As technology continues to change our daily lives, it has found many adepts who think about creative ways of applying it. Previous barriers to massive deployment were related to elevated price points or limited interoperability between systems. For many applications, technology was more a barrier than an enabler. Sometimes value and differentiation was created just by overcoming the technical barriers. Today, it’s not unusual for creative new solutions to come together with new business models that have implications for manufacturers, machine builders, and the system integrators that put these solutions together.
Revolutions don’t always feel like revolutions. Akin to being on a drifting boat, pulled by a gentle stream, we often aren’t aware of the change in our location until we have a reference point in sight. Most of us have lived through dramatic changes and yet may not have fully recognized the magnitude of the change until after the transformation was complete.
Those who were in the travel agency business saw their main source of business, the sale of airline tickets, migrate entirely to the internet and away from their businesses. Those who could not redefine their business to other value-adding areas (e.g., packaged tours and individualized travel) did not survive. While the traditional travel agency got decimated, new opportunities arose for internet-based providers such as Expedia that allowed users to purchase all of their travel from their PC or smartphone.
We have all witnessed how technology has gained a more prominent space in our personal lives to the point where many of us have a hard time visualizing being “off the grid.” Technology’s penetration of the consumer market (seen, for example, in the ubiquity of smartphones) has not only converted a broad population to become technology advocates, but also it has increased the number of minds that think of deploying these technologies in new and unexpected ways.
Innovation along business models
Technology development and broad deployment has enabled important business model innovation with dramatic business implications. What does this mean? Uber and Airbnb provide good examples. At a basic level, ride-sharing company Uber provides individualized transportation to get a user from Point A to Point B. This doesn’t look very different from what a conventional cab offers, but consider it more closely: Uber leverages technology to allows regular drivers to become part-time cab drivers; offers a reliable, customer-friendly and convenient interface through which riders order, pay, and rate their driver; and presents a global vs. local offer, which allows a dramatic scaling up of the business.
Uber can be viewed as a very efficient broker between a group that needs point-A-to-point-B transportation and individuals who are willing to provide a ride in their car for a fee. You can make a similar statement about online room-rental service Airbnb. In the latter case, the brokerage takes place between those in need of a place to stay and those willing to rent their places with spare capacity.
What’s new and different is the business model being deployed and its dramatic impact in the short existence of these companies and their offered services. Uber was founded in 2009, and since then, it has been able to grow its company value to an estimated $70 billion. It operates in more than 600 cities around the world. Interestingly enough, in some cities, Uber’s approach to transportation is viewed as part of the solution to traffic congestion problems. Airbnb was founded in 2008 and displays 3 million lodging listings; it operates in cities in 191 countries. A recent round of funding placed the company’s value at $31 billion.