Successful digitalization requires changes in the core of business modelsAdam M. Skafi
Economies are transforming digitally
No doubt that economies and processes are changing due to the shift in technology, automation, and the adoption of new technologies. That has happened after successive waves of innovation and development shaped the digital economy.
Therefore, companies need to restructure their business models and strategies before reaching out un-development, “sickness” or being threatened when industries on the threshold of significant change [1]. However, many leading companies collapsed from the top of success to the depths of failure when market conditions change. Not because they’re paralyzed but because they engaged in too much activity of the wrong kind. Managers’ mindset on how they see the world plays a major role. So in order to make the right shift, managers should answer key strategic questions: What business are we in? How do we create value? Who are our competitors? Which customers are crucial, and which can we safely ignore? [2].
Shifting in digital strategies
Large companies have already started their shifts in driving more digital sales. Starbucks has started transforming and engaging customer experience by using digital tools. Its customer engagement allowed the company to collect over 50,000 innovation ideas, all led by customer insight and business change [3]. However, a shift requires preparation and a foundation. In the digital world data is the master.
PWC’s 2018 report on digital transformation, suggests a private business to be prepared by cleaning up their current data and by thinking of new data requirements which would construct an asset and a foundation for the shift. Since sales are tightly connected to the company’s strategy, and while there is political, economic and technology uncertainties, businesses must be prepared to “quickly” respond to new developments [4]. The key for this responsiveness is being agile and lean by listening to your customers, supporting your employees and by applying modern business models and methodologies.
Digital business models
Although the definition of a business model differs from an economist to another, nonetheless, “a successful business model creates a heuristic logic that connects technical potential with the realization of economic value” [5]. Unlike the old definitions, modern business models allow an organization to capture, create, and deliver value to meet explicit or latent needs. The greatest benefits of an innovative business model are underlined in generating and testing viable options, selecting the best option, then implement a prototype and continually adapt and modify the business model in response to industry and market reaction [6].
Therefore, different methods and concepts have been developed including (1) the Framework for Strategic Sustainable Development (FSSD), which is a is a process of continual learning that incorporates other methods, tools, and concepts into a shared, structured overview [7], (2) the Business Model Canvas (BMC) which is a generic approach to business model design [8], and (3) the Blue Ocean Strategy which presents a systematic approach to making the competition irrelevant and capture their own blue oceans.
Likewise, Internet of Things (IoT) E-business model is another innovative model. It’s using Blockchain technology and it’s based on seamlessly integrated physical connected devices/objects as well as human beings into the information network in which such information/data is essential for the company to operate, generate sales, and develop [9].
Start-ups generally find transformation easier than do mature firms “lean start-up” model or “lean canvas”, “that has spread well beyond Silicon Valley includes the capacity to “pivot”, or, in other words, to quickly test, discard, and replace ideas and business models that do not work” [10].
Another modern business model which is recently developed is “sharing economy” or peer-to-peer economy. Typical examples of the application of this model are “Airbnb”, the sharing economy-based model of Energy storage systems (ESS) [11], and “Turo” the car-sharing company that allows people to rent cars from others [12] as well as other sharing-economy based platforms and businesses.
Agile and lean methodologies are helping companies to leverage their quality and achieve their goals quickly
Agile frameworks and although they are not a strategy to follow still they assist companies, departments and teams to collaborate together and being close to their customers’ expectations and requirements which is another way to achieve strategic goals. Agile is not a new approach, however, it’s becoming a trend and being adopted not only in startups but also in giant companies including Google, Facebook, BMW, Cognizant, Accenture and other international companies. Among these frameworks, it’s worth to mention Scrum, Kanban, Scrum of Scrums (SoS), Scaled Agile Framework (SAFe), and Large Scaled Scrum (LeSS) [13].
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FSSD, “Framework for Strategic Sustainable Development (FSSD*) | Alliance for Strategic Sustainable Development,” accessed July 21, 2018, http://www.alliance-ssd.org/framework-for-strategic-sustainable-development-fssd/.
César Levy França and Louise Trygg, “An Approach to Business Model Innovation and Design for Strategic Sustainable Development,” Journal of Cleaner Production 140 (January 1, 2017): 155–66, https://doi.org/10.1016/J.JCLEPRO.2016.06.124.
Yu Zhang and Jiangtao Wen, “The IoT Electric Business Model: Using Blockchain Technology for the Internet of Things,” Peer-to-Peer Networking and Applications 10, no. 4 (July 13, 2017): 983–94, https://doi.org/10.1007/s12083-016-0456-1.
David J. Teece, “Business Models and Dynamic Capabilities,” Long Range Planning 51, no. 1 (February 1, 2018): 40–49, https://doi.org/10.1016/J.LRP.2017.06.007.
P. Lombardi and F. Schwabe, “Sharing Economy as a New Business Model for Energy Storage Systems,” Applied Energy 188 (February 15, 2017): 485–96, https://doi.org/10.1016/J.APENERGY.2016.12.016.
Turo, “About Turo,” 2018, https://turo.com/about.
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Marco Iansiti, Karim R Lakhani, and Hassan Mohamed, “It Will Take Years To Transform Business, But the Journey Begins Now,” no. February (2017), https://enterprisersproject.com/sites/default/files/the_truth_about_blockchain.pdf
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