DIGITAL & DISRUPTIVE BUSINESS MODELS
One of the most talked about and feared results of a digital transformations is the impact of structural change to business models. Legacy business have created strong business models with economies of scale and competitive moats. However, these business models are not forever, change occurs and what was once a strength can now be easily attacked by your competition, or more likely someone outside your industry, a new entrant, a disrupter.
The competitive digital mindset is to attack strength, steal customers, reduce competitors profit margins, make a fixed cost structure a liability and then win the new customers acquisition game with a more efficient customer acquisition cost and effective customer experience.
What makes this scenario real is that it has already occurred in many industries and is continuing to do so, since digital gives you more models to leverage in a disruptive way. Some different digital business models that have structurally changed consumer behavior are:
E-commerce: Online shopping platforms that allow businesses to sell products and services directly to customers.
Subscription-based models: Offering products and services on a recurring basis, such as subscription boxes or software-as-a-service (SaaS) models.
Advertising-based models: Offering free content or services in exchange for advertising revenue, such as social media platforms and search engines.
Sharing economy models: Platforms that allow individuals to share resources, such as peer-to-peer ridesharing and vacation rental services.
Digital marketplaces: Online platforms that connect buyers and sellers of goods and services, such as Amazon, eBay, and Etsy.
A platform business model refers to a type of business model where a company creates and operates a digital or physical platform that connects two or more distinct groups of users. These users can be consumers, producers, service providers, or any other participants in the ecosystem.
Enlighted organizations use these different business models in many ways to improve customer experience, innovate products or improve operational efficiency. Disruptors use these business models to “Change the Rules of the Game” to create new services and products. The models they have used in the past include:
Disintermediation: Removing intermediaries in a supply chain, such as direct-to-consumer models that bypass traditional retailers.
Freemium: Offering basic services for free and charging for premium features or services, such as mobile apps or gaming platforms.
Platform-based models: Creating a platform that connects buyers and sellers, such as Airbnb, Uber, or Etsy.
Innovation-based models: Creating new technologies or products that disrupt existing markets, such as electric cars or 3D printing.
Customer-centric models: Putting the customer at the center of the business model, such as personalized recommendations or customization options.
Artificial intelligence (AI) has the potential to cause disruptions across all industry sectors, all professions and possible all work tasks.
Employment: AI has the potential to automate many tasks and jobs traditionally performed by humans. This automation could lead to job displacement in certain industries, particularly those that involve repetitive or routine tasks. However, it's important to note that AI can also create new job opportunities and enhance productivity in other areas.
Industries and Business Models: AI can disrupt various industries by enabling new business models and transforming existing ones. For example, AI-powered chatbots and virtual assistants are changing the way customer service is provided. Self-driving cars and delivery drones have the potential to revolutionize transportation and logistics industries. Companies that fail to adapt to these changes may face challenges or even obsolescence.
Healthcare and Medicine: AI can significantly impact the healthcare sector by improving diagnostics, drug discovery, and personalized medicine. It can analyze large amounts of medical data, detect patterns, and assist in making more accurate diagnoses. AI can also aid in drug development, clinical trials, and streamlining administrative tasks. However, the adoption of AI in healthcare must consider ethical, privacy, and regulatory concerns. Since healthcare is a big consideration when taking a job, can your companies benefit from enhanced AI healthcare to reduce premium costs, or reduce out of office days due to sickness?
Overall, there are many different digital and disruptive business models that have emerged in recent years. Businesses that can successfully adopt these models can gain a competitive advantage and drive growth through innovation in their respective industries.
However, traditional competitors might find it difficult to compete in the digital arena for many reasons. Lack of foresight, not understanding the ramifications of competitors digital moves until it is too late or misunderstanding how difficult it is to play catch-up since digital changes are structural changes, that never revert to the old model.
One core issue is most corporate leaders have not recently attended graduate school or held front line positions where digital is having the most significant impact, their ability to look over the horizon and plan is difficult.
This is where an informed board can help. The board is not only responsible for overseeing the short-term goals of the organization but ensure the long-term prosperity of the company. They can accomplish this by understanding how digital strategies are the changing the competitive landscape and using their deep knowledge in strategy and operations offer up ideas on how companies might react to such threats and opportunities.
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