Digital business model as a modern trend in the Ukrainian economy

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Digital business model as a modern trend in the Ukrainian economy

Heidor A.P. Kyiv National University of Trade and Economics

Kulinich T.V. Lviv Polytechnic National University

Tsyhanenko O.V. Konotop Institute of Sumy State University

Introduction

There have been serious global changes at the beginning of the XXI century, which are characterized by the intensive development of digital technologies, the revolution in the information space and the acceleration of globalization and digitalization of the economy. Currently, the transition to digitalization is one of the key priorities in the development of the world economy. Modern information, digital technologies and innovations used and applied in production, distribution, exchange and consumption have become important in the process of increasing competitiveness.

Digital transformation as a global trend of the world economy opens unique opportunities for business development and improving the quality of life in Ukraine in general. The transition of Ukrainian companies, enterprises and government institutions to digital technologies is accelerating, which contributes to the economic growth of the country. Digital transformation affects the business models and economies of every country in the world, initiating synergetic effects.

The academic paper examines the features of the digital business model as a modern trend and one of the important elements in the Ukrainian economy. The essence of the “digital business model” concept has been investigated and the phases of digital transformation of the business model have been analyzed. Taking into account scientific investigations, the basic components of a business model in the context of digital transformation have been identified. Two main approaches to business organization have been identified, namely: digitization of production “Industrie 4.0” and digitalization in the context of the development of intelligent services. The criteria of platform business models have been outlined, namely: temporal, financial and spatial. The efficiency matrix of digital business models has been displayed and several business trajectories have been highlighted as a sequential change of business models. Digital business models have been analyzed, namely: service, subscription, Software as a service, Platform as a Service and sharing. It has been established that in Ukraine the situation regarding the digitalization of the economy as a whole corresponds to global trends. This is a good chance for the country's economy to become one of the leading countries in the introduction of modern technologies and new digital business models.

The purpose of the research is to study the application of the digital business model as a modern trend in the Ukrainian economy. In order to achieve the purpose outlined, the following objectives have been identified, namely: to define the essence and describe the features of digital business models; to explore the phases of digital transformation of the business model and the efficiency matrix of digital business models; to analyze Ukraine's position in the global indices concerning the digital economy for 2018-2020. While conducting the research, general scientific and special research methods have been used, including analysis and synthesis, comparison, generalization, system-structural analysis.

The issue of implementing the digital business model as a modern trend in the Ukrainian economy is studied by numerous scientists. In particular, the scientific works of A.M. Kolot, L.S. Shevchenko, M.V. Rudenko, O.O. Herasymenko, R.M. Lisova are devoted to the analysis of some aspects and features of application and implementation of the digital business model that have influenced the genesis and the formation of the Ukrainian economy.

Despite the ample quantity of substantive works of both foreign and domestic scientists on this issue, it should be noted that there are virtually no studies on the analysis of the digital business model as a modern trend in the Ukrainian economy.

Presentation of the basic research material

digital business ukrainian economy

Traditionally, the business model determines how an enterprise carries out its production, economic and entrepreneurial activities, namely: how it creates consumer value and added value, brings it to the consumer, interacts with business partners and makes a profit from this activity, satisfying the needs of stakeholders, where this business concept has found practical implementation [1, p. 161]. The business model in the digital economy is characterized by a key feature - digital integration of all participants in the process of creating and consuming values. From this point of view, the digital business model can be described as a business model of shared consumption, in which it becomes important not so much the ownership of property, but its effective application, use and ensuring the growth of enterprise value on this basis [2, p. 334].

The digital business model is based on the fact that information about business operations and processes is processed by digital technologies. The process involves the exchange of service between the customer and the service system in accordance with the exact rules through a specific technical interface. Thus, the digital business model consists of six basic elements, namely: demand, digital system, supply, digital execution of the transaction, remuneration, repeatability of the process. All of these elements can be used to describe all business models, except that there are some features of digital forms affecting the management of digital business models [3, p. 122]. The digital business model is also defined as a relationship where digital technologies have significantly affected the structure and conduct of business and thus create value for customers, the firm and its partners [4, p. 343].

