From the course: Digital Transformation in Supply Chains

Identify new business models for supply chains

From the course: Digital Transformation in Supply Chains

Identify new business models for supply chains

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- Digital technologies can actually change the things that our customers value and what they're willing to pay for it. So we need to be ready to adopt new business models throughout the supply chain. Let's look at five business models that are often enabled by a digital transformation. The first one is automation where we take it a test that's normally done by people and develop a device or a piece of software that can do it better. Automation makes sense when workers are expensive or hard to find or hard to train. Automation can apply to physical tasks but it can also apply to information tasks. The next is digital marketplaces. eBay, Uber and Airbnb are all examples of digital marketplaces. There are lots of other marketplaces that connect customers and suppliers throughout the supply chain. Marketplaces generally earn a small fee for each transaction or they charge a membership fee or they charge a fee to advertisers. The next category is digitalization where we convert a physical product into a digital one. A great example of this was the transition from CDs to streaming music. Digitalization eliminates the cost of manufacturing and distributing physical products and that makes it easier for any company to serve customers around the world. As we look at the potential for the metaverse, the digital world will need to be supported by companies with digital supply chains. The next category is servitization. That's where we change the business relationship from one where we're selling a product to one where we're providing a service. For customers, this resembles a change from buying and maintaining assets to just renting the things that we need. And for suppliers, servitization can enable a shift from a costly and unpredictable sales process to a steady stream of recurring revenue from subscribers. And the final category is new platforms. This covers products and services that are truly brand new that weren't available or even possible before. Smartphones are a good example of a platform that challenged all of us to rethink our businesses, and blockchains are a new platform that may have a big impact in the future. The new platform could also include bringing a product or service into a new market where it wasn't available before. Some of the changes that digital transformation creates are small improvements but others can have a huge impact, such as creating new industries or making existing industries obsolete. So what are some of the ways that digital transformation could create new business models that might actually work better for you?

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