Tech-Driven Business Model Innovation
Tech-Driven Business Model Innovation
This article is part of a content series on the topic of "Digital Business Models" that I created for a course at the Vorarlberg University of Applied Sciences.
In my last article (Why Business Models Matter), I made the argument that business model innovation can also happen without major technological innovation (think of a sock subscription, for example). So we don't always need new technologies to be innovative. But technology for sure is an enabler for new business models. “Now what?” I hear you say…
Okay, let me start from the very beginning. At the beginning there was a problem... and great innovators are consistently working on identifying problems and solving them in new ways, prioritizing value-adding solutions rather than simply following the latest tech hype. Technology is not an end in itself! Having said that, new technologies offer the potential to tackle problems in new ways, potentially enhancing value for customers. And that's where it gets interesting...
“Around the year 1900 there were 100,000 horses in New York. Fast forward a few short years to the advent of electrification and the development of the internal combustion engine. This brought new ways to move people and goods around. By 1912, cars in New York outnumbered horses, and in 1917 the city’s last horse - drawn streetcar made its final run. So, in 12 years your business went from being on top of the world to losing more than half its revenue. Five years after that you were bust and all your knowledge, industry connections and skills were totally obsolete. Failing to anticipate how changes in technology will affect your business or industry, and failing to take action accordingly, can be fatal to your business.” - Allan Dib
1900 must have been an exciting times for the horse and car business. However, the problem of mobility is not a new one. Problems are often not new. Getting from A to B is a problem maybe as old as humanity itself. The problem is relatively stable, but the companies, the context, and the solutions offered have changed massively over time: Horses, trains, buses, planes, scooters, bicycles, cars, flying cars, self-driving cars... new technologies and new contexts are constantly enabling new solutions.
Two things are therefore important. Firstly (1/2), to understand the customer's problems well. Clayton Christensen would say to understand the customer's goals and context well, in which they are hiring your product to perform a certain job (I highly recommend reading "Competing Against Luck" in this regard, certainly one of my 10 favorite books). Or as Michael Seibel from Y-Combinator puts it nicely:
„Hold the problem you're solving tightly, hold the customer tightly, hold the solution you're building loosely (…) Never ask users to tell you what they want. It's not the user's job to come up with features. That's your job. The user's job is to give you problems.
The customers therefore only provide the problems, the solution must come from companies, founders, innovators. Therefore, secondly (2/2), these pioneers need to explore emerging technologies and assess whether these offer opportunities to solve customers' (hopfully well-understood) problems in a better way. New technologies can change the playing field and have a disruptive impact on entire industries. So the solutions (or answers) to (the same old) problems are changing over time. Even Einstein knew that! But wait a moment, Einstein was one of the smartest people in the world… 👀 maybe that's why he knew 🤷♂️
One time, when Albert Einstein was giving an exam to his graduating class, his assistant noticed something unusual. The exam was identical to the one from the previous year. The assistant was worried and thought Einstein had made a mistake: "Excuse me, sir," he said hesitantly, not knowing how to address what he thought was a mistake. "Yes?" replied Einstein. "This test... it seems to be the same one you issued last year," the assistant explained cautiously. Einstein thought for a moment before replying, "Indeed, it's the same exam, but the answers have changed."
Consequently, emerging technologies raise a critical question: can they offer superior solutions to existing (or sometimes new) problems? And what innovative business models do these advancements, such as AI, XR, Metaverse, Web3, and Blockchain, make possible? Or as Sam Altman once said:
Any time you can think of something that is possible this year and wasn’t possible last year, you should pay attention (…) When you can say “I am sure this is going to happen, I’m just not sure if we’ll be the ones to do it”, that’s a good sign”
Developing possible futures of how these emerging technologies will affect individuals, companies or society as a whole requires a certain amount of imagination (and quite a bit of trial and error along the way). But it is not without reason that science fiction books or movies often provide inspiration for technologies and future scenarios.
The term "Metaverse" was coined in 1992 by Neal Stephenson in his science fiction novel Snow Crash, for example. With his story, Stephenson influenced numerous pioneers, including the young Google co-founder Sergei Brin, who cites Snow Crash in an interview at the beginning of the millennium as one of the two books that were important for his development. And product managers at Facebook had to read Snow Crash as part of their internal training. Snow Crash author Neal Stephenson even held the post of "chief futurist" at one of the industry's hyped (and now controversial) players, Magic Leap, from 2014 to 2020. A steep career for a science fiction author! 🔥
But who still reads books these days, or writes newsletters (hold on a second)? However, I keep pace with modern times and besides books I can also recommend a movie: Ready Player One (IMDB 7,4/10). A movie well known to most VR enthusiasts. The movie is set in a future world in which a kind of metaverse has become the center of many people's lives. But see for yourself...
Disclaimer: The thoughts published on MadeMeThink are my personal opinion and should not be considered as investment advice or a recommendation for any type of action. I am not a financial expert. The startups, organizations or corporates highlighted in this publication have caught my interest. This mention is not an endorsement or recommendation to engage with them. Readers should always do their own research.