When online usage was increasing by 2,300% annually in the spring of 1994, Jeff Bezos had a wake-up call. Knowing it was strange, he wondered right away, “What would make sense in the context of that growth?” This is how Amazon was born.
The origin stories of the majority of companies using virtual business models are comparable to Amazon’s.
An organisation that uses technology tools to carry out the majority of its operations without a physical location is said to have a virtual business model.
Although the majority of CEOs now have a fundamental grasp of technology like artificial intelligence, machine learning, big data, internet of things, and digitalization/digital transformation, there is still still misunderstanding about how digital business models operate. These new business models, which are fueled by technology and the strength of networks, are some of the most disruptive of our time.
As we all know, technology is not what drives these business models. In actuality, technology just plays a supporting role. The only thing the digital business models serve is the consumer experience, much like in digital ecosystems. Therefore, there is only one question we need to ask ourselves: How can we use digital tools like platforms, applications, websites, and more to add value for our customers?
The ability to directly access customers and data is where the power rests. You can quickly move your offering into his hand, send him messages in his pocket, and allow him to immediately consume your goods because it can be done so digitally.
It’s also important to note how simple it is to establish, replicate, and automate digital services. This indicates that when you expand your consumer base, there are typically few significant costs involved. The best part about digital business models, on the other hand, is their ability to grow without extra work. You may sell your product 100 times or more than 1 million times without breaking a sweat.
Entering in The World Of Digital Business Model
In a digital economy, firms can create, deliver, and capture value through the use of digital business models. To do this, digital business models employ a variety of digital technologies in the development and delivery of their goods and services. Digital enterprises that don’t have marginal costs have a variety of characteristics, which has numerous ramifications.
The fact that these businesses have substantially lower entrance barriers than conventional businesses is one implication. Because launching a digital firm is far less expensive and requires less physical infrastructure, there is a lower entrance barrier. A digital firm can potentially reach customers all over the world with simply a website or app, which greatly expands its reach.
Everyone knows the “free” business model as it is used by two of the most famous companies in the world. Google, as well as Facebook, are good examples of how to make use of the ad-supported and “free” business model. The idea behind this business model is to offer a service for free and the user becomes then the product that is being sold. In the case of Google and Facebook, every user who is using the services is giving valuable information about himself. With this data, it is then easy to display ads that the companies can buy and target specific users.
This is one of the digital business models that is most frequently observed, particularly in the software industry. Users have free access to a basic (Free) version of the programme that has some limitations. The user has the choice to upgrade to the paid version (Premium) if they wish to use more features or resources.
Spotify is a superb illustration. Everyone is welcome to use the service for free (and to receive adverts), but a monthly subscription is required if you want access to more features and better quality. This is an excellent illustration of how several company models can coexist.
On Demand Model
The “Access-Over-Ownership” business model is comparable to the “On-Demand” business strategy. You are not actually owning a physical product in this instance; rather, it is a virtual good or service.
On-demand services, including those offered by online video retailers like Amazon Video and Apple TV+, allow you to watch videos for a set amount of time.
The “gig-economy” also uses the on-demand concept. In this case, depending on how long you require the consultant’s assistance, you will be automatically charged. (Fiverr, Upwork, UpCounsel, etc.)
Amazon was one of the first and by far the most successful businesses to sell tangible goods online through an online store and an e-commerce business model. Today, it is also the most well-known business model on the internet, and you can buy nearly anything online.
Pure E-Commerce solutions are based on a one-sided sales approach, in contrast to a marketplace model, which is being used today by Amazon. Customers are being sold stocks in a corporation.
Market Place Model
On the internet, we frequently encounter the two-sided market. A third-party platform is used by the buyers and sellers to trade products and services. This marketplace may offer both things (eBay, Etsy, Amazon) and services (Uber, Upwork, etc.).
This business model’s intricacy and dynamics are its main drawbacks. You will never attract buyers if you don’t have any sellers, and you will lose customers if the customers can’t find sellers. Therefore, to keep both sides interested, a two-sided platform needs to properly scale supply and demand simultaneously.
Everything here is “sharing,” but in a professional sense. With the help of this method, you can pay for something for a predetermined period of time without actually owning it. This can include hiring a vehicle (like with Zipcar), an apartment (like with Airbnb), or even business equipment.
Due to the ramifications it has on ownership and the resulting revenues you can produce, this was one of the most disruptive business models. A car might suddenly start to provide income rather than just be an expenditure.
Everything is “sharing,” but in a work-related way. This technique allows you to pay for something over a specified time period without actually owning it. This can apply to renting a car (as with Zipcar), a home (as with Airbnb), or even office supplies.
This was one of the most disruptive business models because of the effects it has on ownership and the money it may generate. The cost of an automobile can abruptly shift from being an expense to being a source of revenue.