Businesses are in a constant state of flux, evolving to be organisations adapted to ‘of the time’; often this involves structures designed to mitigate for future challenges and change. There are a litany of examples of where this has failed, sometimes spectacularly, but for every Kodak, for every Nokia, there is an Apple or a Google suggesting, at times, adaptation can be world-conquering. For the vast majority, the reality of business model adaptation and development lies in the multitude of grey shades found in between graveyard and high earth orbit.
Revolution or evolution?
Business model change is nothing new, and has evolved just as radically in earlier eras. The current waged labour structures would be unrecognisable to the majority living in the 19th century, for example. From the vantage point of 2022, wage labour would appear to be as old as human commercial activity, which it is not, and required somewhat painful implementation. In the modern era, the digital era, business models are yet again experiencing a period of (at times) radical overhaul, driven by the revolution in information, which is proving as potent as steam or electricity.
Consistently, one of the major challenges facing companies is how to marry the scale and buying power inherent in most large corporate structures with the entrepreneurial speed and flexibility typically offered by start-ups. The pandemic delivered learnings in this area, especially during the moments of extreme crisis and business pressure in 2020, which should be instructive for larger players when approaching new business model development and implementation.
The mother of invention
Small yet potent decision-making units have emerged, empowered to drive change over the corporate apparatus, able to bypass parts of the bureaucracy, but also maintain due diligence. While this, for many, was a matter of survival during the height of the pandemic, the lessons from it continue to be important as we move into the post-pandemic era.
In terms of distribution, new business models are often reliant on infrastructure to operate and aid scale, but it can also be a hindrance for models reliant on change, which is often slow and not uniform. Developing markets, for example, can struggle with infrastructure gaps; but that can also be the niche that makes new models work – something that is especially true for shared economy and community ownership models.
Digitalisation and competition
Brands exploit the power of connectivity and data generated from smart devices together with emerging AI capabilities to drive incremental revenue streams within structures unthinkable less than a decade ago. This emerging digital world is leading businesses into an environment where the certainties of the past, most notably around competition, are far less reliable. Digitalisation is producing an environment where literally everyone is a potential friend or foe; often, they can be both.
While internal pressure to change for eminent reasons around efficiency, profit and loss is a key factor in the adoption of new business models, digitalisation is also influencing the exterior world of business pressure, not least legislation. Legislation remains one of the most significant influences on business change, but has hitherto been something of a blunt instrument, often lacking teeth, which is often attributed to the inability to measure outcomes or keep up with the pace of evolving business practice or culture. In the automotive industry, the diesel scandals were indicative of this, but in 2022 we now have much clearer sight of the digitalisation of legislation, which promises a commensurate rise in accountability.
Digitalisation is a common thread for regulators and businesses alike. Meanwhile, sustainability and the enactment of the circular economy are others shaping the course of what is happening now, and how digitalisation is being deployed in the service of sustainability, which will inevitably also be linked to profit and loss, shareholder dividends and ultimately much broader questions around license to operate. This aspect of new business models is seen as revolutionary, in the fact that it will bring with it a radical overhaul in traditional concepts as fundamental as ownership, while offering consumers the prospect of new services and improved experiences.
Many organisations will, of course, not make it. Change is difficult. Not least, balancing internal and external pressures while moving at pace will lead many to come apart at the seams or implode due to a lack of cohesion. This is the tightrope that bridges the present to the future, how to progress, how to stay ahead of competitors without alienating internal structures, external customers, or collaborators.
The subject of new business models as they relate to home and technology-related industries is explored in a recently published strategy briefing entitled, New Business Models: From Connectivity Boom to Pandemic Dynamism and Inflation Surge.