What has ICT done to business models?
Technology has fueled new and efficient ways of living, doing and “acting”. This has led to new triggers and potentials that are unimaginable and many a times leading to an avalanche effect on earlier existing ways of life, getting things done and performing actions. ICT today is a big catalyst for disruption fueled by first the advent of telephony, personal computing and connectivity. The Internet Protocol, which were afterthoughts along with Open Source concepts are now enabling unprecedented levels of innovation en-mass to break out of the business-as-usual means to delivering services or perceiving products.
A new world is born that invests in disruption not as an afterthought but as carefully sought out opportunities to capture existing and new market, “open doors” to new experiences or as leading actions to realize more value within existing value chains. Disruption is now a business, and there is no stopping the massive force that backs this. In the space of ICT, five key tenants underpin our modern-day disruption. Social, Mobile, Analytics, Cloud and Connectivity (SMACC), are now definitely driving new regimes of business, new enclaves of value and promoting new behaviors. This has resulted in new business models that are changing, hampering, complementing or disturbing existing business models in ways that end up with value chain cannibalization, hybridization or re-construction.
So what are disruptive business models?
A disruptive business is one that “blindsides” existing players in an “industry or business space” so completely that they are largely unable to defend against it by staying the same way. As such by staying or maintaining their “way” of business or organizational operations, they essentially cede relevance or leadership to a new generation of consumers, businesses or organizations.
Disruptive business models were first identified by J. L. Bower and Clayton M. Christensen in their classic 1995 Harvard Business Review article, “Disruptive Technologies: Catching the Wave” (1995).
The theory of disruptive innovation explained by Christensen as a dynamic form of industry change that unlocks tremendous gains in economic and social welfare. Disruption is the mechanism that ignites the true power of creativity and induces relatively efficient producers to blossom with inefficient producers withering. The destruction, and the later reallocation of resources, allows for the journey of creativity and destruction to begin anew, enhancing productivity, lowering consumer prices, and greatly increasing economic welfare.” – Greycourt White Paper
Some Key Disruptive ICT Disruptions that have become successful Business models:
- The Subscription Model
Examples: Netflix, Apple Music etc.
These guys disrupt through “lock-in” by taking a product or service that is traditionally purchased on an ad hoc basis, and locking-in repeat custom by charging a subscription fee for continued access to the product/service
- The Marketplace Model
Examples: eBay, iTunes, App Store, Uber, AirBnB etc.
They disrupt with the provision of a digital marketplace that brings together buyers and sellers directly, in return for a transaction or placement fee or commission
- The Hypermarket Model
Examples: Amazon, Apple etc.
Have disrupted by ‘brand bombing’ using sheer market power and scale to crush competition, often by selling below cost price
- The Free Model
Examples: Google, Facebook etc.
Disrupt with an ‘if-you’re-not-paying-for-the-product-you-are-the-product’ model that involves selling personal data or ‘advertising eyeballs’ harvested by offering consumers a ‘free’ product or service that captures their data/attention
- The Freemium Model
Examples: Spotify, LinkedIn, Dropbox etc.
Are Disrupting through digital sampling, where users pay for a basic service or product with their data or ‘eyeballs’, and not money, and then charging to upgrade to the full offer. Works where marginal cost for extra units and distribution are lower than advertising revenue or the sale of personal data
- The Access-over-Ownership Model
Examples: Zipcar, Peerbuy, AirBnB etc.
Disrupt by providing temporary access to goods and services traditionally only available through purchase. Includes ‘Sharing Economy’ disruptors, which takes a commission from people monetizing their assets (home, car, capital) by lending them to ‘borrowers’;
- The Experience Model
Examples: Tesla, Apple etc.
Disrupting by providing a superior or premium experience with new technology and design focus, for which people are prepared to pay more for;
- The Pyramid Model
Examples: Amazon, Microsoft, Dropbox, Telco Distributors etc.
Have disrupted by recruiting an army of resellers and affiliates who are often paid on a commission-only model;
- The On-Demand Model
Examples: Uber, Carriers, Taskrabbit etc.
Are disrupting by monetizing time and selling instant-access at a premium. Includes taking a commission from people with money but no time who pay for goods and services delivered or fulfilled by people with time but no money;
- The Ecosystem Model
Examples: Apple, Google, Amazon etc.
Disrupting by selling interlocking and interdependent suite of products and services that increase in value as more are purchased. Creates consumer dependency on their brand, influences stickiness and services consumers a full spade of one-stop-shop platform for a consumer’s journey for any product or service.
