Digital Business Model: The Architecture with which an organization creates value for Customers differently

Digital Business Model


Alex Osterwalder, the creator of the business model canvas and one of the foremost experts on business model design, defines a business model as the architecture with which an organization creates value for customers, how it delivers that value, how it captures that value and how an organization defends value.
Digital business models are novel ways to generate demand. This demand can be generated from new users, new partners, and for new products, and new markets. It encourages the use of techniques that add defending value to the business.
The digital business model is about creating a new model which can co-exist with the traditional model of doing business. Often, addition of capabilities which enhance the traditional model are considered as digital business models. This is incorrect. For example, the idea that IOT capabilities to improve machine performance comes under improvements to the traditional model using digital technologies.

Technology as an enabler for digital business model

Technology offers plenty of opportunities to create a new digital business model. In this model, if the early adaptors gain a significant market share, then it will be difficult for companies which are laggards to catch up to them. An example for the same is the Windows mobile platform. Despite its huge investments, it couldn’t compete against the established Android platform.
As Marc Andreessen’s quoted in 2011, “Emerging companies built on software are swallowing up whole industries and disrupting previously dominant brand name corporations.” This has become the new reality.

Illustration of a digital business model for an automobile manufacturer:

Consideration for digital business model development:

    Re-assessing the core areas of focus:
    a. Developing e-commerce as a channel for new age products
    b. Non-core business lines (e.g., sale of non-proprietary parts and accessory sales) can be provided to partner eco system
    c. Service function extension to non-exclusive workshop

    Expansion of eco system:
    d. Inclusion of additional players like developers, rental companies, insurance providers, brokers/resellers to create new businesses
    e. Monetising the eco system on the basis of usage

    Expanding of the complimentary products/ Service:
    f. Developing subscription models for ownerships                                                                                                                                                                        

Need for an Intelligent Platform

To be ready for the digital journey, companies need to redefine and invest on core ERP platform, otherwise known as digital core. This has the following benefits:
• It helps scale and meet requirements rapidly
• It works seamlessly across all business processes
• It’s open to cloud-based solution and architecture
• It provides advanced capabilities (AI, ML) in the platform
• It provides a new digital user experience

The next blog will address the question - Why do you need to consider S/4HANA Cloud for enabling your digital business model?


About The Author

Vaideeswaran S
Vaideeswaran S

Director - Enterprise Applications, Blueprint Technologies