Transformation of Business Models from Non-Digital to Digital: A Dominant Logic Perspective

Abstract

Digital innovations are persuasively shifting the business landscape thus challenging traditional business models of incumbents. Information intensive sectors have been most affected and challenged to embrace the new realm. The central argument is that transformation of the business model from non-digital to digital involves a distinct set of activities and distinct assumptions about value creation and capture. Non-digital businesses operate and are guided by the conventional economic rules, whereas digital world of businesses function based on digital economics and economics of digital information (negligible marginal costs, transaction cost reduction, distinct cost structure mechanisms, different sources of revenues, etc). Thus a change of the business model involves a fundamental shift of existing core assumptions that profoundly challenges managers’ beliefs about value creation and capture.