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Why your business model is becoming obsolete

Why your business model is becoming obsolete Esmeralda Swartz

As businesses undertake digital transformations, they have to rethink what customers value most and create operating and business models that take advantage of what's possible through multiple digital platforms. The challenge for businesses is to quickly transform to reach existing and new customers without being hindered by legacy models and legacy thinking.

Technology has always been used as a tool to drive operational efficiency, optimize go-to-market strategies, and improve competitive differentiation. A customer's experience on a digital platform determines how personalized and sticky that relationship is with a service provider or a brand. The ability to quickly respond to shifts in the market and introduce new offerings that provide opportunities to innovate and grow are causing companies to rethink existing licensing, distribution, traditional subscription, and basic paywall models, which in turn means revisiting their monetization platforms.

A successful digital transformation strategy must always support a two-sided business model: the reshaping of customer relationships with richer content and personalized experiences, and the use of digital and social platforms for more customer and partner interaction. Both sides -- what is being offered and how it is being delivered -- must be supported successfully. Companies that will succeed understand that the opportunity in digital transformation comes from understanding and executing on both.

Who would have ever thought that digital devices, social networks, platforms like Google and YouTube, and mobile communications would determine who to trust and what to buy? Today, a product strategy needs to include digital, social, and mobile media to maximize audience reach. Businesses have to rethink what customers value most and create models that take advantage of what's possible for competitive differentiation.

Increased customer expectations in the age of more personalization are having a dramatic impact on how companies set strategy and run their organizations. With the backdrop of existing traditional products, new requirements across multiple platforms, improved interactivity and personalization of content, and increasing complexity, the need for fluidity in business models has never been greater. Every company is dealing with these forces shaping their business:

  • Information to interaction

  • Monologue to dialogue, connections, conversations, and contributions

  • Static to fully interactive experiences that allow you to participate

  • Multi-platform, multi-channel, multinational, multi-currency

The forces of mobility, social media, and digital media have rippled from the individual through to the entire supply chain. The consumer is letting the business know what he or she wants and needs. This disruption is pushing all industries to reshape their customer and partner relationships.

Customers and channels

There has always been a pattern of differentiating brands and platforms by enhancing a customer's experience with augmented products. The classic example is the automotive industry with digital music and machine-to-machine communication to provide an enhanced customer experience.

Another great example is the impact of digital media on a legacy bricks-and-mortar business, the Danish toy company, Lego. Best known for its interlocking plastic blocks, it has reinvented itself with its "Lego Ninjago: Masters of Spinjitzu" and other creative original spinoffs. The Lego animated TV series centers on the adventures of four ninjas, their master, and the requisite evil character based on the Lego toy series of the same name. On Jan. 14, 2011, two pilot episodes were shown on Cartoon Network, and a video game based on the show launched. Music plays a central part throughout the series, with all episodes featuring a theme song called "The Weekend Whip," performed by The Fold. Although Lego was always known for its Lego products based on successful movies such as "Star Wars," the Ninjago series forever changed the licensing model for Lego. In addition, it created direct demand through its YouTube channel and Cartoon Network series, which then filtered to its Lego toy block products. Using multiple platforms and distribution models, Lego was able to reach almost every male child under the age of 10. Any parent with a child in this age group is intimately familiar with Ninjago. Unlike other Lego series, which were all the rage to the extent that the movie stayed in the media limelight, Ninjago and digital platforms are continually fueling demand among existing and new audiences.

Analytics and "now cast" view

The ability to create customer-centric product offers based on the information in the monetization system is invaluable for all business groups within an enterprise. To drive operational decisions, it is critical to align a product or pricing strategy based on understanding customer preferences and needs and quickly monetizing them. Transactional data based on past customer purchasing behavior and patterns is the basis for creating a personalized customer experience. The business model agility to deliver and modify is key.

Delivering business model innovation

One of the key questions most organizations must answer in the digital era is how they can quickly imagine, design, and deliver new business models. All businesses explore new ways to capture revenue, extend customer reach, or move into new industries. Do you continue with subscription models or move to consumption-based models? Do you expand into new markets through new distribution partners? Do you innovate with your own products or bundle products from other suppliers? How do you share revenue with platform providers and content providers for content and audience reach? When you think you have the answers, the market changes again. Conceiving and quickly monetizing any business model that can be imagined, fluidly negotiating agreements with high-value customers, and accurately calculating and compensating channel partners are all essential in the age of digital transformation. The ability to support and monetize all customer and partner touchpoints is critical for managing the digital enterprise.

Esmeralda Swartz is the chief marketing officer at MetraTech.

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Esmeralda has spent 15 years as a marketing, product management, and business development technology executive bringing disruptive technologies and companies to market. Esmeralda is responsible for go-to-market strategy and execution, product...

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