Jan 17, 2019

Ways to Disrupt the Traditional Business Model


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In a disruptive age, established business models are under attack. The basic rules of the game for creating and capturing economic value that were once fixed in place for years, are now increasingly being subject to rapid displacement, disruption—even outright destruction.

With deep roots in the proliferation of advancing tech, disruption has moved from an infrequent inconvenience to a consistent stream of change that is redefining entire industries. A monumental catalyst igniting this shift lies in how tech businesses launching at IPO have changed the value equation determining a business’s worth. While previously about returns and breadth of assets owned, valuations are now starting to be based more on a company’s growth potential and intellectual capital.

Disruption In Practice

For example, with this shift in valuation, Airbnb is now almost twice as valuable as Hilton Worldwide. And with a fraction of the employees, it pays for a workforce that is about 1% of Hilton’s size, according to Vanity Fair. Additionally, Amazon, while not reporting the most favorable revenue numbers over the past year, still remains arguably the most disruptive threat in several industries (and counting). Why? Because their ROI comes in the form of unparalleled growth, market penetration and even their capacity for self-disruption. And Amazon isn’t the only company rewriting the rules of the game. It’s projected that by 2020, five of the top seven digital giants will willfully “self-disrupt” to create their next big industry leadership opportunity.

This momentous shift in how we perceive value has the potential to disrupt every industry. This means big things for tech companies, as those with less capital in physical assets will be at a greater advantage to capitalize on the future pace of growth and change. There is still hope for established players in this new era to disrupt traditional models. But only if they are willing and able to reframe their businesses in a way that opens them to new forms of value creation.

For more on disrupting the classic business model, be sure to check out this article on Front End Innovation!

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