Chapter 1.
New Trends
Of Business Models In
Digital Era
By MSc. Dinh Van Hoang – Email: [email protected]
Content
1. Shift from traditional to digital business models
2. Rise of platform-based business models (e.g., Uber, Airbnb)
3. Subscription-based business models (e.g., Netflix, Spotify)
4. Freemium models (e.g., Dropbox, Slack)
5. Personalization and data-driven business models (e.g., Amazon, Netflix)
6. Collaborative and sharing economy models (e.g., Airbnb, Uber)
7. Circular economy and sustainable business models (e.g., Patagonia, IKEA)
8. Omnichannel and integrated customer experiences (e.g., Apple, Sephora)
9. Implications and challenges of digital business models
1. Shift from Traditional to Digital
Business Models
The business world is undergoing a profound shift as companies adapt to
rapid technological advancements, changing customer preferences, and an
evolving competitive landscape. This transition requires organizations to
rethink their business models and strategies to remain relevant and
competitive in the digital age.
Key Drivers of Digital Transformation
Changing Customer Evolving Competitive
1 Technological 2 3
Preferences Landscape
Advancements
Emerging technologies Customers today expect New digital-native
such as cloud computing, personalized, seamless, and competitors are entering the
big data analytics, and and on-demand the market, forcing
artificial intelligence are experiences, driving established players to adapt
enabling new business organizations to adopt adapt or risk being left
capabilities and disrupting digital-first strategies. behind.
traditional industries.
Case Study: Netflix's Digital Transformation
Transformation
From DVD-by-Mail to Data-Driven Decision Agile Development
Streaming Decision Making
Netflix adopted an agile
Netflix began as a DVD-by- Netflix leveraged agile development
by-mail service but customer data and approach, allowing the
recognized the shift analytics to develop the company to rapidly
towards digital and personalized rapidly iterate and
adapted its business model recommendations and release new features to
model to become a leading and content, driving to meet evolving
leading streaming platform engagement and customer needs.
platform (Harvard Business subscription growth.
Business Review, 2020).
Strategies for Successful Digital
Transformation
1 Data-Driven Decision Making
Leveraging data and analytics to inform strategic
strategic decisions and improve business outcomes.
outcomes.
2 Agile Development
Adopting agile methodologies to enable faster
innovation and adaptation to changing market
conditions.
3 Customer-Centric Approach
Focusing on delivering exceptional customer
experiences and meeting evolving customer needs.
needs.
2. Rise of Platform-
based Business
Models
Platform-based business models have experienced rapid
rapid growth in recent years, disrupting traditional
industries. These innovative models leverage digital
digital technologies, network effects, and scalable asset-
asset-light approaches to create value and capture new
new market opportunities.
Key Characteristics of Platform-based
Businesses
Network Effects Scalability Asset-light Model
The more users a Platforms can rapidly Platforms leverage
platform has, the more scale to serve a large other parties' assets
more valuable it user base with minimal and resources, avoiding
becomes to both marginal costs, avoiding the capital-
producers and enabling exponential intensive investments
consumers, creating a growth. investments required in
a positive feedback required in traditional
loop. traditional business
models.
Case Study: Uber's Rise as a Global
Global Transportation Platform
1 Disrupting the Taxi Industry 2 Rapid Global Expansion
Uber's smartphone-based ride- Leveraging its platform model,
hailing service challenged the Uber quickly scaled to operate in
traditional taxi industry, offering a in hundreds of cities worldwide,
more convenient and on-demand worldwide, becoming a global
transportation solution. transportation giant.
3 Innovative Technology
Uber's innovative use of mobile apps, GPS tracking, and digital payment systems
payment systems transformed the passenger experience.
Case Study: Airbnb's Transformation into a
Hospitality Platform
Disrupting the Hotel Industry Vast Inventory of Listings
Airbnb's peer-to-peer home-sharing By tapping into individual hosts' properties,
platform challenged the traditional hotel Airbnb rapidly built a global portfolio of
hotel model, providing a more unique and diverse accommodations.
and personalized travel experience.
