With the Z1 of Konrad Zuse in the early forties of the last century, the first electronic computer was created. However, the fifth Kondratiev that announced the information technology as a disruptive change in the economy and society started not before the 1970s. The access to the global network is possible anytime, anywhere with mobile devices of all kinds. Together with the gigantic computing power of today’s computers, a big wave to implement well-known concepts is being piled up: the automation of processes, embedded systems in all moving and unmoved objects, data management in the cloud as well as the processing of unimaginably huge amounts of data with Big Data. But what do all these approaches mean for the commercial Canvas ?
Every business can be depicted on the Business Model Canvas. In the following bullet points, the momentum of the digital transformation is considered.
Already in the course of e-business more than twenty years ago, three customer areas were identified: business, consumer and government. Business describes the commercial enterprises, consumer the private customers and government the state/public institutions. In the beginning ventures should explore the digital reality of their own clientele. How digital are the customer areas? Where and when are the customers active? What do the customers want?
Customer relationships E-business already elaborated the possible customer relationships at an early stage: namely, all possible combinations of the axes business, consumer and government (i.e. B2B, B2C, B2G, C2B, C2C, C2G, G2B, G2C, and G2G). For most fields famous examples are available, like Amazon (B2C), eBay (C2C). A look at one’s own relationship structures and the degree of its digitization provides initial starting points for the digital transformation. What relationships exist or are possible? How, when and where does the customer wants to get in contact with the provider? What kind of digitization is needed?
The path through which the participants get in contact with each other is determined by the previous routine. These channels range from personal visits, telephone calls, publications, trade shows, to the Internet. It is an advantage to use all possible channels. Which media is already used? Which channels should be developed?
The proposals are split into two groups. 1) Physical products and on-site services as well as 2) digitizable products and remote services. While the second group comprises purely digital propositions, the first group can be extended with digital building blocks, e.g. the remote maintenance of a machine, the 24-hour hotline, online training. The digital opportunities of the propositions are often not clear. Which parts of the assortment can be digitized? Which new digital services fit into the product range?
Revenue streams In addition to the core business, the accumulated knowledge and contacts provide additional sources of revenue. The digital transformation opens up these information-rich opportunities. Which digital sources of income are available in the field of the propositions? What else can one earn with the existing knowledge? What can you do with the contacts?
Activities It is always surprising how far or how little the internal possibilities of the IT are used. Thus, value creation continues to take place with traditional, paper-based practices. At the latest when the customers are no longer satisfied with the slow, manual processes and if a closer involvement is desired, nothing else remains but adapting digitally. The affected activities can be derived from the digitizable proposals. Which processes are partly or fully automatable? How does the transformation take place?
Digital companies have virtual resources, i.e. the IT with its networks. A look at the degree of internal digitization, the already automated processes, the data landscape and the applications quickly shows the need for action. Which processes are already IT-based? What data is available? Which applications have a digital future?
Partners The participants in the provision of deliverables are the internal and external co-workers. They need new skills in the digital world, such as strong customer focus, lifelong learning, teamwork, change management as well as IT-specific knowledge of computer literacy, data security, data analysis, the Internet, etc. Who are the internal and external partners? Which skill profiles are there or are required? Which skills are missing?
Cost structure The digital transformation is not free of charge. The savings in expenditure and the increases in sales can not be realized overnight. Looking at Amazon, sales are growing steadily, but profits are not developing in the same way. Before you start with the digital transformation, you need an honest commitment concerning the costs. Where do the expenses arise? How long may the digital transformation take? What is the cost of not digitizing?
Bottom line: The complete Business Model Canvas is affected by the digital transformation. The already achieved digital penetration and readiness of all components determine the expected effort. The first step into the digital future is the conscious decision of all involved people for the necessary efforts. The Business Model Canvas provides the required overview.
