Drivers and Instruments for Performance Management of Digital Business Models

Major IT companies such as Google prove that the production and/or ownership of physical products is not essential to achieving commercial success; instead, they rely on digital business models. These are increasingly considered necessary, even though it is often unclear what sets them apart and how they can be successfully managed.

It can be assumed that digitization influences not only the value-creation process but also, first and foremost, methods of corporate performance management and decision-making. Performance management system digitization is often equated with introducing new types of analytical software, without looking deeper into or adapting the underlying processes, performance indicators, or calculation logic; traditional instruments cannot replace digital instruments on a like-for-like basis

Analog and digital business models differ...

  • in how they add value
  • in their cost handling
  • in their revenue model
  • or in how they map processes

These differences result in new requirements for corporate performance management and the associated instruments.

For the study „Drivers and Instruments for Performance Management of Digital Business Models“ data from more than 80 participants were analyzed and interpreted. The results of the study can essentially be allocated to one of three focus topics: Drivers of the digital transformation, performance management of digital business models and value-creation from digital business models

Five core messages can be deduced from the study findings:

  • Cost and revenue models: Analog business models have higher production costs and direct revenue, while digital business models rely on different sales models and invest more heavily in customer acquisition
  • Drivers of digital business models: Digital business models primarily employ services that are usage-based and location-based and related to data processing, while analog business processes focus on products and process optimization, and do not (yet) utilize new technologies
  • Value-creation process and value proposition: Both types of business model are aligned with the principles of open innovation; however, the value-creation process and the value proposition are changed in the course of digitization
  • Corporate performance management: Performance management of digital business models relies heavily on big data and advanced analytics. These have a major influence on both the calculation of KPIs and management perspectives. Non-financial KPIs are also gaining traction
  • Structure of the organization: Organizations that operate digital business models are more agile in how they act, work, and take decisions. When integrating digital business models, analog companies require a change management system to enable them to make adaptations in terms of culture, organization, and personnel