Rather than creating breakthrough technologies, some of today’s most important innovations are introducing fundamentally new business models. Historically, these models have been remarkably stable, dominated by a few key ideas, updated by a few major variations.
A bait-and-hook model was popular in the 1920s, where customers were lured in by a low-cost initial product (the bait was a free razor), then forced to buy endless refills (the hook was blade refills).
During the 1950s, McDonald’s pioneered franchise models. Take the 1960s, when we got “hypermarkets” like Walmart.
The internet, however, opened the door to a period of radical business model innovation in the 1990s. We have seen network effects create new platforms in record time, bitcoin and blockchain undermine existing “trusted third party” financial models, and crowdfunding and ICOs disrupt traditional capital raising methods.
In the next few decades, seven emerging models will redefine business. And today, while countless businesses are anchored by a mentality of maintaining—competing solely on operational execution—it is more vital than ever to leverage these business models for success in the 2020s.
Each is a revolutionary new way to create value; each is a force for acceleration. Here we go.
1. In the Crowd Economy:
Crowdsourcing, crowdfunding, ICOs, leveraged assets, and staff-on-demand are all developments that leverage the billions already online and the billions coming.
All of these have revolutionized the way we do business. Companies have scaled at speed thanks to leveraged assets, such as Uber’s vehicles and Airbnb’s rooms. As with staff-on-demand, these crowd economy models provide companies with the agility they need to adapt to a rapidly changing environment. At the low end, it’s Amazon’s Mechanical Turk, while at the high end, Kaggle’s data scientists-on-demand services.
Despite being the world’s largest “hotel chain,” Airbnb does not own a single hotel room. It leverages (that is, rents out) the assets (spare bedrooms) of the crowd, with more than 6 million rooms, flats, and houses in over 81,000 cities worldwide.
2. There are two types of free/data economies:
This is the platform version of the “bait and hook” model, where the customer is lured with free access to a cool service and then information is collected about them for profit. In addition, it includes all the developments spurred by the big data revolution, which allows us to harness micro-demographics in a whole new way.
Dorm room startups turned into global superpowers because of this model, such as Facebook, Google, and Twitter. In 1999, there were 500,000 Google searches per day, in 2004 there were 200 million, in 2011 there were 3 billion, and in 2013 there were 5.6 billion. The tried-and-true model of Google’s “free” search service will likely continue to succeed in the 2020s as users become more aware of the valuable data they exchange.
3. Creating a smart economy:
To create a new business in the late 1800s, all you had to do was add electricity to an existing tool, such as a drill or washboard, and you had a power drill or a washing machine.
AI will be the electricity in the 2022s. To put it another way, take any existing tool and add some smarts to it. The cell phone became a smartphone, the stereo speaker became a smart speaker, and the car became an autonomous vehicle.
We all know that big names like Amazon and Salesforce are incorporating AI into their business models. According to the National Venture Capital Association, 965 AI-related companies raised $13.5 billion in venture capital through the first nine months of last year. In terms of valuation, Nuro, a driverless grocery delivery service, is the most valuable. We can expect AI to continue transforming most businesses in the 2022s.
4. Economies with closed loops:
It is impossible for natural processes to waste anything. A species’ detritus is always the foundation for another species’ survival. Human attempts to mimic these totally waste-free systems have been dubbed “biomimicry” (if you are designing a new kind of product) or “cradle-to-cradle” (if you are designing a new kind of city) or, simply, “closed-loop economies.” The rise of environmentally conscious consumers and the cost-benefits of closed-loop systems will increase the popularity of these models.
For instance, anyone can pick up waste plastic and drop it off at a “plastic bank,” which was founded in 2013. The plastic bank sorts the waste and sells it to the appropriate recycler, thus closing an open loop in the plastic life cycle by paying the collector in cash or WiFi time for the “trash.”
5. DAOs (Decentralized Autonomous Organizations):
Blockchain and artificial intelligence are merging to create a new kind of company-one with no employees, no bosses, and nonstop production. A set of preprogrammed rules determines how the company operates, and computers handle the resFor instance, autonomous taxis, with blockchain-backed smart contracts, could run themselves 24-7, including going to the repair shop for maintenance without human intervention.nt.
DAOstack offers tools for success, including reliable crypto-economic incentives and decentralized governance protocols, to businesses developing DAOs, which are just beginning to emerge. DAOstack aims to create businesses where the only external influence is the customer.
6. There are multiple world models:
Life is no longer confined to one place. As a result of this delocalized existence, we have real-world personae and online personae. Augmented reality and virtual reality are adding layers to this equation. Avatars are opportunities for new businesses because each of us has an avatar for work and an avatar for play.
A virtual world created in 2003, Second Life, has grown into a multimillion-dollar industry. Others designed digital clothes and digital houses for people’s digital avatars. We now conduct our business in multiple worlds at once every time we add a new layer to the digital strata.
7. Economic transformation:
Rather than a coffee franchise, Starbucks has evolved into a third place, where you can live your life neither at home nor at work. The act of purchasing a cup of coffee became an experience, a kind of caffeinated theme park. In the Transformation Economy, you are not just paying for an experience, but for the opportunity to have your life transformed.