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BUSINESS MODEL
44 THE EUROPEAN BUSINESS REVIEW SEPTEMBER OCTOBER 2021
Companies must embrace digital trans-
formation and adapt to new consump-
tion behaviours to survive. This calls
for a rethinking of their business models while
facing the risk of disruption, handling activist
consumers and their expectations, and adopt-
ing daring transdisciplinary approaches to
tackle business complexity. To do this, three
paradigm shis are recommended. We discuss
these below.
WHEN DISRUPTION IS THE NORM,
LEADING A MARKET MEANS
DIGGING ITS GRAVE
Modern business strategy is still largely based
on Michael Porter’s view and concept of compet-
itive advantage, which ranges from owning an
The rise of the cyber-economy has made it considerably
easier to start a business. One can register a company
online, develop a virtual prototype with high-quality
soware, target customers via sophisticated machine-
learning models, and have products manufactured
and shipped all around the world by professional
manufacturers. Crowdfunding platforms complement
venture capital and business angel oers, while online
consulting companies provide all the support functions
and services. For many B2C industries, vertical
integration has been minimal, subcontracting easy, and
entry barriers have been broken down, thereby allowing
actors to specialise in what they do best. As a result of
technological innovations, the new economy has become
radically more complex and competitive.
BUILDING AN
ETHICAL
COMPETITIVE
ADVANTAGE IN
TIMES OF GROWING
COMPLEXITY
by Hubert Etienne and J. Mark Munoz
www.europeanbusinessreview.com 45
exclusive technology to having pref-
erential access to strategic resources
or economies of scale. According to
Porter’s famous analysis, the state of
competition in an industry is artic-
ulated around ve basic
forces: the bargaining
power of suppliers,
that of consumers, the
threat of new entrants,
the threat of substitute
products or services,
and competitive rivalry.1
Without rejecting the
relevance of this schema, we recom-
mend taking on new perspectives to
meet the changes that have occurred
in the markets since the 1980s.
Porter’s representation is founded
on a kind of conservative ethics,
which assumes the maintenance of
an equilibrium between the forces
at play. However, whatever attractors
a dynamic system is driven to by its
internal forces, these are dened in
such a way that promotes neither
social good nor competitiveness.2
Once constituted as an oligopoly,
a small number of large actors
still have an incentive to compete
between themselves to gain market
share against each other. However,
they have a stronger interest in
protecting the system to which they
are well adapted. With rising barriers
against new entrants and the absorp-
tion of exogenous disturbances, such
as innovations, they benet from
preserving the overall stability of the
system.
Recent industry
disruptions have warned
us that the barbarians
are at the gate, and if
you do not let them in,
they will tear the castle
down. Airbnb provides an
edifying example of such
a phenomenon. It built a
business model orthogonal to most of
the hospitality sector’s KPIs, and more
resilient due to lower capital needs.
Following its recent IPO, the company
is now valued as high as the three
biggest hotel groups globally. Revolut
is another example of a company
that is challenging well-established
Daniel Krason / Shutterstock.com
Recent industry disruptions have
warned us that the barbarians are at
the gate, and if you do not let them
in, they will tear the castle down.
46 THE EUROPEAN BUSINESS REVIEW SEPTEMBER OCTOBER 2021
institutions with its innovative busi-
ness model. Entirely data-driven,
the six-year-old ntech company
provides 12 million users with access
to a quality of services that cannot be
replicated by retail banks.
When disruption is the norm,
every system is in crisis and
stability can only refer to the speed
of the system’s degenera-
tion. A market’s growth does
not tend towards its matu-
rity but its death, a reality
that CEOs should expect,
prepare for, and even accel-
erate. Accepting that your
company may fail, as Jeff
Bezos has recently claimed
Amazon may, is a positive but
insufficient first step. From
this perspective, new entrants only
represent a threat if you are not
planning to be the next one out.
Post-mortem analyses should thus
be used not only to investigate the
extent of the lethal options, but
also to explore the possibilities for
their implementation.
