From Physical to Digital: Business Model Shift no.3

  • Business Model Shifts

Following on from our last article covering the Stakeholder Shift, the third in this series of blogs looking at six business model shifts deep-dives into a phenomenon that’s pretty well understood already here and now: the Digital Shift – the force underpinning the success of renowned brands like Salesforce, The New York Times, Duolingo, and Fortnite.

The digital world. Ah yes. ‘Technology will cure everything,’ right?

Well… no. Not unless used for something ‘real.’ However, ‘real’ doesn’t necessarily mean ‘physical’ – at least not where business models are concerned. Digital technologies offer many advantages in terms of efficiencies, scale, security, and more.

But what if they could be used as tools to drive real value creation and change?

 

Why is this shift happening?

Physical goods – no issue in understanding what those are. It’s the same where business models are concerned. The physical business model’s foundation provides customers with a tangible – let’s just say it for clarity’s sake – physical product.

Per-unit pricing is typical, and products are generally distributed through direct or indirect (retail) channels – requiring set processes and supply chains to move products between locations. Simple, right?

It’s a model that has served many businesses well for a long time. And being physical doesn’t mean it doesn’t incorporate any form of IT. The company producing the physical product may have a robust internal system. One that’s essentially static, however.

Businesses worldwide started waking up to the massive potential of digital technologies and their ability to design customer experiences and track customer behavior and engagement.

Companies wanted to truly understand what drives engagement, enhancing customer interactions with proper digital tools to create more value. And thankfully, thanks to intelligent algorithms and great digital toolboxes that grew increasingly advanced, many jumped on the wagon – with spectacular results.

 

Digital shift story: Fortnite

Fortnite, the game that seemingly hooks every kid in the world, saw great opportunities to provide fun, rich digital interactions while also cleverly monetizing the experience.

While the initial and original game mode cost of $50 was relatively high, most of Fortnite’s revenue comes from its digital in-game currency, “V-bucks.” With it, players can customize their avatar to become the coolest player on the digital block, buying stylish new skins, dances, and more.

Do new players buy one new skin for their character and grow tired of the game within a couple of weeks? Not a chance. Thanks to continuously updated content, new seasons, and features, the game’s weekly reinventions keep people coming back for more, over and over again.

Just two years into the game’s release, Epic Games got over 250 million people playing in this fast-paced world. And we write this article, a hundred more million people have joined. Players can’t seem to get enough.

 

A new mindset

Fortnite is just one of many companies and industries that have embraced the Digital Shift. Other companies (which we cover in-depth in our new book) are:

  • Salesforce, leveraging the power of digital technology to humanize the way we do business.
  • Duolingo, digitally enabling and gamifying language learning to reach new consumer markets.
  • The New York Times, adapting to the new digital era with valuable and innovative digital content.

From video games to music, entertainment to storage space, all of these things, which were once exclusively physical, are now largely accessed digitally. And it seems that’s not going to change anytime soon.

The digital model is optimized for frequent interaction while enabling mass personalization and enhanced proposition – to provide a seamless, personalized experience across all channels. An experience that keeps customers coming back for more.

Stay tuned for the next article in our business shift discovery series. Next, we’ll cover the prolific business profiting organizations like LinkedIn, Kickstarter, and Alibaba Group.

Pssst. Discover the 6 shifts in detail in our new book “Business Model Shifts.” With detailed case studies of world-leading companies and brands, strategic patterns, and a lot of other goodies, we’re sure you’ll love it.

 

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