According to Jorge Lopez at Gartner, a digital business could be defined as “the creation of new business designs by blurring the digital and physical worlds.” The adoption of digital business, which is a precursor to business analytics, is not a new phenomenon. Companies have long been adopting a simpler and more rudimentary version of what we know today as digital business.

Today I am going to describe in detail the various stages of digital-business adoption. This template could be used by the executives and CXOs of companies to assess their standing in the digital conversion of their businesses in order to find out how much ground is left to cover.

Most companies that have been calling themselves digital have not yet transcended to being purely digital businesses. They are instead e-businesses or digital marketing businesses. This state of illusion could lead to serious harm from competitors.

What is required to become a digital business?

Digital business primarily involves the convergence of people, business, and things, and this convergence has the ability to disrupt existing business models. Many consider that convergence to be a success, but a disruptive business would be one that can successfully come up with an efficient way for these three entities to interact with each other to create value. The following figure depicts how various companies define being digital.

Digital Business Perspectives Pic

Figure 1: Perspectives on being a digital business

The CIOs can now see, for example, that even if they are very successful e-businesses, their model is susceptible to becoming irrelevant in the near future because of a new entrant leveraging digital-business capabilities. For many industries, the competitive landscape is turbulent, with new entrants pouring in constantly, making the incumbents review their business models.

Six stages of the digital-business life cycle

The digital-business life cycle can be perceive to contain six stages of digital evolution. Their characteristics are described in the figure below:

Digital Business Models Pic

Figure 2: Digital business models

This figure will help CIOs make the case for digital-business investments. The characteristics are divided into five attributes:

  1. Focus: The business focus of a particular model, which is also the objective of the digital-business model, could be on improving internal productivity which lowers the costs or on improving external productivity by foraying into new markets, finding new sources of revenue, or getting new customers.
  2. Outcomes: This contains the outcomes from a particular model, the causes of which are the aspects of focus defined above.
  3. Entities: This contains the entities that play the role of actors in the business, whose interplay leads to the creation of value and subsequently a scalable and profitable business. For analog business, people served as a proxy for things and even businesses. For digital business and beyond, the three entities of people, business, and things, integrated together after the nexus of forces, leads to the creation of value. The distinction and interaction between the three is only to become more pronounced with the advent of mainstream adoption of the Internet of Things and autonomous systems.
  4. Disruptions: This describes the factors, such as technology, entities, or ideologies, which lead to disruptions in businesses.
  5. Technologies: This identifies the various technological tools, methodologies, and trends that enable a particular business model in a certain stage. This would indicate the technological trends which would transition from the generation of hype to mass adoption.

Let’s look at the various stages in a bit more detail.

Analog business

This stage of development was at the height of business before the development of the Internet. The primary targets were improving revenue or reducing costs. The Internet acted only as a medium of communication between suppliers, customers, and businesses. Technologies like mobile, social, or e-commerce were the business disrupters of these times.

Web business

In this stage, the business had a good Internet presence, which was used mostly for basic promotions to make people familiar with the brand. The attributes of this level of business are the following:

  • The business is engaged in making its presence known by increasing personal traffic, phone calls, or e-mails.
  • It does not require a lot of communication to be managed. A government license to operate may grant an effective monopoly for political purposes.
  • Regarding security, the Internet was considered too risky because secure transactions had not been developed.
  • These businesses were mostly in parts of the world where Internet infrastructure was not yet reliable.

E-business

In this stage, the goals of the analog business achieve scalable performance when combined with the reach of the Internet. For many businesses, e-business led to great successes. For others, they would sustain until businesses armed with digital-business strategies invaded their spaces. The key to e-business is to focus not only on business relationships but also business integration. It uses the Internet’s vast numbers of potential customers, something which analog businesses struggled to achieve. An e-business exploits the reach, availability, and ubiquity of the Internet to connect with customers.

Digital marketing

Consumers have declared their mobile devices and social networks as preferred doorways  to companies. By the advent of digital business, there was a clear increase in the priority businesses gave to customer expectations. Customers exercise a huge influence on brands, markets, products, and even pricing. The biggest challenge for CMOs is to leverage the ever-changing customer expectations to grow the company.

Digital marketing transforms the relationship a company has with its customers by building on a preferred technology platform. The adoption of digital marketing has led to a closer connection with customers and their needs, preferences, and aspirations. This also follows the increase in the influencing power of customers due to the availability of many players and the power to choose between vendors.

Digital business

Digital business promises to bring in an unprecedented convergence of people, business, and things and has the potential to disrupt existing business models—even those born in the era of the Internet and e-business. Some of the attributes of digital business are:

  • Things become agents for themselves, for people, and for businesses. The increase in interconnectivity, communication, and exchange of intelligence of things makes many of them not only agents for providing services but also the frontiers of making business decisions.
  • Nearly all physical and virtual assets in the value chain are in a digitized form. The spectrum of intelligent things interacts and works together to incorporate an end-to-end process.

Digital business represents another big change, as the Internet of Things drastically alters the interoperability of people and devices.  Read more about digital trends from Doug Delaney’s article, “Gartner Predicts Three Big Data Trends for Business Intelligence.

Autonomous systems

The final frontier for the digital business, following continuous improvements in the intelligence of things, would be a business where primary entities work, interact, negotiate, and decide with zero human intervention. This autonomy has the potential to influence deeply the lives of people and the quality of life itself.

Technologies like autonomous vehicles are already in prototype stages which, when perfected, may lead to breakthroughs in industries and practices like transportation, mining, and defense. In addition to the self-managing aspects of these things, there will be an immense improvement in the quality of output due to real-time interaction and decisive performance by these autonomous systems. They would further open doors to advanced artificial-intelligence systems which could self-heal and evolve independently.

Overall, this life cycle is designed to help companies have precise understandings of their current stages of digital-business transformation and then to identify the way forward with the support of top-level management and their boards of directors, given the complexities of integrating with the world of digital business.

Sameer Dhanrajani

Sameer Dhanrajani

Sameer Dhanrajani is Business Leader at Cognizant Technology Solutions. In his capacity, Sameer is responsible for leading end to end business spheres... Read more