There is nothing to debate when we say technology has changed the way we live our lives. It has influenced how we do business, how we learn and even socialized to the point of influencing how we choose a life partner. Today, the most successful businesses are those who have mastered their Digital business model and built wealth by adopting digital technology into their business processes.
Most so-called computer children may not even be aware of video and radio cassette players nor even know what analog photographic films look like. These use to be a business model that paid their owners a lot of money and eventually became replaced by MP3 and phone cameras.
A digital business model is dynamic, ever-changing, and evolving into something new. At times combining elements of traditional brick-and-mortar business style to create something new.
Nowadays, if something is not on the internet it simply does not exist. The internet has created a quick and convenient way for a customer to get access to what they need without paying a visit to the store in person and they can do so from the comfort of their home or office using any digital device such as a mobile phone or a personal computer. Come to think of it, buyers even pay with digital assets such as credit cards, debit cards, or cryptocurrencies. This is amazing!
In this article, I will be sharing with you the meaning of the Digital Business Model and give you examples that will help you to get a clear picture of what this is and may get you inspired on a better approach on how to build your next big thing.
So many entrepreneurs want to make quick money online taking up a mindset that does not create a sustainable and scalable business. This is not a healthy way to go for the African economy in the long run. I hope that this post will help alleviate the survival mentality that has stricken most entrepreneurs in Nigeria and Africa at large and encourage you to build something durable and competitive.
Read on to arm yourself with this knowledge.
What is Digital Business Model?
A Digital Business Model is leveraging or utilizing digital technology to create value for customers which in turn generates a significant financial advantage for the business. In other words, it is how you use the internet to exchange goods and services for profits.
One of the main characteristics of a Digital Business Model is that it is disruptive. For Example, Bolt created disruptive business solutions in the transportation industry by leveraging digital technology (internet and mobile) to deliver value to customers. Jumia is another popular example of how digital technology has shaped the way we buy in Nigeria.
However, building a Digital Business Model comes with a lot of work that requires adaptation to new technology and customer demands. Thus, a successful business model should be able to scale easily.
Why is a Digital Business Model so Important?
Whether you are a new or existing business, a business model is very important for your success. A digital business model can help a company in marketing strategy, projection of revenues, and even expenses. They can also help new, developing brands attract investors, recruit talent, and give a direction as to why the company exists.
Business Model vs Business Plan
A business model is at the center of any business plan. It’s the framework used to design and illustrate how a business might create value and make money. While a business plan is a written document representing a company’s strategy/structure on how to make a profit. Both a business model and a business plan are key elements that help a business create and refine its strategy.
Real Examples of Digital Business Model
To give you a better understanding of what a Digital Business Model looks like, here is my list of 6 digital business models that is disrupting the modern business world and examples of brands who have embraced the revolution.
1. The “Free” Model
Have you ever wondered how Facebook, Instagram, and Twitter offer free access to their website to make money? Some people think it is through their data subscription which is a wrong and obsolete idea. You are the product that they sell. Your attention to advertisement and insight that they get from your daily activities are an invaluable part of what gives these tech giants their massive revenue.
2. Freemium Model
Nigerian love freebies, this has been a business model that has captured the mind of Nigeria since the inception of the internet. With this Digital business model, a user or customer has access to a “limited version” of a service (usually software applications) free of charge or via a “trial” version and the user has the option to upgrade to a higher version that contains premium features.
Examples of companies using the freemium business model are Dropbox, Linkedin, Slack, Asana, Dropbox, Evernote e.t..c
This model is built on the Cloud computing service model: Software as A Service (SAAS).
3. Peer-to-peer, two-sided marketplace
The peer-to-peer business model is built on a platform business model, a third-party marketplace that helps to connect buyers and sellers to trade goods and services. Most cryptocurrencies plate run on this business model.
Examples of companies using the marketplace business model are start credits, Upwork, Uber, eBay e.t.c.
4. Subscription-based model
This business model allows users to have access services, services, updates e.t.c on a weekly, monthly, or annual subscription bases. Content creators, instructors, membership services can benefit immensely from this business model
Examples of companies using a subscription business model are Netflix, Office 365 e.t..c
5. On-Demand Model
The freelancing and gig economy fall primarily into this digital business model, where you contract an individual or agency to deliver a project for you because you do not have the time or expertise to do so.
Most agency and professional services fall into this category
6. E-commerce model
eCommerce businesses have been with us since the beginning of the internet. Contrary to the Market place business model, the eCommerce business model is based on a one-side approach where a store is selling its products and service to the customer.
In conclusion
Digital business models are the foundation of any successful online business as they give the entrepreneur a sense of direction of why they exist and how they should deliver their value to the customer. However, a digital business model is not static but dynamic and several elements from different businesses including the traditional model can be syncretized to create a new model or enhance an existing business model.
Emmanuel Okaiwele is a Freelance Web Developer with Experience in Front End and Back Website Development, Linux Servers Administration, and Digital Strategy.
