As digital becomes the new normal, the paths to success are there for the taking.

But be sure you know  how to navigate the digital frontier.

Acording to John Sviokla, head of Global Thought Leadership at PwC, in his article ‘Four Business Models for the Digital Age’ contests that digitisation, is opening up new avenues of opportunities to create value.

But how do you navigate this digital frontier?

Peter Weill and Stephanie Woerner offer some useful insights on these challenges in their Sloan Management Review article, “Thriving in an Increasingly Digital Ecosystem.” In exploring these insights, and some of their implications, leaders can gain a fuller understanding of the landscape they face.

Your company will need people who can understand the technologies of the industrial infrastructure, such as artificial intelligence and analytics.

Individuals of all ages must have the skills to participate in the digital economy.

They need not just the technical training to use digital tools, but insight into the patterns of technology and how to accumulate the type of data that can foster machine learning.

As the Grand Coalition for Digital Jobs analysing the technology trends, labour market activity and demand for skills, confirms that knowledge of digital tools (coding and programming) will be an ever-increasing advantage for firms and job-seekers alike.

4 Business Models for the Digital Age

Opportunities for companies in every industry are occurring on two critical dimensions: knowledge of the end customer and breadth of product and service offerings.

These dimensions combine to form four business models for creating value: Suppliers, Multichannel Businesses, Modular Producers, and Ecosystem Drivers.

Suppliers, have little direct knowledge of the preferences of their end customers, and may or may not have a direct relationship with them. These companies sell their products and services to distributors in the value chain, and are subject to pricing pressures, as customers look for less expensive alternatives.

So if you don’t know much about your end customers and aren’t intent on solving their problems, you’ll need to find other ways beyond the current operating business model, or risk losing all the value your enterprise has created.

Haier, the world’s largest manufacturer of white goods, has deployed various strategies to differentiate itself from competitors, by taking advantage of the Internet to open up its innovation process enabling customisation.

Multichannel Businesses, have deep knowledge of their consumers because they enjoy a direct relationship with them, providing access through various digital and physical channels. Many banks and brokerage houses are Multichannel Businesses, as are some retailers and insurance companies.

If you are an Multichannel Business, broadening your understanding your customers’ life-event needs is essential for offering an integrated experience that will retain existing consumers and attract new ones.

IKEA, the world’s largest furniture company, is an example of a Multichannel Business that continues to find ways to enhance the range of “products for an everyday life”  within its value chain,all under IKEA’s iconic brand, and recently launched online shopping, gaining a way to learn even more about its customers.

Modular Producers, plug-and-play offerings can work with any number of channels or partners, but they rely on others for distribution as well as for guidance on what the customer needs. A good example is payment companies that enable the consumer to pay for a wide range of goods and services. As is the case with Suppliers, competition is fierce, so your offerings need to be innovative and well priced.

Square Inc, the B2B payments company has launched innovative software and hardware products – point-of-sale, payroll, employee management, and appointment apps that can be used on Apple and Android devices.

Ecosystem Drivers, have deep end-customer knowledge and a breadth of offerings available to them. They leverage these dimensions to provide consumers with a seamless experience, selling not only their own proprietary products and services but also those from providers across the entire ecosystem. Thus, they create value for themselves while extracting rent from others.

As Weill and Woerner’s research demonstrates, the prospects for creating value are greatest for companies that participate in ecosystems rather than in value chains, so Ecosystem Drivers have the greatest potential for value creation and Suppliers the smallest.

All four paths are viable routes to enduring success, provided you are clear on what your generic strategy is and what that strategy requires.

If, however, you are losing customers or growing more slowly than your market, you should consider moving to a different quadrant, either by expanding your knowledge of your end customers or by becoming more of an ecosystem.

Or even by doing both, as GE does by moving from being a Supplier of industrial products to an Ecosystem Driver in the Industrial Internet of Things, with the help of Predix, the cloud-based operating system it launched that helps companies collect, analyse, and leverage operational data so they can optimise the performance of their entire system. And as Predix’s customer base grows, so will GE’s status as an Ecosystem Driver.

 

s+b Blogs

Five Overlooked Principles Shaping the Destiny of Your Business, by John Sviokla

The Best Laid Marketing Plans, by Venky Balakrishnan Iyer

The New Game of Global Tech, by Olaf Acker, Florian Gröne, Germar Schröder