Innovative Technology Expansion into Experiences
Airbnb's mobile apps and online booking Airbnb expanded beyond accommodations,
booking systems made the hosting and accommodations, offering unique local
and guest experience seamless and user- local experiences to further enhance the
user-friendly. the travel experience for guests.
Implications for International Business
Planning and Strategy
Disruptive Potential
Platform-based models can disrupt traditional industries,
requiring companies to adapt their strategies to stay competitive.
competitive.
Global Scalability
The scalability of platform models enables rapid international
international expansion, presenting both opportunities and
and challenges.
Innovative Thinking
Successful platform businesses often require innovative thinking
thinking and the ability to pivot quickly to meet evolving customer
customer needs.
3. Subscription-based
Business Models
Subscription-based business models are a popular
revenue strategy where customers pay a recurring fee,
fee, often monthly or annually, to access a product or
or service. This model provides a steady stream of
predictable revenue for businesses and offers convenience
convenience and value for customers.
Case Study: Netflix's Subscription Model
Model
Key Features Benefits Impact
Netflix offers on- Subscribers enjoy the Netflix's subscription
demand access to a convenience of model has disrupted
vast library of TV unlimited streaming, the traditional cable TV
shows, movies, and personalized industry and
documentaries for a recommendations, and transformed the way
monthly subscription the ability to watch on people consume
fee. multiple devices. entertainment.
Advantages and Challenges of Subscription-
Subscription-based Businesses
1 Advantages 2 Challenges 3 Strategies
Predictable revenue, Acquiring and Offering compelling
customer loyalty, and retaining customers, content, delivering
the ability to scale customers, managing exceptional customer
efficiently. managing churn, and customer service, and
and ensuring a high- and continuously
high-quality product improving the product
product or service. product or service.
4. Freemium Business
Business Models
Freemium business models offer a free basic version of a
version of a product or service to attract users, while also
while also offering premium features or functionality for a
functionality for a fee. This allows companies to acquire
acquire customers at a low cost and monetize the most
most engaged users.
Case Study: Dropbox Freemium Model
Dropbox Freemium Dropbox Growth Monetization
Model
By 2018, Dropbox had While the majority of
Dropbox offers 2GB of over 500 million Dropbox users are on the
free cloud storage with registered users, with 11 the free plan, the
with paid plans starting at million paying company generates
starting at $9.99/month subscribers. The revenue from the subset
$9.99/month for freemium model was a subset of users who pay
additional storage and key driver of this rapid pay for additional storage
features. The free plan growth and user storage and features. This
allows users to try the acquisition. This allows Dropbox to
product and convert to scale efficiently.
to paid as their needs
grow.
Key Considerations for Implementing
Freemium
1 Determine Core Features 2 Set Pricing and Packaging
Identify the essential features that Price the premium features
will be offered for free vs. the competitively while ensuring the
premium features that users will the free plan is valuable enough
pay for. enough to drive user acquisition.
acquisition.
3 Analyze User Behavior 4 Provide Exceptional Support
Continuously monitor user Ensure a positive user experience
engagement and conversion rates experience for both free and
rates to optimize the freemium paying customers to drive long-
freemium offering. long-term loyalty.
5. Personalization and
Data-Driven Business
Models
Personalization and data-driven business models have
become essential strategies for companies to stay
competitive and meet evolving customer demands. By
leveraging customer data, businesses can tailor their
offerings, improve customer experiences, and drive
growth.
Amazon's Personalized Recommendations
Customer Data Recommendation Continuous
Collection Algorithm Optimization
Amazon collects extensive Amazon's sophisticated Amazon continuously
data on customer sophisticated refines its
browsing history, recommendation engine recommendation system,
purchases, and engine analyzes user data system, testing new
preferences to build data to suggest relevant algorithms and
detailed user profiles. relevant products, driving incorporating customer
driving increased customer customer feedback to
customer engagement and improve the accuracy of its
and sales. of its suggestions.
