A Simulation Model Of Digital Product Strategy

Diversification across different industries is a very significant feature of current digital firms' strategy behavior. However, how to describe and explain these strategies and the impact to the performance of these strategies? There is rare literature addressing these problems in academic field.Therefore, we combine the taxonomy of digital products and Fransman's Info-communication layer model, and propose a new digital product layer model (divide the digital product system into infrastructure layer and application layer, and classify those) to describe the product architecture. In addition, this paper proposes a two-plane model to visualize the evolution of digital companies' products profile and represent the industry architecture.Then, we use the agent-based modeling method (one kind of bottom-up micro-simulation technology) design a simulation model for the strategy behavior of digital enterprises:construct the behavior space according the product architecture, and design the behavior rules based on the description of facts, and we find: 1) In the digital product field, the flexibility and response speed is critical for sustaining long-term high profit rate and controlling power.2) These are two ways for digital enterprise to gain competitive advantage:first, to enter new product field as soon as possible, and this kind of strategy need a strong financial support; and second, for those corporate who cannot afford a frequently field expanding, they can choose to develop business model innovation in the initial field, and then improve the performance through the increasing of value per user.