Business Models Of The Future: A Paradigm Shift

Change is around us in barely over a decade, technology has taken over our lives and made us more interconnected, geopolitical balance is shifting with the rise of Asia. A new world order is emerging with Trump, Brexit and other narrow nationalist movements from leaders of the free world, a changing demographic with a large young population in India and Africa, the world as we have known it is vanishing before our eyes.

Old categories and products are falling by the way side, and every category is being disrupted and changing the way we live. Google, Uber/Ola, Paper Boat, Oyo, Vivo, iTunes, Netflix, Scootsy, Pepperfry, MakeMyTrip, Big Basket, Carat Lane, Ali Baba/ India Mart, and many more such brands are changing us in fundamental ways. Market leaders of the past are disappearing rapidly (Remember Lava and Micromax?) and the world around us is changing at a dizzying space.

Economic theories and modeling were built upon a basic assumption of Ceteris Paribus or all things remaining the same. Businesses started their planning processes basis assumptions made about the consumer, competition and the market. Today, no such assumptions make any sense. Businesses can no longer plan for the future they can simply be pre-pared for change. Earlier business models were static. They have to shift to more dynamic business models.
The Three Business Models Of The Future:

The Static Business Model

For much of the last century and a majority of businesses even now are products centric. Product-centric businesses organize themselves around their products/service. For example, a pre-engineered steel building company offers sheds/warehouses or a dairy company offers milk or other dairy products. The products and their manufacturing, supply chain and delivery determine the organizational structure. Thus, you have product managers or brand managers. And the business is geared around ensuring the milk is collected, chilled processed and distributed. A company selling pre-engineered buildings have a similar organization of sourcing, manufacturing, sales, and delivery. The problem with this business model is that there is no agility. Companies have organized systems, efficiencies and process improvements are their mantra and innovations remain in the form of small kaizens. They are geared to produce and sell and both the quantum and rate of innovation remains small.

The Dynamic Business Model

If the businesses aligned themselves around their consumers/ customers they would be more agile. Thus, instead of product managers, if you had a segment manager and put the customer at the heart of the business, you would move from product-centric businesses to Human-Centric Business Design. Thus you followed your customer. If the customer was no longer wanting to leave their home for everything, you figured out a way to reach the consumer. If the customer was worried about energy costs, you created pre-engineered buildings with solar panels. Keeping the customer in the heart of the business allows for continuous change. You then no longer keep making photographic film, you learn to make and store memories Kodak remained product-centric and died. Most brands that have died have done so because they did not keep pace with the changing customer needs. And a human-centric organization needs a new set of roles, structures, and business processes. The metric of efficiency is not so much cost but speed. The ability to react and the agility to market will also go a long way in acquiring and retaining loyal customers.

Change or Die

Earlier, businesses that did not change simply grew at a slower pace. Today, businesses that do not change simply die. The adoption and diffusion of new products and brands is very rapid. Product life cycles have got crunched and brands can grow as rapidly as they can decline. It is time to do things differently. It is time to fulfill a need rather than sell a product.

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Originally published on Consultants Review

What the f@#k is DESIGN THINKING?

What is DESIGN THINKING?

A CEO I met recently is transforming his organization by getting DT workshops conducted across senior, middle and junior management. ‘They are all learning the process’, he said. Young candidates try to impress upon me in job interviews about how they are keenly interested in design thinking. They have mastered the 5-step process defined by IDEO.

Design thinking is not a process. Nor is it a method. Quite simply, it is a different way of thinking.

As we evolved to be homo erectus; we stood straight and could see further in the distance. Simultaneously, we used our peripheral vision and all our senses to analyse information around us. But as language evolved, particularly writing – our brain thought in a linear fashion. Sense was now made a letter at a time, a word at a time, a sentence at a time. And unless we heard or read the next one – there was little meaning to be derived. All schools of learning – science, mathematics, and human sciences developed this linear approach. Logic and reasoning – by induction or deduction, decision trees and all other analytical tools were also developed in this linear construct. Thus – if you followed the trail – the conclusions became more and more obvious.

Design Thinking is simply a way of non-linear thinking. The biggest of discoveries and inventions have occured when after months and years of immersion in the problem, the solution just emerged as a Eureka. When our brain immerses in data around us, we trigger new neural pathways, making newer connections and thus arrive at disruptive solutions. Disruptive because our linear linguistic logic would never have got us there. And disruptive because in a world where everyone is thinking in steps and stages, a spiral way of thinking creates totally new possibilities. Immersing is learning everything there is to about the situation. It is feeling the pain or joy of the user, it is traversing the journey, it is triggering all our senses by capturing the data sensorially and keeping it around us.

