Digitization and connectivity drive ground-shifting new business models New technologies are often seen as disruptive forces. But more often than not it’s the new business models enabled by new technologies that are the true source of disruption. So investors should focus on business model innovators, says trend-specialist Steef Bergakker.
Speed read
Trends
• Digitization coupled with connectivity is the common denominator • Network-based business models are potentially more disruptive • Business model innovators outperform traditional innovators
While new technologies often play a very important role in changing the dynamics of competition, more often than not, it’s changes in business models that play a decisive role in determining which companies will succeed or fail. Why did Google succeed where AltaVista failed? Certainly Google’s superior PageRank search algorithm played an important part in its early success, but it was the introduction of the clever clutter-free family of advertising programs Adwords, Adsense and Doubleclick, a business model innovation, that was the key to the company’s success and subsequent market domination. In a similar vein, Facebook outgrew first mover MySpace. Not through its superior technology, but because it provided a superior user experience by listening and quickly responding to evolving user demands. Again, an example of business model innovation. It’s a popular notion that the replacement of film-
based photography with the digital camera was what sunk Kodak. But, in fact, it was Kodak that invented the digital camera. Clearly, it wasn’t the new digital technology itself that lay at the root of Kodak’s demise, but its failure to design an appropriate business model. The recent meteoric rise of disruptive business model innovators like Uber and Airbnb in hitherto slow-moving industries like personal transportation and accommodation lends anecdotal support to the notion that business model innovation can be an incredibly potent force for change. It pays for investors to keep tabs on business model innovation. According to a Boston Consulting Group analysis1, business model innovators clearly outperform traditional innovators over time. And the dominance of business model innovation over technological innovation as captured in process and product innovation is reflected in superior investment performance.
Potentially disruptive new business models We foresee five categories of new business models that should gain ground over the coming decade. For this we expand on an influential management strategy paper by Stabell and Fjeldstadt2 who proposed a framework of three generic business configurations to understand and analyze value creation logic at company level. We combine their ideas with the cost, experience
Five categories of new business models and their likely impact Five categories of business
Sustaining /
model innovations
Disruptive change / activities
activities
Personalization
Sustaining
Traditional discretionary consumer goods /
Everything as a Service
Sustaining
(XaaS)
Opportunity-rich industries / commercial areas Challenged industries / commercial areas / Personalized medicine; high profile discretionary consumer goods
medicine manufacturing
Industrial Internet of Things; infrastructure
Traditional capital goods manufacturing / after
services (e.g. light, cloud or flying hours)
market business models
Peer-to-peer networks
Disruptive
Crowd-based financial services (funding,
Traditional financial services / telecommunications
Online market places
Disruptive
Online retailing/wholesaling; online auctions;
Brick-and-mortar retailing / wholesaling; traditional
social media
auctions
Personal transportation; lodging, office space
Lodging; transportation / power generating utilities
lending, trading); P2P communication
‘Sharing economy’
Disruptive
Robeco QUARTERLY • #1 / SEPTEMBER 2016
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