Definition and classification of digital business models

The Impact of Digital Business Models on a Company’s Core Operations and Activities with a Special Emphasis on German Markets and Industries
Student’s Name:
Institutional Affiliation:
Introduction
What We Are Talking about, Definition and Explanation of Main Concepts and Ideas
The primary focus of any business model is to offer a foundation for the functioning of any firm or enterprise. The key drivers of the innovative business model have been recent advances in information technology and the rising demand for socially motivated industries as a basis of competitive advantage. Bouwman identifies that a business model reflects the main logic of the firm, how it creates value to consumers and how it operates on a day-to-day basis (Bouwman, 2002). The strategy refers to a firm’s choice of a particular business model and how it decides to compete in the marketplace (Ramon and Ricart, 2010). The tactics, as other supplements of the business model and the overall strategy, refer to the residual options or choices of a firm with regard to the overall strategy (Veit et al., 2013). In the current era of globalization and rapid technological revolution, the firm is likely to employ a two-stage competitive framework in the realization of better operational capabilities in the maximization of stakeholder value and returns. In the first stage, firms choose a model of value creation and capture (Amit and Zott, 2001). This model concentrates exclusively on driving value to consumers through the products or services it creates (Veit et al.

, 2013). In the second stage, firms are likely to use tactical changes that are guided exclusively by their goals, both short and long-term. When looking at the digital business models, sources identify that a business model is digital if technological changes and alterations in digital systems affect the way the enterprise operates and how revenues are generated (Veit et al., 2013). The business model is also a framework to guide the sustainability of a business (Dimitrios et al. 2001). Based on their analysis, Dimitros et al. (2001) believe that a plethora of concepts and theories will guide this project in the examination of e-business models and their application in contemporary businesses and enterprises, particularly in Germany. Based on a literature review of scholarly articles and sources, the most outstanding theories in the digital business models are digital systems, globalization, revolution, business model, strategic, and operational tactics.
The Significance of Digital Business Models in Industry and Businesses
A new field of digital business models focuses on the enrichment of already developed products and systems (Veit et al., 2013). In Germany for example, developments in digital business models are explained in a chapter titled ‘Industry 4.0′ a framework that provides a wide range of models and strategies, based purely on the technological revolution that holds a great potential in defining the future of manufacturing and processing (Veit et al., 2013). The significance of digital business models is to provide a direction for enterprises that rely mostly on technology systems to disseminate products and services (Osterwalder et al., 2005). What is more is that rapid increases in innovation around mobile and Internet technologies have stimulated the importance of business models in information systems and digital capabilities. Unlike traditional enterprises that operated in relatively stable and low-competition environs, the emerging field of digital business is dynamic, complex, and suffers from high levels of uncertainty and rivalry. While the traditional managers are conversant with translating the business strategy into specific operational processes and procedures, the 21st-century managers should be competent in using technology and digital capabilities to create a competitive advantage. The significance of business models is hence clear; to provide a direction of operation for firms and businesses through the use of better technologies and digital capabilities (Campanovo and Pigneur, 2003). Firms and companies whose core methods of operation and practices are affected by shifts in technological innovation and whose revenues are affected by changes in digital technologies can properly benefit by re-innovating their models.
How the Topic Will Be Tackled
A key focus of the paper will be to review a range of scholarly literature and secondary research materials. The exploration will be done exclusively to gather data, ideas, and theories that relate to new digital business models and relationship to contemporary enterprises. The synthesis of literature is conducted in a way that focuses on identifying connections between digital technologies and competitive advantage. A special focus for the paper will be to analyze, through the use of scholarly research, how digital business model, also referred to as e-business model, will enable firms, especially those based in Germany, to build a competitive advantage at the wave of heightened globalization and technological revolution (Osterwalder and Pigneur, 2005).
Research Questions
What are the new technologies and systems that stand to befit a firm’s business model?
What is the relationship between digital business model and competitive advantage?
What are the specific and particular effects and implications of the digital business model on a firm’s core operations, activities, and practices?
