1.

Introduction

In this fast-moving digital based era, companies are becoming leaner than before by
giving more importance to deliver value services to the customers with zero wastage.
Now the question arises that how it is possible to do this.

The whole new cultural environment is created for both the organizations and
consumers due to the technological development in the business model and higher
competition in the marketplace. This statement is valid for companies using digital
technologies and all the industries which are exploring multiple ways to apply this
technology. Nowadays almost all industries have experienced the novel digital
technologies which include technology of sensor, network of people connectivity and
use of smart devices. This innovation and use of technology not only change the
effect of product and services offered by the company by also changes the ecosystem
of business by affecting all the factors from customer services to products models. It
has been observed that literature and application of digital transformation are under
the consideration of management as well as strategies of the business. Despite this
literature and application of digital technologies, still, many companies are unaware
of the advantages and application of digital transformation. Although these companies
tend to invest in digital technologies still they are failed to observe the effects of
technology. This result in incremental enhancement of companies, rather than
transformation using digital technologies to its full extent. These companies who fail
to use digital technologies are filled with employees who have no interest to get
enrolled in value chains. Due to these employees, companies experience a whole new
environment and business models using digital technologies. This process begins with
digital transformation in industries on simple digital products uses to innovate music,
media, and software and then apply this transformation process on primary products.
Uber and Airbnb are examples of this new business transformation which is becoming
more popular by every passing day.

Starting a company is not a complicated thing, but the real task is to apply proper
business strategy and own a successful business model. Every entrepreneur desired to
achieve such type of business, therefore, it is necessary to highlight the ways and
strategies in order to achieve the desired goal and objective. Also by comparing the
old technologies to the new adopted digital technologies will prove helpful to
determine the flaws and weaknesses in previously used business models.
It is interesting to observe that these companies depend on tools based on digital
technologies but they do not contain the main assets of the business, for example,
Uber does not own cars and similarly, Airbnb does not possess real estate.
Digital transformations are degrading the previously used products because these
transformations allow customers to use the minimum cost of the transaction and
increase the value of users. The literature on network effect explains the ways to
increase the value of users whether they are customer or employees. For example, the
more Uber and Airbnb are followed by customers and employees (drivers in case of
Uber and renters in case of Airbnb) the more it increases the value of these users. The
best example to illustrate this concept is to observe the use telephone, the more it is
used by users the more value it gained. The first telephone had no value because it
had no use and similarly the first email account had no value.

However, both the companies that are Uber and Airbnb are good examples in
illustrating the concept of shared economy. The process of gaining the access to
services and sharing the access to services is based on peer to peer activity which is
coordinated by community-based online platforms. These are the worth observing
aspects of Uber and Airbnb, which should be used by every entrepreneur and new
company start-ups. The collaborative consumption model contains both the
information and relation of value creations and their resources.

Research Motivation
A recent research is conducted with 157 respondents which include large companies
and it has been found that today the business is much more efficient than five years
ago and this is expected that this development will further increase with the passage of
time in the field of digital transformation. Out of 157 respondents, 78 percent of
respondents successfully achieve their goal of digital transformation and now leading
towards the process of fundamental transformation. It is difficult to perceive the
transformational system of development and applied it on the model of business.
Many companies experienced that digital transformation is a source of incremental
development which not only affects the product quality but also improves customer
interface. The end result is a condition where companies invest in digital development
and achieve the goal of rapid progress. In this research paper, the basic focus is to
determine the ways to innovate business models so that digital technology can be
applied to its full extent so that new start-ups can use this strategy. Digital
transformation enables companies to pursue development and innovations so that they
don’t use the same resources and requirements. These activities of innovations are
adopted by intrapreneurs that include a set of people working within the boundaries of
the organization and pursue goals of entrepreneurial activities. This kind of
intrapreneur innovation activities in modern companies often based upon several
factors which include the sharing of knowledge, culture innovation, digital innovation,
and strong technological vision. Digital business era enables the traditional
organizations to focus on the availability of resources and support for intrapreneurial
activities and emphasize the fact that these innovation activities of intrapreneurs can
lead to a successful business strategy. This relationship between intrapreneurship and
 digital technology is researched in many management literature and case studies. This
thesis also focuses to explain the relationship between intrapreneurship and digital
technology to the new intrapreneurs and start-ups can initiate digital transformation
and apply digital strategies on their businesses.

1.2 Research Aim and Objective

The basic aims and objective of this study to analyse the current successful business
models which are based on digital platform and learn how they are created value for
their business.

Following are the main points of this study:

To develop a deep understanding of new digital-driven business models for creating business
value.
1. To compare and analyse the pricing models and financial data for two digital driven
companies i.e. Uber and Airbnb.
2. To determine the most effective research methodology for studying the digital-driven
business models of Uber and Airbnb
3. To provide recommendations for future research and determine managerial implications
for new entrepreneurs and start-up businesses.

