Pattern description

This pattern relies on the ability to turn existing products or services into digital variants, and thus offer advantages over tangible products, e.g., easier and faster distribution. Ideally, the digitization of a product or service is realized without harnessing the value proposition which is offered to the customer. In other words: efficiency and multiplication by means of digitization does not reduce the perceived customer value.

Inventive problems

Application examples

Hotmail, now operated by Microsoft, was one of the first webmail service providers to use the Digitisation business model to provide electronic mail rather than conventional letters. The basic Hotmail service, including a modest email storage capacity, is offered free of charge, while customers must pay if they wish to benefit from premium features such as increased storage capacity or freedom from intrusive ads (see Freemium, page 165). Hotmail user’s access their email via a web browser, or more recently by linking to third-party software via POP3 accounts. Address books are set up online and emails can be composed, stored and sent within the user interface. The cost to Microsoft of offering a free basic Hotmail account is negligible when cross-financed by revenue received from premium users.

Another example is Jones International University, an American for-profit university offering qualifications in education and business online. In 1999, it became the first American University to earn recognised accreditation for courses studied and administered solely online. The university offers bachelor’s, master’s and doctoral degree programmes through ‘distance learning’ programmes over the Internet. These ‘e-learning’ courses offer great flexibility to students in remote locations or who work part time. The course material is supported by online discussions via chatrooms, forums, email and telecommunications. Modules, assignments and a series of assessments enable students to work towards the goal of achieving qualifications. Today, leading schools such as Harvard University and MIT also offer online courses, either free of charge or for a small tuition fee.

Traditional banks introduced online services to complement their existing products. Digitisation spawned new businesses specialising in online virtual banking that did not operate physical branches. Examples include Germany’s 1822direkt, DKB and comdirect.de, Austria’s bankdirekt.at, Switzerland’s Swissquote.ch, Great Britain’s First Direct and Russia’s VTB direct bank. These banks often focus on specific financial products such as securities trading or other special investments. One advantage of Digitisation is lower costs, which are frequently shared with customers in the form of higher interest rates.

References

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