What is a digital business

If you look at the definition of e-business in the 90s

You can read that this is a business in which transactions and interaction with partners are built on the basis of information and communication technologies.As you can see, here the concept of technology is the very “heart” of electronic business – and it turns out that everything revolves around them.

Today, digital business is understood much more broadly: it is a business project based on the interaction of people, companies and smart devices at the intersection of the physical and digital worlds. That is, interaction and complexity lie at the very basis here.

In addition, experts emphasize that technologies cannot be considered the core of digital business in any case. Moreover, the use of any technology in itself is not capable of making a business digital. The focus should be on business models and how they are implemented. If this level of business is not optimized, then no IT systems will help to achieve the desired result.

And since we are talking about the result, it is especially useful to stop here and figure out: why create a digital business at all and what can be achieved with it?

What is the goal of digital business?

Hidden income model

Sometimes revenues are not always visible to customers at a glance. Through the collection and analysis of data, other value streams are possible. As we saw with Mozilla, where the open source browser generates royalty income, including various search engines, we know that there can be hidden business models behind platforms and digital services.

It is very important for companies to realize what their potentials are and whether there are further opportunities to use the existing business model with another to generate additional income. But hidden revenue generation can also backfire, especially when dealing with data and uninformed customers. Cambridge Analytics was a great example of such a rollback, with serious repercussions for both companies.

Choosing the Right Digital Business Model

It’s always an answer where you don’t have a direct answer. So what is the best/right/most profitable/most successful business model? – Well

Each enterprise must see what offers it wants to have and where it wants to optimize them.

Two-sided markets are extremely complex and take longer to grow, Freemium is highly adaptable and can be combined with ad hoc business models as we saw with Spotify, and digital ecosystems can be the most complex and risky business models as they involve massive investments. a large user base, as well as the orchestration of multiple partners and streams.

When you think about new business models

It’s always good to think about the customer and the unique value proposition you want to have. Be careful not to overdo it and better keep it clean and light instead of involving too many business models at the same time.

Especially for platforms, markets and digital ecosystems, it is important to note that immediate monetization can hinder growth and lead to a gap between supply and demand. Sometimes digital business models need a critical mass and a critical base in order to use the monetization model, and therefore they need a lot of time and investment before they can start generating income. That’s why there are two different strategies

Therefore, for earlier/faster monetization, it is better to consider Freemium, E-Commerce or subscription models.

They are simpler since the supply side is already fixed/can be better controlled, you can generate direct revenues and can only focus on generating the demand side.

Business models that are more long-term and network effect-oriented tend to be two-sided platforms, valiant marketplaces, and especially digital ecosystems. They have to grow for a long time before monetization makes sense, and therefore have a long-term funding gap that needs to be overcome. But in the long run, they can financially outperform other businesses as they use the network effect, you can call it the winner-take-all effect, to dominate the market due to size and reduce the entry of new competitors as they first need to catch up. (Example, Facebook and Google+ – Facebook had already taken over the market and Google had no chance with their social media platform due to the network effect).