1.4 Structure of Research

This study is comprised of five main chapters where each chapter addresses the one
main area of the research. Chapter 1 provides a deep understanding of research
motivation, establishes a thorough background on the topic, provides insight in to
research objectives and sources of data used in this research. In the second chapter, a
theoretical framework for the study has been established by studying different topics
like digital platforms, digital driven business models, shared economy etc. Several
theories have been investigated on the topic which helped in developing a foundation
for the next chapters. The third chapter of the study laid the foundation for the research
methodology by comparing different available methods and selecting which one is
best for the study. A detailed analysis of the case study companies, Uber and Airbnb is
done in the next chapter whereas final chapter of the study discusses the conclusion of
the study and recommendations/pronouncements for any future research.
 2. Literature Review

The development in the field of communication and information technology reveals

the role of assets in the process of value creation and thus increases the use of digital
products and contents. The trends of digital technology which comprise of social
media, big data and mobile technology not only produce a rapid change in many
firms but also affect the organizations where products are not digitized. These newly
digitized companies’ needs to focus on complex customer interactions so that they
can be able to utilize the process of digitization. This process of digitization is not an
easy task in order to innovate business models. It has been observed that digital
transformation can be done by using proper digital strategy, not the technological
developments. As a result of this digital transformation, not only more and more
digital products are developed by companies which are way better than existing
products but also new ways to implement strategic development are produced.
This thesis defines the idea of digital transformation by illustrating the definitions and
its influence on value creation models and business models. The occurring challenges
in implementing digital transformation are also a key focus of this thesis. Several
effects of these digital transformations are also explored in this thesis and categorize
these effects to overcome these challenges. In the last section of this thesis, the idea
of intrapreneurship is introduced so that digital transformation can be applied in
organizations where the operating products are not digitized yet.
Digital Transformation
The concept of digital transformation is first introduced by Patel and McCarthy in
2000. Earlier authors focused on e-commerce and digital marketing while explaining
the concept of digital transformation while recent researchers emphasize to innovate
the whole business model and value creation system of entire company while
explaining the importance and applications of digital transformation. It is also stated
by authors that digital transformation causes changes in digital technologies which
affect all the aspects of human life.
The evolution in the definitions of digital transformation is due to the rapid shift in
the technology due to the increased application of digital products in many industries.
The application of digital products have started initially with the digital products for
music and entertainment purposes and after 2010 the application of digital
transformation is used to transform the whole business strategies and models

Figure1: The Evaluation of Digital Transformation

It has been observed that digital technologies can give advantages in three areas. The
first area covers the better experience of customers and focuses on their satisfaction,
the second area covers streamlined operations while the third area covers new
business strategies and models. The aim of this thesis is to focus business strategies
planned with digital transformations so that non digitalized company can be enabled
to transform their business model into digitized models. According to authors digital
transformation can be defined as an application of digital technologies which enables
the business to improve their customer experience, the operation of streamline and
thus create a whole new business model. Digital transformation can also be defined
as an application of technology which can be used to upgrade the organizational
performance and improve enterprises. Both the definitions of digital transformation
are linked together because both emphasize in building up new business model and
strategies to improve the organizational activities.
Reshaping Value Creation from product pipelines to business platforms
The application of new technological structures and digital based ecosystems brings
out basic changes in the models of value creation. Hence a whole new organizational
architecture is created because of the implementation of these technologies. This
digital transformation also affects the value chain system of organizations in such a
way that differentiates from the value chain system of the core business.
Product pipeline strategies based upon value chain model that is followed
traditionally, where the value is developed by a series of linear activities within the
borders of an organization. The basic objective of this value creation model is to
increase the volume of sales so that lower cost is required to do business with a
higher rate of efficiency. According to this product pipeline perspective, every
product is strictly lying under the control of the manufacturing sector which focuses
to maintain the position of the brand in the competitive marketplace.

On the other hand business platforms, the value creation model is used to replace
products with the platforms of the industry. This platform is defined as a connection
between two or more sets of users and enables users to directly communicate with
each other. These platforms act as a basic building block to develop independently
run ecosystems. Although the multi-sided role played by these platforms are not new.
Due to technological development customers are directly connected to retailers
through malls and the advent of credit card facilitates both buyer and seller by
providing payment solutions. Modern digital technologies also enable the customer to
actively participate in value creation activities and become a vital part of these
activities in order to enhance the value of co-creators.
The decreased cost of platforms with higher efficiency is only become possible due
to the development in the field of digital technologies. The end result of this
development enables the group of organizations to create such a platform which
combines digital technologies and digital assets of an organization. This advent of
digital technologies allows participation of multiple organizations to share their
assets so that in the end assets are not confined within the limited boundaries of an
organization. In a platform-based ecosystem, more significance is given to network
effects while there is no importance of supply-side economics. There is a direct
relation between the network and value of co-creation, the larger the network os
developed the more it increases the value of participants and as a result, there will be
a rapid increase in the scale of economies.
Figure 2: from pipeline value creation model to platform model. Transformation of value creation logic

