This paper presents some current results from an ongoing research into how a non-digital business model may transform successfully into a digital business model.

Amit and Zott’s break-through business model construct is assumed here as the core conceptual foundation for digitalization. Its main focus on economic value creation and appropriation attempts to unify several contemporary theoretical strands (Schumpeterian innovation, value chain logic, product-market strategies, resource-based view of firm, transaction cost economics and strategic networks). Building upon this conceptualization and by using a digital transformation of a bookselling company as a means of illustration, we bring to the forefront two central arguments to be considered for a successful transformation of business model from non-digital to digital. First, digital transformations shift the notion of firm centric value creation and as such cannot be comprehended without the network. Thus the digital transformation of business models implies multi-actor coordination, where no single executive authority may command the desired behavior, other than by means of negotiations. Secondly, the economic characteristics of digital information challenge conventional managerial wisdom such as the function of positive network effects being opposite to the conventional business logic, reduction of transaction costs and the negligible marginal costs, among others. A key assumption here is that managers’ wisdom is challenged by these characteristics of digital information economics as they act as filters that enable and hinder opportunities, adequate analysis, planning and decision-making.

A review of previous studies on business model change indicates that digital transformation of business models is rather under-researched. Analysis show that whilst these studies provide solid grounds on the factors that hinder and enable business model change, they may not be sufficient to explain and account for digital transformation of business models. Majority of these studies provide very weak connections of the business model with the value network thus disregarding the very distinct feature of business model. We consider that future exploration of these central arguments that this study advocates, would potentially provide insights on how to embark into a successful transformation, and thereby avoid the tragic fate of Blockbuster.