Netflix's Personalized Content Suggestions
Suggestions
User Profiling 1
Netflix collects data on user viewing
habits, ratings, and preferences to build
2 Content Matching
comprehensive user profiles.
Netflix's recommendation algorithm
matches user profiles with its vast
Continuous Improvement 3 content library to suggest titles tailored to
Netflix continuously refines its tailored to individual preferences.
recommendation system, incorporating
incorporating user feedback and
industry trends to enhance the accuracy
accuracy of its suggestions.
Leveraging Customer Data for Business
Growth
1 Personalized Experiences 2 Predictive Analytics
Utilize customer data to create Analyze customer data to identify
personalized products, services, and trends, predict future behavior, and
and marketing campaigns that and make informed business
resonate with individual preferences. decisions.
preferences.
3 Targeted Offerings 4 Continuous Optimization
Develop and promote products and Regularly evaluate and refine data-
and services tailored to specific data-driven strategies to ensure they
customer segments, increasing they remain effective and aligned with
customer satisfaction and loyalty. with evolving customer needs.
6. Collaborative and
Sharing Economy
Models
The collaborative and sharing economy models are
transforming various industries by enabling peer-to-peer
transactions, efficient resource utilization, and flexible
access over ownership. These innovative models are
disrupting traditional business practices and creating new
opportunities for businesses and consumers alike.
Case Study: Airbnb - Disrupting the
Hospitality Industry
Airbnb's Disruptive Model Rapid Growth and Global Challenges and
Reach Regulations
Airbnb's platform Airbnb has experienced Airbnb faces ongoing
connects travelers with experienced exponential challenges related to
local hosts, offering exponential growth, regulatory compliance,
unique and cost-effective operating in over 220 compliance, taxation,
accommodation options, countries and offering and concerns from the
challenging the offering millions of the hotel industry and
traditional hotel industry. listings worldwide. local communities.
Case Study: Uber - Transforming the
Transportation Sector
1 Innovative Ride-Hailing Model 2 Disruption of Traditional Taxis
Uber's technology-driven platform Uber's entry into the market has
connects riders with drivers, providing a significantly disrupted the traditional
convenient and on-demand traditional taxi industry, leading to
transportation solution. increased competition and innovation.
innovation.
3 Regulatory and Legal Challenges 4 Expansion and Diversification
Uber has faced numerous regulatory Uber has expanded beyond ride-hailing
regulatory and legal challenges in hailing into other transportation
various jurisdictions, requiring the services, such as food delivery and
company to navigate complex policy freight logistics, further transforming
policy and regulatory environments. transforming the industry.
environments.
Challenges and Considerations for
Businesses in the Collaborative Economy
Regulatory Compliance Trust and Reputation
Navigating complex and evolving regulations Establishing and maintaining trust with
regulations in various industries and both providers and consumers is crucial
jurisdictions is a significant challenge for for the success of collaborative economy
for collaborative economy businesses. platforms.
Worker Classification Data Privacy and Security
The classification of workers (e.g., employees vs. Collaborative economy businesses must
vs. independent contractors) in the collaborative must carefully manage customer data
collaborative economy remains a contentious issue data and ensure robust data privacy and
contentious issue with legal implications. and security measures are in place.
7. Circular Economy
and Sustainable
Business Models
The circular economy is an alternative to the traditional
linear economy, aiming to keep resources in use for as long
as possible, extract the maximum value from them, and
then recover and regenerate products and materials at the
end of their service life.
Sustainable Business Models: Patagonia
Case Study
Patagonia's Approach Key Initiatives Positive Impact
Patagonia, the outdoor Patagonia's initiatives Patagonia's sustainable
clothing and gear company, include using recycled and practices have led to
company, is a leading and organic materials, reduced resource
example of a sustainable offering product repair consumption, lower
sustainable business services, and encouraging emissions, and a more
model. They focus on encouraging customers to engaged customer base
durability, repairability, and to only buy what they need that values the brand's
and recycling to minimize need through their "Don't environmental
minimize waste and "Don't Buy This Jacket" commitment.
environmental impact. campaign.
