Rethinking Business Models for a Sustainable Future

Why do business models need to be sustainable?

Companies are looking to restructure their business models in order to stay relevant and show resilience. Of the diverse reasons for this update, one sticks out: real value delivered to the end consumer. A successful business model is one that offers resilience by adapting to changing market conditions and business needs. The agile business model is here to stay, especially in the hyperconnected world.

Delivering real value in changing times

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Business model innovation gained a lot of attention and interest, especially in 2020, with the arrival of the coronavirus pandemic, throwing many businesses out of gear. In the ever-present COVID world, digital transformation has emerged as a priority for many organizations, putting business models up for accelerated innovation. With customer preferences and demographics changing tremendously, companies are forced to move out of the comfort of traditional business models and push the envelope to offer something more valuable to the consumer.

Consider the stats:

The digital transformation market is expected to grow at a compound annual growth rate (CAGR) of 22.7 percent from 2019, boasting $3.294 billion by 2025 (Research and Markets)
77% of CIOs name Digital Transformation as their biggest budget priority of 2021 (Constellation Research)
89% of organizations have plans to adopt a digital-first business strategy (IDG)

Why are business models evolving?

Globalized market scenarios – with consumers scattered across the globe, businesses are reaching them with models which drive supply chains and scale up effortlessly
Shifting government regulations – government entities are driving digitalization initiative such as the European Commission declaring 2030 as the Digital Decade
Technological advancements – cloud computing and data driven technologies like AI and ML are shaping new possibilities
Consumer behavior – consumer behavior is being shifted by remote working and on-demand culture

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Where are the trends headed?

Cloud-based models – legacy infrastructure is slowly moving and cloud migration is on the rise. With the arrival of 5G and advanced networks, cloud-based business models will be in demand.
Data-driven models – Companies wish to track and optimize every important business KPI. Integration of data technology is going to see more action with shifts towards AI and ML-based models.
Hybrid models – taking the best of what technology offers, hybrid business models will also see a lot of interest.

Pillars of transformative business models

Core value – The business model of today’s successful company revolves around the differentiating value it creates for the customer (e.g. Uber or AirBnB)
Customer experience – Seamless customer experience (CX) is critical aspect of a defining business model
Business need – A prosperous business model is one that offers resilience by adapting to changing market conditions and business needs

How do we prepare for a digital future?

This is exactly where T-Systems supports as a thought leader with inspiration on innovative topics. Learn how we can shape the next steps into our digital future together.

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Successful business models of today

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Platform-based models – A platform business model is one that creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers. 7 of the 10 most valuable companies are now using platform-based models (e.g. Apple, eBay, Google and Alibaba).
Subscription-based models - The subscription model generates revenue by charging customers a recurring fee processed at regular intervals (e.g. Netflix). Many software companies work on Software as a Service models.

More disruption on the way

Freemium models – The freemium business model allows users to utilize the basic features of a software, game or service for free, then charges for "upgrades" to the basic package (e.g. Hubspot and Slack).
Digital ecosystem models – A business model driven by an ecosystem is one that works with many players to exchange value and create a network (e.g. BMW/Daimler who is creating a shared mobility ecosystem with startups like Car2Go, moovel, and Mytaxi, under the Your Now brand).

In conclusion

With everything, from cars and watches to phones and homes becoming more digitally intelligent and more connected, new business models will revolve around digital ecosystems that create mutual value for all players. Winning digital ecosystems will be those that find success in collaborating with multiple partners to offer valuable customer experiences.
Sustainable business model disruption will not be centered around one dominant idea or technology, rather it will be driven by orchestrating superior digital ecosystems that offer multifaceted solutions which take value creation to the next level.

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