Success factors for digital business models

To stay competitive, the Swedish industry is challenged to reduce its environmental footprint by creating digitalization-enabled advanced services. This effort requires business model innovation, yet most firms lack knowledge about constructing and implementing business models together with ecosystem partners.

A key goal of the DigIn project is to make Swedish industry collaborate better, form new partnerships and ensure that all solutions such as digital business models are developed, tested and agreed upon from a “ecosystem” perspective. From the project perspective this has meant investigating the challenges companies have in profiting from digitalization and suggesting potential improvement in terms of new processes, capabilities and offerings. For example, Björn Stenecker, Chief Procurement Officer at Boliden, described the benefits of the project:

“So far it has already inspired us in many different areas, and hopefully the project itself will give us ideas on how to nurture and how to improve our ecosystems of suppliers, and also how our suppliers could collaborate more between each other.”

One important benefit of the digitalization enabled business models is the possibility to increase efficiency by reducing energy and resource consumption in production. For example, as Metso adopt digitally enabled result-based business models (cost/ton etc), they will be incentivized to push for greater efficiency, reuse and refurbish their products, and by doing so reduce resource waste and energy consumption.

The industrial focus lies on developing and pre-testing sustainable business model innovation methods, increasing the capabilities of participating companies and applying methods within prototype business models in each ecosystem. Based on our research results, we would like to make the following recommendations tofirms that are considering experimentation with digital business models innovation:

• Digitalization is a means to an end, not an end in itself: Companies need to avoid digitalization trap. The need for focus on using digital technologies to change a business model and provide new revenue and value-producing opportunities in industrial ecosystem.
• Business model innovation implies changes to all elements: A business model define the ways an organization creates, delivers and captures value. Companies need to consider changes at all the three elements of business model as they test novel digital technologies.
• Industrial ecosystem view to business model change is critical: With digitalization we are witnessing changes in the industrial ecosystem as new actors are entering the industry and existing actors are changing their roles. This means companies need to critically evaluate who to compete with and who to collaborate with.
• Focus on achievement of sustainability industry goals: Having a focus on achieving not only financial but also social and environmental benefits for customers will be a success factor. Those companies that only position themselves as leaders will have higher demands from industry and society to need new goals.

Automation region is an excellent industrial network partner for DigIn and other industry-oriented projects. As the project operates from north of Sweden (Luleå University of Technology), having a national partner like Automation Region, help us to connect with wide variety of industrial actors. Together we are able to share our research insight with Swedish industry, form new collaboration with interested partners, and undertake benchmark analysis on key research issues. Moreover, we are glad that Automation Region not only focuses on large players but also on SMEs that need most of our attention. Being able to provide innovative and newly established firms with ways to improve their business models is critical for national growth.

DigIn is funded under the influential challenge drive innovation Vinnova Program. In August 2019, we will be reaching an end to stage 2 for DigIn, which has primarily focused development of the methods and tool for digital business model innovation with Swedish industrial ecosystem partners. In the stage 3, we will continue to work closely with more formalized and ready industrial cases and apply our knowledge and insights towards support the commercialization of new business models, such as outcome-based contracts, advanced process optimization through analytics, autonomous mining equipment and others.

We are seeking new industrial partners for stage 3. If you are interested in forming research collaboration DigIn can support your organization with: 1) examining business opportunities and challenges with digitalization and new business models, 2) capability development and investigation of partnering opportunities within ecosystem, and 3) supporting business model innovation activities and ecosystem collaboration. Please contact me – vinit.parida@ltu.se – and I will tell you more.

Vinit Parida
Project Manager DigIn, Professor at Luleå University of Technology

The DigInprojectaims to develop, test, and disseminate sustainable business model innovation methods based on digitalization in Swedish industrial ecosystems. The project consortium includes academics and 20 industrial actors representing customer, provider, service partner, and digital actor perspectives regarding mining, construction, manufacturing and forestry ecosystems. Learn more →