The search for digital transformation affects many areas of the business. In the context of the delivery of goods and services as well as in the generation of revenue and income, traditional notions of the business world dissolve – the size no longer determines the range; Knowledge is not only available to the financially strong ones; Collaboration does not need the common roof of a company. The society and the politics no longer provide the sense of belonging and social security to citizens – opinions are controlled with new resources, the new normal is the loud otherness; ethical principles are reinforced by the own filter bubble. A look at the dimensions of digital transformation shows that we are already in the middle of change.
The following dimensions require rethinking in business as well as in politics – now. Digital transformation will be possible, as soon as obsolete conditions are abandoned – e.g. Preference of long-term frame contracts, high entry barriers for small businesses by purchasing departments, lack of access to financial means and bureaucratic overload through institutional requirements.
Scaling for all The use of economies of scale was previously reserved for large companies. In order to keep the price for the means of production low, large quantities had to be accepted. Digital components cost almost nothing. This will make even small businesses competitive. Now these new entrepreneurs still have to be freed from the bureaucratic burden of the old economy. Purchasing departments and HR departments need new terms and conditions for these micro-business partners.
The services are complex today, since they are composed of many building blocks. The differences in local or national circumstances that have to be taken into account are made possible by modules and interfaces that fit together because they are standardized. The mandatory cooperation and the distribution of income need new business models.
Increasing acceleration The virtual proximity of all those involved, who are only one click away, leads to a staggering speed. Established approaches and formal decision-making can no longer compete. This gives unbureaucratic, agile companies a head start. It can only be achieved, if the legal and internal framework conditions are correspondingly debureaucratized.
„Soft“ capital Since physical assets no longer count in digital markets, „soft“ capital comes to the fore – data, knowledge, software, relationships. The critical key players are the computers, networks and above all the employees, who can be located anywhere in the world. This requires the replacement of a rigid corporate concept with networks that are able to quickly come together and to dissolve again.
The values of a company are situated in the cyber-wonderland. There are no national boundaries or affiliations. Since national laws and regulations lose their effectiveness, we need in the medium term supranational legislatures and tax authorities to take over these tasks. In the meantime, the values are moving back and forth in the twilight zone. Assets are no longer determined by an objective financial value, but by the ability to create something new.
Network for everyone
The minimal effort that is needed to set up a network enables everyone to open their own bubble of information. Over time, there will be powerful creative clouds due to the participants and their networking. This wisdom of the crowd, which is available for free, means the end of many, expensive research sites.
Multi-sided business models
Due to the diverse market, it is increasingly difficult to find the right partner. For this reason, business models will evolve that specialize in the mediation between producers, their suppliers and customers. Proven, close cooperation’s will dissolve in favor of spontaneous, time-limited projects that are needs-oriented. The mediator role can be exercised by all those, who can bring together the relevant partners and will be able to earn a living from it.
The classic location and headquarters will disappear. The company headquarters will be located where the founder is currently living without being officially registered, because the business takes place in cyberspace (see above). Accordingly, there will no longer be the workforce with their representatives and regulated employment relationships. Legislation, state power and jurisdiction need to be adapted to international challenges in order to prevent location nomads, who are constantly on the run from responsibility and other duties.
The point in time, when the digital transformation is over, depends on how quickly and skillfully large companies can respond to these new developments. At the same time, government agencies are challenged to create the appropriate framework conditions to support these new developments. It is not the question whether, but when the parties act. In the meantime, the pioneers of these developments will find their way in the Internet and implement their business models.
Bottom line: The digital transformation is happening for years. Like the frog in the Boiling Frog Syndrome, the world is heating up due to increasing digitalization and networking. The dimensions are the scaling for all, the limitless collaboration, the increasing acceleration, the „soft“ capital, the homeless values, the network for everyone, the multi-sided business models and the loss of the site. For the sectors of the economy and the society this requires an immediate rethinking, in order to get the control over the used free space, so far unregulated by enterprises. This applies to tax havens as well as to the providers of illegal businesses in the Darknet. The dimensions of digital transformation are the basis.