Kathy Gibson reports from Gartner Symposium – Digitalisation is already impacting businesses, and it’s crucial that CIOs have an understanding of how technology will fundamentally change business models, add value and drive revenue.
Gartner’s Lee Weldon points out that this requires a different way of thinking as IT leaders – and not just as a superficial level, but CIOs needs to develop news skills to understand business models as a whole.
“Not enough to deal with business models at a high level; you need to break them down and really understand them,” he says.
“It’s important for us to articulate where the new opportunities to add value are. One of CIOs biggest challenges is in articulating that vision, communicating the real opportunities and threats, in a way that other stakeholders understand.”
Many of the popular digital innovations are nothing like traditional businesses, Weldon says. “I strongly believe that these issues of digitalisation and innovation will be absolutely relevant for all companies at some point in time. Some might be relevant already; a lot of companies haven’t experienced it yet. But we are seeing the signs of digital disruption and innovation affecting everyone – it’s just a matter of time before it touches everyone.”
The Gartner business model framework includes a number of interlocking stages:
* Ideate – the thinking stage where you come up with the ideas;
* Create – translate ideas into specific products, design, R&D etc;
* Engage – how do you interact with customers and stakeholders;
* Offer – the actual product or service that we are providing;
* Monetise – what is the revenue stream? This might not be immediately obvious – the offer could be free and the revenue comes about as a result of the new relationship; and
* Adapt – how to continuously learn; we’ve move away from sustainable competitive advantage – you have to be thinking about what’s next when this one becomes irrelevant?
Business models are not new, neither are business model innovations. But in the not too distant past, the business model was a boring thing – not too long ago there has been a major push into the desire to talk about business models.
Something new is happening: you are seeing businesses that have been born digital and thus a lot of new digitally enhanced business models. And so we are creating digitally modified business moles with digital DNA.
You have infogenes, moneygenes, sociogenes, channelgenes and physigenes – these are the base components that have appeared or become more prominent as a result of the increasingly digital world, that can be combined to for ne or modified digital business models.
For example, Amazon started as an online retailer, then moved to dematerialise the products in a digital marketplace. They have now stretched this out to selling their physical assets with usage-based pricing.
Hackathons are a good example of how companies are using internal or external crowd ideation or creation, which is possible gamified. In many instance, coding is now done by crowdsourcing, with a competition offering a prize for the best solution to a problem. KickStarter gets many people involved in crowdsourcing funding.
Even LinkedIn is a great example of a freemium service – we all create the value by offering our information; LinkedIn makes money by selling that information.
We can’t just ignore the impact of digital businesses, Weldon says. We can’t think in silos and just look at what’s happening in our own industry, but look at other industries as well.
It’s also no good worshipping the people who have done it well and wishing to emulate the giants. We need to look at what we can do, Weldon says, and this means we need to deconstruct why those companies are successful and how we can apply the same business models.
Some patterns that emerge are:
* Dilemma flipping to apply digital innovation to turn structural disadvantage to advantages;
* Applying digital capabilities to persistent company and societal issues;
* Digital adjacencies – creating new products, services and businesses that are primarily connected by digital synergies;
* Servicisation – wrapping digital services around physical products to create value and stickiness;
* Exposing internal digital and information assets as platforms’
* Envisaging digital innovations across the ecosystem, not only within the company.
Weldon recommends that CIOs accept that we all need to be active engaged in digital innovation.
This means they can’t ignore it and shouldn’t worship the digerati, focus on industry best practice or focus only on certain bits of the business model
Instead, CIOs are urged to actively seek out inspiring business model innovations and deconstruct them to understand how the underlying pattern could work for their business.
“If you not the one driving change someone else will,” Weldon warns.
