Four components that give companies stability in their digital business models

By digitizing their business models and building additional digital business units, many companies gain stability and reach. Companies can become more independent and better serve a wide range of customer needs. The fundamental prerequisites are the right mindset, clean data management, scalable infrastructure, and a platform/application.

Digitalization should not be seen as a diversification of the business model, but rather as an expansion of products and solutions that have proven successful in the market in other forms and are now being integrated into the value chain in an expanded form. Personal trainers in gyms, for example, have proven their worth and are frequently booked on-site. In times of working from home, digitizing these services offers a way to expand the service portfolio.

Digital business models create stability

To return to the example of the gym: If it were to decide to rent out space as a co-working space or operate its own café within the gym, this might be economically sound and even successful. However, in neither of these projects would the gym directly benefit from its experience and expertise as a fitness studio. The situation is different if it begins to develop a new digital business model around its core competencies. One possible approach is online courses or an online shop selling specific fitness-related equipment.

Studies show that the development of new, digital business models is receiving considerable attention, particularly in the insurance and finance sectors. Here, too, companies are examining digital business models that promote stability and enhance the customer experience, with the aim of expanding existing products or developing new ones. This mindset is less pronounced in other sectors, especially in manufacturing, where only about one-third of decision-makers see data-driven business models as drivers of stability. These models enable manufacturing companies to provide comprehensive services for their products. Whereas a company previously earned revenue only from the sale of a single product, the digital business model enables recurring services and thus a more stable cash flow.

Promote the connection between product and digital services

The automotive industry knows how this works. The car manufacturer Audi plans to offer an increased number of digital services and functions in the future, thereby significantly increasing its revenue share. The entire business model and value chain are undergoing fundamental changes. Instead of a one-off sale, the focus is shifting to digital after-sales. Customers will be able to add or remove upgrades or functions for their vehicle as needed.

Printer manufacturers have also adopted this principle and offer, for example, access to various software packages, services, and materials such as inks and papers.

Another example comes from well-known sporting goods retailers. These companies established their classic online and offline retail businesses for sporting goods early on. Now, it can be observed that they are building an ecosystem of services related to selected products, thus complementing their portfolio. 

4 crucial components as the basis for a digital business model

• The company culture: The networking of different disciplines forms the basis for change and the development of digital business models. Interdisciplinary, agile teams are a central anchor point in the corporate culture that must be established and fostered. The service concept must be integrated with the product and considered across industries.

• The data: Developing digital business models requires data. Companies can draw on data they already obtain through the production and distribution of their products, or they can tap into new data sources. In the manufacturing sector, for example, IoT sensors integrated into the finished product can provide information about its condition or usage. The same can serve as a starting point in the transportation industry.

• The infrastructure:  Cloud computing is particularly attractive because it is scalable and simplifies networking with other systems. Performance can be accessed as needed and depending on location. In contrast, many legacy systems and IT landscapes that have grown over decades and were designed as on-premises solutions are coming under pressure in light of the demands for agility and interfaces.

• The platform: Closely intertwined with the topic of infrastructure is the concept of platforms. The potential of platforms is still underestimated. They open access to new customer groups, enable innovative collaborations, and can help reduce sales costs. Clearly, not every company can build its own platform. For many companies, however, it will likely be more attractive to position themselves within an ecosystem close to their customers by offering a highly specialized service and playing a significant role in their niche.

Developing digital business models offers companies a way to differentiate themselves from competitors and leave their own unique mark. There's always the option to expand their portfolio or participate in digital platforms to reach new customer groups. Alternatively, companies can build their own platform and make it available to other businesses, benefiting from collaboration and network effects. There are virtually no limits to imagination and entrepreneurial spirit.

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