Business model shifts Six Ways to Create New Value For Customers

304 Pages·2020·15.1 MB·english

by  Patrick van der Pijl

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Business model shifts
Six ways to create
new value for customers

written by Patrick van der Pijl, Roland Wijnen, Justin Lokitz
designed by Maarten van Lieshout
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Copyright © 2021 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Dedicated to your
(future) customers.
III
Business model shifts Introduction
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Table of contents
1 | From normal to new normal 48 | From shareholder to stakeholder
COVID-19 has thrown the world for a loop. Businesses we’ve relied on for Generating revenue and making a profit is a byproduct of achieving your
decades are fast becoming extinct. There also has never been a better time goal. In the long-term, a company will destroy shareholder value if it doesn’t
to make a business model shift. continuously create amazing value for its customers and other stakeholders.
8 | From products to services 90 | From physical to digital
We tend to praise products, perhaps even knowing deep down that our Humans are physical, tactile creatures. The physicality of objects makes them
praise is not about the products, but the benefits they provide. Services get more tangible to us. Yet, every day we take one step closer to some hybrid
the job done without the hassles of ownership and upkeep. version of ourselves as we merge the online and offline worlds we live in.
IV
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Intro
The customer wins! VI
132 | From pipeline to platform
Where is value now and next? VIII
Business model shift X
Throughout history, the biggest companies used pipeline business models
to become what they are today. It took only a decade for new entrants, using
How to use this book XII
platform business models, to eat their lunch.
Conclusion
Where value is shifting! 254
172 | From incremental to exponential How to drive your own shift 257
Business model growth curve 258
Most business models begin with a short burst of exponential growth followed by
a long period of linear growth. What if you could inject your business model with Alibaba’s growth curve 260
some secret sauce that would take it from 10% improvement to 10X growth?
Trends 262
Creating the right ecosystem 264
References 266
214 | From linear to circular
The makers 270
Our traditional economy has limited growth potential because linear The contributors 272
business models exhaust resources to make products that eventually go to
What’s your shift? 273
waste. Circular business models overcome these limits.
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Business model shifts Introduction
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The customer wins!
As Jean-Baptiste Alphonse Karr, a French critic, journalist, and novelist, once said, “The more
things change, the more they remain the same.” This statement has never been truer or more
evident than it is at this very moment.
As this book is being finalized, the world is used to “suggest” the word in a search term. stant in that we desire and need things like
in the throes of a global pandemic, known Today, deep learning, a subset of machine security, connectedness, and freedom, as
as COVID-19. Not only has this pandemic learning, which is itself a subset of AI, is technology changes—thereby changing the
strained the very fabric of society, it has cast being used to create its own algorithms. In world around us—the way people go about
a spotlight on the economy, pointing out other words, in only a few years’ time, we’ve achieving their wants and needs is also
businesses (and business models) that must come from a time when humans owned changing. For example, just as many com-
change or die trying. and published the math used to create panies finalized their shiny new open office
efficiencies in various computer systems, plans, we found ourselves in the middle of a
To say this time is an exciting time to live to a time when humans actually know very global paradigm shift. Due to the pandemic,
is an understatement to say the least. little about why the system chooses (itself) we could no longer meet in “meatspace”
Change—very visibly—is accelerating, to make certain decisions. AI, in a sense, is (the physical world). This quickly changed
compounding on itself, creating even more sowing the seeds for better AI, which is in peoples’ perceptions of what it meant to
change, faster. We can see that change is not turn creating better AI, and so on. meet face-to-face, creating a new world of
linear. We see this in technology, where only face-to-face online meetings that had pre-
a few years ago technologies like Artificial The same goes for people’s attitudes and viously been mostly niche or relegated to a
Intelligence (AI) were the province of a behaviors. Although at a high level our few scattered people or groups within any
handful of people, who created algorithms wants and needs remain somewhat con- company. In fact, at the time of this writing,
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people are meeting virtually even for weekly eventually become tired of the latest trend. what innovation is all about. To succeed, you
happy hours with their family and friends. This, of course, is how most paradigm shifts must adopt a mindset that is open to explo-
start. When in the late 1970s Sony introduced ration and continually searches for (unmet)
