New Business models
Research by Deloitte and OpenMatters has found that investors are placing a greater value on companies with business
models that embrace today’s technology, emphasize intangible assets (such as intellectual property), and enable the
crowdsourcing of products and services through the use of networks.
Digital technologies have enabled the emergence of the following business models: peer-to-peer networks, freemium,
delivering outcomes (mainly driven by Internet of Things), crowdfunding/crowdsourcing, as a service, ecommerce/marketplaces and personalization, among others.
New Revenue Model
Many companies still focus too much on the equation that counts: revenue = price x volume. Moreover,
focusing solely on product, service and process can obscure other, less obvious ways for companies to create value.
Leaders should widen the scope of their strategic thinking to analyze how other frameworks, such as networks,
channels and customer engagement can create value for their business.9 With that in mind, a number of new revenue
sources that enable enterprises to profit from the possibilities that digital technology opens up.
- Transaction. Traditional manufactured products are packaged and resold from one to many users; ownership is
transferred from seller to buyer through distribution channels.
- Capacity leasing. Capacity is monetized in the form of human time, machine or asset availability; companies
manage supply of capacity through demand forecasting, customer orders and sales
- Licensing. Technology, brand or intangible assets are licensed for periods of time to reflect the value of the
original invention but without the inventors needing to market or sell the product/service themselves
- Subscription. Products/services are subscribed to, usually for a period of time, which can be as short as a day
but often for longer, locking customers in with a reduced upfront cost.
- Commission. Agents collect commissions (or a margin) for matching buyers to sellers for a given
product/service; agents can be people or, more recently, scalable digital platforms.
- Advertising. Often used in media and entertainment as a way to distribute and share ideas, with associated
products/services marketed through the medium
- Trading. Buy low, sell high, if successful; traders monetize mispriced goods and services due to fluctuations in
demand and supply using market knowledge.
- Donations. Agents collect commissions (or a margin) for matching buyers to sellers for a given
product/service; agents can be people or, more recently, scalable digital platforms.
- Subsidies. . Often found in public service organizations whereby traditional revenue models only make up part of
the cost to provide the service; subsidies typically incentivize improvements in quality of service.
New Operating Model.
From an analysis of a number of leading companies that have fully embraced the potential that digital offers, five
successful digital operating models have been identified. These models have been applied across industries and vary in
their focus, but all are based on some common principles. They replace rigid approaches to technology, data and
processes with flexibility, while also substituting a perfectionist and siloed culture with one that is open to innovation and
interaction with customers and partners.
- Customer-centric. This model focuses on making customers’ lives easier and emphasizes front-office
processes. Leading exponents include Nespresso and the UK retailer Argos, but it can be applied across
industries. It works best with a culture that puts the client first and a decentralized structure that empowers frontline staff. Its success is best measured by a higher net promoter score (NPS).
- Extra-frugal. This model thrives on a culture of ‘less is more’ and a standardized organizational structure. By
optimizing manufacturing, supply and support processes, it can provide a high-quality service at a low cost. A
prime example of this model is tire manufacturer Michelin
- Data-powered. Taking its inspiration from one of the precepts of the management theorist W. Edwards Deming –
“In God we trust. Others must bring data” – this model is built around prowess in analytics and software
intelligence. Epitomized by Google and Netflix, data-powered companies have an agile culture focused on
innovation through empirical experimentation. Usually built around a hub-and-spoke structure, this model
measures success primarily through its return on investment.
- Skynet. Named after the conscious, artificial general intelligence of the Terminator films, this model makes
intensive use of machines to increase productivity and flexibility in production. Pioneered by enterprises such as
Amazon and Rio Tinto, Skynet organizations are characterized by an engineer-led culture dedicated to
automation. This model is often particularly suited to manufacturing processes. A key performance indicator is
the ratio of full-time employees to revenue.
- Open and liquid. This model looks outward with a view to creating an ecosystem that can enrich the customer
proposition. Built around a sharing customer, all processes in organizations of this kind are characterized by a
constant flow of dialog with the outside world. Examples include Facebook and PayPal. A key measure of
success is NPS.
New Leadership
Creating a workplace that attracts high-caliber digital workers requires a progressive and forward-looking organizational
culture. The impetus to set this culture has to come from leadership. The traditional attributes that set a good leader
apart remain relevant, but today’s leaders also need to be well-versed in digital and how it’s disrupting their business.
CEOs such Jeff Immelt at GE, Microsoft’s Satya Nadella and Marc Benioff of Salesforce.com are moving away from
hierarchical, autocratic top-down approaches and looking instead to create more open, collaborative environments,
powered through digital collaboration tools. This resonates well with millennials.
- Creator of vision and mission. Expand company’s mission statement to encompass a transformation purpose.
- Strategic planner.Move from five-year to one-year planning cycles, driven by data and predictive analytics. Focus more on experimenting instead of long-term planning.
- Driver of information-based business models. Find and develop new products and services that are (fully) dataand information-based for scalability.
- Enabler of the shift to on-demand operating models. Benefit from communities, crowdsourcing and staff onmand.
- Innovation promoter. Promote external innovation and go beyond product, process and service innovation.
success is NPS.
- Operational excellence driver. Automate processes in all departments.
New Data-Driven Models*
To exploit the potential of new, data-driven business models, companies will need to use data to disrupt their business
(before someone else does). Companies have to explore the entire big data ecosystem and be nimble. The big-data
landscape is in a state of flux with new data sources and big-data technologies emerging, such as Hadoop and Hive.
- Explore all available data and be prepared to consider a broad range of technologies when developing a big-data
strategy that could prove differentiating in the market.
- Start local, end global; users in larger companies are winning big by starting small and staying realistic with their
expectations, helped by frequent, direct CIO involvement and strong C-suite support.
- Focus resources on proving value in one area and then letting the results cascade across the wider enterprise,
rather than attempting to do everything at once.
- Remember the differences between good data and bad data; every hour spent hunting down an orphan database
hurts the return on investment of your analytics team, so businesses need to make data as ubiquitous as possible
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