Digitization – New business models for SMEs
How new business models result from digitization and affect SMEs
Digitization offers great opportunities especially for SMEs. In our article we explain which business models are in vogue, which are becoming important and which technologies are causing these trends.
Through innovation and technological advances, IT is becoming one of the biggest drivers for all sectors of the economy. Especially agile SMEs can adapt faster to new innovative business models and benefit from them in various areas. But what impact does digitization have on the business models of SMEs?
According to Cisco, there are currently around 25 billion Internet-enabled devices in circulation, and this figure is expected to rise to more than 50 billion by 2020. We consume information every day via digital media. Networking with friends and communicating across the world is just as easy as sorting and sharing all your photos in seconds.
Our shopping behavior has adapted greatly to the possibilities. We get recommended an article via social media, get information on the websites, buy it in the online store, follow the shipment via cell phone and pay everything comfortably with only 2 clicks.
Many of these processes have made our lives easier. This is exactly where the fundamental advantage of digitalization lies. We optimize processes, develop new manufacturing methods, intelligent machines help to save costs and produce more efficiently. An example of this change can be found in a very old industry. Print shops today are more IT service providers than printers actually are. Print data is sent online, processed, forwarded to the presses, billed via the central ERP system and prepared for dispatch.
Drivers for digital business models
As already mentioned, technical innovation is the biggest driver. As soon as a new technology emerges and is also actively used by customers, a need arises to which companies must respond.
Having information always and everywhere available has changed our lives. Mobile technologies have become a fundamental part of our lives in recent years. However, smartphones enable much more than just displaying information. There are innumerable possibilities, as for example WeChat has impressively shown, where life can be completely handled over the phone. Companies can enable communication and new functions with the help of mobile helpers.
Just as smartphones have made it into everyday life, social media networks have become an integral part of our daily lives. Consumers are networking, exchanging information and recessions and finding out about products and companies. It is becoming more and more important to communicate with customers on a personal level, to build trust and to find out about their needs.
Machine learning and Artificial Intelligence (AI) are major topics that will attract more attention in the coming years. It not only endangers jobs and is important for large companies like Google’s search, but it also enables completely new ways of automating processes. Good examples at the moment are chatbots or self-learning algorithms that analyze data and make suggestions for companies or even financial advisors.
“Data is the new Oil” (Clive Humby) – Whether we are talking about optimization in marketing, warehouse management or market analysis. We need data and the better we can understand our environment, the easier it is for us to draw conclusions. Companies can use targeted information to see new niches, optimize processes, or target customers more effectively. In doing so, data must be collected at many points and evaluated in a targeted manner to create added value.
Office 2.0 or simply send a document on vacation. The advantages of having the data centrally accessible on the Internet are known by many. Especially companies can profit from these flexible IT solutions, because the expensive maintenance and procurement of hardware is not necessary and also the security is given externally. But also as a provider there are new possibilities. So even services can be offered, which can be used completely independent of location and hardware, which is a central advantage for many customers.
Innovation and Technology
Whether it’s 3D printers, drones, self-propelled cars or virtual reality. All these innovations have one thing in common: they enable a whole universe of new business models. Such technological developments are particularly interesting for SMEs, as they can act faster and have more potential for growth. 3D printing, for example, enables a fast and cheap production of special parts, which poses different challenges for large companies.
New business models emerge
Facebook, Uber, Airbnb, Alibaba, WeChat, Snapchat and many more. All these companies have something in common. They have used new business models and either completely reinvented a market or pushed out the competition. Customer experiences, networking of companies, automation of production or the systematic processing of customer interfaces. The digitalization of companies creates many opportunities and Industry 4.0 is becoming an important topic.
Banks, travel industry, hotels, retail, education, cabs, insurance companies and many more have changed. Digital business models can be created by software, hardware or hybrid forms of it. Travel portals offer search services to compare the cheapest prices and collect commission for this. Skype, Whatsapp and Co. offer services that allow us to communicate easily and earn money through advertising. Alibaba, Amazon and ebay help us to shop easier and get fees for it. Apps control our houses, find our cars or are already available on our wrist and thus we buy physical products.
What questions should SMEs ask themselves?
Sharing economy, technologies, platforms, apps and exchange and download portals and much more are changing the way many industries operate. Companies must critically question their strategy and ask themselves how they can take advantage of this change.
- Which technologies are relevant for my industry? What developments have there been in similar industries?
- Which data do I need and how can I collect them?
- Where are my points of contact with my customers (customer journey)? How can I improve the customer experience?
- What does my value chain look like and which technologies are developing in the individual sub-sectors?
- How do I make my processes simpler, cheaper or more efficient?
- Are my employees flexible enough? Do I possibly need new skills?
Potential areas for digital business models
In principle, digital business models can be divided into 4 areas. Interactivity, networking, availability and integration. Basically it is not only about improving existing models but also about discovering new ones.
Self-service services are a classic example of customer interaction. They involve an exchange of information, goods or even money. However, the advantage can be that customers can help express their wishes, configure their own systems or help develop products. It may be that you let customers choose their own offers and test prototypes together with them. You can actively involve the customer from the development to the sale and thus promote his sense of belonging.
The Internet has made it all the easier to network services. Producers and suppliers can link their systems to optimize production processes. Or several companies can be networked and depicted via platforms such as booking.com or for insurance comparisons. New business models can also be created by linking customers to companies.
The Internet has opened up new possibilities especially for SMEs. You can offer your products worldwide, sell them around the clock and also enable you to meet new customer segments.
Platforms make it possible to combine various offers. So for example offerers for journeys can appear together and offer flights, hotels as well as rented cars uvm. together. This enables the customers to offer added value and creates more relevance through a more targeted offer.
The in-house development of digital business models
Customers want to have relevant offers and it should make their lives easier. No matter if you develop software, produce a new product or join a platform idea. Added value and ease of use are always central.
Especially important for SMEs: start small, think big
Digital transformation requires the transformation of the organization, of roles, strategies, processes, structures and much more. Managers have completely new challenges and it is even more important to think creatively. (Brainstorming Methods)
And slow starting and testing also allows you to keep an eye on the details, as well as to slowly adapt to the change without overstraining yourself.