7 Business Models to Rule the Decade
(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.
All have revolutionized the way we do business. Just consider leveraged assets, like Uber’s vehicles and Airbnb’s rooms, which have allowed companies to scale at speed. These crowd economy models also lean on staff-on-demand, which provide a company with the agility needed to adapt to a rapidly changing environment. 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.
Example: Airbnb has become the largest “hotel chain” in the world, yet it doesn’t own a single hotel room. Instead, 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 across the globe.
(2) 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.
Example: Facebook, Google, Twitter—there’s a reason this model has transformed dorm room startups into global superpowers. Google’s search queries per day have risen from 500,000 in 1999, to 200 million in 2004, to 3 billion in 2011, to 5.6 billion today. While more users are becoming aware of the valuable data they exchange in return for Google’s “free” search service, this tried-and-true model will likely continue to succeed in the 2020s.
(3) The Smartness Economy: In the late 1800s, if you wanted a good idea for a new business, all you needed was to take an existing tool, say a drill or a washboard, and add electricity to it—thus 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.
Example: We all know the big names incorporating AI into their business models—from Amazon to Salesforce. But more AI startups arise each day: 965 AI-related companies in the U.S. raised $13.5 billion in venture capital through the first 9 months of last year, according to the National Venture Capital Association. The most highly valued of them all is Nuro, a driverless grocery delivery service valued at $2.7 billion. Expect AI to continue transforming most businesses in the 2020s.
(4) Closed-Loop Economies: In nature, nothing is ever wasted. The detritus of one species always becomes the foundation for the survival of another species. Human attempts to mimic these entirely waste-free systems have been dubbed “biomimicry” (if you’re talking about designing a new kind of product) or “cradle-to-cradle” (if you’re talking about designing a new kind of city) or, more simply, “closed-loop economies.” These models will grow increasingly prevalent with the rise of environmentally-conscious consumers and the cost benefits of closed-loop systems.
Example: The Plastic Bank, founded in 2013, allows anyone to pick up waste plastic and drop it off at a “plastic bank.” The collector is then paid for the “trash” in anything from cash to WiFi time, while the plastic bank sorts the material and sells it to the appropriate recycler—thus closing an open loop in the life cycle of plastic.
(5) Decentralized Autonomous Organizations (DAOs): At the convergence of blockchain and AI sits a radically 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 do the rest. A fleet of autonomous taxis, for instance, with a blockchain-backed smart contracts layer, could run itself 24-7, including driving to the repair shop for maintenance, without any human involvement.
Example: While DAOs are just beginning to emerge, the platform DAOstack is working to provide these businesses with tools for success, including reliable crypto-economic incentives and decentralized governance protocols. DAOstack aims to create businesses where the only external influence is the customer.
(6) Multiple World Models: We no longer live in only one place. We have real-world personae and online personae, and this delocalized existence is only going to expand. With the rise of augmented reality and virtual reality, we’re introducing more 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.
Example: Second Life, the very first virtual world created in 2003, gave rise to a multimillion-dollar economy. People were paying other people to design digital clothes and digital houses for their digital avatars. Every time we add a new layer to the digital strata, we’re also adding an entire economy built upon that layer, meaning we are now conducting our business in multiple worlds at once.
(7) Transformation Economy: The Experience Economy was about the sharing of experiences—so Starbucks went from being a coffee franchise to a “third place.” That is, neither home nor work, but a “third place” in which to live your life. Buying a cup of coffee became an experience, a caffeinated theme 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.
Example: Early versions of this model can be seen in the rise of “transformational festivals” like Burning Man, or fitness companies like CrossFit, where the experience is generally bad (you work out in old warehouses), but the transformation is great (the person you become after three months of working out in those warehouses). Consumers are no longer searching for merely pleasurable experiences—they are looking for challenges that transform.
What all this tells us is that business as usual is becoming business unusual.
And for existing companies, as Harvard’s Clayton Christensen explained, this is no longer optional: “Most [organizations] think the key to growth is developing new technologies and products. But often this is not so. To unlock the next wave of growth, companies must embed these innovations in a disruptive new business model.”
And for those of us on the outside of these disruptive models, our experience will be better, cheaper, faster.
Better meaning new business models do what all business models do—solve problems for people in the real world better than anyone else.
Cheaper is obvious. With demonetization running rampant, customers—and that means all of us—are expecting more for less.
But the real shift is the final shift: faster. New business models are no longer forces for stability and security. To compete in today’s accelerated climate, these models are designed for speed and agility.
Most importantly, none of this is in any danger of slowing down.
Friday, January 31, 2020
Wednesday, January 29, 2020
On this mid-week edition of "Notations" here in our Education Platform, we chose an excerpt courtesy the team at Delaneys' Place about America--Please enjoy:
Saturday, January 25, 2020
Plus, his big move 20 years ago this month. Then, a piece of a listicle from five years ago, and of course: 7 other things worth a click.
|Bill Murphy Jr.||Jan 24|
Funny thing. Bill Gates took to Twitter yesterday to tweet a list of his seven most favorite tweets.
The occasion is—and honestly, who commemorates this?—but it’s the 10th anniversary of when Gates jointed Twitter.
