Insight
Business Model Transformation: From Physical to Digital
[Article reprinted from BMI - The Strategy.Click here for the original article】
Digital transformation is not only about moving from physical to digital, digital brands can also leverage digital technology to optimize customer experience and enhance brand value. Take Fortnite Fortnite Heroes, a popular online game around the world, for example, has successfully utilized digital technology to create a fun and rich digital interactive experience for gamers around the world, creating a new profit model.
Where did the digital transformation come from?
Physical goods is a well understood concept, and in fact the same concept can be extended to business models. A physical business model is based on providing tangible goods to customers, or more clearly, providing physical goods to customers.
Each unit of merchandise has a standardized pricing model, and merchandise is usually distributed through direct or indirect (retail) channels, so it's essential to have processes and supply chains in place that allow for the smooth flow of merchandise from one location to another. Sounds simple, right?
This model has worked well for many organizations for a long time. And "physical" doesn't mean that it doesn't include any form of IT. A company that produces physical goods may have a robust internal IT system, but it's still largely rigid.
Businesses around the world have realized the unlimited potential of digital technology and the capabilities it can give them, such as the ability to help design better customer experiences and track customer behavior and engagement.
Organizations want to truly understand what drives customer engagement and use the right digital tools to enhance customer interactions and create more value. Thanks to smart algorithms and increasingly advanced digital tools, many organizations are keeping up with this trend and achieving amazing results.
Digital Transformation Case: Fortnite
Fortnite is a popular online game for kids all over the world, and its success lies in its ability to seize the opportunity to create a fun and rich digital interactive experience for gamers all over the world, while at the same time creating an ingenious profit model.
Fortnite's original and most primitive game mode costs $50 USD, and while it's not cheap, most of Fortnite's revenue comes from the game's digital currency, "V-bucks". Players can use them to customize their characters, including purchasing new cool colors, dance moves, and more, to become the most eye-catching player in the digital world.
So, will new players get bored after a few weeks of buying new skin colors for their characters? Absolutely not. Because Fortnite is constantly updating the game, releasing new seasons of challenges and character features, and keeping players coming back with weekly updates.
Just two years after the game's release, Fortnite developer Epic Games has managed to capture more than 250 million players worldwide. As we write this, more than 100 million new players have joined Fortnite, making it a game that gamers can't get enough of.
New Thinking
Fortnite is just one of many businesses and industries embracing the digital transformation. The others are listed below and will be covered in depth in our new book:
-Salesforce, leveraging the power of digital technology to humanize the way business is done.
-Duolingo, a new consumer market through digital and game-based language learning.
-The New York Times, with valuable and innovative digital content for the new digital age.
Whether it's from video games to music, or entertainment to storage, most of the things that once had to exist physically are now available digitally, and that trend isn't likely to change anytime soon.
In order to interact with customers more frequently, companies are constantly refining their digital models and further personalizing their experiences and value propositions, so that they can provide a smooth and customized experience across all channels and keep customers coming back for more.
About BMI・Strategy
Business Models Inc is a global, locally-operated strategic design consultancy specializing in business model innovation and service design. We help corporations and start-ups develop sustainable, innovative business models through customized projects to achieve leadership in a rapidly changing world.
BMI-Fangliao has two best-selling books
Produced by Patrick van der Pijl, CEO and Founder of BMI - The Business Model Generation, the book has been translated into 36 languages around the world and has been recognized by USA Today as one of the 12 best business books of all time.
Design a Better Business is a new tool, skill, and mindset for strategy and innovation. Applying design thinking to strategy and innovation, Design a Better Business takes readers from the initial idea to scaling their own business through a practical approach that has earned it the #1 spot on Amazon's Strategy New Releases list.
