Digital Business Models

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Hi there! 

I hope you are doing great. You are welcome to another opportunity to learn and grow in s collateral way. 

I hope the experience so far has been great. Well, let's dive into today's conversation, shall we?

Today we will be talking about Digital Business Models. 

First, let's talk about what business models are.

Business Models are how an organization creates, delivers and captures value. They are a holistic framework that helps you understand, design and test your assumptions in the marketplace. 

There are nine(9) aspects of a business;

  • Customers
  • Product/Offering
  • Customer acquisition and product delivery
  • Customer relationship
  • Revenue
  • Core activities in creating and delivering a product
  • Resources
  • Partners
  • Cost structure. 
There is a popular business model that most entrepreneurs use and it's called; The Business Model Canva(BMC).

BMC is a 1-page canvas that encapsulates a business model. The main reason a BMC is used so much is that it is fast, concise, and shareable. 

I would also recommend reading the book; Business Model Generation by Alexander Osterwalder and Yves Pigneur. 

The BMC consists of nine(9) segments and these segments answer the questions that will determine if you are ready to start building your product/business. They are also the same as the list of business aspects we listed above;

  • Customer segment: who are we creating value for?
  • Value proposition: what value do we deliver to the customers?
  • Channels: how do we plan to acquire customers and communicate with our customers and how do we plan to deliver the value proposition to them?
  • Customer relationship: how do you plan to establish and manage the relationship between customers and the product/brand?
  • Revenue streams: for what value are our customers willing to pay?
  • Key resources: what are the key activities for the value proposition?
  • Key activities: what key activities do our value propositions require? E.g; marketing, product development, customer support etc
  • Key partnerships: who are the key suppliers? Which key resources are we acquiring from our partners and which key activities do our partners perform?
  • Cost structure: what are the most important costs to our business model?
As a product or business person, these are issue you will need to address before you take any product to the market.

Now, let's talk about Digital Business Model.
This is a business model that leverages on digital technologies to create a product or offering. 
There are a lot of models out there, but for this post, we will be focusing on just four popular ones. 

But wait! Before I talk about them, let me first talk about revenue models. Revenue models are basically the way products will bring money to the business. They are; Freemium, Subscription, Ad-support(these ones work on social media platforms), and Pay per-use. 
I would be integrating them into the explanation of the digital business models. 

So back to that, the digital business models are;

1. On-Demand: Examples of this model are Netflix, Uber, AWS etc. In On-Demand, consumption of the asset is monetized. You have access to the asset at anytime. The focus is on using rather than purchasing the asset. 
The revenue models for this are; subscription and pay per use.
 
2. Marketplace: examples of this are Amazon, Alibaba.com In marketplace, supply and demand are brought together. Another name for marketplace is e-commerce model.
The revenue models for this are; subscription and pay per use.

3. Open source: examples of this are RedHat, Firefox. In Open source, the software is free to be accessed by the user.
The revenue models for this are; freemium, subscription and pay per use.

4. Software As A Service(Saas):examples of this are Slack, Zoom, Microsoft office. In SaaS, hosted software is licensed to customers via a subscription plan. Revenue recognition comes only after service is consumed, not when purchased.
The revenue models for this are; freemium, subscription and pay per use.

Phew! I know this is a long read, but I am very confident that it is worth every word. 

I hope you found this helpful.

Till the next post.

Franny.

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