IKEA's Circular Initiatives and Sustainability
Sustainability Efforts
1 Material Sourcing 2 Product Design
IKEA focuses on using renewable, IKEA designs their products for
recycled, and recyclable materials for longevity, repairability, and
in their products, such as and disassembly to facilitate
bamboo, recycled plastic, and recycling and reuse at the end of a
FSC-certified wood. end of a product's life.
3 Take-Back Schemes 4 Renewable Energy
IKEA offers furniture buyback and IKEA aims to generate as much
and take-back programs to much renewable energy as it
encourage customers to return consumes by 2025, reducing its
return used items for its environmental footprint.
refurbishment or recycling.
Barriers and Challenges to Implementing
Circular Economy
1 Economic Barriers
Transitioning to a circular economy can require significant
significant upfront investments in new technologies and
and infrastructure, which can be a deterrent for some
businesses.
2 Regulatory Hurdles
Existing regulations and policies may not be designed to
to support circular economy practices, making it challenging
challenging for businesses to implement them.
3 Consumer Mindset
Changing consumer behavior and attitudes towards
sustainability and product ownership can be a significant
significant challenge in the shift to a circular economy.
Strategies for Transitioning to a Circular
Business Model
Design for Circularity Implement Reverse Logistics
Incorporate design principles that Establish systems to collect,
prioritize durability, repairability, and refurbish, and reintegrate used
and recyclability to extend the life of products and materials back into the
products and materials. supply chain.
Collaborate with Stakeholders Explore New Business Models
Work closely with suppliers, Consider transitioning to models like
customers, and other partners to like product-as-a-service or sharing
align on circular economy goals and economy to retain ownership and
and develop joint initiatives. responsibility for products.
8. Omnichannel and
Integrated Customer
Experiences
Omnichannel strategies focus on providing a seamless and
cohesive customer experience across all touchpoints, both
online and offline. By integrating various channels,
businesses can offer a more personalized and convenient
experience, leading to increased customer loyalty and
sales.
Case Study: Apple's Omnichannel Strategy
Integrated Retail Consistent Brand Personalized
Network Experience Interactions
Apple's vast network of The design, layout, and Apple's Genius Bar and
physical stores, combined customer service personalized support
combined with its online experience are consistent services cater to individual
presence, allows customers consistent across all Apple individual customer needs,
customers to seamlessly Apple stores, creating a needs, fostering deeper
move between channels to cohesive and recognizable relationships and brand
to research, purchase, and recognizable brand identity. loyalty.
and receive support for identity.
their products.
Key Takeaways and Implications for
International Business Planning
1 Seamless Integration 2 Localization and Personalization
Businesses must ensure a seamless Adapting the omnichannel approach
integration of online and offline approach to local market needs and
channels to provide a consistent and and preferences is crucial for success
convenient customer experience. success in international markets.
3 Data-driven Insights 4 Agility and Innovation
Leveraging customer data and Continuously exploring new
analytics to understand behavior and technologies and evolving the
behavior and preferences can help omnichannel approach is necessary
help optimize the omnichannel necessary to stay competitive in a
strategy. a dynamic global marketplace.
9. Implications of
Digital Business
Models
Digital business models have transformed how companies
operate and engage with customers. They offer increased
scalability, personalization, and data-driven insights to
drive growth and innovation. However, these models also
present challenges around security, privacy, and the need
for continuous adaptation to technological advancements.
Challenges of Digital Business Models
Cybersecurity Risks Data Privacy Concerns Technological Adaptation
Adaptation
Digital platforms are Collecting and leveraging
susceptible to cyber leveraging customer data The rapid pace of
threats, requiring robust data raises ethical and technological change
security measures to regulatory issues around change requires
protect sensitive around data privacy and businesses to
customer and financial consent. continuously update
data. their digital
infrastructure and skills
skills to remain
competitive.
The End of Chapter 1
