Three digital business models to drive manufacturing growth

Manufacturing leaders face a clear challenge today: how to expand market share when traditional approaches fall short. There is a need to constantly refresh, revamp and reinvent products that retain existing customers whilst, simultaneously, attracting new ones. 

If you are a leader in the manufacturing sector, it is likely that digital transformation is a priority for you and your organisation. However, in our experience, many traditional manufacturers struggle with long-term strategy & vision. Knowing where to focus and what to prioritise is a significant challenge.

Some models that might help with innovation

We find that when you are starting out on a digital project, one of the best places to start is to use a business model that aligns to your overall goal and business opportunity you have identified. 

Models can show you an ideal outcome and walk you through the steps you'll need to take to get you there. By using tried-and-tested practices, you get a clear framework to help you set out your vision and goals and can learn from the successes (and failures) of other peers, competitors and market-leaders.

With that in mind I thought it would be useful to pull out three of our favourite models and give you an idea of you might be able to apply digital tools and practices in your organisation.  

Model one: The Trojan Horse

The Trojan Horse is a digital business model that has a somewhat mixed reputation (the Wikipedia entry is particularly scathing 😅). 

A Trojan Horse is a method of gathering user data by giving something away for free. Sometimes this can be seen as a cynical marketing ploy, designed to 'trick' users into giving up their personal information. However, when it is done well you can create a real value exchange that helps widen your target audience, whilst giving something away that is genuinely useful. You can then start to build a relationship with the user via direct marketing that introduces them to your brand, or product and demonstrates what you can provide for them.

A good example of a Trojan Horse 

Fender's Play app exemplifies this brilliantly. The guitar manufacturer created an app for iPad, iPhone and web that exposes their brand to millions of new people.

The app gives musicians access to high-quality learning content, dramatically reducing the chance of them abandoning guitar within three months (a common problem for new players). 

The results? Increased customer lifetime value as users stick with playing and ultimately buy more guitars. Plus, the app offers paid options that have generated over $20 million to date.

Model two: Product Cannibalisation

"If you don't cannibalize yourself, someone else will"

Steve Jobs

This is a philosophy that has driven Apple's success for decades.

Product Cannibalisation requires courage but can deliver extraordinary results. The concept is simple: there's always risk of competitors or new entrants bringing innovative digital versions of your product to market. The opportunity? Get there first.

By adopting this method, manufacturers can go on the offensive and become the early adopter, embracing new technology and trends before others can steal your market.

A good example of Product Cannibalisation

Leica understood this principle perfectly. Recognising that photographers often use phones when carrying a camera is impractical, they created the "LUX" photos app.

This app builds on their reputation for excellent image quality while generating subscription revenue. Since a Leica camera can cost £5,000+, the app allows a broader market to experience Leica quality through a low-cost annual subscription.

Model three: Companion Apps

In today's market, consumers expect smart products to have companion apps for configuration and control. 

The challenge? Most apps aren't used. Manufacturers must determine how to create genuinely useful companion experiences, rather than wasting time, money and effort to create another app that isn't useful or neccessary.

The key shift manufacturers need to make is to stop asking "how do we add an app?" and start asking "how do we make the product better?". We delve into this topic a bit further in a recent blog on smart product development.

Some good examples of Companion Apps

• Igloo Home creates apps for Smart Key Safes used by Airbnb hosts.
• Zhiyun lets photographers control lights remotely.
• Uphonour enables homeowners to manage thermostats.

The opportunity: Using digital to transform your business

There is a real opportunity to expand and augment your target audience by adapting digital tools and products. Digital products can:

• be sold at lower costs than physical counterparts
• often appeal to different audience segments
• serve as gateways to your physical products 
• act as a stand alone tool for digital natives

Successful digital transformation creates meaningful, connected experiences. Great products should be so intuitive that users barely notice the technology behind them.

Hopefully this overview has got you thinking about how you can use business models to augment your thinking and give you and your organisation some fresh ideas.

Growth is an ongoing challenge for manufacturing organisations. The need to innovate and stand apart from the competition has never been greater. 

What to do next 

If you've enjoyed learning about these models, we go into more detail in our newest guide - Badly Drawn Business Models for Innovation. The teaser edition is available now and the full resource will be available soon (if you download the teaser, we'll send you the full guide once it's ready).