1.
Digital Business
Model Innovation
Tathagat Varma
Strategy & Operations, Walmart Global Tech
Doctoral Scholar (EFPM) at Indian School of Business

2.
Disclaimer
All views mine!

3.
Agenda
Business Models
and BMC
Digital Business
Models
Business
Models Innovation

4.
What’s a
Business
Model?

5.
What’s a
Business
Model?
How does a company
function?
How does it run its
business?
How does it create,
capture and deliver
value?

6.
All models are wrong!
All models are wrong, but some are useful! – George Box

7.
Why do
we need a
Business
Model?
From: Digital Business Models – Bernd W. Wirtz, 2019

8.
Evolution of Business Models
From: Digital Business Models – Bernd W. Wirtz, 2019

9.
Business Plan
vs. Business
Model
https://www.businessmodelcompetition.com/general-information.html

10.
Business
Model
Levels
From: Digital Business Models – Bernd W. Wirtz, 2019

11.
Components
of a Business
Model

12.
Describing
a business
model
• Alexander Osterwalder
created Business Model
Canvas (BMC) as a visual
tool
• It is a simple and powerful
way to describe how a
company intends to make
money
• Nine blocks cover four
main area: customers, offer,
infrastructure and financial
viability.
https://www.123rf.com/photo_129012742_stock-vector-business-model-canvas-template-with-icons.html

13.
This Photo by Unknown Author is licensed under CC BY-SA-NC

14.
Some Business Model Patterns…
• Add-ons
• Cash Machine
• Cross-selling
• Crowdsourcing
• Customer Loyalty
• Digitisation
• Direct selling
• Experience selling
• Flat rate
• Fractional ownership
• Freemium
• Guaranteed availability
• Ingredient branding
• Integrator
• Leverage customer data
• Lock-in
• Long tail
• Mass customization
• Orchestrator
• Pay per use
• Performance-based contracting
• Razor and blade
• Rent instead of buy
• Robin Hood
• Self-service
• Shop in shop
• Subscription
• Two-sides markets
• ...
The Business Model Navigator: Oliver Gassmann, Karolin Frankenberger, Michaela Csok

15.
Some business models…
Customers Value Capabilities Finance
Tanishq Festivals, weddings, and
celebrations. Urban
working women. Upper
middle class.
Brand that guarantees
purity, transparent prices.
National reach. Gold
exchange (40%+)
274 stores in 160 cities.
Design, Celebrity
endorsements.
“Making charges” (8-35%). Rs
18,600 Cr revenue.
Maruti Burgeoning and
aspirational middle-class
First car! Car for every
wallet (16 cars in over 150
variants). 9th among brand
trust (2019). TrueValue in
1,190 outlets
Extensive sales network
(3,598 sales outlets across
1,861 cities). Pan-India
network of service (3,792).
Cost leadership
Haldirams Traditional Rajasthan /
north Indian snacks and
sweets
Traditional north-Indian
snacks made with assured
quality and available fresh
across India, including
online.
400 products. Traditional
recipes. Managed family
crises / trademark disputes
well.
Crossed $1 Billion (2019), 80%
from packages snacks.
SBI The banker to every Indian
(400MM+)
Availability, access,
compliance, trust
24,000 branches and 190
offices in 35 countries.
59,000+ ATMs
Gross NPA (6.15%) Net NPAs
down to 3%. Net profit Rs
14,438Cr (FY20) the highest in
company history

16.
Why did they fail?
• Kingfisher Airlines
• HMT Watches
• Tata Nano
• Yes Bank

17.
Digital Business Models

18.
What is Digital?
Technology-centric
view: it’s all about
technology!
Customer-centric
view: it’s all about how
a company engages
with customers
Business-centric view:
it’s an entirely new way
of doing business
Organization-Centric
View: it's all about the
new way of working
Process-centric view:
it's all about being agile
and lean
Data-centric view: it's
all about how a
company uses data
Strategy-centric view:
it's all about how a
business delivers value!

19.
What is Digital?
• Applying the culture, practices, processes &
technologies of the Internet-era to respond to people’s
raised expectations. – Tom Loosemore @tomskitomski
• “The truth is that digital transformation is actually not
about adapting to new technology at all – it’s about
directing an organization to be more adaptive to
change itself.” - Lindsay Herbert. “Digital
Transformation.”

