Digital business models: crack the code in 5 steps
- Business Model Innovation
Now, is a good as time as any to figure out what is going to be next for your business. In our fast-changing world there are daily developments in technology that lead to new digital business models. We see big trends such as the magical metaverse, hyperautomation and data-driven operations.
There is a big chance that there is plenty of opportunity for your business to create value in tapping into these developments. Keen to find out? In this article you find your roadmap to value creation. So, hit-up your digital whiteboard and start your journey today.
5 steps to design your next digital business model
What happens in the digital space impacts every business model nowadays. So let’s explore and make it concrete by showing how this process could work for your business. We applied this process for one of the most beloved brands, McDonalds, to search how to create value in the future beyond fast food. All the 5-steps are illustrated by applying this to the context and situation of McDonalds.
Step 1: Explore your changing context & customer needs
Like we said, the world is changing fast. So, the context of your business is far from static. It changes on a daily basis – and by the minute in some industries. Continuous understanding requires continuous exploration of the world around you. Think far beyond the boundaries of your current portfolio and organization. What are market and technology trends? What’s the economic climate like? And what are rules & regulations that might impact your business over time? To discover future opportunities, research the business model of front-runners to see what you can learn from them. We will give you a head-start here. Check out our podcast with GoSpooky.
To really paint a rich picture of your context, zoom in on the needs of your customer and stakeholders. And do no zoom in from behind your desk. Go out and actually talk to your customers. Find out what they are currently experiencing and how their needs are changing over time. Do you see any big shifts in behavior that could influence your future business model? Conclude all your exploration research by defining the opportunities and threats for your business.
Tip: Do not confuse understanding your context with market research. Understanding your context serves primarily as a way to explore and weigh possibilities.
To stay the most beloved restaurants for kids all around the world, McDonalds explored what children do these days. Looking forward Generation Alpha (2010 – mid 2020) spends time on Fortnite, Tiktok and Snapchat and values digital emerging experiences. This generation joined the first virtual concerts online and plan to keep going. The evolving digital space and new ways to have fun compete in a way with the fun trip to McDonalds restaurant, yet offering digital items is an exciting new realm from McDonalds
Step 2: Understand where you are coming from and where you want to go
It’s nice to go out and explore opportunities, right? But don’t ignore your current business just yet. Understanding where you are coming from is crucial to define where to play and how to win. This all starts by mapping your current business model and identifying your strengths and weaknesses? Is our current business ready for a digital future?
If so, make sure to have a bold vision and a clear impact ambition. This will bring focus and provide anchor points when you need to make strategic choices when you are on the quest for your future business model.
Conclude by brainstorming around the question: what building blocks of your current business model will be valuable in the future? And what building block will most likely slow your innovation process.
Tip: Sketch your current business model. Don’t assume your team understands your current business. Make it visual so you are all on the same page when you start your innovation journey.
The business model of McDonalds is about fast food, as illustrated in the business model canvas down below. With restaurants ideally located for on the go, or recently closer to home for a quick meal through delivery. Lastly, their Brand is well known, including their products such as Big Mac and Happy Meal.
Business model of McDonalds
Step 3: Ideate what your future business can be
Our favorite step the process; it’s time to get creative. Gather a bunch of ambitious colleagues from different positions and layers of the organization. Stick a million post-its to your digital white board and stack-up on inspiration. You now have all the ingredients to ideate what your future business can be.
Need a jump-start for ideation? Bring in all the information you collected in step 1 and 2. Bring-in digital business models from front runners and competitors (we call it fresh watching) and formulate What-If questions.
- What if your customers only start paying in crypto?
Gucci started accepting crypto as a way to attract and reach the younger generation. To support this as a paying option new key partners are needed. (E.g. Triple A platform enables businesses to accepts crypto)
- What if teams work fully remotely?
Automattic (known from WordPress) is a fully distributed company that operates by levering digital tools and systems.
- What if your core value proposition is free for all?
Fortnite’s core proposition is free for all players, making it accessible for the many. To generate revenue Fortnite sells additional virtual skins, items and dances!
- What if business operations becomes fully data-driven?
German manufacturer Henkel adopted data-driven algorithms to predict demand to reduce inventory levels and optimize processes.
- What if .. well you get the drift. It’s up to you now.
Tip: write down all of your ideas. Even if you believe they are not worth at thie point in time. They might be in the future, or maybe the add up to a great idea once you start clustering them after ideation.
What if McDonalds goes 100% digital?
New idea pop-up brainstorming around this question:
- A virtual McDonalds restaurant you could always visit.
- McDonalds restaurants in games where gamers could go for a virtual meal and pay with crypto
- Virtual branded McDonalds items (NFTs) and more
Step 4: Design your next digital business model
You created an enormous amount of brilliant idea, let’s put them to use. See if you can design different business models using the (clustered) ideas. Explore different directions and describe the way value could be created, delivered, and captured. It’s important to go back and understand which building blocks you could leverage (step 2). Make sure at least 3 options are created, then assess the ideas. Compare the options in terms of potential value and effort needed. Rank and select the business model option that has the most potential and run with it.
Tip: make sure to use these building blocks you could typically leverage for digital business models:
- Digital channels & touchpoints
- Digital services & products
- Digital resources such as data, algorithms
- Digital infrastructure & processes
- Digital Capabilities
When assessing the ideas, the virtual items emerged as most valuable in potential moving forward. The business model became quite simple, instead of physical items along the happy meal, McDonalds decided to move towards digital items. This not only help reduce their footprint and waste, but these items are also increasingly becoming more popular along these kids. By leveraging current channels and proposition it feels like a first good step to start exploring the space.
Step 5: Set-up a roadmap to move forward
We said run with it. But we are not talking marathons. Don’t start building a full-fledged business just yet. Create a roadmap with short sprints. In these sprints you will run experiments, build prototypes and validate desirability, feasibility and viability of your future digital business models.
Designing, building and growing your future business is a different ballgame than managing your current operations. So, consider what your winning innovation team might look like. Because an exciting, yet uncertain future awaits.
But first how to start? Virtual items should have some value. McDonalds explored the options and found that ‘digital masks’ unlocked through snapchat could be the first milestone. Launching the first virtual happy meal gifts in one country helps to test and track the success & adoption among the target group. After more countries follow and unique partnership can help to further shape the digital item space.
Exploring new digital business models can help your organization grow and increase the positive impact you create. Being a front runner won’t be easy, luckily, we love to help you on your journey. Get in touch with our colleague Michiel to find out more.
Are you wondering whether your next digital business model should be in the metaverse? Download our playbook and explore the possibilities.Download playbook
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