Main Part
A Literature Review on the Scope of Digital Business Model
For the past decade, many e-business ideas have been considered by literature covering business models and information technology (Lambert, 2006). These ideas mainly focus on value proportions for creating competitive advantage coupled with technological possibilities like the widespread use of digital technologies and the internet. While a good number of e-business models have been successful, the failure of most has been due to unsustainable businesses. The new era has meant the availability of new communication and digital tools is critically underpinning in the success of enterprises and firms. The new world of digital business can best be adapted through the adoptions of sound and digital processes and systems which offer companies competitive advantages, better positioning, and more improved performance and productivity. Osterwalder et al. (2005) identify that today, without a proper formulation and a solid conceptualization of the model it is hard to use new technologies and capabilities to create a competitive edge. In this realization, a range of capabilities and IT support systems stand to benefit a firm’s outlook on its digital business model. A number of approaches exist for influencing the digital business model and these include; [1] informational text, [2] morphological representation, [3] structured text, [4] ad-hoc graphical illustration and representation, [5] dedicated graphical representation, and [6] conceptual model with well-defined semantics (Veit et al., 2013).
It is important to note that when examining the scope of digital business models, the goals of these models should be equally exhausted to fully understand the importance and significance of changing specific business model to suit the prevailing market and industry conditions. The first goal of any digital business model is the monetization of proactive social consumers mostly online clients and customers (Afuah and Tucci, 2001). Most business looking forward to leveraging a digital business model is to clearly and fully tap the ever-rising base of online clients, viewers, and digital audiences. For example, in Germany, companies like BMW, Mercedes, and Volkswagen, automotive industries, have enhanced their digital capabilities through the design of functional, effective, and user-friendly digital platforms and avenues. These companies realized the ever-growing consumer base and hence changed their marketing and advertising approaches to digital. Another goal of the digital business model is the realization of new service and product models as is the case of hybrid bundles (Al-Debei et al., 2008). For example, in Germany, one interesting field under the Industry 4.0 is concerned with the costing of the hybrid bundles. Under Industry 4.0, for instance, the product service systems abbreviated as PSS are a particular example of a hybrid that applies a service logic that is dominant to the product itself. Most firms have therefore adopted a change in their business models to properly capture the concept of hybrid bundles where they can price or cost products and services that require the infusion of both human and IT services.
The final goal of digital business models is to enhance the understanding of consumer and organizational behavior at the wave of technological revolution. For example, Germany media and advertising firms such as Edel AG, Koch Media, Radio Bremen, Ganske Publishing Group, and Funke Medingrouppe are gradually adopting semantic foundations and better user graphics. The use of these particular IT support systems and processes in the firms’ core business models is to keep pace with technological growth while at the same time understanding consumer behavior by collecting their browsing habits, expectations, and nursing user engagement (Gordijn and Akkermans, 2010). Alt and Zimmermann (2001) support that any e-business model has fundamental goals and objectives the most immediate ones being [1] monetizing proactive social users, [2] realization of new and better product and service bundles, and [3] understanding consumer behavior and expectations to add value to their services and products.
Limitations of the Study and the Need for Future Research
A thorough analysis of the existing literature on e-business models provides an overview of the application of different technologies in building a competitive advantage. The review further provides an overview of why enterprises and companies are gradually leveraging new business model. Regardless of the scope of present literature, a lot needs to be discussed and answered with regard to the literature of digital business models. For example, there is need to evaluate the existing opportunities for companies using traditional models of operation as opposed to digital ones. Companies that are yet to exploit digital channels have immense benefits like cost savings, little disruption of their business models, and the ability to remain focused on a niche without necessarily having to expand their business outlook. Another limitation of the existing literature of digital business models is that they provide a landscape for the digitization of companies without examining the backsides of limitations of such a progress (Thomas et al., 2011). For example, while technology provides immense opportunities for expansion, it is central examine the suitability of change, and the complementary nature between a company’s core operations and processes and its adoption of new technologies. For example, firms whose consumers are mostly based offline need to rethink their approach. For example, healthcare agencies that provide medical and drug supplements for the elderly, those targeting children, and seniors may not necessarily achieve a competitive edge by adopting a digital business model. Hence, the focus of specific companies, their business outlook, and the nature of activities should define and guide their business models (Bouwman, 2002).
Summary
A number of findings stem from the above research on the impact of digital business models on a firm’s practices and operations with a special focus on Germany industries. These include but not limited to;
Digitalization will enable firms to enhance their operational capabilities and efficiencies. The use of new software and applications, better semantics, and digital tools ease data entry, enhance the performance of machines, and streamline processes in manufacturing and processing (Afuah and Tucci, 2001).