20.
What’s a Digital Mindset?
“Being digital is about using data to make better and faster
decisions, devolving decision making to smaller teams, and
developing much more iterative and rapid ways of doing things.
Thinking in this way shouldn’t be limited to just a handful of
functions. It should incorporate a broad swath of how companies
operate, including creatively partnering with external companies to
extend necessary capabilities. A digital mind-set institutionalizes
cross-functional collaboration, flattens hierarchies, and builds
environments to encourage the generation of new ideas.
Incentives and metrics are developed to support such decision-
making agility."
https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/what-digital-really-means

21.
Digitization, Digitalization and
Digital Transformation…
https://sloanreview.mit.edu/article/digital-transformation-on-purpose/

22.
Drivers of
Business
Model
Innovation
From: Digital Business Models – Bernd W. Wirtz, 2019

23.
Stages of
Development
in Digital
Business
Integration
From: Digital Business Models – Bernd W. Wirtz, 2019

24.
Digital Business
Model (DBM)
Framework
• Digitization is compelling
companies to move their
business models on two
dimensions.
• They are moving from
controlled value chains to
more complex, networked
systems.
• They are moving from less
familiarity with customer
needs and life events to a
better, closer understanding
of them, resulting in better
customer engagement.
From: What’s Your Business Model? – Peter Weill and Stephanie L. Woerner

25.
Ecosystem Drivers outperform!
Ecosystem driver: organizer of an
ecosystem, a coordinated network
of enterprises, devices, and
customers to create value for all
participants, which is the
destination in a particular domain
(such as shopping), ensuring great
customer service; includes
complementary and sometimes
competitor products.
From: What’s Your Business Model? – Peter Weill and Stephanie L. Woerner

26.
Components of a Digital Business Model
https://sloanreview.mit.edu/article/optimizing-your-digital-business-model/

27.
Sources of
Competitive
Advantage in
Next-
Generation
Enterprises
From: What’s Your Business Model? – Peter Weill and Stephanie L. Woerner

28.
Key questions
for
transformation
in the digital
economy
Threat: How strong is the digital threat to your
business model?
Model: Which business model is best for your
enterprise’s future?
Advantage: What is your competitive advantage?
Connection: How will you use mobile technologies and
the internet of things (IoT) to connect and learn?
Capabilities: Are you buying options for the future and
preparing for the necessary organizational surgery?
Leadership: Do you have the leadership at all levels to
make transformation happen?
From: What’s Your Business Model? – Peter Weill and Stephanie L. Woerner

29.
Digital
Business
Model
Innovation
From: Digital Business Models – Bernd W. Wirtz, 2019

30.
A Businerss
Model
Innovation
Framework
From: Digital Business Models – Bernd W. Wirtz, 2019

31.
B2C Digital
Business
Model:
4C-Net
From: Digital Business Models – Bernd W. Wirtz, 2019

32.
Developing Hybrid Business Models
From: Digital Business Models – Bernd W. Wirtz, 2019

33.
Drivers for
Developing
Hybrid
Business
Models
From: Digital Business Models – Bernd W. Wirtz, 2019

34.
B2B Digital
Business
Models:
4S-Net
From: Digital Business Models – Bernd W. Wirtz, 2019

35.
Assessing
Your Digital
Business
Model
https://sloanreview.mit.edu/files/2013/03/a0741a07b2.pdf

36.
Success
Factors of
Digital
Business
From: Digital Business Models – Bernd W. Wirtz, 2019

37.
From Pipelines to Platforms…
Pipeline businesses create value by controlling a
linear series of activities—the classic value-chain
model. Inputs at one end of the chain (say, materials
from suppliers) undergo a series of steps that
transform them into an output that’s worth more:
the finished product. Apple’s handset business is
essentially a pipeline. But combine it with the App
Store, the marketplace that connects app
developers and iPhone owners, and you’ve got a
platform.
Shifts involve:
• From resource control to resource orchestration
• From internal optimization to external interaction
• From a focus on customer value to a focus on
ecosystem value

38.
Network Effect
• AT&T Annual Report, 1908:
“A telephone — without a
connection at the other end
of the line — is not even a toy
or a scientific instrument. It
is one of the most useless
things in the world. Its value
depends on the connection
with the other telephone—
and increases with the
number of connections.”
• 70% of value in tech is driven
by network effect!
https://www.nfx.com/post/network-effects-manual/

39.
Digital Transformation often fails!
• Bain: 95% either failed
to deliver or settled for
diluted performance
• Forbes: 84%
• HBR: 70%
Pic: https://dsruptr.com/2019/12/01/the-trillion-dollar-reason-fortune-500-companies-fail-at-digital-transformation/

40.
Some big ones…!
• P&G (2012)
• Ford Smart Mobility
(2014)
• GE Digital (2015)
• Why do they fail?

41.
Digital Transformation is not about
technology!
• https://hbr.org/2019/03/digital-transformation-is-not-about-technology
• Digital transformation worked (for these organizations) because their leaders
went back to the fundamentals: they focused on changing the mindset of its
members as well as the organizational culture and processes before they
decide what digital tools to use and how to use them. What the members
envision to be the future of the organization drove the technology, not the
other way around.
• Lessons:
• Figure out your business strategy before you invest in anything
• Leverage insiders
• Design customer experience from the outside in
• Recognize employees’ fear of being replaced
• Bring Silicon Valley start-up culture inside

