Understanding the New Business Models that Thrive on Technology
Look closely into the digital world and you will realize that modern technologies are not only improving business functions across industries but also are fueling new business models. Netflix, Uber, Amazon and Airbnb are a few examples of this new-age, tech-driven business model.
These next-gen businesses leverage modern technologies and disrupted business conventions while developing a hybrid business model that focuses on augmenting customer experience at every touchpoint of the customer journey. By breaking conventional business norms, they introduced a new category of sustainable excellence and bookmarked domains that other start-up ventures soon began exploring
So how did these next-gen ventures fuel this change?
An innovator does not necessarily do something unique; they do things uniquely.
An entrepreneur/innovator identifies the need for innovation in the sector and proposes breakthrough alternatives that captivate their consumers.
Amazon, Uber, Netflix and Airbnb adopted this strategy. They did not introduce a new product in the market, but they changed the face of an industry that was not progressing due to the lack of innovation. They focused on a popular marketing strategy known as Blue Ocean, which is the pursuit of differentiation in the marketplace.
The Blue Ocean strategy
The Blue Ocean Strategy is about capturing uncontested market space by generating demand for a new product and defeating the competition by making it irrelevant. Assume that there are red and blue oceans in the market. To create an elusive blue ocean, the theory recommends adopting a Four Actions Framework and construct buyer-value elements to win over the competition.
- 1. Raise: Which factors shall be raised well above the industry standard?
- 2. Reduce: Which factors should be reduced well below the industry standard?
- 3. Eliminate: Which factors have the industry long competed on can be eliminated?
- 4. Create: Which factors should be created that the industry has never offered?
These new-age businesses, who were once labeled as outliers but now happen to be market leaders of today, aced the Blue Ocean strategy in the marketplace.
- Uber’s on-demand taxi services disrupted the traditional business industries and completely changed the course of conventional taxi booking practices.
- Amazon did not build a new bookstore, rather it gave access to million book titles at the touch of a button and revolutionized the reader’s experience.
- Airbnb, which has transformed the entire travel experience, does not own any of the homes or hotels that it provides. They didn’t build another listing platform but built a community of sharing.
- Netflix has swelled from an online movie rental space to the biggest video streaming platform in the world. It recognized and leveraged the power of data and analytics to gain an edge over its competition and the rest is history.
Freemium model is a demo-based selling in which companies offer free trials or free versions with restricted features of their product. Customers need to pay a subscription cost to enjoy the complete product. It is similar to tech giants offering Software as a Service (SaaS). The freemium model enables companies to prove their product and build customer loyalty while customers have a fair chance to test the service and make an informed decision.
The key to success with the freemium model is to be very selective of the features that are offered for free and paid because they will impact the conversion rate. Netflix, for instance, offers a 30-days free trial. Similarly, Amazon allows viewers to watch the first episode of its original shows for free on its video platform and to watch further, viewers need to become prime members. Today, both the giants have approximately 205 million subscribers. The idea is to engage and entice the user for conversion.
Mass customization is another strategy that is revolutionizing the markets. It involves shifting the power into the hands of the consumers and making them feel more valued and powerful. Customization is available in four forms:
In collaborative customization, companies invite suggestions from the customers to get familiar with their needs and make customization basis the same. A brilliant example of this strategy is Dell configuring personal computers based on the individual request of its customers.
In adaptive customization, companies release their product with a few customization options for the end-user. It may include a software upgrade, Machine Learning, and Artificial Intelligence aided features, and more.
It is a great way to maintain customer loyalty. In cosmetic customization, companies provide a unique offering for different customer segments – like a premium label bundled with some perks for loyal customers.
In transparent customization, companies design their product as per specific customer needs. While customers are aware of the process, they may not be aware of the involved techniques. For example, ChemStation, a soap manufacturer analyzes customer needs and offers a customized mixture accordingly.
Change is inevitable; innovation is the key
It is easy to be overwhelmed by the success of these next-gen businesses, but as businesses, we need to factor in our business model and vision. It is also pivotal to remember that all business models are subjected to change. Solutions that appear novel today may become irrelevant tomorrow. There is no definite success mantra, but an adaptable and scalable business can always float through. You should partner with a digital transformation provider that can help you innovate and improve the experience of your customers. NLB Services possess expertise in modern technologies, such as AI, Blockchain and analytics to help propel your business onto the path of digital transformation.