Only the dominant players have
something to lose with a change
of system. This is why most actors
would not expect them to dig their
own graves. However, a company
should be distinguished from the
market it operates in. Instead of
tracking the next move on the
market, players should prepare the
next market to move on, leveraging
their strength on the closing market
to bring customers into the opening
one. By doing so, they ensure a
favourable entrance for themselves
into a market they have designed
according to their strengths and their
competitors’ weaknesses. By shut-
ting the market down, they also cut
the ground from under their compet-
itors’ and potential new entrants’
feet. This market shi would conse-
quently reduce the relevance of their
ongoing innovation projects.
Uber have demonstrated an
example of this process. First, it
disrupted the taxi market, then
it changed the fundamentals of
this new market by introducing
options for self-driving cars and
planes. The key challenge consists
of convincing customers to move,
not just from one product to
another, but from one market to a
new one. In contrast to the conserva-
tive aspect present in Porter’s schema,
this evolutionary approach could help
companies progress towards more
customer-oriented and ethically
driven markets.
The source: techcrunch.com
Image Credits: Revolut
First, it [Uber] disrupted
the taxi market, then it
changed the fundamen-
tals of this new market by
introducing options for self-
driving cars and planes.
BUSINESS MODEL
www.europeanbusinessreview.com 47
RESPOND TO ACTIVIST
CONSUMERS WITH AN
ETHICAL COMPETITIVE
ADVANTAGE
Porter’s model relates to an equilib-
rium of forces which have signicantly
changed over the past decades. The
increase in competition has nega-
tively impacted suppliers’ power while
multiplying the substitutive options.
Consumers have greatly beneted
from this evolution and now occupy
the centre of the competitive rivalry.
Customers have gained an
important collective power
through three main channels:
1 a rise in supply, increasing
the number of substitutes and
dragging prices down
2 better access to informa-
tion through consumer watch,
aggregation and comparison
platforms, and information
access facilitators (e.g., Yuka)
3 world-scale platforms gath-
ering users by affinity and
enabling them to trigger and
coordinate collective actions
In light of the immense challenges
of our times, consumers have
also changed their consumption
behaviour. As famously theorised
by Thorstein Veblen,3 a purchase
always claims two ends: one prac-
tical, associated with the function of
the product, and one socio-ontolog-
ical, dening the buyer. The more
numerous the options, the more
decisive the choice. The new gener-
ation of customers associates this
second function more directly with
a contribution to a political cause.
Activist consumers now take ethical
Audio und werbung / Shutterstock.com
48 THE EUROPEAN BUSINESS REVIEW SEPTEMBER OCTOBER 2021
considerations into account in their
consumption choices, voting with
their wallets for companies engaged
in fair trade, supporting short circuit
production, or paying particular
attention to animal welfare.4
Consumer pressures have already
forced industries to enact
drastic changes. These pres-
sures have been used to
advocate for ending child
labour in the sportswear
market, banning the use of
fur from haute couture, or
shiing towards more envi-
ronmentally responsible
practices. Until recently, with the Wall
Street Boys’ raid on GameStop’s stock,
a professional trader would never
have expected that taking a short-
selling position against a company
could trigger a worldwide collective
backlash costing billions of dollars to
some of the largest investment funds.
In addition to the pressure directly
exercised by consumers, companies
also receive indirect pressure from
brand ambassadors supporting their
marketing campaigns. These ambas-
sadors oen use their inuence to
support causes. As social inuencers,
they also have their own brand image
to manage, thereby incentivising
them to stay away from potential
company scandals. The French foot-
ball player Antoine Griezmann
recently broke his contract with
Huawei because the rm is suspected
of supporting China’s repression of
the Uighurs. Avoiding scandals is
essential for companies, but their
actions in this regard may dier
from those they might take in order
to deal with justice systems. Unlike
a lawsuit, which can be delayed over
years and a ne provisioned for, a
public scandal leads to immediate
sanctions, directly impacting the
company’s revenue and stock price
and constituting a negative goodwill
over the long term.
