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Early Warning: A Global Business Model Tsunami Coming Your Way

The word tsunami keeps appearing in my conversations with senior leaders around innovation and the future. Why?

Because they like I believe disruption is now too weak a term to describe what is happening in business models in many markets and industries globally. Business model tsunami more appropriately describes the phenomenon as social media and the digital world emerge from the edge and enter mainstream business and our daily lives.

Indeed, a senior executive from one of Australia’s leading insurance companies in a conversation this week likened the eruption of digital to the discovery of electricity and the implications that had on the lives of those who lived at that time. It is fair to say it was electricity that sparked the Industrial Revolution decimating old values and creating new industries simultaneously without a moment’s hesitation. That analogy rings true for me.

So what evidence do I have supporting this statement and the parallels described I hear you ask?

There are so many examples and so much evidence it is difficult to know where to start. So I will exemplify services that affect my life personally.

Let’s start with the music industry.

Spotify  -  Here’s how Spotify describes itself.

“Think of Spotify as your new music collection. Your library. Only this time your collection is vast: millions of tracks and counting. Spotify comes in all shapes and sizes, available for your PC, Mac, home audio system and mobile phone. Wherever you go, your music follows you. And because the music plays live, there’s no need to wait for downloads and no big dent in your hard drive.”

The business model implications.

You don’t have to buy music from iTunes anymore. That business model is on the way out. Indeed you don’t have to buy music any longer full stop. Music just sits out in the cloud digitally and you access it on your desktop when you need it. Algorithms recognize what you like to listen to and introduce you to music styles and new artists that it sees you enjoy along with their biographies and complete discography. You just click and listen. Music is now completely digital, distributed to your desk top in real time!

Cost - free.

If you want your music advertisement free as opposed to an ad every second track and are prepared to pay US$12 per month, you can listen ad free.

The accounting industry

Freshbooks –  Cloud  Accounting For Small Business

“One busy afternoon in 2003, Mike (the Founder) accidentally saved over an invoice and lost his work. Then and there the inspiration for FreshBooks was born; there had to be a better way to bill clients. Eight years later and over five million users strong, FreshBooks has grown to be the leader in cloud accounting for small businesses around the world.”

Business model implications

The introduction this year by Freshbooks of an iPhone and iPad app allows you to have immediate access to your entire set of accounts anywhere any time.  Your accounts are immediately updated in the cloud after each transaction and travel with you at all times. You can invoice on the spot electronically and receive payment directly into your bank account via a link in your invoice instantly. End of year, you send a link to your set of accounts on Freshbooks to fully qualified and Australian accredited accounting specialists in India who complete and file your tax return for you.

 Accounting is now fully digital, mobile and accessible in real time from your desk.

Cost is US$19.00 per month

The Education Industry

Stanford University

At the beginning of October this year, Stanford University announced a 10 week on-line crash course in creativity.  Stanford University Professor Tina Seelig in the preamble to the course outlined its philosophy and content.

“ a set of tools and conditions that we each control - our Innovation Engine - that allows us to increase our own creativity and that of our teams and organizations. (I will show you)...that just as the scientific method demystifies the process of discovery, there is a formal process for unlocking the pathway to invention.”

In the space of 4 weeks from the announcement of the course, 36,000 – that is right, 36,000 - enrolled globally. Even after the course had commenced enrollments grew. Thye now stand 4 weeks into the course at over 40,000. There are 7200 groups of 5 working globally on developing their knowledge and understanding of organizational creativity and creative skills. From my observation, this course is of fair level entry standard and if you complete it, you will have a good basic understanding of creativity and its application in the work place. At the end of the 10 weeks, you receive a certificate of completion from Stanford University.

Business Model Implication.

It is impossible to know what the full implications of this global education phenomenon will be.

However, we are witnessing the birth of free mass mobile digital education that has real meaning and application in markets and personal lives globally.  Imagine being able to say in an emerging economy you have completed a Stanford University course in creativity!!

Cost – free....

The flow on affects of these savings is what is causing the tsunami. These industries and their traditional markets are being washed away as we sleep.

The big question is how will all those hundreds of thousands of people previously engaged in the music, accounting and education industries be gainfully employed as the business model tsunami driven by the technology eruption comes ashore.

The realty is capital will flow were it is perceived growth opportunities are in the future. The difficulty is the technology tsunami is still on its path of destruction and has not yet gathered full pace.

Innovation is the only answer to its power!

If you would like to join me in the Innovation Ecology, the brand new social media platform for innovation professionals where these issues and solutions to real life innovation challenges are being developed by your peers, leading innovation practitioners, click here.

