The internet hasn’t just broken down silos of communication or enabled businesses to reach audiences in new countries – the digitisation of the economy has given rise to new and innovative business models.

Traditionally, business has relied on a hierarchy – models wherein a steady environment is created to maximise efficiency and productivity. But in the “always on” era, with digital natives now becoming the dominant demographic, hierarchal models can often be a hindrance to an ability to be agile and innovate.

The network business model is a system for the digital age. Denoted by a flatter management structure and a change in thinking and approach to business, the network is about reaching as many people as possible in order to maximise collective knowledge and information.

Whereas the traditional model relies on control, a networked model emphasises adaptability and fluidity – prioritising the ability to change in order to survive.

This is already being seen in new approaches to old problems. Zappos, the retail giant based in Las Vegas, has recently done away with its recruiting site and has instead focused all its efforts on social media.

The idea behind the move is to open the organisation up to prospective employees – to showcase the inner workings of the company with the hope of attracting like-minded employees. This comes after the company rid itself of managers altogether, instead focusing on different methods of communication. Both of these initiatives are based on the idea that employees having been accustomed to constant contact interact and do business in different ways.

Addressing the ‘always on’ customer requires a new type of business model which emphasises collaboration and universal knowledge. Businesses need to develop strategies that integrate siloed internal resources. This will trigger a collaborative network of partners, thought leaders, brand ambassadors, and suppliers.

Traditional business structures are breaking down. Those businesses with digitally-capable workforces are thriving, and are able to extract more value. For instance, in a comparison between those businesses in bricks and mortar, and those businesses with tech and digitally-enabled business models, employees are able to provide $300,000 more revenue on average.

This is especially important considering pure bricks-and-mortar players are forced to transition to an online environment. Maintaining margins during that shift requires careful planning – and significant investment in staff.

The old metrics of retail are no longer applicable. Profit per square foot is not as reliable an indicator given the role of retail stores has changed, becoming more of a touchpoint and experiential centre, where experienced staff provide advice, rather than a main sales point.

Using technology to boost connectivity and conversion

Being able to turn business models around isn’t easy, but many traditional businesses are attempting this and are making significant strides. In Australia, major retailers have spent considerable amounts of time and money in boosting their online presence.

For instance, in Country Road staff are now being instructed to serve customers with iPads, instead of standing at a service desk. This enables the customer to connect more directly with the consumer, and increases the likelihood of a sale.

Apple staff in its retail stores no longer rely on standalone tills, but instead can check out customers from wherever they are in the store – reaching the customer in their comfort zone.

Apple even inspires its customers to act as their own agents, giving them the ability to purchase goods using an iPhone or iPod touch without having to interact with staff at all. The “always-on” customer extends not just online, but to the retail environment as well – and those businesses providing new and more flexible touch points are moving ahead.

Capital intensive industries

Disruption in capital intensive industries is happening everywhere, and is changing the way many traditional business models are operating. The online education market is being disrupted with the growth of Massive Online Open Course (MOOC) providers such as Coursera and Udacity who have thrown a spanner in the works of traditional education models – especially in the United States where billions are invested in tertiary education.

Simple Bank changes the traditional banking model. Customers receive a visa card to make purchases and access to a range of easy to use analytical tools to track and anticipate spending. Features which track spending and goals have helped customers save $400 million by July 2013.

As a result, the company has 40,000 customers and has recorded over $US1 billion in transactions.

What do these models have in common?

These digital business models have four things in common: a compelling experience, focus on a specific problem area, the ability to provide insights for customers, and an establishment of trust. Given the amount of personal data being handled by these models, trust is essential.

Modern business models are about more than just using digital tools and models. Antiquated, hierarchical structures are outdated. The modern, digital business model is about using a flatter management structure and digital methods of communication to connect previously disconnected areas of a business.

Traditional business models are about control. The modern, digital business model is fluid, constantly connected and reliant on communication, insight, compelling experiences and trust.


To find out more about the increasing value of data and other digital trends, please visit our Digital Innovation research site and download your free report.

 

Contributor

John Riccio

John is PwC’s Global Design & Deploy, Experience Consulting partner.

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