Many companies have already gone through digital transformation in the enterprise, and have even expanded digital initiatives to a wider business ecosystem, but what about extending digital transformation across an entire industry? To reinvent an industry through digital innovation, you need to rethink every component of the business model.
Redesigning a digital ecosystem can take companies and industries in entirely new directions, where they have to alter the ways that they have traditionally done business, affecting resources, processes, costs, revenue structures, and customer value proposition.
The recent SAP eBook, The Digital Economy: Reinventing the Business World, highlights five different approaches to business model innovation that can affect industries:
- Leverage technology to change the dynamics of an entire industry. Digital innovators use technology in new ways and use their developments as examples to reinvent and benefit entire industries. Electric car manufacturer Tesla opened its patents related to electric vehicles in 2014 to stimulate innovation in the electric car industry.1
- Substitute products and services with digital alternatives. Customer expectations are forcing many companies to alter their business models and introduce digital versions of products or services. Netflix revolutionized the video rental industry and continually reinvents itself in response to changing technology trends, and as a result has surpassed industry competitors that didn’t adapt swiftly enough.
- Create new digital businesses. Even traditionally non-technical companies can introduce digital offerings that expand their customer base and alter the industry standard. Starbucks launched a dedicated digital unit in 2008, which now accounts for over 7 million mobile transactions per week.1
- Rethink the value proposition. Try to enhance existing products and services using digital technology. Many companies and industries are finding immense value in the big data they have accumulated about their customer’s buying habits. They are now using that information to their industry’s advantage in different ways. Michelin doesn’t just sell tires anymore. It has moved to a service model by installing telematic sensors in customer vehicles to analyze vehicle performance and provide real-time advice on cutting fuel consumption.1
- Redesign your business network. A key component of every business sector is its value chain of suppliers, distributers, service experts, marketers, and everyone else involved in the industry. Innovative companies are re-evaluating and redesigning their supply chain to incorporate technology and create streamlined digital ecosystems that are transforming entire industries. The fast-paced electronics industry and the historically slow-moving, hierarchical auto industry have had to alter their business models to work together to meet consumer demand for connected cars.
As the Internet of Things expands and leads to growing digital ecosystems, it is creating a whole new way of doing business for many industries. Companies must learn to cooperate through the complexity of evolving ecosystems in order to deliver the experience or outcome that today’s customers expect.
1Capgemini Consulting, Ctrl-alt-del: Rebooting the Business Model for the Digital Age
To learn more about how digital innovation can affect entire industries, download the SAP eBook, The Digital Economy: Reinventing the Business World.
For an in-depth look at the multiple factors driving digital transformation, download the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.
Take a closer look at how one industry is transforming with the digital era. Download the SAP eBook, Connected Care: The Digital Pulse of Global Healthcare.