Part - I, Business Model Innovation - Why?
Dec 14, 2016 | Seema Sutradhar
A few days ago my daughter and I went for shopping for her 16th birthday. We had bought what we wanted and then it was time for some food. So we went to a sushi restaurant. Great, it was all going well, and I was looking forward to ordering some favourite items. The waitress came and handed over a QR code printed on a piece of card. All I could read was a table number. She also handed over a sheet of paper with a few simple instructions and suggested we download an App. I was not happy with it. I wanted to order food, and here I was to download an App. Alright! My daughter and I navigated through it and did what it said and voila! In a jiffy, we were on the menu page. We made selections, and we put the order by scanning the QR code. All done! In a minute a printed list with our choices was handed over to us, and we were all set. It was better, much faster and gave a lot more information on the go which I would not have asked for. Nevertheless, it was great to have. So I smiled and noted - one more App and am getting smarter! At the same time it flashed in my mind for a moment - so the person who used to take these orders has lost his job!
Indeed we do not do things the way we did just a few years ago. The world around us has changed so much. We are getting smarter in everything we do - shopping, commuting, travel, holidays, watching videos, listening to music, almost everything. The rules have changed. Uber, Amazon, Airbnb, Netflix, Spotify they are like the new normal.
To add to this, we are living in a much more connected world now. Facebook, WhatsApp, and the likes have changed the socialising scene altogether. News or anything interesting makes it's way through social media faster and quicker than ever before. We are constantly getting exposed to tonnes of interesting content through friends & colleagues, and family with whom we have got connected so well in today's world. The challenge now is how to escape this sometimes :) The good part is that we have found a smarter way to socialise in this fast and time constrained World. The options are open, and people can choose what and how much they want. Also, we cannot ignore the tremendous learning that is happening from being connected. People love to share and when you share you learn new things - especially the rapidly changing ways of doing things in our daily lives. Sharing of an App or a cool service one enjoyed is so common, and it is making this type of change spread widely at lightening speed.
We all know that this rapid change we are experiencing now is all possible due to the internet, mobility, and other technological advances. The change is widespread and irrespective of being in an advanced or developing country, internet and mobility have made their way successfully.
The speed of change is too fast and too big. It
is a tsunami indeed.
Thomas L Friedman in his article in NY Times, dated Nov 21, 2016, beautifully summarises when this change started and we probably missed to notice it, but in retrospection, we realise what exactly happened in and around the year 2007.
“Steve Jobs and Apple released the first iPhone in 2007, starting the smartphone revolution that is now putting an internet-connected computer in the palm of everyone on the planet. In late 2006, Facebook, which had been confined to universities and high schools, opened itself to anyone with an email address and exploded globally. Twitter was created in 2006 but took off in 2007. In 2007, Hadoop, the most important software you’ve never heard of, began expanding the ability of any company to store and analyse enormous amounts of unstructured data. This helped enable both Big Data and cloud computing. Indeed, “the cloud” really took off in 2007.
In 2007, the Kindle kicked off the e-book revolution, and Google introduced Android. In 2007, IBM started Watson — the world’s first cognitive computer that today can understand virtually every paper ever written on cancer and suggest to doctors highly accurate diagnoses and treatment options. And have you ever looked at a graph of the cost of sequencing a human genome? It goes from $100 million in the early 2000s and begins to fall dramatically starting around … 2007.
The cost of making solar panels began to decline sharply in 2007. Airbnb was conceived in 2007 and change.org started in 2007. GitHub, now the world’s largest open-source software sharing library, was opened in 2007. And in 2007 Intel for the first time introduced non-Silicon materials into its microchip transistors, thus extending the duration of Moore’s Law — the expectation that the power of microchips would double roughly every two years. As a result, the exponential growth in computing power continues to this day. Finally, in 2006, the internet crossed well over a billion users worldwide.
In time, 2007 may be seen as one of the greatest technological inflection points in history. And we completely missed it.”
In the same article, he says that connectivity and computing got so fast, cheap, ubiquitous and leveraged, that they changed three forms of power - in really differentiated ways - all at once: the power of one, the power of machines and the power of ideas.