The same goes for transportation in and Betamax (and VCRs), Universal Studios sued customer needs and contextual changes in
around most cities around the world. Before Sony for copyright infringement, stating that the business, technology, regulatory, and
2009, hailing, calling, or waiting in line for consumers would use Sony’s technology to competitive landscape.
taxis was commonplace. Today we grab our steal content. Sony not only won the case,
smartphones and use ride-hailing apps to but once the paradigm shifted, Universal If you commit to change in this way, you can
magically summon vehicles to take us from Studios and every other movie studio found shift your business and business model as
point A to point B. When these services themselves in a place where they had to needed to outlast the competition, perhaps
don’t work or aren’t available we’re at a loss, release movies to videotape for home rental even cannibalizing the value you created
having little idea about what to do next. or they would become less relevant to cus- in the past and creating more value for the
tomers and risk extinction. future.
These changes have in many respects made
the world more connected and easier to This is not an isolated case. Wherein 50 years
navigate, even if some of the underlying ago the average lifespan of a company was
information is obfuscated from our view. about 61 years, today that lifespan has de-
Companies die because
With these changes, people expect the com- creased to less than 20 years. In most cases,
panies they do business with to adapt to the companies die because they’re no longer
they’ve become fixated
new paradigm. Just as traditional taxi com- relevant, having become fixated on fighting
panies around the world have had to adapt for the current business model rather than
on fighting for their
or face extinction, so will your businesses if shifting to a newer, more relevant one. This
you’re not willing to change to meet your is the fate of the survival mindset.
current business model
future customers’ wants and needs. The good news is that you have agency
here! You and the leaders in your organiza-
rather than shifting to a
How to respond? tion can also commit to change, focusing on
As an organization, you can certainly choose what’s truly relevant for your customers and
more relevant one.
to resist change, thinking your customers will stakeholders, now and in the future. This is
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Business model shifts Introduction
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Where
distribution.” Expansion in this case often value being created for new and existing
comes down to investing in product devel- customers.
opment and/or acquisitions and expanding
to new geographies and markets, selling Grow a portfolio
is value
the same goods. Because those goods and of business models
the underlying (single) business model are By now, we’ve established that the business
the lifeblood of the organization, protect- world continuously shifts as technology
ing intellectual property (IP) is a constant changes at an accelerating rate, and cus-
now and
endeavor. Consider the aforementioned tomer behavior and expectations change.
example of Universal Studios. With a single Just as Universal Studios and its competitors
business model in play for content produc- were forced to create new business models
tion and distribution—even if that business to remain relevant, organizations today
next?
model had multiple customer segments must develop, build, grow, and manage not
and revenue streams—if the content can just one business model but a portfolio of
no longer be protected, in Universal’s eyes, business models to serve an entire spectrum
the business model will die. of evolving customer needs.
Keeping this in mind, it’s no wonder that Such a business model portfolio consists
many organizations, including Universal of mature business models that generate
Studios, did quite well through most of the current cash flow; adjacent business models
A single business model twentieth century, spending little effort on that are on a growth trajectory (potentially)
Many traditional businesses that deal in new business models or innovation within leading to future cash flow; emerging busi-
buying, manufacturing, brokering, and their existing business models. Traditional ness models that are being incubated with
selling goods are fairly static where their companies of this period that worked with the idea that they may help gain traction
business models are concerned. This makes a single business model often attempt- in another market; and declining business
sense for businesses that historically have ed to innovate by engaging in disparate models that are losing relevance and subse-
dealt with a stable or slowly changing activities that were not tied tightly to their quently declining in revenue. Organizations
context. How about this: “To fulfill customer business goals. In these cases, the return on that employ a business model portfolio
demand, traditional businesses manufac- innovation was often pretty low because approach are always in search of future
ture more goods while raising capital to innovation that is not tied tightly to a com- value, particularly in customer segments and
continually increase production and scale pany’s business goals seldom leads to new markets where they may not yet play. What’s
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