How can digital technology transform your business model?
5 minutes read
Transforming your company’s business model with digital technology can help you cut costs and create new revenue streams.
“When you invest in digital technology, it’s about more than acquiring new systems to optimize operations,” says Anna Walkowiak, a Senior Business Advisor and Business Model Innovation Lead at BDC.
“You should think about how digital technology can transform the way your business creates value. You can use digital technology to rethink and improve every aspect of your business model—from customer relationships to key processes and your value proposition.”
Businesses that fail to do so risk falling behind competitors, Walkowiak warns. “It’s a question of staying relevant. Digital technology can help you stay competitive and can transform businesses of any size and in any sector.”
You can take your company to a new level by building a culture of creativity.
What is digital technology?
Digital technology is any tool that lets you create, collect or use digital data. It includes everything from email and websites to artificial intelligence and smart sensors. Digital tools can also be customer-facing, and include:
- e-commerce sites
- email marketing
- marketing automation software
- online survey tools
- search engine optimization
Back-office digital tools include:
- online collaboration applications
- cloud applications and data storage
- website analytics
- social media management
- digital dashboards
- accounting and invoicing software
- enterprise resource planning software
- customer relationship management software
- smart robotics
3 steps to transforming your business model with digital technology
Walkowiak suggests the following three steps for transforming your business model.
1. Plan your digital technology investments
Investing in digital technology should be part of a strategic process. Don’t make the mistake of buying expensive software or equipment in an ad hoc way. Companies that do so often wind up with costly systems that don’t meet their requirements or integrate well with other systems.
Start by sitting with key employees to review your business goals and strategic plan.
This downloadable canvas is a commonly used tool to break down and visualize the profit mechanism and how revenue comes into the company. It is a simple one-page chart that depicts your business model using nine essential components:
- key partners
- key activities or operations
- key resources
- value propositions
- cost structure
- customer relationships
- customer segments
- revenue streams
For each of the nine components, review your current digital capabilities with your team, discussing how to improve your performance with new technology. For each component, discuss:
1. key goals and bottlenecks you could address with technology
2. important technology trends that employees and stakeholders see happening in the industry
3. what you’re hearing from competitors, start-ups (new players), customers and partners
4. new must-have and nice-to-have tools, the return for each and how they’d change your business model over the next several years
Ask yourself if making new investments could help you:
- deepen partner relationships and develop new partnerships (including with suppliers)
- make operations more productive
- use resources more efficiently and improve supply chain management
- bring more value to customers and create new revenue streams
- use data to simplify and improve decision-making
Next, narrow down a list of priority projects that offer the best potential return. You can develop several scenarios with different combinations of projects, then consider which has the best probability of success.
To help choose high-potential initiatives, you can use Pareto analysis, aka the 80/20 rule—a decision-making tool based on the notion that 20% of factors are responsible for 80% of effects.
It’s important not to wait. You can test new processes or systems on a small scale, in small batches or with a lab-like approach.
2. Adopt digital technology
Follow a careful search to find the right digital technology for your needs. It’s common for tech purchases to go awry because of hidden expenses, features that don’t work as expected and implementation challenges.
Here are some useful steps before making a major tech purchase.
- Do a functional requirements analysis.
- Develop a vendor list.
- Rate vendors and determine the total cost of each solution.
3. Consider digital transformation
Digital transformation is more than merely adopting a new technology system. It’s also about looking for ways to use digital technology to revamp your entire business model.
It’s important to be bold and encourage employee creativity as part of this pursuit of innovation. “The biggest fear for many companies is taking action and trying new approaches with customers,” Walkowiak says. “It’s important not to wait. You can test new processes or systems on a small scale, in small batches or with a lab-like approach. It can become part of your corporate culture.”
Learn and adjust as you go, then ramp up your efforts when they show signs of success. Innovation relies heavily on not being afraid of making mistakes, instead embracing slip-ups as part of your learning curve.
“This is extremely important for business model innovation,” Walkowiak says. “Design your concept of a new customer experience, for example, by doing small-scale tests, analyzing insights and seeing how they impact operations. When you see interest and potential, then invest much more in building different pieces of the company—to truly transform.”
Waslkowiak also warns away from “following”—seeing what other companies are doing and only then following suit.
“You can miss many opportunities if you just follow along,” Walkowiak says. “Instead of being a follower, you can take your company to a new level by building a culture of creativity to leverage digital data intelligence and transform your business model.”