Researchers map digital business models

The Danes are increasingly embracing internet commerce. In just three years, the number of online purchases have climbed by 60 percent to 74 million transactions in Danish internet shops last year. It looks like the figures for 2014 will be even higher.

So the digital companies in Denmark are in a lucrative growth market. But who are the digital companies? The answer to that question is found in an analysis for the Danish Business Authority by Kim Normann Andersen and Jan Damsgaard, Professors at the Department of IT Management with CBS.

"Digital grocers" or "pure players"?

In their report, they draw up seven archetypes of digital companies that exist today. The aim was to see if digital business models have changed over the past twenty years since the market was created.

- We've found that there has been a shift in momentum in the industry. Many more companies have started incorporating the digital aspect in some parts of their business, and at the same time we see more so-called pure players, explains Kim Normann Andersen.

Pure players is the collective term for four of the seven archetypes. They are businesses that no longer have a physical shop you can make your purchase at, but only exist online. When internet commerce emerged 15-20 years ago, it was often 'real' shops that supplemented their business with online sales. This archetype is called "the digital grocer" in the analysis.

100% digital products are gold

The development - and the archetypes - clearly reflect that to an increasing degree it is fully digital products such as apps, games and software that the digital companies sell. One of the new archetypes is "the software producer", which sells software licenses, while "the digital platform builder" makes an earning by offering a free platform and advertising on that platform. Examples of these archetypes are Microsoft and Facebook respectively.

But other digital products have also emerged. A third example is the archetype "the app inventor", which profits on apps via an existing digital platform.

- These new business models demonstrate some amazing future possibilities for the small entrepreneur. Because the entry barrier is very low for companies that are completely digital, and there are already many examples of small entrepreneurs who achieve success with the right idea, says Kim Normann Andersen.

The seven archetypes

1. The digital grocer

- Has a physical store but supplements with online sales
- Branding, advertising, product catalogues, service and guides online

2. The web shop

- Buys products from wholesalers and sells directly to consumers online
- Avoids expensive physical retail shop and has a wider range of products

3. The digital producer

- Expands its physical products with digital services, e.g. with IOT (Internet Of Things)
- Creates new functionalities and digital lock-in effects about the physical product

4. The software producer

- Builds software with license/direct payment
- Marginal costs close to zero, scalability and roll-out/update online

5. The digital platform builder

- Builds its own digital platform online
- Scaling of the number of users and uses the source for indirect sales

6. The app inventor

- Identifies a need and builds an app to meet that need
- Extremely low start-up and exit costs

7. The Wiki creator

- Users are both content creators and content consumers
- Profit through donations and/or indirect sales

Read the analysis here (in Danish) 

Press services contact: Kim Normann Andersen