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Are your customers leaving you behind digitally? If you cant offer your
customers a great digital experience (i.e., an easy-to-use website, awesome
mobile experience), you are inviting great-customer-experience firms like
Amazon into your marketspace. Fortunately, being better at digital busi-
ness seems to help growth. We found that enterprises with above-average
digital business effectiveness had revenue growth eleven percentage points
higher than their industry average.
1
This briefing looks at where to start,
and shows how one companyBanco do Brasilcreated a powerful
digital business model.
The Three Essenal Capabilies of Your Digital Business Model
At MIT CISR, we have developed a framework to help enterprises
strengthen their digital business
models (i.e., how companies
engage customers digitally) via
three capabilities: content (what is
consumed), customer experience
(how it is packaged), and platform (how it is deli-
vered). To better understand digital business models, we surveyed compa-
nies to assess the effectiveness of their content, experience, and platform
(see figure 1). The industry with the strongest effectiveness scores overall
(the highlighted cells in the figure table) was IT software and services,
while energy and mining and healthcare were among the weakest. How-
ever, regardless of industry, top financial performers had better digital
business model effectiveness. In the financial services industry, for exam-
ple, the top third of financial performers had respectively 22%, 41%, and
21% better content, experience, and platform scores on a basket of growth
and net margin than the bottom third of performers. This is good evidence
that firms with better digital business models
also have stronger financial performance.
We have studied the successful digital business
models of companies like Amazon, Apple,
Bloomberg, Banco do Brasil, Commonwealth
Bank of Australia, DirecTV, ING Direct,
Google, Netflix, and USAA, and analyzed survey
results from 130 enterprises. For an industry-
leading digital business model, your enterprise
has to have good content, customer experience,
and digital platforms.
But if your business has traditionally delivered
products and services through non-digital chan-
nels, how do you develop an effective digital
business model?
Where Should You Build Capabilies?
The place to start depends on your strategic
goals.
2

If your goal is driving new digital revenue,
then start with strengthening your digital con-
tent (new products and features and new
product information). More new content
and the associated buzzis correlated with
revenue increases.
If your goal is cross-selling and driving more
revenue per customer, focus on improving
your customer experience. A rich customer
experience that includes easy-to-use interfaces
2013 MIT Sloan CISR, Weill and Woerner. CISR Research Briefings are published monthly to update MIT CISR patrons and sponsors
on current research projects.
Volume XIII, Number 7, July 2013
Are your customers leaving
you behind digitally?
Peter Weill, Chairman & Senior Research Scienst
Stephanie L. Woerner, Research Scienst
MIT Center for Informanon Systems Research
1
MIT CISR 2010 Digital Business Models survey, N=130. Digital business
effectiveness (a combination of eighteen questions) is statistically significant in a
regression against revenue growth, controlling for enterprise size and industry.
2
This section reports statistically significant regres-
sions between effectiveness of the three components
of a digital business model and different measures of
firm performance.


