Rethinking the right way to do business
Business model innovation can be a boon for your organization
Innovation efforts are often tied to technology, but often are too narrow in focus
Implementing new technology can warrant revisiting your business model
Subscription-based “as a service” models have become massively popular
New business models can boost growth by tapping into new customer segments
Whether it is driven by customer feedback, new tech, or your own initiative, periodically revisiting your existing business model and pushing your leaders to consider alternatives is an important part of being innovative
“Everything” as a service
In a recent edition, I wrote about 8 key takeaways from my recent trip to Silicon Valley. One broader trend that has been going on for quite some time is the move of many organizations to an “as-a-service” business model. Virtually everyone has heard of “software-as-a-service” or SaaS and I wrote last month about how firms should consider shifting money budgeted for capital expenditures to be used for operating expenses to take advantage of this trend and accelerate their innovation efforts. Often, technological advances can open up new business models; as evidenced by the rise of the popular platform-ecosystem model or subscription-based approaches.
I was reminded of the importance of business models this week when considering options to care for our wonderful dog Zoey while we go on a family vacation next month. We adopted Zoey from our local animal shelter in spring of 2019 following our last family vacation, and since the pandemic we have not all travelled together. This will be the first time in 3 years that we have been away from Zoey, so finding the right care for her is really important to us. In the past, these options were fairly limited: 1) ask a friend to take her in for an entire week, 2) ask a neighbor to make regular visits 3 times daily in our house, or 3) board her at a local kennel. None of these options is ideal for us and we initially debated back and forth about what to do.
Fortunately, there are many more choices today for pet care. I recently discovered Rover after a quick search online which pairs caregivers with pet families. Rover offers several services including dog walking, doggy day care, drop-in visits, house sitting and full boarding options. Prospective pet sitters sign up for the platform and indicate which service(s) they are able to provide, their locations, their hourly rate, and other preferences. Thanks to online reviews and secure messaging to arrange an initial “meet and greet” to see if a sitter and pet are a good match, Rover makes it much simpler to find and customize a solution that works best for Zoey and gives us peace of mind that she will be well cared for on our trip without placing a burden on our neighbors and friends.
The risk of getting your business model wrong
At the Plug and Plug Silicon Valley Summit, the opening session featured a fireside chat with tech veteran Omid Kordestani. Kordestani mentioned in his comments that the biggest mistake Netscape made was “thinking that it was a software company”. In Kordestani’s telling, this view of Netscape’s business model left it vulnerable when Microsoft was able to replicate many of its features in Explorer, which it then distributed for free bundled with its popular Windows operating system (and led to a famous antitrust case against the company). Netscape had a product everyone wanted - at one point, its browser had 80% of the market share - but Netscape was unable to translate that success into a long-term thriving enterprise in large part because it lacked a viable business model. The Internet evolved to be characterized by an ad-driven model which funded “free” functions such as search and social media.
Many of the startups I heard from at the Silicon Valley Summit spoke not just about their innovative technology as a competitive edge, but the new business models they enabled as well. There were so many “as-a-service” concepts mentioned: banking-as-a-service (BaaS), mobility-as-a-service (MaaS), community-as-a-service (CaaS) to enable the creator economy, even “X-as-a-service” where X is any product you can reasonably think of. It wasn’t just “as a service” models however; many firms were focused on building out the Layer 1 and 2 infrastructure for blockchain, smart contracts, the crypto economy, non-fungible tokens (NFTs) and Web3 in general. Augmented reality and virtual reality (AR/VR) were popular as well, and many startups were focused on enabling the online gaming and 10M+ creators going live each month, including “fan monetization” - yes, actually paying viewers for watching ads!
Newer generations demand new business models
Another one of the fireside chats at the Summit was with Aneesh Dhawan from Knit, a startup focused on helping firms better understand Gen Z. Dhawan mentioned that social media must be the primary channel for acquiring and servicing Gen Z customers. Gen Z are digital natives and think digital first; for example, 95% of Gen Z uses mobile banking and they prefer having all of their financial services in one place. Gen Z is the most diverse generation in history as well, and they want to make a social impact on the world. Additionally, they want to be rewarded for their time and data and they want more control over what they see in the form of ads or solicitations. As a result, the nature of building relationships with younger people is changing, and brands must provide meaningful and immersive digital experiences to this audience.
How much impact are newer generations having? Consider this: at the end of 2021, TikTok officially passed Google as the most popular web domain. This implies that firms who have spent years and significant sums of money optimizing their search engine optimization (SEO) efforts may find themselves outside of the consideration set for customers who are going to TikTok as their go-to online destination of choice. This requires a full rethink of your branding strategy: a notable quote from the Summit was that, “one of the most embarrassing things you can do on TikTok is run ads on a trend that was hot 2 months ago”. Early research shows that Gen Z and the new Gen Alpha are less loyal to brands as much as they are loyal to values. To respond, brands must demonstrate they are trustworthy and authentic.
As technology continues to change, how you reach your customers is changing as well. This begins with reconsidering your business model and going beyond to your branding, messaging, and communication channels. Traditional advertising is not trusted, even from celebrities, which is why influencer marketing has become big business: these voices feel more authentic and have built trust with the audience they have curated over time. When was the last time your core business model changed? It might be time for a refresh.
Has your organization made a significant change to your business model recently? If so, how did it change? Do you offer more options or have you completely redesigned your value proposition? What technological upgrades that your organization has made might lend themselves to unlocking new possibilities? What preferences are your customers voicing for how they interact with you? Does this vary by generation or location?