Customers want to interact with companies anywhere and anytime – one recent study found that 72% of customers said they would replace some traditional channels with mobile apps given the choice.
But the stakes are high when designing a digital business model. For instance, Netflix angered many of its customers when it separated its delivery via mail and digital delivery – alongside big price hikes. The company’s share price dropped 79% between July and November 2011. But when companies get their digital business models right, the results can be remarkable. For example, Amazon sold more e-books than physical books for the first time in May 2011. Moreover a new study found that organisations in the top third in terms of digital customer experience had 8.5% higher net margins and 7.8% higher revenue growth than industry rivals.
Research shows that three components of a digital business model – content, experience, and platform – can combine successfully to create a unique customer value proposition:
(1) Content (What is consumed?)
Information: Product information, price and use details, etc.
Product: Digital products, such as e-books, e-saver accounts, movies, software.
(2) Experience (How is it packaged?)
Experience can include customer-facing digitised business processes, community and customer input, expertise for informed decision making, recommendations, tools, and interface.
(3) Platform (How is it delivered?)
Internal: Other business processes, customer data, technology.
External: Proprietary hardware, public networks, partners.
Action Point
What content do your customers find most valuable? What other content could you offer that customers would value or pay for?
How good is your digital customer experience – and who owns it? Who has the best customer experience in your industry?
How effective are your internal digital platforms – and who owns them?
Source: Weill, P. and Woerner, S. L. (2013) Optimising Your Digital Business Model, SMR, Spring; and Teece, D. J. (2010) Business Models, Business Strategy and Innovation, LRP, 43.