How innovative business models can reshape an industry
Written by Olaf Groth, PhD – Global Professor of Innovation, Strategy, Management, & Economics, Hult International Business School.
New business models
In today’s globalized world, new, innovative business models are emerging that are redefining roles and activating new players. The new structure they are creating gets disrupted and reshuffled. Value chains and industry structures between participants are being broken down and re-arranged. Multi-dimensional value webs are emerging, in which actors may have multiple roles that defy simple classifications, such as supplier, customer, or competitor. Today, customers can also become suppliers; competitors can become collaborators; etc.
In addition, entirely new actors are increasingly becoming part of our business ecosystems, which include social ventures, foundations, public-private partnerships, and sovereign wealth funds, to name just a few. As a result, more actors in a business ecosystem are able to create and extract value, and assets are optimized, because more people interact and contribute.
Examples of this process include the early case of M-PESA mobile payments in Africa, the more recent cases of Zipcar and Buzzcar car sharing platforms, the Uber taxi service, and a development which will play out in the future—additive manufacturing.
To explain this phenomenon, we can draw on three different schools of thought, which come together to produce a new model: ‘3D renaissance entrepreneurship’. This model makes industry ecosystems more participatory and decentralized, featuring very different types of actors. The most innovative form of this process is the emergence of various community sharing models.
Why we are seeing these changes
What is driving the development of this new model of 3D renaissance entrepreneurship? The convergence of the following trends in the global socio-technical and socio-economic environment of our business ecosystem:
- Empowerment of individuals globally through technology, such as mobile, broadband, etc.
- Democratization of innovation knowledge and capital through the adoption of open innovation that leverages individual consumer and expert inputs and ideas; jugaad innovation (meaning frugal, improvised innovation) that creates superior solutions using fewer resources; and reverse innovation that takes novel concepts from the developing world and applies them to industrialized economies
- Mobility and diffusion of talent that has been trained at the world’s premier innovation centers and then returns to its home country, or moves on to another country
- Fragmentation of economic and innovation actors with diverse interests, such as not-for-profit organizations and high net-worth individuals (Bill Gates, GeorgeSoros, etc.)
- Evolution of a global innovation ecosystem because more developing countries are tied into the global economy and have learned from foreign multinationals
- Scarcity of natural resources, due to increased air pollution, water shortages, environmental decline, and decreasing biodiversity
- Persistence of low global growth, as a result of economic crises in the U.S., E.U., and Japan, combined with slower growth in the BRICs (Brazil, Russia, India, and China)
- The increasing cost of technology in other areas of life (healthcare, education, transportation, energy, etc.).
How we can harness the power of business model innovation
In order to harness this new model of entrepreneurship we need to mesh, unlock, engage, and evolve:
- Mesh trends and forces that create innovation opportunity
- Unlock three-dimensional value by transforming value chains into value webs
- Engage actors in the value web to negotiate multipartner alliances
- Evolve the corporation into a borderless entity.
The competencies you need to deal with these new models
What does this mean for business talent, or in other words—you? To create value between all of these different actors we need to move away from the traditional approach of acting along linear value chains, and instead think in terms of value webs. Value webs are inherently more multi-dimensional and require the integration of different interests and inputs using different incentive and transaction structures.[Tweet “We need to move away from the traditional approach of acting along linear value chains.”]
In essence, you need to become a renaissance entrepreneur, who thinks and acts in those multi-dimensional ways and can orchestrate integrative innovation and value-creation accordingly. You need to grow your renaissance brain and calibrate your skillset to meet these new demands. At different points in the process of ‘mesh, unlock, engage, and evolve’, you will have to conduct activities that lie outside of, or bridge, traditional functional roles and titles.
For instance, as a marketing manager, you now need to be able to think about messaging to the broader market in such a way that disparate stakeholders are both represented appropriately by your campaigns and also spoken to by other messages you send within your value web.
Similarly, as a platform engineer or a business requirements analyst, you now need to be able to work with divergent styles and processes that the more diverse sets of stakeholders and contributors bring to the platform.
As a business development or strategy associate, you need to be able to lay out a vision, design programs, and chart execution paths that synchronize stakeholders and contributors at the right time and in the right sequence. In other words, as modern global executives, we need to be not only multi-dimensional strategists in this ecosystem, but also network entrepreneurs and commercial diplomats with a heavy dose of “soft” interpersonal engagement skills. And all of us need to get used to engaging, failing, learning, and improving much more rapidly as we figure out the right constellation of contributions and incentives.
The bottom line is that each functional role is becoming more complex, tuning itself to the different directions of the value web, and getting used to constant repetition and adjustment. Doing this while engaging with different internal functions and external partners in the value web also requires ‘soft’ or ‘engagement’ skills.
These include competencies such as:
- Connecting divergent interests and needs
- Selling ideas and solutions according to these divergent needs
- Thinking and acting entrepreneurially
- Synthesizing disparate pieces of data
- Being culturally attuned to disparate values
- Building teams with professionals and non-professionals that exhibit vastly differing styles
- Managing challenging relationships with non-business actors with emotional intelligence and empathy
- Mustering the courage to experiment and fail
- Exhibiting mental flexibility, persistence, and energy to regroup fast
- Creating rapport in different corners of a value web with equal amounts of integrity, ethics, and transparency.
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Global Professor of Innovation, Strategy, Management, & Economics at Hult International Business School, PhD, MALD, Fletcher School at Tufts University
Olaf Groth is Global Professor of Innovation, Strategy, Management, & Economics at Hult International Business School as well as the Founder and Managing Director of Emergent Frontiers Group LLC, which advises senior executives internationally on global innovation trends, strategy, and commercial diplomacy. He has 20 years of experience in executive and advisory roles with Monitor Group, Qualcomm, Boeing, Vodafone, AirTouch, and a transportation start-up.
 Porter, Michael E. (July-August 1997) How Competitive Forces Shape Strategy (Harvard Business Review).
 Chesbrough, Henry (2006) Open Business Models (Harvard Business School Press); Kim, W. Chan & Mauborgne Renee (2004) Blue Ocean Strategy (Harvard Business School Press); Khanna, Parag (2011) How to Run the World – Charting a Course to the Next Renaissance (Random House).