Shared value can be defined as advantages relative to costs. The basic concept of shared
value not only includes a definition of shared value but also includes the arising social
problems. Shared value combines new forms of collaboration. This collaboration uses the
platforms as used by Uber and Airbnb, according to this thesis, the value is developed by
transactions of individuals and firms. The concept of creating value can also be defined as a
co-production process between suppliers and business parties.

New digital-driven business models

As industries endure digital transformation and reflect inconsideration on the
new value creation models and possibilities digital transformation
presents, historic enterprise models are frequently now not applicable to the new commercial
enterprise environments and new commercial enterprise models are required.
A structural template of how a focal association transacts with customers,
companions and vendors; that is, how it chooses to join with the element and product
markets. The operation of companies into four business mannequin categories: asset
builder, service provider, technological know-how creator, and community
orchestrator. These business models differentiate fundamentally in phrases of value
delivery technique as well as the crucial object of the organization.
Table 1: The business model categorization (Applied from Libert et al., 2016)

Researchers stated that digital technology systems create a relation between digital
ecosystems with the employees in an organization in such a way that new rules of
collaboration, value creation, and digital products are functioned. This digital
ecosystem and digital environment of an organization demand new business models
based on digital technologies.
In order to succeed in this digital working environment, the company must have to
activate its network around different organizations so that the value of this network
can be increased and maintain in the competitive market. Digital transformation
enables any organization to focus on the network (including people and
organizations) by transforming their business models. For example manufacturers of
automobile not only rely on engineering and design structure of automobiles but also
transform their business models by providing service-oriented solutions based on the
digital business ecosystem.
The development in the field of digital technologies not only affect the business
models but also affect the topic of digital models that converts business models in
such a way that creates value chain and generate revenues by using digital
technologies. It has been observed through several case studies that those
organizations who change their business models according to network orchestrator
and more likely to grow faster as compare to other organizations and similarly gain
higher profit and works more efficiently. However, these digital-based business
models are very hard to find in the marketplace. A research is conducted comprising
of 559 respondents from different industries, out of which 7 percent of respondents
believe that digital activities of the company can create new businesses while 15
percent of respondents believe digital initiative can create new working business
models.
Business model transformations are very hard to move from one industry to another
industry. In the fast-changing digital environment, the capabilities of an organization
can become easily be adjustable that focuses on the innovation of new business ideas
and newly available opportunities. In this digital based environment, digital layers are
embedded between the layers of components in order to transform business model
successfully. This reveals a fact that the main objective of organizations should not
only focus to improve business models and opportunities but also develop such a
strategy that gives importance to both digital business models and value creations. It
has been observed through several case studies that key to successful digital
transformation is to transform the strategy of the organization so that digital
technologies can be utilized rather than implementing digital technologies on an
individual basis.