Why is Ecosystem Model a key disruptive business model for Telco’s now?
Mobile has very quickly caused a cataclysmic shift in today’s communications landscape. It has given birth to new breed of consumers who seek and need information and related services at their fingertips, in real-time, all-the-time. Reviewing the experience of getting a good restaurant when you arrive in a new city and how it has changed in the past few years will prove the impact Mobile is, and will, have on consumers and businesses. It starts with, Foursquare app recognizing your location, giving you a list of restaurant recommendations, integrating with Yelp to offer you the ability to make a reservation and that integration leading to a hand-off to Yelp which makes the best choice for you, helps to place your reservation ahead of your arrival and in-turn prompts you for you your mode of commute – Walk, Metro, Car, Bicycle. Based on your choice of Car, prompts if by Taxi or self-drive, and if by Taxi a call-up of Uber app to order a commute service where information of your present location and intended destination are already availed to the nearest Uber driver. You arrive at the restaurant, check-in on your Foursquare App and when you enter restaurant get a personal greeting as the restaurant gets notified of your arrival etc. This is a complete A-Z service enabled through data or information exchange between various service providers or players to deliver a seamless experience to a visitor in a city. A completely new level of fulfillment of needs and assurance of experience hither to would have been hectic, comparatively.
This example or scenario can as well consolidated into an aggregated experience from on App or Digitalized Service offering by consolidating the chain of providers and services (traditional or digital) needed to deliver a unified experience to the consumer. This new service that offer an “A-Z” experience (illustration 1) by relying on digital platforms, is a “digitalized service”. Today’s digitalized services rely on SMACC to deliver “everything-as-a-service” based on a Real-time, Online, All-in-one, DIY, Social (ROADS) DNA. In the example outlined, the number of applications or providers that together end up providing that seamless “life” activity of just eating can range from one to daisy chain of middle-end providers. The contribution or sharing of information or data between the various providers involved in offering that journey experience to the consumer leads to the creation of digitalized services that strap their different business operating processes together – taxi order operating process, restaurant reservation process etc. This leads to the exchange of an information in a new value chain that is both life-changing and leverages the creativity of sharing within an “ecosystem” business model to deliver a new service or perhaps more rightly a new experience.
Illustration 1. Ecosystem business process digitalization for disruptive business models
A Telco is at the center of this experience and new service and enabling all this to become possible. From the end-user terminal (handheld, Mobile, IoT terminal etc) needing assured connectivity to an information or data endpoint in the service delivery channel, Telco’s are at the heart of it all, and herein lies the essence of the Ecosystem Business model as an awakening opportunity for Telco’s to re-invent themselves, not just as clever pipes but value pipes. To achieve this feat, Telco’s must partake in digitalizing their own business processes as well as those of participating players (CP’s, SP’s, Content Providers, Application Developers/Providers etc.). It is just not enough when Telco’s looking to be players in an ecosystem business model look to clever means of managing their role as pipe providers, but rather to leverage their existing massive pool of assets, including the wealth of data they process for multi-purposed use under an “ecosystem” thinking. The ecosystem business model is a multi-sided information sharing economy which Telco’s can create and or leverage to successfully partake in the enablement and delivery of digitalized services.
The era of disruption does not need to leave Telco’s disrupted. The value chain for digitalized services has opportunities for Telco’s to be well-integrated into the growing world of experience and journey related ecosystems. But this integration into an “ecosystem business” will only be profitable if Telco’s embrace the new regime of disruption by being visionary within their catchment markets, and facilitating “ecosystem” type interactions that aim at being disruptive rather than disrupted. It starts with journey based thinking of consumers and value based experience. Ecosystems do not have to be large or massive, but can be niche and poignant. Digital payments ecosystems are for example serving markets today by offering Digitalization of payment processes across various industries, starting with their retail sectors. Telco’s that are already investing into mobile money infrastructure can expand their field of play with “ecosystem payment services” so as to help improve payment experience and yet offer niche digitalized service functions, such as credit management etc without needing to be in control of the complete ecosystem business process. The point is for Telco’s to be part of, play-in or indeed be platforms that facilitate digitalization businesses.
To partake in the growth of disruptive new services, Telco’s will need to start investing in digitalizing their business processes and as well helping to integrate and digitalize business operating processes of the new partnerships they will have to form. This will be achieved through focus on the consumer or enterprise outside just pure communications journeys, but on the value of communication to improving experience for monetization.
Credits: Greycourt & Co., Inc., Digital Intelligence Today, MSHCDN.com