04.05.2020

Changed digital business models for a changed world

The momentarily prevailing economic circumstances present many companies with enormous challenges. Businesses which require physical proximity in enclosed spaces or even physical contact are particularly jeopardized, sometimes to such an extent that they must close.

Measures such as working from home and social distancing tend to eliminate the “client factor” from many business models.

However, business models that have recently become, or were already, available online have experienced a real upswing. Among other things, this boost can be seen in online conferences and digital training, online medical services like telemedicine or online pharmacies and offers in the home entertainment area for example. E-commerce business models and associated sectors are also gaining traction Certain sectors such as gastronomy, entertainment, trade fairs, events and tourism have been hit particularly hard. How are they supposed to handle the present circumstances? The first positive instances with respect to these sectors go to show that some of the affected companies have already been able to adjust to those circumstances through adjusting their business models. So, restaurants have digitized sales through apps and scooters, event companies have held events online or tourism service providers have expanded their portfolios through digital tours and experiences.

How to change your business model

In the current situation, the resulting operational opportunities need to be defined in order to strengthen short-term market positions during this digital fight if an online business model is to be established. After that, the integration of an online business model into the company-wide business model and its strategic orientation need to be defined for the long run after the crisis as well. But how can a short-term adaptation or enlargement of the present business model be implemented in such a manner that changed client requirements, target group behaviors and markets can be responded to?

What needs to be realized ad hoc?

During the current situation it is essential that the primary focus be directed to crisis mode and crisis control mechanisms with a view to developing comprehensible realistic solutions.

As a second step, however, new opportunities must be evaluated and seized in order to secure basic operations. Ramping up digital initiatives and digitalizing analog business models must be considered here. With the aid of released capacities that can act in a supportive manner, fast implementation can be consequently initiated and realized.

During the first step, the current business model will be analyzed. Based on this analysis, risks and opportunities will be identified and evaluated. Meanwhile, this analysis will also focus on the impact of changed client behavior on the status quo business model. Version 1.0 of the new business model is going to develop from this interplay of changed client behaviors and needs, adjusted value promises made to clients, newly identified client channels and additionally, newly identified potential clients. First considerations already must be included for the time after the crisis as well:

How is client behavior going to develop?
Will there be a rollback to client behavior before the crisis?
Will new client behavior merely regress slightly?

That is aimed at estimating in how sustainable the adjustments to the current business models will have to be implemented. For example; are we to presume that digital tours will replace real city trips in the future, Hopefully they will not, however they can serve as providers of advanced information for interested visitors” meaning that, tourism service providers can utilize them to expand their offers. Or, how “sustainable” will the currently booming “social networking apps” be? It is to be expected that their use will clearly decrease, and people will go out and meet friends and family in person again. However, things can look differently for online services, like, digital medical services. Even before the present situation, a clear increase had been recognizable, and this trend can be presumed to continue when the crisis is over.

But regardless of whether desired adjustments to the current business model or the development of new business models are supposed to address short-term changes in client behavior or whether they are supposed to be integrated into the company portfolio in the long run, fast implementation needs to be made sure of so that the first mover advantage can be put to good use. The fact that with such courses of action, there are no 100 % solutions must be accepted and deemed an opportunity. Due to fast, client-oriented implementation, it will be possible to assess based on early testing methods, like, landing pages or virtual prototyping if the digital business model is doing justice to adjusted client behavior. After going live successfully, marketing measures that are adapted to changed client behavior will be initiated.

A lot of ground needs to be covered quickly under the present circumstances. Aside from leeway which makes it possible to work and make decisions also under conditions of insecurity, four factors are especially crucial for realizing the business models aspired to quickly, in our experience:

Technology

Digital initiatives succeeding fast depend on the compatibility of technologies and management grasping rapidly what technology to select. It needs to be made sure of that the respective chosen technology is to be integrated quickly and smoothly. That can be realized through an analysis of prevailing known technologies and an assessment of the new technology respectively its compatibility. At the beginning, it needs to be clearly communicated within management that the new technology cannot be examined down to the smallest detail but that coming to a swift decision will secure a leading edge over competitors.

Coworkers

Especially at this time, your coworkers are important factors for success when it comes down to quick implementation. De-emotionalizing imminent changes will help employees to attune to the new conditions and to support them. During that, short-term internal training and knowledge transfers will help to get released resources (back) on track for the new initiative as quickly as possible. Top management encouraging coworkers to learn the ropes of new areas like digital business models and making a commitment to their personnel to embrace, indeed, to live and breathe the Fail Fast Culture will support employees with regard to your decision. Establishing change management measures early on while particularly focusing on the very purpose of the digital initiative and on the WIIFM, “What’s in it for me” constitute further factors for success in order to prepare the staff for the forthcoming changes.

Processes

Both securing short decision-making processes and rapidly integrating new digital processes enable fast implementation. Direct communication routes to the decision-makers need to be initialized and lived by all the stakeholders so that swift and short decision-making processes can be implemented. The IT and business departments have to be especially supported and enabled when it comes down to the premise of directly integrating the new digital processes into already established ones.

Structures

Agile structures are a prerequisite for reacting to quickly changing requirements at a short response time and for realizing the high need for quick wins. During that, it is necessary to make sure that above all, the project organization structure be shaped according to agile principles. Additionally, it must be insured that the project organization be swiftly incorporated into the company organization so that the run mode can be initiated as soon as possible. During that, it is completely acceptable to realize short-term measures – as described above – fast within agile project structures, to begin with. In the medium term, however, it is imperative to integrate them systematically into the existing structures or to enrich those.

Swift action and courage can make a vital difference during this time

The present circumstances have only been around for a few weeks, but the first companies have already adjusted their business models and new business ideas and models have been developed. Besides, it is currently not possible to say yet what further changes regarding client behavior and markets will occur and whether they will be just of a passing nature or if they are going to remain. New opportunities will open up and at the same time, companies will be faced with new challenges. Now it is of the utmost importance for companies to be “courageous” and to make also crucial changes possible – special times often require special measures as well which are aimed not merely at responding to current circumstances but at being pro-active under those conditions. A changed world will require changed business models in the short but also in the medium and long term.