WHY IT WOULD BE WISE TO EXPERIMENT WITH NEW BUSINESS MODELS TODAY, NOT TOMORROW.

  • by Sally Uren, CEO, Forum for the Future
  • Sep 25, 2013
  • 0 comments

New business models. Or even, innovative, new business models. Or, new, innovative and disruptive business models. Whichever description you use, it’s clear that there is an increasing appetite to see current business models change or evolve (depending on your own diagnosis of the scale of the sustainability challenges we face) to produce goods and services with sustainability running through their core.

But wait! The marketing and brand managers cry, consumers quite like today’s products and services. And wait! Today’s business models are just fine, cry the strategy and finance folk. We’re making money, and, umm, we’re making money.

Yes, they do. And yes, you might well be. But for how long? Looking into the future tells us that both of these responses might need to change, and that today’s business models, and the goods and services they deliver, will require quite a radical transformation.

Let’s take a peek at Consumers in 2030. This collaboration between Forum for the Future and the UK consumer champion Which? shares research and projections about what life might be like for UK consumers in 2030. It uses a detailed historical analysis of consumer trends from the mid-1950s to the present, modeling these trends forwards to 2030.

The economic projections in Consumers in 2030 indicate that the average household could be spending 6.2% of their income on gas, electricity and water in 2030. That’s more than we were paying in 1965 and double what we were paying in 2003. As the graph below shows, the rising price of global commodities, slow wage growth and other factors could mean we pay more for essentials from now on. This will squeeze the disposable income of lower and middle income households the hardest.

Such changes in household budgets, with the need to find new ways of accessing money, along with rock-bottom levels of trust in large institutions, are one set of drivers behind a potential new service we might see in 2030. As well as project forward key trends, we also worked up five new service offers we might see in 2030, based on innovations we are seeing today. Crowd House Mortgages is one of these, and is a virtual service that gives people the confidence, facilities and insurance to invest in, and borrow from one another on a long-term basis. Imagine microfinance and peer to peer lending scale in such a way that teams of home-buyers to take out loans and support one another to make repayments. The business model behind this is based on high levels of trust, and money staying with local communities. Banks don’t even get a look in. This is the sharing economy scaled for the domestic housing market.

Another potential new service we might see in 2030 is Bathroom GP, a product-service bundle that discretely takes biological readings and screens for illnesses as you use the bathroom. For example, it checks your kidney function, glucose levels, digestive health and the presence of viruses, and then suggests changes you might make in order to stay healthy. Sounds far-fetched? The technology to take readings from skin exists today, and our appetite to manage our health is on the increase. The point is that the business model behind this technological-driven service doesn’t exist today, but in 2030 it just might.

But 2030 is a long way off, so no need to think about these new business models just yet. Right? Wrong. Let’s look at 2020, just 6 years from now. Consumer Futures overview contains four different, but entirely plausible scenarios which explore how patterns of consumption and consumer behaviour may have changed by 2020. In all of our scenarios, brands and businesses have evolved and adapted their business models to address challenges such as resource scarcity, building resilience into value chains faced with accelerating impacts of climate change, and responding to changing consumer demands, most notably a desire for greater transparency. Many of the successful brands and businesses in our world of 2020 are the ones that have shifted from selling products to selling services, giving consumers access to what they need, without the material ownership.

Business models only need to be disruptive if you haven’t planned for them. All of our work suggests that planning for a very different future now, would be wise. In the future, consumers will be looking for new products and services, with the attendant new business models. This means experimenting now. Taking risks in new ways of delivering services, where the pathway to value creation is unclear.

And, one thing is for sure – purpose will be key. In a resource constrained world, where ultra-transparency is the norm, where we can access information about anything (and anybody), purpose will be paramount. The first question to ask of your business model, your products and services, as you begin this journey, is what is the purpose? Going forward, if that purpose isn’t linked to the creation of some sort of environmental, or social value, as well as the more classic economic markers of value, then the purpose might be quite short-lived indeed. As will the business model and all that goes with it
 

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