The evolution of technology has forced many companies to rethink their business models , since what we know as physical and traditional businesses are today threatened by the massive use of the Internet and the changes and evolution that the consumer or consumer groups have undergone today.
The reality is that digital transformation is here to stay, and those companies that fail to adapt or evolve at the pace set by technology and the Internet will be left behind and overtaken by digital business models that provide innovation and value to new generations of customers and consumers.
The COVID-19 pandemic, which forced humanity to limit physical contact, was the starting point for digital businesses to achieve their maximum boom, which continues today and does not seem to lose popularity.
According to figures provided by Statista Digital Market Insights , a data and indicators platform, the e-commerce market in Latin America and the Caribbean reached $125 billion dollars in retail sales during 2022. In 2027, the figure is expected to exceed $243 billion dollars, achieving the highest value recorded in this sector.
It is in this context that digital business models and their management become highly relevant , as they become the ideal alternative for companies to boost their businesses, thereby obtaining competitive advantages that allow them to remain current and constantly growing.
If you want to know more about digital business management , be sure to read this article, because we will be delving into the models and types of digital businesses , the Canvas business model and examples of the most profitable digital businesses that exist . Also, find out where you can study the Administration Degree , so that you can become an expert in the creation and management of digital businesses .
What are digital business models?
First, let's define what a business model is , in order to then understand what a digital business model refers to and how its development and implementation contributes to companies.
Business models are a general overview of a company, that is, they are what shape a business, help to clarify what it generates and delivers value to consumers. A business model is an essential tool to establish a company's planning and to be clear about how to start operations.
The business model determines what types of strategies must be implemented to achieve a company's objectives, what the value of its products or services is, how they can be inserted into the market and who its target audience is.
Among the benefits of business models are:
The opportunity to better understand and know a company and its business.
The vision of the current and real panorama of a company and allowing to determine the changes and improvements that it needs.
Allow to identify and re-evaluate elements that are not relevant.
Provide spaces for analysis and definition of proposals and strategies that respond to the achievement of the objectives of a company and its business.
Traditional business models have been evolving over the years, giving way to innovative forms that improve the operational and production structure of businesses, delivering greater value and better experiences to consumers. These innovations are currently known as digital business models .
Digital business models refer to business models implemented in the digital environment, that is, companies take advantage of technologies and the Internet to optimize their services, generating value for suppliers and customers.
The digital business model allows a company to improve its products and/or services, define needs and guidelines to provide better service, and propose digital actions that enable greater profitability for a business.
Characteristics of digital business models:
Digital business models have specific characteristics that allow them to be differentiated from traditional models and similar concepts such as digital offerings. Among the most notable characteristics are:
The use of digital technologies: when a business implements digital technologies, then we will know that it is a digital business model, since through them it manages to establish its value proposition.
Digital channels: Another specific feature of digital business models is the use of virtual channels to acquire and distribute customers.
Unique selling proposition Digital USP : essential and indisputable characteristic of a digital business model. It is crucial that the value proposition and the differential of the products or services offered by a company is created and monetized in the digital environment.
Types of digital business models
Today, there are different types of digital business models that allow companies, depending on their sector, to organize their business approach, giving priority to the efficient investment of time and resources, with the aim of achieving profitable results for the company and customers.
Below, learn about the most common types of digital business models :
Free model (with advertising): This business model is based on offering the consumer a free service, where, through the use of this service, the user becomes the product that the company ultimately sells.
A couple of very clear examples of companies that implement the free business model (with advertising) are Facebook and Google, who offer their services and products at no cost, but in exchange, users provide valuable data and information about themselves, which then become products for sale to companies that wish to advertise to specific audiences.
Freemium model: This model is mostly used for software-related products and services. In this business model, the user can obtain free access to applications or programs in a basic version that usually has usage limitations. If the user or client wants to have all the services of the program or application, they must pay for a premium version.
A couple of good examples of this type of business model are Canva and Spotify, where to access more features and better quality options, a monthly subscription must be paid for a premium plan.
On-demand model: This is a model based on the offering of a virtual product or service, for which the user pays to be consumed at a specific time. An example of this model could be Google TV, where you can pay to access a specific program or movie.
E-commerce model: This is the best-known digital business model, which focuses on the sale of physical products through a virtual store. In this type of model, companies establish a unilateral sales style, meaning that they are responsible for selling their own products to customers. Two companies that are a good example of this type of business model are Amazon and Apple's online store.
Marketplace model (peer-to-peer, two-sided): The peer-to-peer marketplace could be defined as a relatively new model, but one that has gained quite a bit of popularity. It involves offering goods and services through a third-party platform. For example, independent drivers offer transportation services with their own cars, through a third-party platform, which in this case could be Uber.
Shared or property access model: This is considered one of the most innovative and disruptive digital business models currently in existence. Its focus is on “sharing” a good or using the moj database property in a commercial manner and for a certain period of time. An example of this model could be the Airbnb platform, which allows renting/sharing an apartment, house, room or space with a client for a limited period of time.
Subscription model: one of the most well-known, along with the e-commerce model. It is based on giving the user full access to services and updates for a monthly or annual payment. This model generally applies to platforms or applications with streaming services, software or memberships. Specific examples of the subscription model would be Netflix, Adobe Suite or the Microsoft Office 365 software package.
Business Model Canvas: The Key to Digital Business Management
The Business Model Canvas is a tool that supports the strategic management of digital and traditional business administration . The Canvas model allows companies to identify key elements of their businesses, and also broadens the vision of determining aspects such as infrastructure, supply, target audience and financial issues of companies, in order to recognize deficiencies and analyze and optimize investments and returns.
The Business Model Canvas was developed by Alexander Osterwalder , a business consultant, and Yves Pigneur , a professor of information systems and management, who established nine categories that represent the general characteristics of a company:
Customer segments: This category involves segmenting the market or specific group of people to whom a company's products or services could be sold. Groups can be segmented based on needs, channels or offers.
Value proposition: In this section, the objective is to describe what the product or service is that is offered and why customers should buy it, that is, to delve into the features and benefits that add value to what the company offers in the group segments.
Channels: refer to the means through which communication and interaction with the target audience will be established, making them aware of the value proposition of a company's products or services. Channels can be owned or external, and can also be classified as direct or indirect. They are divided into 5 stages known as awareness, evaluation, purchase, delivery and after-sales.
Customer relationship: can be classified as a self-service relationship, personal or automated assistance. Basically, it is the relationship established between the company and its customers.
Source of income: In this section you should specify the sources of income, which may include direct sales with a single payment, subscription payment or pay-per-use.
Key Resources: This category proposes listing the resources necessary for the previous points to work. At this point you should be clear about whether you have a digital or traditional business model. You can include resources such as software, human talent, financial, intellectual, as well as physical resources that include vehicles or infrastructure.
Key Activities: This section should address and answer questions that allow you to define the essential activities that make up a business. It is important to ask questions about production, problem solving, and platforms or applications that need to be implemented.
Key partners: This focuses on defining who the key collaborators and people are to get the business up and running. Identifying and selecting key partners will allow you to optimize resources, reduce risks, and acquire resources.
Cost structure: This is the financial approach. In this category, it is important to make a breakdown of expenses, taking into account fixed costs, variables, expenses, cost reduction, among others.