Part Five of a Five-Part Series

For several weeks we’ve been discussing business model innovation – a topic many of you have asked about. This is the final post of the five-part series. Previous posts covered Accelerators and Incubators, Premium, Personalized & Service-focused, Platforms & Ecosystems, and Subscriptions/Rentals.

Model # 5 is Digital/Physical and Omnichannel.

E-commerce and brick-and-mortar are no longer two distinct entities. While established firms are scrambling to become digital, online players ranging from Amazon (Whole Foods) to Wayfair are increasingly building storefront presence. Physical and digital are becoming one and the same, and companies must be accessible and attractive to customers wherever they are.

Why would you pursue this model?

Accessibility, ‘anytime, anywhere’ convenience, the ability to easily comparison shop, seamless experiences, rewards and cost savings are just a few of the benefits for customers. For businesses, connecting with customers across platforms and touch points builds loyalty. Omnichannel also yields higher return on marketing investment. According to a study conducted by Harvard Business Review, retailers’ omnichannel customers are more valuable on multiple counts: they spend an average of 4% more on every shopping occasion in the store and 10% more online than single-channel customers; the amount they spend increases with the number of channels they use.

How does it work?

Shopping options must straddle both worlds. BOPIS (buy online, pick up in store) and mobile ordering apps for fast food are today’s norm. Geo-location and tracking have redefined ‘point of purchase.’

Supply chain and warehouse capabilities must be set up for both; last mile delivery must be fast, flexible and efficient.

Organizational structure should be composed of cross-unit teams including IT, marketing, compliance, and other functions from each channel. On the technology front, connected technologies, tracking systems, and integrated ecommerce platforms are essential. IT experts recommend advanced systems that utilize an open-source architecture.

For all industries, integrating digital with physical is key to competitiveness. As omnichannel has become the prevalent business model, companies must realign goals and processes to ensure a seamless customer experience.

Summary: Putting It All Together

To summarize, the five main models with the respective capabilities required and value created are outlined below.

Archetype Capabilities Required Value Created
Subscription/Rental Marketing, fulfillment, customer service, and data analytics coupled with integrated CRM systems. Companies must nurture subscribers and continuously evolve the product/service. Machine learning and/or AI capabilities to increase engagement and retention. “Retain the customer” – Drive shareholder value through customer retention and recurring revenue, higher margins.
Premium, Personalized, and Service-focused Data analytics and interpretation skills, customer responsiveness, and strong customer engagement approaches. Technologies: Flexible mfg, 3D printing, sensors/scanning tools, AI, machine learning, CRM, data mining. “Cater to the customer” – Customer loyalty, deeper consumer insight, higher margins, reduced inventory.
Digital/Physical and Omnichannel Customer behavior and data analytics. Cross-unit organizational structure, strong operational capabilities. Connected technologies, integrated e-commerce platforms, open source architecture. “Own the customer” convenience, cost savings, seamless experience. Business value: competitive edge, increased sales.
Platforms and Ecosystems IT capabilities such as API’s, Internet of Things (IoT) technology, data tracking and analysis. Execution requires compelling vision, existing platform, the ability to scale. “Connect the customer & marketplace” – Network effect, data exchange, customer insight.
Accelerators and Incubators Openness, experimentation, risk-taking, collaboration over distributed environments. Prototyping, dedicated facilities, investment capital. “Test and launch with customers”Experiment with new models, organizational structures, and products. Create the future without constraints of past.

Overall the power of Business Model innovation is in the orchestration of your unique value proposition and strengths with operational excellence. Most companies will find the most impactful models align with core strengths and future goals. The key is finding your unique points of differentiation and recognizing that the holistic system is what makes it harder to copy than product innovation, more sustainable, and powerful.

For more insight: Once again, we invite you to download our new briefing report 5 Business Models for Sustainable Growth (here). I would love to hear your experiences and feedback or answer any questions. Please feel free to email me at cperkins@innovationedge.com or give me a call at 920-205-3297 any time. 

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