Next-generation technologies such as artificial intelligence are working well as proofs of concept and small-scale, highly focused applications such as chatbots or predictive analytics. Now, it’s time to scale these technologies to the point where they can move the enterprise forward in new directions. That’s the challenge, and new research shows they’re not there yet.
Digital business models employ technologies to deliver not only better products and services, but to also personalized, meaningful experiences to customers. New models may also replace once-and-done offerings with subscription-based services or opportunities. Or, new types of services are made available on demand to customers. Notice the common denominator here — it’s all benefiting, and perhaps even wowing, the customer. Replacing live customer service reps with chatbots will not wow customers, or add much other value other than labor cost-savings. Predictive analytics may help keep production lines running, but that’s a minimal expectation for customers.
Most digital technologies themselves are understood, at least on the surface, by executives these days. Artificial intelligence, cloud computing, analytics, and virtual reality are common terms heard in conversations among C-suite executives and managers. The challenge is they have yet to act on it. The essence of a digitally transformed business model is using the power of digital technologies to provide direct and personal solutions that create deep and long lasting relationships with consumers. That’s the wow factor.
While most executives claim to be familiar with next-generation technologies, but only 10% of companies have a digital business model in place to fully use these opportunities, a recent survey of 214 US executives conducted by researchers at the ESCP Business School in Berlin and the MIT Sloan Center for Information Systems Research.
The response to the business potential of digital technologies is still lukewarm at best, with only about half of executives buying into their potential. Slightly more than half, 52%, see artificial intelligence as “very” to “extremely” relevant to their businesses. Another 47% see virtual reality and augmented reality as highly relevant.
While executives are knowledgeable and aware of digital technologies, “the bad news is that most companies do not seem to act on this knowledge to transfer their business to the future,” according to the study’s co-authors, Philip Meissner, chair of strategic management and decision making at ESCP Business School, and Martin Mocker, research affiliate with MIT CISR. “And creating such a business model does not seem to be top of mind for most executives either. Only one-third said that they primarily think of digital business models when they think about digitization. Two-thirds focus on digital processes instead.”
The single most important focus of a transitioned business model is the customer, pure and simple. “Digital business models take your company directly to the consumer, wherever they are,” Meissner and Mocker state. “Their smartphone is always with them and is so is your business.”
The recent Covid-19 crisis demonstrated to the world the immense value of a digital, customer-focused business model, they add. “While some businesses saw revenues decrease by more than 80% within weeks, companies with a digital business model thrived. Uber was able to respond quickly to the crisis due to its proximity to their customers. Even when the ride sharing business started to decrease during the crisis, they could easily switch to offering the services of Uber eats to customer groups, who may not have used them before.” Digital business models open new avenues of personalization, they state.