Digitally-Enhanced Business Models

Digitally-enhanced business models represent the first stage of digitalization, where companies start to leverage digital channels to amplify their products and services. At this stage, product and distribution are still treated separately.

Introduction to digitally-enhanced business models

When it comes to digitally enhanced business models, those are the starting point of the so-called “digital transformation journey.” Beyond buzzwords or complex terms, what it really means is a company starts to use digital channels to amplify its products and services. 

Think of the case of a company that starts to understand the logic of search engines, social media, and in general what it means to communicate online. In this first level of digitalization, the nature of the product or service is not changed, only the perception and how the product is communicated changes. In this phase, the company starts to realize the potential of the web.

And it starts to gain its first customers through digital marketing and digital channels. However, it treats the web only as a distribution channel, rather than the primary value enhancement platform to change the way the product and service is designed, developed, built and delivered. 

Thus, this really represents that first step toward digitalization. The value proposition itself isn’t changed, but the perception around it can be enhanced. While this is a great first step, and for many small businesses it does work in the long term. It works to a certain extent. 

A digital channel is a marketing channel, part of a distribution strategy, helping an organization to reach its potential customers via electronic means. There are several digital marketing channels, usually divided into organic and paid channels. Some organic channels are SEO, SMO, email marketing. And some paid channels comprise SEM, SMM, and display advertising.

At this stage, the company starts to understand the realm of possibilities that the web offers. It starts to explore the various digital marketing channels. And while doing so it experiments with many of them, while tuning in those that might fit well with the core product and service.

Over time, the company might specialize in a core channel, while still leveraging on a multi-channel strategy. Thus, here, the company starts to realize that in order to take full advantage of digitalization it needs to integrate those channels as part of the product and service development.

Therefore, the digital channel isn’t just used to amplify the product or service. It starts to pervade various stages of the business. From product discovery (by leveraging on data offered by the various channels to identify demand) to product development (by gathering customers’ feedback early on) to quick iteration and experimentation (by testing what works and what doesn’t) and by realizing that the next step of this process is breaking down the walls between product and distribution.

Read Next: Stages of Digital Transformation.

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