Summary of the R

by Peter Weill and Stephanie L. Woerner

published in the summer of 2015.
Business world is evolving with the advancement in technology as businesses are increasingly
digitizing their operations restructuring long standing successful business models with new
opportunities and shattering industry barriers giving birth to a new phenomenon called Digital
Disruption. Considering the amount of turmoil digital disruption is causing, companies should
explore new business options to fit in the connected future of the digital ecosystems. Digital
disruption imparts both opportunities and threats that are real and immediate. Probably the most
significant opportunity that digitization provides is the capability to leverage strong customer
relationships and increase cross selling chances. Presently the leading companies are
investigating strategic options for the next generation enterprises based on two most important
dimensions of the transformation initiatives; to know more about the end customers, and to
operate in an increasingly digital ecosystem.

To better understand the end consumers, the companies should have a deep knowledge of the end
consumers including but not limited to names and addresses, demographics, IP addresses,
purchase histories, and life events. Furthermore, to operate in a digital ecosystem, the companies
need to move from value chains to complex and integrated ecosystems. By moving from value
chains to ecosystems and increasing customer knowledge, four distinct and specific business
models are established. These business models are formed based on the extent to which the
companies wish to control the value chain or ecosystem, and invest in knowing their end
customers. The business models are Suppliers, Omnichannel Businesses, Ecosystem Drivers, and
Modular Producers.

In the Suppliers business model, the company has partial knowledge about the end consumer and
is the part of the value chain of another powerful company. For instance, companies that sells
insurance through independent agents. The major downside of this business model is that with
further digitization search will become easier for the customers so the suppliers are bound to lose
their power and reduce prices thus suffocating their own growth. On the other side, Omnichannel
model is the type of business model which gives customers access to their products across
multiple channels, both physical and digital, provides greater choice and a seamless experience.
For example, Wal-
the customer relationship. The biggest challenge of this model is the knowledge of the end
consumer and his/her goals, and to reduce the amount of customer churn. The companies can
utilize big data analytics, social media, mobile apps, and customer experience metrics such as
Net Promoter Score (NPS) etc. to better understand their end consumers. Another noteworthy
aspect of knowing the consumers could be the life events of the consumers such as buying car,
moving, getting married, or having a child which could provide great insights into the needs of
the consumers.

The third business model is the Ecosystem Driver model which establishes an ecosystem by
creating relationships with other providers that offer complementary or sometimes competing
services to thoroughly fulfill the needs of the consumer in one specific domain. Ecosystem
drivers provide a platform for the participants to conduct business such as Amazon, Upwork,
Google, and Apple. These companies could be more or less open such as Google is more open
than Apple. Similar to the omnichannel business, ecosystem drivers use their brand strength to
attract participants, ensure a great customer experience and offer one-stop shopping for the
consumers. Ecosystem drives aspire to own the customer relationship in one domain such as
financial, retail, healthcare, and entertainment etc., by increasing their knowledge of their end
consumers. In exchange for their services, these ecosystem drivers charge rent from the
participants both the consumers and the service providers and they rely on their brand strength
and feedback from the consumers ratings and reviews to build their reputation and revenues.

The last business model is the Modular Producer which provides plug-and-play products and
services that can adapt to a variety of ecosystems. Paypal is a great example as it is among the
best in the category and it continues to roll out new products and services that are among the best
options and are well priced. It is also hardware-agonistic, mobile-enabled, cloud-based service
which perfectly fits in any ecosystem. This business model is in a hypercompetitive environment
as there are a lot of alternate options to which the customer might switch. One fascinating
characteristic of this model is that only a few players make a significant profits and the rest
struggle to survive in the market. In contrast with ecosystem drivers model, the modular
producers don t get to see all the customer data, they are only limited to the data from the
transactions they process.

In general, smaller and younger companies seize opportunities created by the digital disruption
but large companies struggle to respond as younger companies have fewer legacy systems, are
less global, and are more willing to take risks. They can also collect, analyze, and act on data to
gain the knowledge of the end consumers almost immediately. It is commonly accepted that
companies that derive more revenues from managing ecosystems and that have better customer
knowledge tend to perform better than their counterparts. For instance, ecosystem drivers have
high margins and growth compared to rest of the business models as they are more responsive to
their consumer needs and become a destination to sell their own products as well as others to
address their customer s life events. Furthermore, omnichannel has equivalent customer
experience as ecosystems drivers but omnichannel businesses are slightly slower to market new
products.

For preparing for the future, the companies should create new capabilities. One is learning more
about their customers. They can do so by:

Use digital capabilities to obtain information about customer s goals and life
events.
Amplify the customer voice inside the company.
Emphasize evidence-based decision making.
Develop an integrated, multiproduct channel customer experience.

Instead of focusing on selling their product, companies should focus on meeting the customer
needs with the context of their life events which is completely different approach and an aspect.

The findings of this research paper in a nutshell are that the companies should employee digital
techniques to know more about their end consumers by utilizing big data analytics and social
media etc. to help them solve their life event needs. Additionally, companies that operate strictly
as suppliers will be under growing pressure because the customers will have even more options
to choose from and will have more knowledge. For surviving in the market in future, the
companies will have to develop a digital ecosystem and partner with others, even competitors.

Thank you!