that makes the effort of this business model comparatively high. Netflix, for example, regularly produces its own films and series in order to create new incentives for viewers and to keep customer satisfaction and loyalty high.

On-demand model

The name of the business model says it all: the customer or user only pays for the service he actually receives. On-demand services are particularly attractive to many consumers: the customer is flexible in their use, regardless of the service provider and does not have to pay a fixed monthly or annual fee. The world's largest taxi company Uber works according to this model - the customer can order a taxi on demand via the app. For companies, sales are more difficult to calculate than with the subscription model, since sales are heavily dependent on demand.

User designed

Digitization has once again brought the topics of customer satisfaction and customer experience to the fore: Customers increasingly expect individual, tailored products and services. For companies, the question arises: How can individual customer focus be created with the least possible expenditure of resources and costs? The online service PosterXXL, for example, has found an answer to this with its hybrid model: a combination of individual and mass production. The individual experience is created by the fact that the customer can design his own photo products. From the customer's point of view, this increases the value of the products considerably - and ultimately also the success of the digital business model for the company.

Peer to peer

A well-known example of this digital business model is the ebay platform: Here, users can offer a product or service at a price they choose. Interested parties can contact the provider directly for questions or to purchase. Airbnb is also a peer-to-peer platform: the company does not have its own rooms. Instead, private individuals offer their available rooms or holiday apartments on the platform. When booking, the searcher contacts the private provider directly - airbnb only intervenes in the event of a problem.

Hidden revenue generation

The largest online services such as search engines or social media platforms are free today. Nevertheless, the Internet giants generate enormous sales with it - to a large extent with the personal data of the users. With this valuable data, advertising tailored to the customer can be placed, whereby Google and Co. generate their sales.

 

3. Importance and goals of digital business models

When it comes to acquiring new customers and increasing their own sales, companies come to the implementation new digital business models not around. While incremental digitization in the company is a first step to reduce process costs and increase efficiency, among other things, new business models promote sustainable company growth. They are therefore of great importance for all companies that want to remain competitive in the economy of the future. Above all, digital business models contribute to the achievement of the following goals:

Optimal positioning in the digital ecosystem

Digital business models enable companies to react to market changes and changing customer needs and expectations. Small and medium-sized companies in particular are increasingly confronted with new competitors and agile startups that determine today's (digital) market. In order not to lose touch, established companies must see the new market conditions as an opportunity and take on a central role in the digitally networked ecosystem - this is possible through the development of new digital business models. It is crucial to understand your own ecosystem first and to rely on cooperation with the right partners. The goal: to offer the customer the greatest possible added value and thereby ultimately increase their own sales. Working with startups, other companies or even competitors enables access to new resources, competencies and markets. In this way, new sales channels and target groups can be opened up, thereby increasing corporate success in the long term.

Long-term customer loyalty

The relationship between companies and customers has changed: While the focus in generating sales was previously on as many transactions as possible, companies now rely on a long-term relationship with customers. Repeated and regular exchange with existing customers is significantly more profitable and more successful in the long term than several individual transactions with constantly changing customers. For customers to remain loyal to a brand, it is not enough to know their needs. Rather, your own business model must be continuously developed in order to meet customer needs again and again or to create new ones. Actions must therefore arise from the interpretation of data.

Increase in customer satisfaction and sales

Today's society is “always on”: Everyone can always get information within a few seconds and also expects this. The customer is no longer just the recipient of a product or service, but influences the market with his wishes and thus plays a central role in the value chain. Customer expectations have risen due to the large range on offer. Companies need to offer their customers an exceptional experience in order to differentiate themselves from the competition. Digital business models are a decisive measure for securing your own future viability.

