As they say, Netflix did not kill blockbuster, but ridiculous late fees did. Uber did not kill the taxi business, rather, limited access and fare control from the operators did. Amazon did not kill other retailers, but poor customer service and lack of innovation did. In other words, if a business is not customer-centric and also does not leverage technology and innovation, then the biggest threat to this business is obsolescence. So, businesses of the future require a business remodeling and a mindset shift.

For organizations to remain relevant in the present and future, they must keep evolving their business model (that is either go through Change or Transformation). Change uses external influences to modify actions, whiles transformation modifies beliefs, so actions become natural and thereby achieve the desired result.

CHANGE

* Requires becoming familiar with the current situation and using the past as a fundamental reference point. It is assessing the past, comparing it to the present and deterring the future / wanted position.

* Makes things better, cheaper, faster and more efficient whiles implementing finite initiatives. There are definitive beginnings and ends.

* The result of change is that an organization or individual becomes a better version, not a different version. It depends on the goals associated with the wanted change, but ultimately you are left in a better state.

TRANSFORMATION

* Throughout transformation, there is a constant assessment of present and future with intermediate to gauge process and success.

* Allows you to design your own future and invent ways to realise it.

* Assess the present to future, it’s Iterative, Experimental and makes a better system.

*The result of transformation is that an organization or individual becomes a new version. Example a Caterpillar turning into a Butterfly.

Factors that impact these business models and requires change or transformation includes but are not limited to;

1. Technology

2. Globalization and

3. Changing Behaviour

1. TECHNOLOGY

Digitization and exponential technologies are creating a world of abundance and at the same time decentralizing everything and as such, business models that worked in the past are not working anymore.

Ronald Coase a British economist and author, in one of his famous articles “The Nature of the Firm” (1937), for which he won a Nobel Memorial Prize in Economic Sciences in 1991; argues that, the reason why organizations exist is to lower transaction cost, and by bringing together other elements in to one organization, the lowed transaction cost allows the organization to charge a margin and therefore sell access to an offering.

He further argues that the organization can build a critical mass through marketing, sales and public relations.

Alfred Chandler, who also wrote classics like Scale and Scope and Theory of the Firm, argues that companies exist to exploit the benefits of being big and taking advantage of the economics of scale.

However, times have changed and technologies such as genetics, nanotechnology, the internet, robotic automation, cloud computing, blockchain, artificial intelligence, generative design, etc is disrupting traditional industrial processes and business models.

In fact, according to Raffaella Sadun, a professor, business administration and research fellow at the National Bureau of Economic Research, “While some firms think about technology merely as a different type of capital investment that does not impact their way of doing things, others are adopting new technologies as they make significant changes or transformation to the customers they serve, the skills they employ, and their organizational structures. The latter approach involves higher costs and time horizons, but most likely also much higher returns.”

Professor David J. Collis, author of International Strategy: Context, Concepts and Implications makes the point that “Emerging technologies of all types and forms are helping companies exploit new business models”. For example, Apple coupled the iPod with iTunes, it revolutionized the audio device market. Classic competitive strategy (as its name suggests) has focused more on value capture and competition within existing business models, and yet the most valuable companies in the US today simply did not exist 30 years ago. The technology they exploit creates enormous value for customers through the novelty of the ‘job to be done’ and by monetizing their offerings in very different ways.

The fact is that, many of these digital firms are based on a ‘platform’ business model—a term that only applied to railroads a few decades ago—only goes to show how far the new technologies have transformed the strategy and business model landscape. This, in fact is one of the things Nokia and Blackberry failed to understand. They should have built a platform with an ecosystem.

2. GLOBALIZATION

It is the point where we consider the world to be one big “global village” (the whole world considered as being closely connected by modern telecommunications and as being interdependent economically, socially, and politically).

Globalization has changed the competitive environment of companies. For example, today, Over The TOP (OTT) players such as Facebook, Instagram, WeChat, WhatsApp, Amazon Music, Apple TV, Disney+, Google Play Movies & TV, HBO Max, Hulu, iTunes, Netflix, Prime Video, YouTube etc. are out competing telecom companies in their home countries.

In addition, globalization means the growing numbers of well-educated professionals across the world, an expanding middle class, growing consumer bases, urbanization, and rising incomes leading to abundance. The structure of family life for these modern, middle-class populations around the world is assuming the “western” nuclear form and moving away from the more traditional extended cohabitation family unit. This requires changes/transformation to meet those needs. Brands have leveraged on this and created platforms such as Google Family Link, an account management platform by Google, Family Sharing feature designed by Apple and Family Safety, created by Microsoft.

3. CHANGING BEHAVIOUR / DEMOGRAPHY

Typically, if a consumer gets a particular experience from a product and service (P&S) provider, they expect the same experience from other P&S providers. For example, if I get a great experience from a restaurant app, I expect the same experience from a banking app and this requires organizational change or transformation of the business model to meet the changing needs and behaviour of the consumer.

As millennials and gen z are contentiously becoming the go to segment, their values, lifestyle preferences and technological proficiency creates a new consumer culture. These group of people want sustainability, flexibility, authenticity, and diversity and for this they catch a lot of flak for being entitled or lazy, but they have actually changed the world of business.

For example, they don’t want to wait in crowded lines to get food, clothes or toiletries and therefore get things delivered right to their door with the click of a button. They live their lives on social media.

With such a social media culture, consumers demand a quick response from the businesses they interact with. This means having a social media and customer service team available pretty close to 24 hours a day, 7 days a week. If a customer publicly tweets a complaint to a business and it goes unaddressed, the whole world can see it and add their own commentary. Because of this, businesses have had no choice but to become more transparent and accessible.

Today we are open to having conversations on various subjects, which sometimes leads to rants on Facebook and Twitter. Again, today’s consumer takes reviews and recommendations of products from yelp! Pinterest, Instagram etc and this new behaviour requires change or transformation of business models, capabilities and even resource allocation.

In conclusion, the essence of this is for organizations to come to the realization that times have indeed changed and what used to work, no longer works.

In fact, more importantly, then ever in a digital era, business model development must include but not limited to;

1. Acquisition – building a Return On Involvement (ROI) and not Return on Investment. Example, with Google and Wikipedia, you have everybody involved including customers and as well as the whole value chain.

2. Engagement – developing a ”Network Effect” strategy for example Uber, Facebook and MTN Mobile Money.

3. Retention- building an economics of scale, such that the business can lower the transaction cost and yet have free and premium subscription service. Example, Amazon with it’s large infrastructure in place can lower cost and charge for premium service due to added value.

Credit

This article was written with the inspiration and content from

• Salim Ismail – author, speaker, and Executive Director of Singularity University and lead author of Exponential Organizations.

• Https://Rocknchange.Com, Change Vs. Transformation by Marcel Chaudron

• Https://Www.N2growth.Com

• https://hbswk.hbs.edu/item/6-ways-that-digital-technology-disrupts-business-strategy

• Wikipedia