Business model innovators should look for circumstances that signal an opportunity to transform a business model and disrupt a category. Let’s examine those with the greatest potential:
When groups of customers are shut out of a market because offerings are too costly or complex, opportunities to innovate are everywhere, especially in a digital economy. Personal computers connected to the Internet ushered in a new era of empowered customers and citizen journalists. As a result, new business models were rapidly created by organizations such as Amazon and scores of digitally empowered companies that connected with consumers and networks to create value. Consider Zara, the Spanish retailer that uses technology to make the latest fashions available to middle-class incomes at speeds much faster than upscale competitors. Innovation in distance learning is making higher education available to rural areas far away from urban-centered universities, which will help accelerate the economic development of undeveloped countries.
New and emerging technology
Wrapping a new business model around an emerging and widely accessible technology is what disrupted the music industry, via the iPod. Technology has been a significant disruptor of the media industry, most notably in the streaming of home entertainment. Even the commercialization of military or space technologies inspires business model innovation; the microwave oven, the Global Positioning System (GPS) and the Internet itself all started at NASA and in the military. Virtual technologies are changing shopping and selection as well, reducing the costs of sales by reducing retailer footprints. Audi City brings a virtual shopping experience—combining touch-and-feel experiences with the instant gratification of digital configuration—to people in highly concentrated urban areas, far away from the organization’s physical dealers, which are found mostly insuburban neighborhoods.
Product usage insight
In a connected economy, products become transmitters and receivers of information, enabling every brand to enter the advice business. This process also allows customers to continually advise brands. Nike, a provider of athletic apparel, now provides athletic advice using its Nike+ device-integrated apps and services to collect and analyze how its customers use its products. Customers use the same means to provide feedback to Nike marketers, creating a tight bond of mutual participation and collaboration.
Consider the auto parts dealer that doesn’t sell things but rather alerts drivers when critical components of their vehicles should be proactively serviced. A connected economy also enables brands to expand their USP by forming communities of customers who help and advise each other, with customers recommending products and services for the brand to consider. This continuous feedback loop has proven more effective than traditional annual focus groups.
Combing information and access
Sometimes the sum is greater than the parts, especially in the context of big data and digitally connected products. This intelligence can create revenue-generating insights beyond a company’s initial USP. For example, what if Divvy used its location- and time-based bicycle traffic data to advise restaurants and convenience stores what time they should open on weekends? The opportunity to monetize digital data, data we simply didn’t have until now, creates new revenue opportunities for any brand.
The creative use of data also enables relationship marketing. Knowing that a distinct consumer segment happens to be interested in a popular cultural topic makes it possible to create content and services that resonate and advance the brand. Creative use of information also transforms casual encounters into essential relationships. These information-enabled relationships might include Uber telling you your car is approaching on the next block, or FedEx telling you that your package is at a distribution center and will be at your door the next morning. Events and information that used to be invisible are brought to the digital forefront, helping companies build an unprecedented level of trust and reliability. Southwest Airlines, for example, with its latest Transfarency campaign, builds on the desire of its customers to avoid hidden costs and charges by openly exposing its fee structures, then comparing them with other leading airlines.
Competing with speed
Competing with speed has been a hallmark of business advantage for decades, but it’s often reserved for brands with big capabilities and resources. But in a digital economy, speed is more accessible as a business differentiator. Further, customers know companies have data about them they’ve never had before. Their expectations for fast response with extraordinarily high levels of relevance grow every day. Using data to compete with speed is giving rise to more sophisticated real-time marketing. Initially tied to programmatic ad buying, real-time marketing now goes beyond serving up targeted ads to responding to changes in the marketplace faster than competitors. Achieving this differentiated capability requires streamlining of the business processes that give marketers the opportunity to be there first. It also requires a new mindset and a culture that recognizes the value of speed.