 

4. The top 3 challenges in building and developing a digital business model

  1. Courage to change
    The digital transformation is essential for the survival of companies in almost all industries. Nevertheless, many B2B companies in particular are still hesitant to convert their business processes and take a holistic approach to digital transformation. First of all, this is understandable, because the general business risk is much higher here than in the B2C market: B2B products are not aimed at the masses - like classic consumer goods - but at a niche target group. Often the product or service has to be adapted to the respective customer requirements, which results in a mostly complex and cost-intensive conversion of production. In the long term, however, this is precisely where the potential of digital transformation lies - in the streamlining, increased efficiency and transparency of corporate processes as well as in (re) positioning within the ecosystem. The risk of being forced out of the market today is much greater if companies do not rely on digital business models and processes. It is therefore more important than ever to have the courage to change in both the B2C and B2B sectors.
  2. Strategic approach
    Many companies have already recognized the need for a digital business model and are using digital channels to reach additional target groups and generate new sales. What should not be underestimated here: Digital services and products must be permanently monitored, developed and scaled by the right team. This means that companies have to strategically plan and set up their digital projects end-to-end right from the start and make the necessary resources available. If the time and financial expenditure of a digital initiative is underestimated, lower profits or even losses can result despite solid sales.
  3. Continuous optimization
    The aim of every new business model is to maximize your own sales. This is only possible if it is continuously developed and optimized in accordance with customer needs. Digitization enables companies to constantly record and analyze customer and behavioral data and thus align their own business model to the wishes of the customer. It is crucial that companies use this expanded understanding of their target group in order to increase the added value of their own services and thus ultimately their own sales.

 

5. Top 3 success factors for a digital business model

The ultimate goal of a digital business model is to deliver the value proposition and thereby generate new sales. How do companies achieve this goal? The focus is on three success factors. A digital business model is successful if ...

  1. ... it fulfills a basic customer need, simplifies the customer's life considerably and thus delivers decisive added value.
    The customer or user focus is therefore crucial for the success of a digital business model. This also applies to its continuous further development, which should always be based on customer feedback.
  2. ... it binds customers in the long term.
    Companies should aim to achieve one long-term relationship to the customer and to increase the customer lifetime.
    It is important to know your value proposition exactly and to align your pricing model accordingly instead of just adding a margin to the costs. Only those who know their customers can do business successfully in the long term.
  3. ... it is supported by all levels in the company.
    Digital transformation begins with people and not with technology: If every employee is convinced of the advantages of digitization, the right mindset in the corporate culture also emerges. Correct internal communication and opportunities for (digital) further training of your own employees are decisive for success.

Our approach - your guarantee of success

This is how we build successful digital business models

Phase 1

Ecosystem analysis

What are future trends and growth potential?

The first step is the ecosystem analysis. Unlike the static market analysis, it is dynamic and takes into account changes in the market and future trends. The aim is to identify new players in the market and the customer's potential for growth. On this basis, approaches and ideas for new business models are developed and implemented: With the help of agile working methods such as Design Thinking, we put ourselves in the role of various stakeholders and try to understand their needs and problems. From this we derive innovation measures and develop a strategic basis.

Phase 2

Validation

Is the digital business model developing traction?

The ideas developed are tested on the basis of hypotheses in the validation phase. For this purpose, the digital business model is tested on the customer under real market conditions. The aim is to find out whether the digital business model generates the desired sales at the right time. Customers not only have to accept the product or service, they have to want to purchase it in order for a business model to be promising. In the test phase, we particularly focus on speed and user-centeredness.

Phase 3

Scaling

Successful scaling with the support of etventure

After the selected business idea has been successfully tested, the business model is rolled out across the market. With our four core competencies of strategy, implementation, empowerment and ecosystem, we create the basis for successfully scaling the digital business model in the market. Our approach is unique, as we differ from other management consultancies with our implementation strength, our distinctive specialist knowledge and our startup spirit.Our digital experts have already implemented and successfully scaled numerous successful business models together with our customers over the past 10 years.

So that you and your employees can drive digital transformation independently in the future, we train them to become entrepreneurs. Through workshops and individually tailored training courses, employees learn to work in an agile and innovative manner. By empowering all employees and training them on the job, the culture of innovation is strengthened throughout the company.

In order for your digital business model to be successful in a digitally networked ecosystem in the long term, cooperation with other companies is essential. That is why we bring you together with suitable partners from our ecosystem - always with the aim of creating the greatest added value for the customer.