(That means that I joined Twitter 15 months earlier. Unlike Gates, we just held a quite little dinner to celebrate.*)
I’m trying to put a finger on exactly why Gates’s tweet about tweets caught my attention.
Perhaps it’s because by all rights Microsoft should have been able to build Twitter long before Jack Dorsey and crew did.
Also, Gates is currently worth about $110 billion, and the entire market cap of Twitter is only about $26 billion.
Anyway, I took the bait, and I wrote for Inc.com this morning about the commonalities among the tweets Gates picked as his favorites. (In short, they have nothing to do with anything from the first half of his life; they’re all about either his relationships or his anti-poverty initiatives.)
There’s actually a much more momentous Gates anniversary going on right now, which is that this month is the 20th anniversary of when Gates stepped down as CEO of Microsoft.
Granted, he didn’t exactly go gently into the good night. Gates stayed on as chairman for another few years, and also became the head of software strategy. Of course, he also put his first $5 billion into the Bill and Melinda Gates Foundation.
I’m working on a slightly longer, thoughtful piece about how Gates has evolved (well, I think it’s thoughtful)—which will likely run over the weekend.
Since I’ve been writing this kind of thing for a long time, however, and since all past is prologue, I took a look back at what I wrote five years ago, when yes, I was covering the 15th anniversary of Gates’s decision to step down.
Five years ago was still the age of listicles, so I came up with seven “leadership lessons” from the early life of Bill Gates—things he learned when he was young, but that other people often take a lifetime to understand.
There are other keys to his success of course, but I still like these as takeaways:
1. Get in early--and learn.
Gates’s big head start was that in 1969, when he was in eighth grade, his school bought an early computer. He was excused from regular math classes to learn to program. His first successful project: a tic-tac-toe program.
2. Seek forgiveness, not permission.
There are so many examples we could turn to here, but: that computer in eighth grade? Gates (with his friend Paul Allen) exploited bugs to obtain free computer time. When they were caught, they traded their bug-finding ability for still more free computer time.
3. Get paid.
Gates never had a problem asking for money. At age 14, he was writing code for a corporate client; by age 17, he and Allen launched their first company. At 21, he became famous for writing an "Open Letter to Hobbyists" telling them to "pay up," after he realized that amateur programmers were pirating his software.
4. Learning matters more than school.
Gates’s SAT score was “nearly perfect,” and his family valued education. He enrolled at Harvard at 17, but of course, dropped out in his second year to start Microsoft with Allen—and begin his real education.
5. When you're in charge, take charge.
Gates was a difficult, extremely competitive boss at Microsoft. At least one employee described his criticism as "devastating." But, he took responsibility. During the first five years, he oversaw every line of code. If you're old enough to have used MS-DOS or the original version of Windows, you've used a product Gates helped code.
6. Be the guy who predicts the future.
Obviously easier said than done, but Gates saw the future first at several early key moments. One of them—and this is a classic story—came in 1980, when he negotiated a deal to license the DOS operating system to IBM for a low $50,000, but had the foresight not transfer the copyright.
7. Tackle a big enough mission.
In some ways this should be first on the list, but we’ll use it as the bridge to the present.
Following the examples of John Rockefeller and Andrew Carnegie (and the mentorship of Warren Buffett), Gates and his wife, Melinda Gates, are now among America's most generous philanthropists. Their mission is about solving "big problems" that they believe governments are incapable of fixing.
I mean, it’s not as big a deal as 10 years on Twitter, of course, but it might have a little something to do with his ultimate legacy.
*We did not actually hold a quiet little dinner to celebrate.
I usually try not to beat myself up too much about little mistakes in Understandably, but I had to laugh at my error yesterday.
- It’s Merriam-Webster, the dictionary, that defines an entrepreneur as “one who organizes, manages, and assumes the risks of a business or enterprise.”
7 other things worth a click
- Can’t make this up: A man settled a racial discrimination case against his former employer, but when he went to deposit his check, the bank accused him of fraud. Now, he’s suing the bank for discrimination, too. (Detroit Free Press)
- Nearly 40 percent of Americans say they couldn’t handle a $1,000 emergency without a loan. (Bankrate)
- The CEO of Goldman Sachs says his firm won’t underwrite IPOs for companies that have at least one “diverse board member” (with the focus mainly being on including women.) (LinkedIn)
- The former CEO of Wells Fargo is banned from the banking industry and must pay a $17.5 million fine, as a results of scandals involving fake accounts. (CNBC)
- Planters is apparently killing off Mr. Peanut. During the Super Bowl. For… ratings or publicity or something. (Inc.com)
- A 76-year-old billionaire pharmaceutical executive was sentenced to 66 months in federal prison, in connection with the opioid epidemic. (NPR)
- An Italian astronaut is the first to cook food in space from raw ingredients. The recipe: chocolate chip cookies, aboard the International Space Station. They had to bring them home for testing instead of eating them, though. (Associated Press)
Tuesday, January 21, 2020
Monday, January 20, 2020
We wanted to send a special shout out to the team at the Atlantic on this special edition on this day as we wanted to present the following on the thoughts of Dr. King on this #MLKDay2020:
Friday, January 17, 2020
Sunday, January 12, 2020
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