This pattern relies on the ability to turn existing products or services into digital variants, and thus offer advantages over tangible products, e.g., easier and faster distribution. Ideally, the digitization of a product or service is realized without harnessing the value proposition which is offered to the customer. In other words: efficiency and multiplication by means of digitization does not reduce the perceived customer value.
How they do it: Cewe digitized the process of creating and ordering individualized products, utilizing your own fotos. Through their website, customers can create their products remotely at anytime and have them shipped to their home.
Pattern Co-Occurrence
Below, the pattern "Digitization" is analyzed based on co-occurrence, in order to get insights into how this business model pattern is applied in combination with other patterns within the firms we studied.
A digital transformation business model for innovation (chapter)
4 Results
Figure 1 The Digitization business model framework.
In Figure
1, we present
a first graphical version of
the digitization business
model
innovation
framework. The model is depicted as a directed graph whose components are
causally
linked. The nodes represent components of the business model framework and
contain
descriptions of typical effects resulting from digitization.
The
way to read this model is to start with a node that is affected by
digitization, e.g.
shifting
from products to digital features will
typically create new value
propositions,
such
as real-time data, a potential for data analytics, remote access, etc. Often,
this will
generate
new digital, bidirectional
channels, etc. As such, the model is an explanatory
model
of current changes in businesses. However, it is also possible to exploit the
model
structure
for the study of the consequences of going digital. The model then should be
read
in sense that a change in a component will naturally imply a predicted change
in the
connected components. Importantly,
such a causally connected business model
thus
naturally supports
a more general
analysis of the consequences
of going digital
for
previously
unseen cases and can be tested and further improved. Of course, it is possible
to describe the
model in more detail, e.g. going
back to individual case studies.
For
reasons of legibility this information is not include in the Figure above.
In this model, there is an important link from the channels component to customer
relations and back to activities (with a potential added circle from channels to customer
segments to customer relation for the case where the new digital channels also open new
customer groups). These links are built from the consideration of hybrid value creation
(Reichwald & Piller 06, Velamuri 10) often triggered by digitisation. Although the joint
value creation of businesses and their customers does not rely on being digital, it is
particulary widespread in the digital world and has been labelled co-creation, open
innovation, crowdsourcing etc.
The model clarifies that – as products or services shift towards digital, it can be
expected that the associated channels become digital. This is direct consequence of the
underlying technology characteristics – low-cost, direct and bidirectional. This in turn
induces a change in the customer relationship and will often naturally lead to open
innovation approaches that exploit the bidirectional communication for the design of
products/services. For the innovation practitioner this suggests to include hybrid value
creation approaches whenever a product is equipped with a digital component.
5
Discussion
The
model presented here aims
to represent both empirical
objects and empirical
characteristics of
phenomena businesses experience
when going digital. It
models in
particular components of
business models and assumes
an underlying causality in the
linkages
between components following changes in any given component. The model is
both
descriptive of a set of cases described in literature, structured
using technical and
economic
characteristics of information
and communication technology, but also
predictive
with respect to yet unseen cases of digitization. Causality is
modelled using
directed links
that suggest consequences
in a component
resulting from changes
in
another.
The
underlying motivation behind this paper is to provide such causal linkages as a
central
element in improved economic models of innovation processes. It has previously
been
argued for the theory of innovation management research that innovation research
(and
management research in general) exhibits a lack of causal models. This lack
often
unnecessarily
opens the whole field to
severe criticism as it makes it
very hard, if not
impossible,
to test and validate research results. The model presented here is only a first
step
and should be tested with novel cases of digitization and, where necessary,
refined
further.
Secondly,
the model offers a systematic approach to the study of effects on business
models of
going digital. We
have already seen how the change in one component
(products)
generates consequential changes through a range
of components (up to
‘activities’). In order to model this
change, it was
indeed necessary to introduce added
causal
links (not present in the Schallmo and Brecht (10) framework). It is to be
expected
that
more such links will be
identified when studying a large number
or perhaps more
detailed
case examples.
Thirdly,
from a practical perspective, the model can be used to develop or to refine
new digital business models.
It offers an opportunity to study
the whole spectrum of
potential changes
induced by digital
technologies starting from
an existing business
model.
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