42.
Why So Many High-Profile Digital
Transformations Fail?
• https://hbr.org/2018/03/why-so-many-high-profile-digital-
transformations-fail?
• No managers should view digital — or any other major
technological innovation — as their sure salvation
• Digital is not just a thing that you can you can buy and plug into
the organization
• It’s important to calibrate your digital investments to the
readiness of your industry — both customers and competitors
• When things are not going so well in the existing business, the
call of a new business model can become more powerful than it
should

43.
Digital Transformation Is About
Talent, Not Technology
• https://hbr.org/2020/05/digital-transformation-is-about-talent-
not-technology?
• Contrary to popular belief, digital transformation is less about
technology and more about people. You can pretty much buy any
technology, but your ability to adapt to an even more digital
future depends on developing the next generation of
skills, closing the gap between talent supply and demand, and
future-proofing your own and others’ potential.
• Put people first
• Focus on soft skills
• Drive change from the top
• Act on data insights
• If you can’t fail fast, make sure you succeed slowly!

44.
The $900 billion reason GE, Ford and
P&G failed at digital transformation
• https://www.cnbc.com/2019/10/30/heres-why-ge-fords-digital-transformation-
programs-failed-last-year.html
• Much has been written dissecting the reasons for digital transformation failure —
most experts have settled on people/employees, organizational culture and
leadership as weak links. But few acknowledge the real common thread:
communication breakdown.
• The truth is, people aren’t the problem; it’s the organization’s failure to
communicate effectively with its people that sets them up for digital
transformation trouble from the start.
• Focus on the why
• Create personalized communication journey
• Create targeted multimedia experiences that reach different groups
• Communicate in context
• Use data to measure and iterate
• Become a change-ready organization

45.
Why digital strategies fail?
• https://www.mckinsey.com/business-functions/mckinsey-digital/our-
insights/why-digital-strategies-fail
• We find that a surprisingly large number underestimate the increasing
momentum of digitization, the behavioral changes and technology driving it,
and, perhaps most of all, the scale of the disruption bearing down on them.
Many companies are still locked into strategy-development processes that
churn along on annual cycles. Only 8 percent of companies we surveyed
recently said their current business model would remain economically viable if
their industry keeps digitizing at its current course and speed.
• Pitfalls
• Fuzzy definitions
• Misunderstanding the economics of digital
• Overlooking ecosystems
• Overindexing on the ”usual suspects”
• Missing the duality of digital

46.
Business Model
Innovation
This Photo by Unknown Author is licensed under CC BY-NC-ND

47.
The Business Model Navigator: Oliver Gassmann, Karolin Frankenberger, Michaela Csok
Opportunities…and challenges!

48.
What’s
your
current
business
model?

49.
Epicenters of Business
Model Innovation
• Resource-driven
• Offer-driven
• Customer-
driven
• Finance-driven
This Photo by Unknown Author is licensed under CC BY-SA-NCBusiness Model Generation: A handbook for visionaries, game changers, and challenges – Alexander Osterwalder and Yves Pigneur

50.
Resource-driven
Business Model Generation: A handbook for visionaries, game changers, and challenges – Alexander Osterwalder and Yves Pigneur

51.
Offer-driven
Business Model Generation: A handbook for visionaries, game changers, and challenges – Alexander Osterwalder and Yves Pigneur

52.
Customer-driven
Business Model Generation: A handbook for visionaries, game changers, and challenges – Alexander Osterwalder and Yves Pigneur

53.
Finance-driven
Business Model Generation: A handbook for visionaries, game changers, and challenges – Alexander Osterwalder and Yves Pigneur

54.
Multiple-epicenter driven
Business Model Generation: A handbook for visionaries, game changers, and challenges – Alexander Osterwalder and Yves Pigneur

55.
What
business
are you in?
This Photo by Unknown Author is licensed under CC BY-SA-NC

56.
Who are your
customers?

57.
Why do
they buy
your
products?
This Photo by Unknown Author is licensed under CC BY-SA-NC

58.
What are
their pain
points?
This Photo by Unknown Author is licensed under CC BY-SA-NC

59.
Example of
an
agriculture
digital
business
model
https://www.agupdate.com/digitization-transforms-business-models-of-agriculture-input-suppliers/pdf_53b96a33-8f6e-5a1b-8977-ad7997cae49c.html

60.
Business
Model
Innovations in
Agriculture
and food
https://start-life.nl/archief/4-strategies-business-model-innovation-ag-food/

61.
Recap
This Photo by Unknown Author is licensed under CC BY-SA-NC