The business model is an architecture of product, service and information flows, which includes a description of the various business participants and their roles; description of potential benefits for various business participants; description of sources of income, discussed in [5]. Some researchers note that the business model consists of three basic components, namely: value proposition, when the business model contains a description of the benefits that customers or other business partners can derive from its implementation, that is, what value the company offers to customers and strategic partners; value-added architecture, that is, how benefits are generated for customers and strategic partners; revenue model, that is, the value of the business model and, therefore, its sustainability [6].

The leading German economists D. Shalmo and K. Williams have developed phases' sequence of digital transformation of the business model based on approaches to digital transformation and existing theories of business model innovation (see Figure 1), which have been highlighted in [7].

Figure 1. Phases of digital transformation of the business model Note: compiled based on the source: [7].

Companies that are making progress using a digital business model need to make changes to their business organization. There are two different approaches: the first - digitalization of production “Industrie 4.0”, which forms a distributed business structure. Digitization means that information is disseminated throughout the company and the decision-making process becomes more decentralized. Thus, this process of decentralization takes organizational changes related to automation and new enterprise resource planning systems - Enterprise Resource Planning (ERP), to a new level. The second approach is digitalization in the context of the development of intelligent services, which consists in the creation of central organizational units for the development and implementation of ideas around intelligent services. Trials of new digital technologies are driving companies to take advantage of the opportunities offered by digitalization and use new digital business models for growth.

In industrial companies, the process of implementing digital business models is completely replaced by new business models. However, there are very few cases where the existing business model is completely replaced by the digital business model, which has been established in [8].

The digital business model creates added value for customers through the use of digital technologies that facilitate the interaction of different participants in economic processes in real time through the use of digital communication channels. The digital business model has eliminated the middle link - the call center and replaced it with a new, more efficient tool - a mobile application that reduces time and financial costs. The main criteria for distinguishing platform business models are outlined in [9, p. 88]:

1) time criterion - direct (without intermediaries-agents) interaction of participants of market relations in real time;

2) financial criterion - low transaction costs of interaction of platform users;

3) spatial criterion - no barriers to entry.

The effectiveness of implementation can be assessed as the contribution of digital technologies to ensuring the growth of the enterprise's value; however, it is important to assess the sensitivity of the company's value to the implementation of digital technologies based on the assessment of “cost without digitalization” and “cost with digitalization”. The efficiency matrix of digital business models is reflected in Figure 2. In the matrix, several business trajectories can be distinguished as a sequential change in business models.

Figure 2. Matrix of efficiency of digital business models Note: compiled based on the source: [2, p. 338].

The transformation trajectory of DBM 4 - DBM 3 - DBM 2 - DBM 1 (DBM is a digital business model) requires a global restructuring of all elements of the enterprise; with successive transformation, the risk of losing value from the transition to the new model will decrease. The strategy of digital cooperation at all stages of transition will be a solution in this situation.

The trajectory of transformation DBM 4 - DBM 2 - DBM 1 requires a significant restructuring of all elements of the enterprise. Accelerated transformation will reduce the risk of losing value from the transition to the new model through application of innovations. In terms of time, this trajectory is more competitive than the previous one.

It has been known from [2, p. 337-338] that the trajectory of transformation DBM 4 - DBM 1 is almost impossible on the basis of own resources and without investment in unique innovative technologies.

One of the current trends is the formation of platform business models (see Figure 3), forasmuch as the digital platform makes it possible to combine two or more independent product groups in order to increase the profits of all participants; it enables consumers and producers to communicate with each other in order to share the goods, services and information, which has been established in [10, p.185].

Platform business models provide development of value to consumers through the widespread use of digital and other advanced technologies “Industrie 4.0”, which enable the interaction of economic entities in real time, equal access of producers and customers to information and its reliability. Figure 4 shows the basic features and benefits of platform business models, outlined in [ 11,p.40].

Figure 3. Classification of business platforms Note: compiled based on the source: [10, с. 185-186].

Thus, a platform is a business model that is able to accelerate the exchange of value between two or more groups of users, consumers and producers, to carry out this exchange, promoting the emergence of communities and markets within which users interact and carry out transactions as it has been established in [12, p. 208].

