Powerful Business Models: the key to monetize technology

Today, technology does not have value by itself, but as an element of an adequate business model. The most promising startups, and most Unicorns, have very well played this game.

The industrial age approached business activities as systems formed by assets that altogether provided the strengths on which a company would underpin its competitiveness and succeed in its markets. The most classical and successful analysis framework for this approach was the “7Ss” introduced by Mckinsey’s Thomas Peters and Robert Waterman, based on the analysis of the companies’ Skills, Strategy, Staff, Systems, Style, Structure and Shared Values to identify its strengths and obtain an appraisal about its level of excellence.

There is no doubt that the 7Ss has become an extremely useful tool, very generally used, that analyses mature companies, and especially big corporations as the purpose of Peters and Waterman was, through seven specific assets.

However, at the turn of the millennium, we began to see that the new successful companies were not only leveraging their competitive advantages on their assets., The key for their success was mainly rooted in their activities, in other words, in what they were doing and how they were doing it. Apple, IKEA, Google, Ryan Air, Southwestern Airlines, Microsoft,, are just a few examples. On the other hand, many technological innovators, especially those based on web platforms services, were seeing how their portals were gaining visitors day by day, but their earnings still remained low, providing extremely interesting value propositions, but completely lost when it came to establishing the mechanisms to actually monetize all their activities and services. 

All of a sudden, we began to see that the product or service was not anymore the main element on which companies should establish their offerings. The product or service, as the basic trade piece and centre of the escalation principle on which the 1^st industrial revolution was based, was discovered as just one more layer of the full value proposition.  4^th industrial revolution, the power is no longer on the side of the industries, but on the side of the consumers or clients.

Defining a value proposition in this new era not only requires product engineering, but considering elements often out of the own companies’ control, like capabilities, networks and competencies. Moreover, new technologies introduce new possibilities in the ways to interact with customers, opening new opportunities from how the product or service is used or consumed, conditioning and determining the way and specific moment customers will pay, and all this with implications in the companies’ operations, processes and cost structure. In this scenario, it seems clear that the value proposition does not stand alone, but it lives supported and connected to other activities that add up determining a comprehensive offer that determines customers’ perception of the benefits and experience with the brand. These activities underpin the  Business Model, of which the value proposition is just one of its parts. 

The concept of “Business Models” and “Open Business Models” as the description of the logic by which an organisation creates, delivers and captures value broke in with enormous impact in the business world jargon as the cornerstone of how businesses should be approached in the new era, extending to technology and not technology-based businesses.

Today, very few deny the fact that a technology does not have value by itself, but it actually acquires it when it is commercialised through an adequate business model. A mediocre technology in an excellent business model can become more valuable than a great technology in a mediocre business model. This is the grounding of why business modelling has become today a substantial component of innovation as a discipline.

Business modelling is a creative process, which is a peculiarity among other business disciplines, where we could agree that analysis prevails. For this reason business modelling has had to adopt concepts and approaches from other more creative disciplines. Four of its most interesting approaches are Open Innovation and Open Business Models, the Blue Ocean Strategy, the Services Dominant Logic, and Design Thinking.All four of them have in common the need of thinking outside of the box to generate new possibilities challenging the way businesses are performed today. For startups, these strategic tools provide useful methods to challenge inherent beliefs, pushing founders into thinking about different strategies, and to approach business modelling as a continuous and iterative improvement process.

Europe is today home to more than 120 unicorns (privately held, VC-backed companies valued at $1bn on any round previous to IPO or acquisition), 68 of which graduated in 2021 alone — more than triple the 18 new entries of 2020 and four times as many as all unicorns minted on the continent before 2014. Europe has therefore made more than five unicorns a month in 2021, and there is no doubt that Business Models disruptiveness plays an important role in these companies’ success. We can mention some already mostly well known, like Glovo, Bla Bla Car, Cabify, Job and Talentor Odoo, but newcomers are showing alike creativity and solidness in their Business Models, even in markets known by their maturity, such as Octopus, a low cost green-energy retailer that provides a differentiated experience for its customers, based on the distinct advantages of their own integrated billing and CRM system. Octopus’ unique customer service allows clients being repeatedly assisted by the same team. Also referring to mature markets, Germany’s fastest ever unicorn, Gorillas, delivers groceries at ultra-fast speeds (10 minutes) in an already very competing delivery market by operating its own warehouses, supplying its riders with Gorillas-branded clothing and electric bikes. Last but not least, France’s Alan won a French insurance licence, the first one awarded since 1980, allowing the team to enter the  French 36 €bn health insurance market. Alan started providing health insurance for employees of small companies, differentiating itself from the century-old industry giants such as Axa and Generali with a simple pricing structure and an easy-to-use app.

These are only some examples of the many thriving European start-ups who have underpinned their businesses on technology, but who have also adapted mature activities to the present customers’ interests and requests, and to the demands and nature of today’s employees. New people trigger new business models. More than ever, it’s not what we have, but it’s what we do.

Image by Daniel Dino-Slofer on Pixabay