Digital business model and national competitiveness

Abstract

The benefits of digital technologies that cannot be quantified in monetary terms are described as digital dark matter. Product service systems (PSS) are unified mix or bundles of products and services that deliver value in use; which ultimately is an unobservable construct and hence generate non-pecuniary benefits. The aim of this article is to empirically quantify the digital dark matter within product service systems, and correlate that measure with national competitiveness. We implement a novel methodology that establishes the link between customer needs and the product and digital service portfolio offered across 10 developed economies. The context of analysis is the music industry; which has a cannibalistic PSS. The supply of physical and digital formats is calculated with industry revenues. Consumer information is obtained from a unique database of more than 18,000 consumer surveys; with this information consumer preferences on digital and physical formats are modelled and predicted through logistic regressions. Our method provides estimations for the digital business model challenge in each country; the variable is interpreted as an inverse measure of the digital dark matter. The country with the lowest business model challenge is US, where major companies developing digital technologies are located. Digital dark matter is positively correlated with Global Competitiveness Index from the World Competitiveness Forum. The success of a product-service combination requires good understanding of market demand. Governments embarking on soft innovation policies might incentivise and encourage the development of service orientated business models based on digital technologies. Theoretically we expand the concept of digital dark matter to the PSS literature. Empirically, we propose a novel method to measure digital dark matter, which is robust as it is positively linked to competitiveness.