This post is an extract of my forthcoming book on business model innovation. The innovation book looks at why business model innovation is needed and how it works. You can read more about it here. These posts are early drafts of planned content and I’m putting them out to get feedback. Please do comment below, or subscribe to these pages to get each new section as it is published. In today’s post, we will be looking at finding opportunities in this new world.
Digitalisation is the next step from digitisation.
If digitisation is converting our analog information into digital information, digitalisation is the realisation that now information is in a much more flexible form, we are constrained by the old rules of paper and analog.
We can handle the data quite differently, and as a result, we can create more value, we can do things faster or better than we ever have before.
Did Craig List change the selling game?
A really simple example is Craig’s List. This is an American website for selling second-hand stuff and personal services. Back in the day, when everything was analog to sell something that you didn’t want, you had to take out a classified advert (not sure what classified means here) in the local paper, pop your telephone number down and wait for buyers to ring you. This worked well whether you were selling old cars, your body, or bric-a-brac.
It was quite expensive because you had to call the paper, explain what you wanted, write the copy. This then had to be typeset, handed over to the printers and a few days later a newspaper would be delivered to thousands of people with your advert on it.
Craig List realised that by digitalising this process, it could be made significantly faster. You filled out a form with your advert, paid some money, and your advert was up and available for anyone who came to Craig’s website to read. As a result, it was not only cheaper – you did all the work, but Craig’s list was effectively a newspaper with an infinite number of pages. Everything changed.
How did banks digitse themselves?
Digitalisation goes a lot further than that, and as it does, it starts to blur into business model innovation. When I was a student, I went along to NatWest to open an account. A bunch of forms later, I took my cheque to the counter, where it was deposited into the account. When I wanted some money, I came back to the branch and took some out.
A couple of years ago, I opened an account at Starling, a neo-bank. It doesn’t have any branches. I downloaded an app, took my photo, and uploaded my passport. With my identity verified, I had the account opened in minutes. And a few minutes after that I had transferred cash into the account and was spending money using Apple pay.
A lot of the core functions have been digitalised and made vastly more efficient. But in many ways, the bank still has the same underlying business model as NatWest did in my youth.
Digitalisation then is often a halfway house. It is a place between – let’s keep doing things the way they were, and let’s change radically. It is efficiency and effectiveness play. In some industries, digitalisation keeps you in the game – banking or insurance, for example. If you haven’t moved to use apps, for example, for most banking then you are losing customers and credibility. In other industries, it is an opportunity to get a competitive advantage over competitors in one or more aspects of your operations. And in some, it is a part of an overall transformation process.
You don’t need to do digitalisation to do business model innovation. Business model innovation is not the same as digitalisation, but they often do overlap.
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