Digital can’t replace a bad business model

Investment in digital won’t make up a for a bad business model. That was the third finding from my analysis of digital leadership among UK companies (and the odd US one too).

At first though this may be a rather damning statement for a digital consultant to make but it’s a fact that leaps from the data. The research placed companies in the Digital Leaders quadrant even though they are doing very little with digital. They had managed to achieve the benefits associated with digital without actually digitising their business.

So the first major lesson is; fix your business model.

Lesson two; transform the business model through digital.

Fixing the business model

Alex Osterwalder’s business model canvas is a great place to start when assessing a business model. You can download a PowerPoint version of the business model canvas from this blog.

Example business model canvas for Phones4U

Example business model canvas for Phones4U

Whether it’s your clients business model or your own that you’re assessing, the canvas provides a good way to review your customers, channels, partners, relationships, revenue and activities. The crucial question is to ask whether these elements of the business model are creating a value proposition that is indeed valuable to the end client.

Of course, if revenue streams are less than cost streams then you have a profit issue.

Finding the digital transformation opportunities

Digital transformation can serve a business in one of the three ways listed below:

  1. Digitise the customer experience – take the service you’ve always provided and deliver it through digital channels or integrate digital channels into the non-digital channels
  2. Build new digital business models – create a completely new business model built around new technologies
  3. Improve operational efficiency – use technology to improve internal business operations and reduce costs

So when examining you business model pay particular attention to your channels, key activities, key resources, value proposition and customers.

On your channels, are you making full use of web, social, mobile and wearables to deliver your value proposition?

Can key activities and key resources be replaced or optimised through technology? This may include the use of project tools such as Basecamp, mobile timesheets or expense applications, file-sharing through DropBox or even on-demand outsourcing through Elance. An important question is how much of your supply chain can be digitised to strip out wasteful processes.

Are there new customers that you can reach through digital? This may mean an entry into new markets or perhaps serving a new segment of customers. The latter concept of designing a product with a lower price is at the heart of disruptive innovation.

Finally, your brand has a value proposition that you and your customers believe in. Can you deliver this value chain digitally? It would be a new business model but a far easier one to manage. As per my earlier point, it may also help you find new customers.

So there you have it, two simple tasks. Fix your business model and digitise it.

Just don’t try to do them in the reverse order.

David Sealey is a trusted adviser to senior executives on getting the most from their investment in digital and data. David created Storm81 as a place to share his passion for business, digital technologies, multichannel marketing and everything else around these topics.

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