Companies seem frustratingly slow in using digital for innovation. The problem is they invariably think of digital as a value-add to their existing business. They’d rather spend hundreds of thousands of dollars on their online “presence” than invest in figuring out how digital opens up their revenue streams and transforms their value chains.
I drafted this table as a tool for brands to identify new value and growth opportunities in digital space. The four quadrants are, clockwise:
Addition: Making legacy business more valuable by using digital to add a new revenue stream to the core business. This means adding digital as a sales and marketing channel to brands’ existing products/service marketing and sales. In this scenario, digital is considered as a value-add in the company’s traditional value chain. Examples are Target, Walmart, Barnes&Noble e-commerce platforms.
Systems: Connecting products and services to create new value by assessing company’s existing offerings and bundling them together via digital technology. Value that’s created as the outcome is outside businesses’ traditional value chain and counts as the new revenue source. Think Barnes&Noble Nook, American Express digital initiatives, Nike Fuelband.
Design: Customer-led business solutions are an incremental value-add as they make the existing products and services better from the end-user standpoint. They use laser user focus to serve their existing customers better and/or to overcome the current consumer barriers in the category. Examples are Patagonia, Simple.
Distruption: Disruptive solutions create a completely new value in the industry. Disruptive businesses have their own value chain, different from the one their industry’s built around. Think AirBnB, Square.
Looking at this chart is clear that, more often than not, clients and agencies expect Disruption from digital, but are thinking of it only as Addition.
Originally published on November 25, 2012