Reader Comments (4)

I think the education trend is the most interesting and its implication on the business model will be the most profound when considered in conjunction with a retiring baby boomer generation. Arguably for the first time in living memory, not only is information freely and readily available, but those with knowledge - especially those in 'retirement' - may be driven by different things and use this knowledge differently. Businesses that rely on protected knowledge for their competitive advantage may soon find it harder to compete because they are competing against groups that aren't looking for financial gain, but rather intellectual nourishment or the advancement of society.

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November 14, 2012 | Unregistered CommenterRoss

Thanks a lot. Interesting reading.
When a Tsunami is approaching (or a tsunami warning is announced) ... there is not point in running , trying to escape and reach high ground. You may survive, but the landscape won´t be the same after that. Temporary survival is not the solution.
The way I see it... the ony way out of a tsunami is sufing the wave. Get all that energy, and turn it into momentum for your business: It requires courage, timing -and the suitable "surfboard"- , but only by doing so, you (companies, people, professionals) can ride the swell, and take advantage -get the most- of such energy. There is not point in fighting or resisting a Tsunami. The "trend is your friend"... as long as you are heading in the same direction.
We are currently under a tsunami of digitalisation and connectivity, of social media... few companies and business are surfing and getting the most, gaining momentum and having fun. (such as Spotify or Instagram) Others (in several sectors and insdustries beyond music, media, publishing, education..) have drown; some others, so far trading water, will perish ... other are buliding hastly "surf boards" ant taking surfing lessons. Survival of the swifest (the most agile in self adapting to the new environment).
Your conceptual model fits in this concept. Thanks for sharing it so clearly

November 22, 2012 | Unregistered CommenterNacho Villoch

As you say, Ralph, there are so many examples it is difficult to know where to start.

Two of the key challenges I see, and they are closely inter-related, are a) the paucity of information and especially of case studies, on the cultural change implications of dealing with (or surfing) the coming (or is it here now?) tsunami, and b) how we communicate about what is happening in language that is not too equivocal and not requiring too much learning of specialised (read "social business insiders") vocabularies and nuances.

Specialists in social business/social media frequently comment, online and offline, on the crucial importance of the cultural change implications of corporate/organisational engagement with the new digitally-framed/powered environment, but I for one have not had much success in finding decent expositions of what that means in practice, or in finding relevant case studies or even war stories which may lack the intellectual rigour we expect (or should) of "case studies" but could still provide some illumination.

If culture is as important as the experts say it is - and I believe strongly that it is - is that recognised by industry/government leaders? When was the last conference on the topic? (I appreciate it might have happened, but if so I missed it.)

On language, those of us who deal with these issues on a daily (hourly?) basis can't even agree on some basic "languaging". "Social business" means one thing to the consultant pitching to enterprise and offering services to strategise their engagement on, via, with social media: it means something quite different to people working in the not-for-profit sector, who use the term without its necessarily needing to have any reference to the digital world implications.

I believe there is a lot of talking/writing at cross purposes, due in no small part to lack of a commonality/community of discourse.

Exciting times, and with much work to be done on language, frameworks, stories.

December 12, 2012 | Unregistered CommenterDes Walsh

Nice comments. I think it is very early days on the social media/digital business front. The problem appears to me at the moment very few digital/social media business models are turning profits - revenue yes, profits no!! And social media is based on a pyramid system. You own the platform and get in there early you make and control the market and the flow of funds associated with it. So there is no common language because the market and the providers in the market are all struggle for survival, place and ultimately dominance!! There is one area that is underpinning this market revolution though. That is payment aggregation. For the first time, banks have real competition that are not banks!! So watch this space as currency in the market moves from banks at the centre to much more fragmented flows of cash evolving through many many different channels. As the on-line platforms PayPal, Ebay and in particular Amazon grow they will confront banks directly and this is when things will get exciting. In a meeting recently, I heard quoted the combined revenues of these three organizations exceeds in total the combined revenue of Australian banks x 5...and we have I think 2 banks in the top 50 banks in size in the world. So the social media/digital world is being developed by individuals/organizations who are not in the center rather they are on the edges and they will use whatever language that suits them...I subscribe to a little known Diigo Group entitled Web2.0 Group and each day I get asked to trail new social media platforms and wow!!! It's like old rock'n roll days, Des. As long as you code something, you might have a hit!! Again thanks for your contribution.,

December 12, 2012 | Registered CommenterRalph Kerle

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