What are the business models reshaping our lives?

Many of the most important developments taking place today do not include cutting-edge technology, but rather the development of radically new business models. Throughout much of the period, these models have been surprisingly consistent, dominated by a few main theories, reinforced by a few major variations on these themes.

The most obvious changes are in the way that businesses sell to their customers and the way customers buy, in both business-to-business and business-to-consumer contexts. Part of this change is about digitization, as companies pursue new economic activities in virtual markets online. Also rising is the “Uber-ization” of business, as companies that traditionally sold products now sell services and vice versa, and the line between them becomes increasingly blurred.

In the 1920s, it was the “bait and hook” models, where customers are lured in with a low-cost initial product (the bait: a free razor) and then forced to buy endless refills (the hook: blade refills). In the 1950s, it was the “franchise models” pioneered by McDonald’s. Or take the 1960s, where we got “hypermarkets” like Walmart.

But with the arrival of the Internet in the 1990s, the reinvention of the business model entered a period of radical growth. In less than two decades, we’ve seen network effects birth new platforms in record time, bitcoin and blockchain undercut existing “trusted third party” financial models, and crowdfunding and ICOs overturn the traditional ways capital is raised.

We are now experiencing seven new models slated to redefine industry in the next few decades. So today, as countless companies are dominated by a mindset of maintaining — competing solely on operational execution — it is more important than ever to exploit these business models for success in the 2020s. Let’s dive in.

1. The Crowd Economy: Crowdsourcing, crowdfunding, ICOs, leveraged assets, and staff-on-demand—essentially, all the developments that leverage the billions of people already online and the billions coming online.

Both have revolutionized the way we do business. Only consider leveraged assets, including Uber’s vehicles and Airbnb ‘s rooms, which have allowed companies to scale at speed. Such crowd economy models often rely on staff-on-demand, which provide a organization with the agility required to adapt to a rapidly changing climate. And it’s everything from micro-task laborers behind Amazon’s Mechanical Turk on the low end, to Kaggle’s data scientist-on-demand services on the high end.

2. The Smartness Economy: At the end of the 1800s, if you wanted a good idea for a new company, all you needed was to take an existing device, either a drill or a washboard, and add electricity to it — creating a power drill or a washing machine.

In the 2020s, AI will be the electricity. In other words, take any existing tool, and add a layer of smartness. So cell phones became smartphones and stereo speakers became smart speakers and cars become autonomous vehicles.

3. The Free/Data Economy: This is the platform version of the “bait and hook” model, essentially baiting the customer with free access to a cool service and then making money off the data gathered about that customer. It also includes all the developments spurred by the big data revolution, which is allowing us to exploit micro-demographics like never before.

4. Multiple World Models: We no longer exist in just one location. We have real-world personae and online personae, and this delocalized life is only going to grow. In the rise of augmented reality and virtual reality, we’re adding further layers to this equation. You’ll have avatars for work and avatars for play, and all of these versions of ourselves are opportunities for new businesses.

5. Transformation Economy: The Experience Economy was about the exchange of experiences — so Starbucks moved from being a coffee chain to a “ third place . ” This is, neither home nor work, but a “third place” in which to live your life. Buying a cup of coffee was an experience, a caffeinated amusement park of sorts. The next iteration of this idea is the Transformation Economy, where you’re not just paying for an experience, you’re paying to have your life transformed by this experience.

What all this tells us is that business as normal is now business unusual. And for those of us on the outside of these revolutionary trends, our experience would be easier, cheaper, quicker. Good meaning modern business models do what all business models do — solve issues for people in the real world good than anybody else. Cheaper is obvious. With demonetization running rampant, customers—and that means all of us—are expecting more for less.

But the actual shift is the final shift: faster. New business models are no longer forces for stability and security. In order to compete in today’s accelerated climate, these models are designed for speed and agility. There is no sign of slowing down.

Check out my related post: What is a good co-branding partnership?

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