It would be correct to say that most people misunderstand what a digital business is. They confuse it with social media marketing or having a simple e-commerce apparel store. However, digital business is a new technological paradigm that the world is drastically shifting. Since it is a comparatively new subject, we recommend doing an online digital business course from an excellent university to gain in-depth knowledge as to what a digital business is. 

Digital business is a fine blend of the digital and physical worlds. To thoroughly understand what a digital business is, we will take you for a haircut! Let us go to the new men’s salon that has just opened up in the neighborhood. As you enter the salon, you are greeted by a voice, coming from an LCD with your picture on the screen, “Hello Sir, welcome to our salon. Please proceed to counter number two. Thank You”. You know that the welcome message was for you because it was with your picture on the screen.

So, you go to counter number two, where you find a nice friendly person. Again, you see yourself on-screen at the counter.  When you ask for a haircut, the LCD screen shows your face with different hairstyles immediately. You tell the guy behind the counter that you would prefer hairstyle number five, as you can see that it looks good on you. Wonderful!

Next, the digital world hands it over to the physical world. The guy gives you a haircut as per the hairstyle chosen on the LCD right next to your seat and this is where expectations and results join hands, leaving no room for disappointment.

To have such a digitally transformed business, you need to have an effective digital business strategy. And for that, there are five main principles:

1.  Know Your Ambition and Resources

Just like any other business, it is of utmost importance to be clear about your vision. The digital world is significantly evolving, so if you are not sure about the transformation that you plan to bring in, it is all going to backfire.

At the same time, calculate your strengths, weaknesses and your resources that are in line with the digital paradigm. Regarding the example above, if you know a barber who is ready to work for free, but is not IT savvy at all, you should not count him in as a resource. But a friend who knows how to install facial recognition cameras will be an excellent resource for your business.

2.  Understand the Customers

To accurately target a particular customer segment with your digital business, you need to do some thoughtful profiling. No matter how creative your digital transformation idea is, if there is a perceptual gap between you and the target segment, the digital adrenaline will not kick in. 

Remember, before Facebook, there was Orkut. It used to allow you to write on anyone’s scrapbook without their consent. Google thought it was a good idea for a digital friendship, but the target users thought otherwise. This is an example of a perception gap, and one should try to minimize this gap as much as possible.

3.  Analyze the Digital Market

Although the market is not fully stuffed with digitally transformed companies, there are some players in almost all major categories. When it comes to music, we have companies like Spotify and Soundcloud. For Videos, we have YouTube and Vimeo. Netflix is now watched more than cable TV.

You will have to carefully study the market dynamics before you try to enter it with your digital initiative. Some key factors that you should take into consideration are the digital businesses that are already there in that category, state laws and regulations, and the rapid technological advancements that may have a drastic impact on the digital world.

4.  Position Mapping

Position maps are perceptual maps that define your market position as compared to other competitors in the target segment. You can have different perceptual maps with different parameters on the graph. For example, take market share on the y-axis, and customer rating on the x-axis. This way, you can position your company according to its market share and customer rating.

Assuming that you are in the video content market, you will be much lower than YouTube and Vimeo on the y-axis, in terms of market share. However, if people are enjoying your service, and you are getting high customer ratings, your business could be close to YouTube on the horizontal axis.

Similarly, you can have a map of companies with brand recognition on the y-axis against years in business on the x-axis. Having these market position maps helps significantly in knowing where you stand in the market, and where you plan to be.

5.  Tactical Plan for Transitions

Now that you have a fair idea of your positioning and direction, you need a tactical plan for your positive transitions according to your position maps. To understand this final principle, we will do a simple exercise of modeling a digital initiative.

Let us assume you want to start a handbag business, and you have the required knowledge of the handbag industry as well as the digital world. During your customer profiling, you have deduced that ladies are highly concerned about the privacy of their handbags. It now becomes the basis of your digital initiative.

When you study the market dynamics, you find that there are no strict regulations against digitally transforming handbags, and no player has yet entered this market niche. Hence, you design and produce bags that have sensors installed in them that are wirelessly linked to your cloud portal. Each purse has a unique owner, having an individual ID. That ID will log all the timestamps when the bag unzips. So, a girl can log into the online portal, and check if somebody else has attempted to undo and search the handbag. That is one of the many features of your unique product.

Once everything is in place, you will plot the maps. Your position is shallow in terms of market share and brand awareness. However, in terms of innovative technology, you find yourself much higher. It indicates that you should use a digital marketing campaign focused around your critical digital features like handbag privacy check to increase your market share and brand recognition. Therefore, this tactic would move you to a higher position on the market share map while not compromising your technological edge on the other map.


An effective strategy for a digital business should be made, taking into consideration the fundamental principles that we have shared above. With the market space crammed with all sorts of business models, it is common to get lost and go off track. Many businesses consider themselves digitally transformed, but they are nothing more than online stores delivering merchandise to your doorstep. When your product or service itself becomes significantly digitally integrated, only then can it be considered a digital business? If you still want a more in-depth feel of the digital world, watch Black Mirror!

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