Digital transformation enhances customer experience and improves how enterprises engage and interact with customers. As discussed, digital business models collect consumer contact information, enable access to customer business relationships, and analyzes customer service and purchase behaviors (Lambert, 2006).
An outlook on the digital business model, other than enhancing data privacy and security, expands a firm’s approach and the access to a large consumer base including online communities, online businesses, and multi-international companies with the digital presence(s) (Anderson et al., 2006).
Digital models like e-business models are a basis for competitive advantage. Firms with the online presence can communicate with customers, provide superior customer service, and better understand new business practices and trends. This means they are better suited to exploit and seize opportunities than offline or physical enterprises.
Finally, while digitalization is increasingly becoming a trend for businesses, a firm’s core focus, its goals, and objectives should be aligned with the adopted technologies. As seen in the paper, a good number of digital practices have failed solely as a result of unsustainable businesses and enterprises. This means the focus of digital business model must address the nature of a company’s activities, target market, and customer base in the realization of its financial and economic success.
References
Afuah, A., and Tucci, C. (2001) Internet Business Models and Strategies, McGraw-Hill, New York, NY. 2.
Al-Debei, M. M., El-Haddadeh, R., and Avison, D. (2008) Towards a Business Model for Cellular Network and Telecommunication Operators: A Theoretical Framework, Proceedings of the 13th Conference of the UK Academy for Information Systems, April 11-12, Bournemouth, UK. 3.
Alexander Osterwalder, Yves Pigneur. (2005). Comparing Two Business for Designing e-Business Models and Value Constellations. 18th Bled eConference eIntegration in Action Bled, Slovenia. Department of Computer Science, Vrij Universiteit Amsterdam [email protected], R., and Zimmermann, H. (2001) Introduction to special section – business models, Electronic Markets, 11, 1, 3-9. 4.
Amit, R., and Zott, C. (2001) Value Creation in eBusiness, Strategic Management Journal, 6-7, 22, 493-520. 5.
Anderson, B., Bergholtz, M., Edirisuriya, A., Ilayperuma, I., Johannesson, P., Grégoire, B., Schmitt, M., Dubois, E., Abels, S., Hahn, A., Gordijn, J., Weigand, H., Wangler, B. (2006) Towards a Reference Ontology for Business Models, International Conference on Conceptual Modeling (ER2006). 6.
Bouwman, H. (2002). The sense and nonsense of Business Models, International Workshop on Business Models, HEC Lausanne, 6p. Cat. O, Project code: ICT. 7.
Campanovo, G., and Pigneur, Y. (2003) The business model analysis applied to mobile business, Proceedings of the 5th International Conference on Enterprise Information Systems, April 23-26, Angers.
Dimitrios A. Papakiriakopoulos, Angeliki K. Poylumenakou, Georgios J. Doukidis. (2001). Building e-business Models: An Analytical Framework and Development Guidelines. Athens University of Economics and Business. Pp. 1 – pp. 463.
Gordijn, J, and Akkermans, H. (2010). Does e-business Modelling Really Help? Submission: HICSS36 – E-Commerce Systems Development: Models, Methods, and Methodologies.
Lambert, S. (2006). A Business Model Research Schema. School of Commerce Research Series. Pp. 1 – pp. 16.
Osterwalder, Alexander; Pigneur, Yves; and Tucci, Christopher L. (2005) “Clarifying Business Models: Origins, Present, and Future of the Concept, “Communications of the Association for Information Systems: Vol. 16, Article 1.
Ramon Casadesus and Enric Ricart. (2010). From Strategy to Business Models and onto Tactics. The Elsevier: Long Range Planning 43 (2010) 195 – 215.
Thomas, B, Julian, K, Dirk, W, and Peter, L. (2011). Analyzing the Business Model Concept: A Comprehensive Classification of Literature. Thirty Second International Conference on Information Systems, Shanghai.
Veit D, Clemons E, Benlian A, Buxmann P, Hess, Kundisch D, Leimeister JM, Loos P, Spann M (2013) Business Models: An Information Systems Research Agenda. The BISE Research Notes. Pp.1 – pp. 53.