Digital businesses use technology to create value in business models, customer experiences, and internal operations. The term includes both digital-only brands and traditional companies transforming through digital technologies.
Growth of the Digital Economy
People are spending more money online, shifting business focus toward digital revenue and channels. As digital products and services become familiar, companies seek new competitive advantages in the digital space.
Digital business now extends beyond selling online. According to Accenture, digital businesses gain competitive edges by combining digital and physical resources in ways others cannot.
Definitions and Key Ideas
Gartner defines digital business as creating new value chains and business opportunities that traditional models cannot offer. McKinsey views it as a way of doing things rather than a thing itself. Most digital businesses either expand value at new frontiers or use technology to improve growth and performance beyond traditional limits.
Companies should review key elements of digital business and compare them with their own models.
Common Elements of a Digital Business
- Use existing technologies to reduce costs, collect data, and improve customer experience. Technology becomes a source of competitive advantage, whether by lowering overhead or adding customer value.
- Embrace digital transformation and the cultural shifts it brings. This often requires organizational restructuring and greater IT involvement in strategic decisions.
- Explore business models centered on customer experience. People pay more for superior experiences, making this a key differentiator. As digital becomes the preferred medium, strategies must reflect that.
Digital business transforms how organizations view technology. It moves from a support function to a driver of innovation, revenue, and market growth.
Digital Business vs. E-Business
E-business improves efficiency within existing models. For example, moving a credit card application online removes paper inefficiency but does not change the core experience.
Digital business, in contrast, uses technology to create new value and experiences that redefine industries.
Examples of Digital Business
- Uber uses smartphones and an asset-light platform to connect riders and drivers at scale, improving the traditional taxi experience.
- Netflix evolved from mailing DVDs to streaming, disrupting entertainment by letting users watch anytime, anywhere.
- Disney enhances theme park visits through its MagicBand system, linking physical and digital experiences in ticketing, dining, attractions, and purchases.
Where to Start
Digital business represents the destination, while digital transformation is the path to reach it. Transformation focuses on customer needs and integrates digital technologies into business models.
Gartner identifies six key steps to building a digital business. Because transformation involves deep organizational change, clear priorities and milestones are essential to manage complexity and sustain progress.