and the ability to self serve and get input from fellow customers makes
consumers more likely to buy more of your products.
If your goal is profitability, then focus on building, reusing, and
exploiting the shared digital platforms. Firms with better digitized
platforms had better net margins.
Eventually you will need to be great in all three areas to have a world-class
digital business model, but attempting to build all of these three is a daunt-
ing task. Finding the correct starting point is essential. Here is how Banco
do Brasil used a strategic goalfast growth while managing the costs of
serving customersas an entry point on its digital journey.
Banco do Brasil: Creang a DBM That Cuts Costs and
Serves More Customers
Banco do Brasil is the largest Latin American bank by assets, with over 55
million customers. Active in twenty countries, it has a 19% market share in
Brazil. Customer growth was 28% from Q1 2010 to Q1 2012. Some years
ago, Banco do Brasil faced an interesting dilemma. As a very successful
bank with lots of prod-
ucts in a fast-growing
part of the world, it
needed a way to grow
while cutting the costs
of serving customers.
As Internet penetration
was still quite low in Brazil, Banco do
Brasil decided to create a world-class network of
44,000 ATMs to address its fast growth while managing costs. These ATMs
now allow its customers to access more than 300 products and services.
Although the bank has more than 5,000 branches and a network of banking
agents, management felt digital bankingspecifically ATMswas the right
digital business model for growth. But the bank also wanted to emphasize
the customer experience and make each customer feel a personal connec-
tion to increase loyalty and retention. CEO Aldemir Bendine explained,
We want to be a bank tailored to customer needs, where each one feels
personally served in all our channels.
To achieve this goal of personalization, the bank uses income, direct deposit
information, investments, and age to allocate each customer to a segment.
The banks ATMs then tailor menu selections based on the segment profile.
For example, there are five segments for individual customers and five for
companies, organized by income and assets. Within the segments are niches,
such as university students, public servants, farmers, and military. The seg-
ment profile helps in filtering so that customers see only products attractive
to them. In addition, Banco do Brasil can add behavior to the tailoring cri-
teria (e.g., Are you in the market for a car loan?).
Interestingly, customers are more likely to apply for loans at the ATM because
they dont have to explain why they need one. The customer sees only the
credit lines for which she or he is able to apply,
and can create payment simulations of different
loans. Once a loan is chosen, the customer is
offered loan insurance for an extra fee, including
an online health status review. When the customer
confirms the information, the loan is approved
and funds are immediately made available.
To help overcome reluctance to move from
using tellers, most branches have greeters in the
self-service ATM area. Greeters have two main
roles: to help customers use the ATMs (about
10% of customers need human help) and to
highlight and sell customers additional products
that are available via ATM.
This successful ATM network is now being inte-
grated and optimized for self service across mul-
tiple channels including mobile, internet, and
digital TV. The results are impressive. Net in-
come improved 5.3% per annum (20082012)
and about 40% of personal loan applications are
now made through ATMs. ATM is Banco do
Brasils most popular channel and has the high-
est satisfaction rating. More than 90% of cus-
tomers use ATMs and this channel accounts for
44% of the banks total transactions.
In order to enhance customer experience and
build on its successes, Banco do Brasil is now
integrating mobile channels with the ATM net-
work. A recent innovation enables customers to
apply for personal loans via cell phone. The trans-
action is confirmed via SMS and the loan appears
immediately in the account. Customers can then
access the funds electronically or as cash at an
ATM. For Banco do Brasil, its digital business
model focused on using ATMs both to improve
customer experience and to increase efficiency
(see figure 2). The ATMs allowed Banco do Brasil
to customize its large set of products to customer
needs and increase the banks margin by exploit-
ing a digital platformall while growing fast.
Its Time to Start Building Your
Digital Capabilies
Now is the time to review your digital business
model and its link to your future performance.
We have reached a tipping point and all indus-
CISR Research Briefng, Vol. XIII, No. 7 Page 2 July 2013
For an industry-leading digital
business model, your enterprise has
to have good content, customer
experience, and digital platforms.


Figure 2: Banco do Brasils Digital Business Model
July 2013 Page 3 CISR Research Briefng, Vol. XIII, No. 7
Figure 1: Eecnveness of Content, Experience, and Plauorm by Industry
What is
consumed?
How is it
packaged?
How is it
delivered?
Multichannel:branch,ATM,web,mobile
Internet channelhasitsowncallcenter
BranchesallhaveATMs(avg.6.4/branch);largestbrancheshaveupto30ATMs
ATMofferingsaretailored bycustomersegment(e.g.,onlyloansforwhicha
customerqualifiesareoffered)
300+productsandservicesincluding loans,billpay,checking,withdrawals,
anddepositsareavailable ontheATMnetwork
5266branchesandanetworkofbanking agents
ExclusiveATMnetworkconnectstoexternal partnersforpayments
DashboardsmonitorATMperformancewithSMSalerts
ATMterminal architecture reusedinotherclientterminal systems
Platform
Content
Experience
Industry Content Experience Platform
ITSoftwareandServices 7.4 6.6 7.6
Manufacturing, Chemicals,andPharmaceuticals 3.6 5.6 6.4
Professional andConsumer Services 6.2 5.4 6.8
TelecomandMedia 7.0 5.2 6.8
Banking,FinancialServices, andInsurance 5.8 5.0 6.2
Education, Government,andNonprofit 6.4 5.0 6.2
Aerospace, Electronics,andTransportation 5.8 4.4 6.8
EnergyandMining 4.8 3.4 6.0
Healthcare 5.8 2.8 6.0
Average 5.8 4.8 6.6
Source:MITCISR2010DigitalBusinessModelsSurvey,N=130
Questionspercapability:Content=6;Experience=7;Platform=5
Highlightedcellsindicatethestrongesteffectivenessscores
foreachcapability
tries need to work on their digital business
models. Even industries dependent on physical
interactionlike healthcareare increasingly
digitized and, given our survey results, have a
lot of room for improvement!
So what to do? The three capabilities required for an effective digital
business modelcontent, experience, and platformbuild on one anoth-
er. To develop strength in all three areas, you need to find your equivalent
of Banco do Brasils world-class ATM network: an entry point tied to your
strategic goals. From there, your digital business model can evolve into a
competitive advantage.