Changing the game with new technologies and new business models
September 10, 2016
This month’s HBR features a useful article on how the combination of new technologies and new business models can transform markets. Here’s a summary:
A business model that can link a new technology to an emerging market need is the key to industry transformation. When Apple coupled the iPod with iTunes, it revolutionized the audio devices market. But most attempts to introduce a new business model fail. Analysis of companies that had launched new business models indicated six recurring features in the best models:
- Personalised product or service at competitive price
- Closed loop (circular) processes, less waste, more reuse
- Asset sharing, partnering to collaborative consumption
- Usage-based pricing, from renting to pay as you go
- Collaborative ecosystem, reducing risk and supply costs
- Agile organisations, realtime and responsive to change.
Whilst no model, even the likes of Airbnb, displayed all of these factors, having a higher number correlated with a greater chance of success at transformation. The diagram below shows how these 6 characteristics of business models connect technology and market trends, enabling transformation of the industry – or “gamechanging” strategies – to emerge:
On the market side, demand has grown across emerging and developed markets, with people more different and discerning, costs have rise and regulators seek to keep control of changing markets. On the technology side, sensors that allow cheaper and broader data capture; big data, artificial intelligence, and machine learning enable companies to turn enormous amounts of unstructured data into rules and decisions; connected devices (the internet of things) and cloud technology allow broad data manipulation and analysis; whilst nanotechnology and 3-D printing open up new models of micro-production and selling.
Uber ticks 5 of the 6 boxes. Its business model is built on asset sharing where drivers use their own cars, and a collaborative ecosystem in which the driver assumes the risk of winning rides, while the platform helps minimize that risk through the application of big data. The platform creates agility through an internal decision-making system that responds to market changes in real time, allowing usage-based pricing and direct drivers to locations where the probability of finding a fare is high, and customers rate drivers encouraging drivers to offer clean cars and quality service, and some personalisation allowing choice of car based on location and ranking.
Creating a better business model
In the “Gamechangers” book we explore many examples of innovators who have changed their markets through business model innovation. You can also explore 100s of live case studies, how companies are shaking up markets right now, and judge for your self whether they are likely to succeed.
Also, you can download a series of practical templates – or canvases – for developing your future strategy, value proposition, business model and much more, in the Gamechanger Labs. There are also a series of practical video tutorials to get you started.
Most practically, you can sign up for the Business Innovation Program. This puts business model innovation at the heart of your future thinking, and practical 3 day program, customised at and for your business, and also with me at IE Business School and in partnership with Nordic Executive Academy.