The Business Model Canvas (BMC)[2] approach has been established as the de facto standard to describe business models, regardless of whether they are classical or digital. Every business model description has to answer the same set of questions. The BMC is a tool on the one hand to ensure that all aspects of the business model are covered and consistent, and on the other to serve as an intuitively sound vehicle to guide stakeholder discussions. The Value Proposition – which is displayed in the centre of the BMC – is the starting point of the business model definition using the BMC.

On the production side, the BMC describes the internal Key Activities and Key Resources necessary, along with the Key Partners required to produce the intended goods and service. These form the Value Propositions to the market, highlighted by the Customer Segments to be approached, building Customer Relationships in the various Channels of interaction with the client. The production side defines the Cost Structure of the business model, while the market side defines the Revenue Streams.

It is evident that the digitalisation of a business will have an impact on all these components. In describing the change of the business model, or even formulating a radically new one, each of these dimensions must be studied intensively and described. 

In a digital business model, new digital Channels will be deployed in the communication with customers, leading to materially new Customer Relationships and bringing new digital Value Propositions to the market.

The internal Key Activities will need to be adapted, requiring potentially new Key Resources and linking the enterprise to new Key Partners, potentially in a digital ecosystem. The interaction of these dimensions needs to be considered carefully in order to avoid inconsistencies in the planned new digital business model.

Typically, a large company has a business model that is an aggregation of multiple smaller business models. A car manufacturer, for example, would define separate business models for passenger cars and lorries, and even break down those business models into brands, regions, etc. Consequently, enterprises can even describe business models for internal services.

Once the business model has been agreed upon and gained the approval of the various stakeholders, the enterprise architecture analysis can start in order to define in detail the new operational set-up of the digital enterprise. The enterprise architecture consistently describes the means necessary to achieve the new targets of the digital business model. It helps to break down the company’s new vision into concrete targets for business units, process changes, organisational adaptations, IT, business development, etc. This is described in section ‘Breaking Down the Digital strategy at the Business Unit Level [COMING SOON]’

By combining business model and enterprise architecture analysis, the disparity between the current and the future digital state can be assessed and the concrete digital transformation programme can be specified to encompass all dimensions of the enterprise’s market approach and operational set-up.

Changing the business model of the enterprise is a formidable challenge to the organisation. 

The transformation programme defines the path towards the new future. The CDO now needs to define and command the governance tools necessary to direct the company towards the desired target. Stamina and dedication are needed to keep direction. The old change management paradigm applies: 

‘If you want the team to sail to distant shores, don’t give them detailed building plans for the ship, but instead tell them about those shores and truly excite them about the destination.’ 

The digital business model is a description of these ‘distant shores’ and serves as a compass to reach them. The CDO will need to take out this map regularly, demonstrate progress made along the way and highlight the gaps that still need to be covered. A canvas approach such as the BMC can help the broader team visualise the target and progress achieved.