New Business Model
The advancement of communications technology on mobile devices with 4G heading towards 5G, social media and currently blockchain are changing the industries on value creation with new business model. Entrepreneurs seek innovative business models that drive different users’ demands which lead to value creation and wealth creation. Innovative thinking is what new business model all about. Internet technology is changing at a fast pace but unnoticed to many. Many new business models have been developed since the bitcoin blockchain was introduced in 2008. Now there are business models that allow users to buy cryptocurrencies on the Ethereum blockchain network and deposit to earn interest and disrupt traditional financial institutions with innovative investment options. Now blockchain technology has further improved with Solana’s blockchain innovations that facilitate massive increase in transaction volume (65,000 per second) and lowering costs ($0.00025 per transaction) resulting more new business models become viable. That is the forefront of new business model.
What is a new business model ?
Let’s change gear to connect audience that are not familiar or comfortable with new technologies. New business model I referred to in the above section can also associate with traditional businesses like the retail industry where it has relationship to any citizens and people of all walks of life. The advancement in internet and mobile technology made online purchase of goods very common nowadays, it was a new business model when it was first introduced years ago.
Brannon (2011) studied business models and innovation, he defined a business model as a framework of understanding how profit can be made. He argued that an innovative business model describes the design of the capabilities that enable a business to create value in new ways. New way in a sense that the entrepreneur is the first mover in the market in terms of value creation, no one has done it before. Kortmann (2016) research on open business models argued that a firm not only needs to leverage internal capabilities but also to integrate consumers’ concepts and ideas into a new product development process in order to capture greater value (some Web 3.0 element here), and a business model is not only concerned with making a profit directly but also indirectly, for example, by meeting its corporate social responsibilities (CSR) and attract supporters of the business. The cosmetics company-The Body Shop built its retail business model based on CSR initiatives such as “no animal testing” and “making packaging from greenhouse gases”; it attracts global customers via providing natural products that are produced ethically and sustainably.
Casadesus (2013) also argued that profit can be made indirectly with a sponsor-based type business model where a firm monetises its product through sponsors rather than setting prices for consumers, for example, Google’s advertisers. These arguments open up entrepreneurs’ mindset that their business models can be monetised directly and indirectly in creative ways. The implication is that “thinking outside the box” is the key success factor to drive innovation in the new business model, which adapt to an environment where consumers or users are highly connected globally via the internet and where concerns and information are shared rapidly.
Consumers’ increased use of internet platforms for services is changing the competitiveness of all industries, and their business models need to be adapted to the new phenomenon to stay competitive. In Porter’s Five Forces model, Porter (1985) advocated that a firm’s ability to compete and sustain a business depends on its resistance to the five forces of suppliers, buyers, entrants, substitutes and competition. Downes (1997) argued that technology and society have evolved so much that the Five Forces model is outdated and that new forces have emerged which have added instability and complications to the environment. These new forces are digitalisation, globalisation and deregulation which require to be addressed by strategic planners. The rise of Uber and Airbnb is example of how “digitalisation, globalisation and deregulation” that created new business models in taxi business and accommodation business respectively. Porter (2001) counter-argued that digitalisation will not make strategy obsolete because when all firms embrace digitalisation it neutralises its effects, and that the internet would not supplant a firm’s core competencies such as unique products and knowledge but rather would complement them instead, giving it a robust competitive advantage. Prahalad (1990) argued that core competencies are the collective learning of an organisation. What makes a company competitive is its ability to turn core competencies into core products and services and then introduce them into new markets. Prepletany (2013) carried out a case study of an innovative business model in retail business and argued that future technology trends will increasingly drive consumers strongly connected to retailers via many channels, including the internet, which retailers can utilise to generate more sales.
BULB's business model
These arguments suggest that previous management theories require a fresh look under the impact of new technology and that business needs to initiate changes to maintain its competitive advantage. For example, BULB’s business model is created from the basis of technology advancement in blockchain. Its business model was based on Solana’s fast and inexpensive transactions. BULB challenges traditional write-to-earn platform like Medium with its competitive advantage that built on the Solana blockchain network. Furthermore what BULB is developing into Web 3.0 would be an interesting story. It has been quite some time since when Web 2.0 replaced Web 1.0 around year 2000 and put an end to the internet era of when users can only read the content without any interaction of the Web 2.0 platform like Facebook with upload capability. Web 3.0 is the new movement which entrepreneurs can derive new business model. Start-up companies in the Web 3.0 movement are positioned to challenge giant firms like Google and Facebook that monetise on users data in a Web 2.0 paradigm, not in a sense that Web 3.0 will replace it soon, but Web 3.0 companies like the "Brave browser" will establish their own market position as an alternative competitive force to attract users that challenge the Google browser. Web 3.0 is based on a "new" concept that users’ community control their own destiny, it is “thinking out of the box” approach and looking internet platform in a new way, a new business model. However, reminder for entrepreneurs is the fact that core competencies of a firm are still the roots of its competitive advantage and internet technology like blockchain just opens up new ways of serving consumers or users.
The above review of a number of theories and concepts helps to form the conceptual idea that a business model consists of a design framework which creates value via new ways to impress consumers or users that drive revenue growth, both directly and indirectly, However, reminder for entrepreneurs is the fact that core competencies of a firm are still the roots of its competitive advantage and internet technology like blockchain just opens up new ways of serving consumers or users. This suggests that entrepreneurs need to integrate digitalisation with their core competences to form new user experiences and satisfaction which lead to new business model.
Brannon, D. 2011, ‘Business Models and Performance_ Entrepreneurial aspects in the New York wine industry’, Syracuse University, Whitman School of Management.
Casadesus-Masanell, R. & Zhu, F. 2013, ‘Business model innovation and competitive imitation: The case of sponsor based business model’, Strategic Management Journal, vol. 34, pp. 464-482.
Downes, L. 1997, ‘Beyond Porter’, Context Magazine, Fall, pp. 21-24.
Kortmann, S. & Piller, F. 2016, ‘Open business models and closed-loop value chains: Redefining the firm-consumer relationship’, California Management Review, vol. 58, no. 3, pp. 88-108.
Porter, M.E. 1985, Competitive advantage: Creating and sustaining superior performance, Free Press, New York, NY.
Porter, M.E. 2001, ‘Strategy and the internet,’ Harvard Business Review, vol. 79, no. 2, pp. 63-78.
Prahalad, C.K. & Hamel, G. 1990, ‘The core competence of the corporation, Harvard Business Review, May-June, pp. 70-91.
Prepletany, D. 2013, ‘The impact of digital technologies on innovations in retail business models’, Master’s thesis, Aalborg University, Aalborg.