What he meant by the power of one is the ability one individual or a small group has now. It is a tremendous power that one has, to make or break a thing. He gave an example of President-elect Donal Trump when he wants to be heard he now gets his message out directly from his New York penthouse through twitter to 15 million-plus followers at any hour of the day he pleases.
The power of machines is not that machines can only beat humans at “Jeopardy!” or chess, they are starting to become truly creative, offering architectural and other designs and writing news stories, songs, and poetry that are indistinguishable from the work of humans.
And the third is that of ideas that now flow digitally through social networks all over the world faster and farther than ever. As a result, new ideas can quickly and effortlessly take root unlike in the past.
We are certain to note that technology including connectivity and power of computing has changed our lives enormously - the way we live, our work and the way we connect and socialise.
Economists are saying we are already at the beginning of the fourth industrial revolution that is fundamentally changing the way we live, work and relate to one another. Klaus Schwab, Founder and Executive Chairman, World Economic Forum in his book “The Fourth Industrial Revolution” says
“Previous industrial revolutions liberated humankind from animal power, made mass production possible and brought digital capabilities to billions of people. This Fourth Industrial Revolution is, however, fundamentally different.
It is characterised by a range of new technologies that
are fusing the physical, digital and biological worlds,
impacting all disciplines, economies and industries,
and even challenging ideas about what it means to
The resulting shifts and disruptions mean that we live in a time of great promise and great peril. The world has the potential to connect billions more people to digital networks, dramatically improve the efficiency of organisations and even manage assets in ways that can help regenerate the natural environment, potentially undoing the damage of previous industrial revolutions.
Together shape a future that works for all by putting people first, empowering them and constantly reminding ourselves that all of these new technologies are first and foremost tools made by people for people.“
So this is indeed a time of great promise and great peril alike. Promise, because technology is enabling us to do things we never could imagine, the possibilities are immense. It is in our hands to harness this power. At the same time, this power can also be miss used - the power of one, the power of machines and the power of ideas. We see examples of both good and bad. Finding innovative ways of business that embody the 3Ps - People, Planet and Profit together without marginalising one for the other is the real challenge of the future. Ignoring any of the first two Ps for the third is not what will work in the long run. Collaboration among entities at various levels instead of siloed thinking will only take us to the greater prosperity and for the good of the Planet.
Learning how humankind can benefit from this revolution while addressing its challenges was also the central aim of the World Economic Forum Annual Meeting 2016, which was held under the theme “Mastering the Fourth Industrial Revolution.”
Now on the ground when we look closely, businesses like Uber and Airbnb have leveraged their offering by providing a platform that connected customers with the providers in an elegant and economical way. The service quality is so high that no one would like to ignore it. The underlying principle for these businesses is about sharing of resources. Technology made it possible to share resources effortlessly and thereby increase utilisation and made these businesses super hit. The success of Netflix is not just streaming videos, but the main thing for Netflix is about intelligent recommendations that it makes to its users, based on their past choices or preferences. Analytics made it possible for them. Another success is of Amazon that kept its keen focus on customers and provided exceptional services making things possible with the help of technology. From customer care to correct prediction of future customer needs to, service management or customer relationship management systems, they have indigenously pioneered these and have made their business big as the Amazon river.
These company’s successes are phenomenal. Technology is at the core that made their businesses succeed. Without technology, these offering would not have been possible. However, if you look closely, there is more than technology which are the reasons for their successes. They focused on innovating value for their customers and created a business model that not only meets the need of the changed environment but also optimised on asset utilisation or focused on efficiency. The customers they have targeted, the channels they deliver through, the charging model and many of the other aspects behind the scene that make their services and in turn their businesses so successful. It is the complete business model that they have innovated surrounding the same core product or service leveraging technology. In this changed time when our everyday life has adopted new ways of doing things in almost every aspect, businesses need to find new ways to meet customer's as well as the workforce's expectations. They need to enhance or better innovate the entire business model to succeed and be able to survive this disruption.
Reference and illustration:: Business Model Canvas is taken from the book "Business Model Generation" by Alexander Osterwalder and Yves Pigneur, 2010.