The use of digital platforms in the interaction of different parties makes it possible to minimize the number of intermediaries between them and allows the manufacturer or seller to offer their product to numerous buyers, regardless of their geographical location. Buyers have ample opportunities to compare the products they need according to different characteristics. There are the following digital business models, namely: service, subscription, Software as a service, Platform as a Service and sharing [13, p. 85].

Figure 4. Features and benefits of platform business models Note: compiled based on the source: [11, p. 40-41].

The service model of business is characterized by the fact that buyers have the opportunity to pay only for the actual use of the product, without mandatory ownership of it. When using this model, manufacturers can sell not only equipment to customers, however, the main emphasis is placed on services towards supporting the use of this product. The use of the service model is becoming quite popular due to the emergence of new technologies, such as: electronic sensors with the ability to transmit information to the service organization in real time and software products, equipment that makes it possible to quickly and efficiently analyze the growth of the model. The service model category is a subscription business model that allows customers to access the required service or product, based on regular payments to the supplier. Examples of subscription business models are Software as a service, Platform as a Service.

Software as a service is a business model that allows customers to use the software product on a subscription basis for a certain period, without the need for additional training of its employees, software installation and maintenance. By the way, the advantage of this model is access to the software product without binding to a specific device or location.

Platform as a Service is a business model in which the seller of the service provides customers with the programs they need and

control through the cloud infrastructure. The seller also maintains the necessary cloud infrastructure.

The sharing model is a business model that enables the collective use of goods and services, including through exchange or lease instead of acquisition and ownership. Exchange can be done with things, services, skills, money. There are special trading platforms based on shared consumption. Individuals as well as public and private organizations can participate in the shared consumption model. When using this model, the efficiency of use of things significantly increases [13, p. 86].

That is, as a result of the development of information technology, the digital economy is characterized by the following trends, namely: increasing the concentration of economic activity on digital platforms; expanding the possibilities of using service models, increasing their reliability; active use of the model of shared consumption with the use of special sites, which has been considered in [14, p. 124-125].

Digitization of the economy characterizes the state of digital transformations in the process of organizing social-economic relations in the model of the society, which corresponds to domestic realities and combines the society, business and the state. In order to study the development of Ukraine's digital economy, it is advisable to analyze the position of the state in global indices (see Table 1).

Table 1

Ukraine's ranking according to the Global Innovation Index and the Global Digital Competitiveness Index for 2018-2020

Note: compiled based on the source: [16; 17].

In 2020, Ukraine has more effective results in terms of innovative results than innovative investments; consequently, it ranks the 71st place in the world, exceeding the figures for 2019 and 2018. According to innovative results, Ukraine ranks the 37th place, where this position is lower than in 2019 and 2018. According to the global index of digital competitiveness, in 2020, Ukraine took the position it occupied in 2018 (the 58th place) [16].

Therefore, the implementation of the digital business model depends on the level of development and readiness of the country and stakeholders, as well as on the policies pursued at the national, regional and international levels.

Conclusions from the research conducted

Thus, it has been determined that in modern conditions the implementation of the digital business model is important for ensuring economic growth of the country. Effective conduct of business in the context of digitalization requires the use of digital technologies in business processes, management and business models in general. After all, the ability of enterprises to operate for a long time depends on how thoughtful their business models are in terms of creating consumer value. Those companies will remain on the market that will be able to properly change their business models to modern trends, as well as to effectively use new technologies and opportunities provided by the digital economy. Companies that will be able to properly take advantage of new opportunities and cope with the problems arising will not only be competitive, but also can take a leading position.

Digital transformation contributes to the study of the business model, which in turn requires greater detailing and elaboration of all business processes. At the same time, the digital business model cannot be effectively implemented without comprehensive digitalization of business processes and the introduction of innovations into the business process itself. Therefore, understanding the impact of digital transformation on the business model is a crucial factor for all types of businesses and organizations, which makes this area of research relevant and meaningful.

A promising direction for further research on this issue is the assessment of the effectiveness of ensuring the implementation of a digital business model, which represents both scientific and applied value and the development of optimal methods that will allow in a short time and with minimal costs introducing innovative and digital technologies at the enterprise.

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