Design Thinking is about unlearning – rather than learning. It is about immersion – rather than research. It is about feeling what the user feels rather than listening. It is about the rigour to achieve effortless thought, rather than rigour of effortful proof. It is looking at the whole rather than the sum of its parts.

It really is that simple.

Why Indians are poor innovators

As more and more real estate projects hit India across the country, you see more steel and glass – with little thinking on cleaning systems, local materials and innovative use of materials for the Indian heat and dust. Over 35 years ago, I had met an architect who had talked of creating a roof made with overturned earthen pots sandwiched between two slabs. The resultant roof led to an 8% difference in temperature between the outside and inside. I have never heard of this or anything similar since. Such low cost innovations – from a floating bicycle to the solar cooker (300 days of sunshine and a value conscious Indian consumer should have made for a blockbuster product ) have never taken off in India. Overall, across categories, innovations are few and far between.

History – 1657, 1757, 1857 and 1957 : The answer lies in history. 1657 was when the industrial revolution was taking off – with the steam engine and the spinning jenny both being invented by then. India saw the ascension of Aurangzeb then. By 1757, the first commercial car and tarred roads had appeared, while India had lost the first war of independence in the Battle of Plassey – and East India Company rule was established. With it came decimation of Indian crafts and a focus on growing cash crops and exporting raw materials. By 1857, the zipper, the fax machine, fiber optics and hydrogen fuel cells had been invented whereas India had lost the second war of independence and British Raj was firmly established. 10 years post independence, India was playing a rapid ‘catch-up’ with the world, importing learning – from large scale projects such as the Bhakra-Nangal to modelling IITs after MIT. Older, indigenous knowledge was lost and our journey of C&D – copy and development had begun

Copy & Development – the Indian way: India had missed the industrial revolution and Indian entrepreneurs had never experienced the enormous economic outcome of the power of innovation. ‘Foreign’ became a signifier of technologically advanced, qualitatively superior and and overall a more desirable offering. The license raj further killed any creativity in enterprise and lazy product development became a way of life across all areas of society. There was no economic reward for innovating as we also became lazy consumers tolerating the Ambassador car and the icicle filled refrigerators and more such products.

Jugaad v/s Innovation: The Indian ingenuity has always been around. We have value engineered solutions and found remarkable ways of doing things. I remember when my father worked with IPCL in the ’70s and a Heavy Water plant was to be erected using German expertise. The enormous boilers and chimneys were transported from Germany – but had to stop a few kms. short of their destination as they could not cross a small culvert – a weak small bridge on the road. After much debating, the Germans retired saying this crossing will take 2-3 months- till a proper load bearing bridge could be built. The Indian team brainstormed and came up with the idea of filling the empty space under the culvert with sand bags – thus providing structural support. The trucks crossed over in a few hours and the German experts woke up to see the heavy water towers up! While the Indian mind has always been original thinking and creative, innovations have still been missing as the economic impact of innovations is not part of our collective experience.

A new breed of entrepreneurs – the age of innovation: The older, more established companies in India – whether Indian or multi-national are low to innovate. Even a different mould – that creates a unique bottle shape is frequently passed-up as being ‘too expensive’ – a cost that could be offset be 2-3 insertions of ‘blink-and-you-miss’ TV ads – while packaging is what stays on the shelf and what people put money down for. But a new breed of entrepreneurs are disrupting the market place with product, packaging or service design innovations. Paperboat, Fogg (no gas), the Indigo ramp, Oyo, Ola, Scooty, Caratlane.com are all offered by a new generation of entrepreneurs. Significant innovations by the old guard are conspicuous by their absence.

Change or Die : Earlier, low or no innovation simply meant a slower ‘Hindu’ rate of growth. Today, it means death. Consumer’s today have changed. Never before have so many been so ready to experiment, to try the new. The quest of newness also means they are fickle, and are constantly looking for the new. From restaurants to cell phones (Micromax and Lava – the erstwhile market leaders are no longer significant), brands are dying. Unless brands innovate continuously, consumers are going to abandon them. The age of innovation has just begun. Courage and creativity are survival skills from now on.