2. 2
Module M3 Getting started with a digital business
Competence
unit
CU3.2 Drafting a digital
business plan
Learning
outcome
Describe different models
for my digital business
idea
Type of
resource
PowerPoint Presentation
(PPT)
Type of
learning
Face-to-face
Resource title Digital Business Model Types
Learning
hours
1h
Contents
- The importance of choosing the right digital business model
- Definitions
- Description of digital business model typologies
4. 4
Is it that
important to
choose the right
digital business
model?
Source: en.wikipedia.org
5. Yes, it is! And let’s see the reasons behind this
▪ Fast technological change
▪ Rising competition
▪ Dynamically changing market structures
These three factors force established firms to
continuously innovate their business models
5
6. AirBnB
is an example of a digital company, whose
business model is purely digital and based
on information rather than physical
products
6
Source: pixabay.com
8. Is a model that
leverages on digital
technology to improve
several aspects of an
organization
A digital business model
Covers a wide spectrum
of practices, from how
customers interact, to how
the value proposition is
derived, or how
monetization happens.
8
9. “ “[it] articulates the logic
and provides data and
other evidence that
demonstrates how a
digital business creates
and delivers value to
customers”
Source: Zott et al., 2011, The Business Model: Recent
Developments and Future Research, Journal of
Management, vol.37(4), p.1020 9
11. TYPE 1: OPEN SOURCE BUSINESS MODEL
An open source model
makes software free to
access, and it generally
gives the ability to a
community of
programmers to
contribute to it. You can
make money by
charging premium
subscriptions and for
training and services
associated with its open
source software.
Building up an open
source-based business
model isn’t simple and
it’s success highly
depends on the ability
of the project to engage
the community of
developers and
contributors in working
on the source code to
improve it and make it
very valuable.
Such a model allows
strong marketing for
the product. But it
doesn’t necessarily
translate in revenues
for the company.
11
12. $2.9 billion
In revenues, of which,
$346 millions
From training and services
$2.57 billion
From subscriptions
12
Let’s see the
example of
Red Hat
13. TYPE 2: FREE MODEL
Digital businesses
release products for
free with the hope
that once enough
people would get
used to them,
monetization would
not be an issue.
After releasing a free
service to a larger
and larger user base,
you have to attract
the first angel
investors.
Your venture
capitalists have to
quickly turn to the
advertising model to
monetize your users,
to avoid being left
without cash and
investors.
13
14. 14
Did you know that
Google and
Facebook have
started using a
free digital
business model?
Source: FourWeekMBA.com
15. TYPE 3: FREEMIUM MODEL
This model allows a high
virality growth. Cases
like Dropbox, MailChimp,
Spotify, and many
others have created viral
growth thanks to these
models.
A free version is
available to
anyone. The key is
to switch to paid
subscriptions as
to get more
volume, no
advertising or
more data.
If you opt to this model,
you need to make sure
you have the following:
*A strong enterprise
customer base
*An optimized conversion
funnel to switch free
users in paid ones
*A robust technological
infrastructure that can
handle a broad base of
free users
15
16. TYPE 4: SUBSCRIPTION-BASED MODEL
This model will allow
you to build a
sustainable revenue
stream over time.
However, this kind of
model isn’t a simple
task.
Usually, a model that
relies on a
subscription also
requires essential
investments in
infrastructures.
Also, you will need to
build a process
skewed toward a
great customer
experience to
minimize churn rates
and improve the
lifetime customer
value.
16
17. 17
Did you know that
Netflix, Amazon
Prime, and Spotify
use a
subscription-
based digital
business model?
Source: FourWeekMBA.com
18. TYPE 5: ON-DEMAND MODEL
An on-demand
consumption allows
people to have
access to the
content at different
time intervals.
The on-demand
model can be
monetized in several
ways. From
subscriptions to fees
for each transaction
on a platform.
The critical
ingredient is to
create a smooth user
experience, in which
you barely realize
there is someone in
the backend
manufacturing that
experience. Keep in
mind the example of
Uber! 18
19. TYPE 6: PEER-TO-PEER MODEL
A peer-to-peer
marketplace is
a platform where
usually two sides are
participating in a
transaction, which
can be about
products (Etsy) or
services
(Airbnb, LinkedIn).
For you to have
demand on
the platform, you
need a continuous
generated supply. At
the same time to
have supply you need
to create demand.
This model usually
faces several
challenges in making
sure the supply side
is served adequately
to justify demand.
Therefore, you have
to come up with
several strategies to
enhance supply, like
dynamic pricing
strategies
19
20. TYPE 7: E-COMMERCE MODEL
It is one of the most
successful digital
business models out
there. It indicates a
process of buying
and selling of various
products and
services by
businesses through
the internet.
E-commerce draws
on such technologies
as electronic funds
transfer, supply chain
management,
internet marketing,
online transaction
processing, etc.
There are primarily five
types of e-commerce
models:
-Business to Consumer
-Business to Business
-Consumer to Consumer
-Peer to Peer
-Mobile Commerce
20
22. Each model we saw above
isn’t a blueprint that can be
applied entirely to a
company. Often business
models are the fruit of the
combination of several
models. Make a proper
research before choosing the
model that applies better to
your digital business
22
IT’S ALL ABOUT MIXING
THINGS UP!
23. LET’S REVIEW SOME CONCEPTS
A digital business
model
leverages on digital
technology to
improve several
aspects of an
organization
We reviewed 7
different types of
digital business
models
▪ Open source business
model
▪ Free model
▪ Freemium model
▪ Subscription-based
model
▪ On-demand model
▪ Peer-to-peer, two-sided
marketplace
▪ E-commerce model
23
24. This project has been funded with support from the European Commission.
This publication reflec ts the vi ews onl y of the aut hor , and the Commission cannot
be held responsible for any use which may be made of the information contained therein.
Project Number: 2018-1-UK01-KA202-047909
