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.
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.
- Digital Transformation Journey: Digitally-enhanced business models mark the starting point of the digital transformation journey for organizations. It involves using digital channels to amplify products and services without fundamentally altering them.
- Perception and Communication: In this phase, the focus is on changing the perception of products and services and how they are communicated to the target audience. The digital channels, such as search engines and social media, are used for marketing and distribution purposes.
- Digital Marketing Channels: Companies explore and experiment with various digital marketing channels, including organic channels like SEO and email marketing, and paid channels like SEM and SMM. They identify the ones that work best for their core product and service.
- Data-Driven Decision Making: Businesses leverage data from digital channels to gain insights into customer demand and preferences. They use this data for product discovery and to gather early feedback from customers.
- Quick Iteration and Experimentation: The digital environment allows for quick iteration and experimentation, enabling businesses to test what works and what doesn’t. This iterative approach helps in refining products and services based on customer feedback.
- Breaking Down Barriers: As companies progress in their digital transformation, they realize the need to integrate digital channels across the entire business development process. This involves breaking down barriers between product development and distribution, allowing the digital channels to be part of the core product strategy.
- Multi-Channel Strategy: While some companies specialize in a core digital marketing channel, they still adopt a multi-channel strategy to reach a broader audience and diversify their marketing efforts.
- Value Enhancement Platform: In the later stages of digitalization, the web becomes a value enhancement platform that influences product design, development, and delivery. Companies fully embrace digitalization by leveraging digital channels for innovation and customer-centric strategies.
- Digital Disruption and Competitive Advantage: Digitally-enhanced business models lay the foundation for potential digital disruption and competitive advantage. Companies that effectively integrate digital channels into their business development process are better positioned to adapt to changing market dynamics and customer needs.
Read Next: Stages of Digital Transformation.
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