Moving to a Digital Business Model – Opportunities and Challenges

Caution HOT! Digital Business Models

© Pitopia, Wolfgang Demmel, 2010

At the first Product Management Festival that took place in Zurich last month, I had the opportunity to speak about a topic that has been fascinating me for a long time: how cost structures for digital products are fundamentally different from those for physical products – and the implications this has for business models, and even company culture:

“On one hand, digital business models present unique opportunities: they enable new pricing and revenue models, such as Freemium, and they can generate profit margins that are simply impossible with traditional models.

On the flip side, digital business models present unique challenges, for example the need for extreme speed and agility, cultural challenges, and a higher risk due to a tendency to promote “winner-take-all” market structures.

In conclusion: even if your company’s heritage is in the world of traditional (physical) business models, with “software eating the world”, there may be attractive digital business opportunities available to you. However, do not underestimate the amount of change that this switch demands from your organization.”

The slide deck is available here (PDF) – it highlights how the unique properties of digital business models are tied back to their cost structure, which is characterized by low variable cost and therefore, low marginal cost.

Special thanks go to Dirk Haun: Dirk is the author of “Presenting for Geeks” and he kindly helped me turn the initial draft into my first slide deck in the visual presentation style, following the rule of “one idea per slide”.

The PDF (extended slide deck)  includes these core presentation slides, plus additional pages that provide part of my “voice over” from the talk and the detailed cost structure data. These additional pages (obviously) do not follow the visual presentation style.

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