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Insights for a CIO/CTO: Common Features of Transformative Business Models

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Abstract

On the common characteristics of transformative business models.
Insights for a CIO/CTO: Common
Features of Transformative Business
Models
By Hamish Sadler
Part of the “Insights for a CIO/CTO” Series
Introduction
If you are an entrepreneur or thinking of becoming one, you might have had this familiar
feeling of “Why did I not think of that idea?”. And you may be right about that!
However, one thing to remember is that many multi-billion-dollar businesses did not
necessarily invent a new product or service. Conversely, what you can say they created was a
transformative business model around already-existing and already-known products or
services or even technologies.
Take Lime Scooters for example. Everyone knew electric scooters existed or could become
more of a reality with advancements of battery technology. But it was “how Lime created a
working business model around them” that propelled them to the business they are today.
When many innovative business models were investigated, interestingly, a set of common
recurring characteristics emerged among them. Knowing such common features can be that
missing “bolt” in the structure of your business model which is why I would like to bring this
into your attention.
S. Kavadias et al. have thoroughly investigated tens of successful innovative businesses to find
that golden common recurring formula or DNA they all share in their business models. They
argue that new technology alone cannot transform an entire industry unless a business
model can link it to an emerging market need (Kavadias et al., 2016).
This highlights that “innovative” is not just an adjective applicable to “products” or “services”;
it is in fact also applicable to a “business model”, without which success may not be achieved.
Kavadias highlights that at least 3 of these 6 features must be present in a business model for it
to become a transformative business model. It is no surprise Kavadias argues that that
Uber has all of these 6 features, except for the “Closed-Loop Process” feature below.
As you can see below, Lime Scooters tick at least four of these six features. It’s no wonder that
in less than 11 months from January to November 2017, they reached a $1.1b valuation
(Robinson, 2018).
So let’s zoom into these common characteristics:
1. Personalization
This aspect covers on-demand configuration of products or services based on personal needs.
In the case of Lime Scooters, in my view, the very fact that scooters that are available in a
user’s proximity can be shown and found by users easily is an example of pivoting products
and their availability to custom needs of users.
2. Closed-Loop Process
Product recycling sits at the core of this feature. People like to have a way of ending their use
of products without having to through them away and business models that fulfil this need
may have a better future.
3. Asset Sharing
Aligned with the previous feature, asset sharing also aligns with people’s desire to make
money through the ownership of assets they own. This tendency can be taken advantage of in
a business model.
4. Usage-Based Pricing
The as-you-go or as-you-use temporary usage pricing model sits at the centre of some
successful business models. People don’t like long-term commitments that may leave them in
a situation where they end up paying for things they don’t use anymore or too often.
In the case of Lime Scooters, time and usage based pricing is obviously an important aspect of
the business model.
5. Collaborative Ecosystem
This is about creating and improving collaborations between supply chain partners and
distributing business risks among them appropriately.
In case of Lime Scooters, enabling the public to contribute to the battery charging process is a
strong example of this feature that in deed helps its popularity as well.
6. Agility
This is around real-time adaptation and response to market changes and skipping the
traditional hierarchies in decision making.
In the case of Lime Scooters, the battery charging economy and making it possible for
chargers to view scooters that require charging while providing a difficulty-based rewarding
scheme are examples of real-time agile response to market changes.
References
KAVADIAS, S., LADAS, K. & LOCH, C. 2016. The transformative business model. Harvard
business review, 94, 91-98.
ROBINSON, M. 2018. Uber, Google and top VCs just poured $335 million into scooter startup
Lime here's why one investor thinks it's the future of commuting [Online]. Available:
https://finance.yahoo.com/news/startup-west-coast-scooter-sharing-161119672.html
[Accessed].
ResearchGate has not been able to resolve any citations for this publication.
The transformative business model
  • S Kavadias
  • K Ladas
  • C Loch
KAVADIAS, S., LADAS, K. & LOCH, C. 2016. The transformative business model. Harvard business review, 94, 91-98.
Uber, Google and top VCs just poured $335 million into scooter startup Lime -here's why one investor thinks it's the future of commuting
  • M Robinson
ROBINSON, M. 2018. Uber, Google and top VCs just poured $335 million into scooter startup Lime -here's why one investor thinks it's the future of commuting [Online]. Available: https://finance.yahoo.com/news/startup-west-coast-scooter-sharing-161119672.html [Accessed].