Digital Strategy
Leaders that are driving digital technologies are not differentiated through
technological experience and excellence but they got differentiated by using a good
digital strategy in order to control the process of digital transformation. It has been
observed that the lack of digital strategy and lack of competitive spirit can become a
hurdle to achieve successful digital transformation. A controlled digital
transformation process not only requires digital strategy but also a need of creating
capabilities which enable an organization to promote digitalization within the firm.
Unlike previously used traditional strategy, digital strategy is helpful in showcasing
the vision of the future, and reconsider business and e-commerce decisions. It is
suggested for the organization to focus on digital transformation rather than
transformation of actual content in order to achieve the desired goal. Most of the
studies based on strategy development topic reveal a fact that digital transformation
cannot be assumed to transform in a form of a product which implements digital
technologies but rather it is a digital strategy that enables an organization to avail
advantages of digital technologies. It has been stated by the researcher that the
biggest obstacle to successfully implement digital transformation is the lack of proper
digital strategy. ,
In a cultural environment where business models are not as efficient as required, their
consistent model based on digital technologies are needed in order to support the
management in crucial crises. Management of an organization should take the
responsibility to control the strategies of the business model and continuously keep
an eye on customer satisfaction, operational process, and digital business models. It
has been observed that the process of applying digital strategy is not a list of steps to
be followed to get the desired result; rather it is suggested to focus on enhancing the
development of the organization in terms of innovating new ideas and activities to
improve value creation and business models.
The strategy of digital transformation is started from the top to bottom, not from
bottom up. The important challenge is to transform the whole industry structure with
digital technologies; this can be done by implementing and using the proper tools and
techniques of strategic management. This vision can be accomplished by
communicating with internal and external networks of an organization. It is therefore
suggested that the idea of transforming digital technologies must be supported by
managers and supervisors of an organization because they are the main drivers of this
transformation process and only they can manage to successfully apply tools of
digital strategies.
It has been observed that in organizations where management posses shared vision
quality related to digital transformation, almost out of 100 percent, almost 93 percent
of employees support the importance of this transformation. According to researchers
the vision of digital transformation allows the organizations to engage in beneficial
activities and determine available opportunities in order to achieve the desired goals
and objectives. The most efficient method to promote digital vision within
organizations is depending upon both acceptance from the organization and increased
employee buy-in activities. The concept of digital transformation also promotes
collaborative functions within the boundaries of organizational environment because
employees working there tend to share common objective and vision and give more
importance to the digital technologies. These collaborative functions are found to be
highly important for those organizations who want to gain maximum benefit from the
digital transformation, in the end, these functional activities lead to the increase in
transformational innovations. Moreover, this shared vision of an organization which
is followed by proper techniques of digital strategy is able to identify the areas of an
organization where required skills and talents are missing and aim to rectify this
issue. The important aspect of digital transformation also ensures the risk of losing
skills in the desired area of an organization.
Developing the building blocks of digital transformation are not enough as it is
required to evaluate and test these digital activities and constantly examine theirs
after effects. In order to define the aspects of digital transformation, there is a need to
establish more products based on digital technologies. It has to be ensured in the
whole process that digital activities should be supported by organization every time
in order to achieve transformative results. The strategy of digital transformation
should also promote the relationship of newly started digital businesses with
traditional working business so that more entrepreneurs can be encouraged to start
their businesses.
After a close analysis of digital activities, it has been observed that these activities
ensure gain available resources when required; these resources can be presented in
the form of time or money to initiate digital activities. Moreover, the digital strategy
also plays an important role in considering Information Technology and Information
infra structure so that organizations can be capable to gain maximum value and
initiatives of digital technology. Researchers revealed a fact that investments in the
field of Information technology and Information Infrastructure can directly be related
to the resources of infrastructure and information.
As there is a constant need to innovate tools of digital strategies and avail maximum
opportunities, the main objective should be a focus to develop such a process which
continuously monitoring digital activities. In this fast-moving digital era, the process of
development depends upon experiments and direct responses rather than predicting the near
future planning. It is the duty of cultural organizations to arrange campaigns which teach to
use digital strategies and help in the process of decision making rather than to teach the use of
information data and sources. Case studies show that companies like Uber and Airbnb use the
platform of digital transformation in order to shape their business models do that participants
can actively participate in activities and interact with each other through proper
communication. Uber only give the option to select the ride according to requirement and no
of users rather choose a driver they want, thus it is not in the hands of either driver or rider to
change the layout of the system. These are the example of a platform-based business where
values are added by the interactions of individuals. In addition, these platforms allow
companies like Uber and Airbnb to transform the structure of their industries (for example
transportation in case of Uber and real estate in case of Airbnb) by using new ways of
connecting with customers in order to sustain their position in the competitive marketplace.

Digital transformation challenges

As the formerly described vast literature on digital transformation covers both the
management researches and corporations literature in order to acknowledge the need
for digital strategies. Despite the increasing awareness about digital transformation,
its uses, and its application, many companies still facing difficulties in starting the
digital transformation process and implement it to get advantages of these
transformations. The basic objective of this thesis is to identify the challenges that
occur while implementing digital transformation and find numerous ways to
overcome these challenges, thus creating a whole new framework which categorizes
each and every challenge.
The literature which defines strategic management tools and techniques, business
transformation and arising challenges while implementing digital transformation is
very extensive. Although there is a similarity in the challenges faced while
implementing general transformation with the challenges of implementing digital
transformation but still digital transformation contain own set of characteristics
which differs from general transformation. In this thesis, the only aim is to focus on
the challenges that occur during the implementation process of digital transformation.
There are three categories of challenges that occur while implementing digital
transformation. The first category is transformation challenges, second is innovation
challenges and third is governance challenges. These categories are also termed as
phases of challenges but it has to be noted that these phases are different from the
linear transformation phases. If the organization is moved from A state to B state, the
challenges will remain the same and also digital initiatives are required to overcome
these challenges. These digital initiatives may include new products, value creation
models and business models which can be applied through the proper use of strategic
management tools and techniques. Moreover, these challenges do not arise alone but
rather they appear in a form of sets. These sets of challenges create a strongly
dynamic model in order to interact with the environment.
Figure 3: Digital Transformation Challenges