Which model should be used depends on the market timing in terms of market penetration and competitive dynamics for a particular digital business model.
If a market is already mature with established, digital competitors occupying strategic positions the approach would be M&A given that a strategic asset is available at a reasonable price. The advantages include time saved to enter and occupy a market while acquiring know-how immediately. However, no capabilities would be created inside in this case and post-integration risks to retain the value of the asset are high.
If a particular market is truly blocked, partnerships are the only way to capture additional revenues and profits as well as drive internal innovation. The downsides include the possibility that a partner becomes a future competitor and that no capabilities are created due to indirect user interaction.
is a way to better de-risk internal digital business creations. In general, new digital business models can be found and set-up much faster in a separate entity outside of an established company while leveraging its existing assets with a co-creation strategy. The challenges include patience needed and a portfolio approach as Co-Creation generates winners and losers.
in existing startups, either direct, via CVC, other VCs or accelerators, decrease interference or agency risks and permits financial gains as well as insights through board seats. However, the latter can be limited to an observer position due to potential conflict of interest. In addition the financial risks of investments are very high as more than 70% do not return the fund.