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“Tradition is the illusion of permanence.”
We don’t always start out these pieces with Woody Allen quotes, but when we do, they’re corkers.
One of the most dangerous things about the single, traditional business model is precisely the fact that it offers a sense of security, when in today’s disruptive world, there’s fairly little to be had (just ask Kodak).
Now, none of that is said to discourage you – quite the opposite, in fact! Whilst the traditional business model just isn’t suitable for today, there are business models out there that can offer you competitive advantages, creative ways to create value, and endless opportunities for innovation.
So what is a business model, anyway?
Put simply, it’s the way an enterprise creates and captures value for its stakeholders. It’s the way you identify which services and products you sell, your target market, and how you plan to make a profit.
You could put it this way – it’s almost a kind of logic – a line of thinking that helps you rationalise whether or not your business will be successful. Applied to your company, the logic of a business model offers guidance and strategy for how you can make the most of your market.
Not sure which business model you’re following? Map and visualise the logic of your company with the business model canvas:
- Key Partners
- Key Activities
- Key Resources
- Value Propositions
- Customer Relationships
- Channels
- Customer Segments
- Cost Structure
- Revenue Streams
OK, OK, give me an example?
Business models often come with some pretty crazy names – like the ‘bait and hook,’ also known as ‘razor and blade’ – these are companies like Nespresso and Xbox.
You might be more familiar with the franchise business model, responsible for giants like McDonalds, Burger King, KFC, and certain hotels. Other models include the hypermarket model, of which Walmart is a key example.
So what’s wrong with these models? Well, done properly, they can obviously dominate. The downside is when technology and customer demand outpaces your model, rendering it obsolete.
You mean like photography?
We do indeed. In just a few decades, photography evolved from the daguerreotype to the smartphone, in an explosion of technology that left certain companies reeling.
Let’s take Kodak as an example – while at one point, it represented the future, that future was wrested from it by change. The change that Kodak should have made was a business one – not a technological one.
So technology ≠ innovation?
Exactly! The businesses set to be successful are the ones that understand this principle and act on it.
To explain exactly what we mean, we had a look at three key data points – namely consumer trends and behaviours, venture capital funding, and market or problem growth rate – which all have a significant impact on the success or failure of a business.
Taking these three things into consideration, we have five business models we believe represent the future. These are:
- The Crowd-Based Model
- The Rundle Model
- The Closed-Loop Model
- The Second World Model
- The DAO Model
Let’s get stuck in.
The Crowd-Based Model
The crowd-based business model is a model that connects people through an online platform to acquire or share access to goods and services – think Airbnb, Toptal, and Peerby.
There are a number of huge perks to this model, not least of which is the opportunity for seriously high growth – like, $14 billion in 2014 to a forecasted $335 billion by 2025 high growth.
The other benefits? It offers your customers more affordable access to goods and services, and it’s asset-light, so you don’t necessarily have to rely on owning the goods or knowledge you sell.
Want to make the most of this model? Ask yourself the following:
“How can we spin up a business that enables us to monetise access goods and services via a platform that we don’t necessarily own?”
The Rundle Model
Shifting from a transactional model, the rundle model offers businesses a recurring revenue model that drives value by bundling products and services together into a subscription service that offers customers the perception of saving costs.
The immediate example that comes to mind is obviously Amazon Prime, but Walmart+ and Uber are also good examples. The best bits of the rundle model?
It’s proven – the average household in the U.S. spends $237 on subscriptions, and it’s simple, too – the fewer decisions your customers have to make, the less risk of them becoming fatigued by choice and taking no purchase actions.
Lastly, this model is ‘sticky’. It locks customers in, and creates compelling reasons for people to keep buying from you.
Thinking of trying this on for size? Ask yourself:
“What kind of business would enable me to generate recurring revenue from customers, lock them into my ecosystem, and create a predictable recurring revenue model?”
The Closed-Loop Model
Picture a perfect world where no waste is generated; everything is shared, repaired, reused, or recycled and turned into something valuable. Sounds good, huh? It’s known as the closed-loop model, and it’s the ‘logic’ that Whirli, Protix, and Globechain leverage to add value to their market.
Oh, and that market is vast. The circular economy is expected to unlock $4.5 trillion of growth – and it’s front of mind, too. The closed-loop model has a lot to offer climate conscious customers who are concerned about environmental and sustainable challenges, and prioritise purchases that positively contribute to solving them.
Practically, it’s also business fundamental, giving you an opportunity to bake ESG (Environmental, Social, and Governance) factors into your model.
So, what are the key questions here?
“What kind of business would help me to share out, repair, reuse, and recycle my core products? How can I extract the most value from them while solving a customer need, simultaneously contributing to the sustainability question in a positive way?”
The Second World Model
Oh hello, Metaverse. Didn’t see you there. Welcome to the Second World Model: the model that leverages persistent online 3-D virtual environments.
Whether you log on through your PC or VR headset, things like Metaverse Property, Voxel Architects, and The Fabricant offer an actual mass of opportunity, from advertising to social commerce, digital events, and creator monetisation.
Not only is it an area of hyper growth, but it’s already happening - $105m was spent just on virtual land in November 2021, and this space is predicted to grow to $3 trillion opportunity over the next five years.
A seductively simple question for you…
“How could I create a business that serves the needs of customers in other realms?”
The DAO Model
It sounds like a cyber anarchist’s dream, doesn’t it? Meet the DAO model.
DAO stands for ‘decentralised autonomous organisation’ but in layperson’s terms, that’s a business model where there is no conventional management structure, board of directors, or human intervention. Instead, decisions are made based on an open-source operating code.
It may sound a little futuristically far-fetched, but it’s working for companies like DAO.vc, Endaoment, Freela, and it actually takes advantage of established conventions.
It might surprise the Luddites, but the blockchain and smart contracts have been around for some time – and the DAO model might just be the future of work. In a world turned off by corporate careers, it represents an attractive alternative to The Great Resignation.
How can you make it work for you? Ask yourself.
“What kind of business could I create that is self-organising, decentralised, and autonomous?”
They’ve all got something in common, right?
Damn right. These models
- Smash status quos.
- Violate traditional constraints.
- Offer first mover advantage.
- Enable constant adaptation.
In other words, if you focus only on optimising your status quo, rather than smashing it to bits, you are effectively creating (unnecessary!) risk for your company, your employees, and your customers.
The good news is it doesn't have to be that way. Want to blow up the stale things in your business and create the right conditions for constant adaptation? We can help. Get in touch.