Given that the socio-
ontological function of
consumption has become
a rst-choice criterion
for customers choosing
between a vast number
of options, companies
should respond to this
demand. Larry Fink acknowledged
this new imperative in his letter to
the CEOs of BlackRock portfolio
companies, encouraging them to be
explicit about their rms’ ‘purpose’.5
Today’s employees and customers
do not solely want to avoid having a
guilty conscience when working for
or buying from companies that are
abiding by the law and respecting
Companies need to turn away from
business pseudo-neutrality, pick
up a fight, and explicitly define
strong values they aim to support.
BUSINESS MODEL
www.europeanbusinessreview.com 49
some ethical standards. They also
want to leverage their work and
consumption power as an entry key to
a community of people, engaged in a
collective adventure and supporting a
certain vision of the future.
Addressing this demand calls for a
greater eort than merely advertising
the company’s good practices and
managing scandals via
traditional crisis commu-
nication. Companies
need to turn away from
business pseudo-neu-
trality, pick up a ght,
and explicitly dene
strong values they aim
to support. They should
also respond to consumer
demands for emotional engagement
with brands, setting up multidirec-
tional communication with eective
feedback loops to develop trust and
increase engagement. Beyond a rm’s
culture or identity, companies need
to embrace a specic vision for the
future of society and back their plans
with a viable public relations political
philosophy, as originally theorised by
Edward Bernays.
6
Although his moti-
vations were ethically questionable,
Bernays’s analysis was correct, as he
understood that American women
would not buy cigarettes without a
reason, unless smoking was asso-
ciated with political activism and
supported a certain conception of
society. Consumption behaviours
demonstrated by favouring certain
branded products over others increas-
ingly tend to be interpreted through
the prism of Ernest Renan’s denition
of a nation as a ‘plebiscite of everyday’.
7
It is becoming vital for B2C busi-
nesses to attract a community of
consumers to a common project
while developing a trust relationship
to increase their engagement. It is
necessary to foster their purchasing
potential for profitability and
ensure their continuous loyalty,
thereby hedging against any poten-
tial scandals. It is also essential to
collect their data to understand
the evolution of the market and
of consumer expectations. Such
knowledge is crucial to best prepare
for the opening of the next market
and convince consumers to follow a
future shift in direction.
The classic SWOT matrix does not
allow comparisons between compa-
nies on such grounds. Instead, we
suggest adapting Fogg’s behaviour
model for persuasive design to busi-
ness strategy.8 It is based on two axes:
ability and motivation. Motivation
would refer here to the appeal of
the company’s ethics: how much do
customers appreciate the project that
the company supports for the future
of humanity? Ability would reect
the customers’ ease when supporting
the company’s project with their
purchasing power (i.e., depending on
the product’s quality, price and distri-
bution coverage). When combined and
projected on to a graph,
these two parameters
dene an ethical competi-
tive advantage that allows
comparisons between
companies in the market.
The x-coordinates can be
captured by aggregating
proxies such as prices
and quality scores among
a set of substitutable goods. The y-co-
ordinate may then be determined as
the spread between the theoretical
indierence curve of the parameters
aggregated in x and the empirical
distribution of purchased goods per
class of consumers based on their
purchasing capacity. Employer
appeal may also be integrated into
the graph in a third axis leveraging
employees’ satisfaction surveys,
employers’ rankings, or the compen-
sation elasticity of job demand.
FIGURE 1 The ethical competitive advantage
In this illustration, the green
company has a competitive
advantage over the blue and
the red companies. It offers
the best trade-off between
the appeal of the compa-
ny’s project and the effective
capacity for consumers to
engage with it.
ABILITY
MOTIVATION
high
easyhard
low
Consumption behaviours demon-
strated by favouring certain branded
products over others increasingly
tend to be interpreted through the
prism of Ernest Renan’s definition of
a nation as a ‘plebiscite of everyday’.
50 THE EUROPEAN BUSINESS REVIEW SEPTEMBER OCTOBER 2021
COMPETING IN THE AGE
OF COMPLEXITY REQUIRES
A CROSS-DISCIPLINARY
PERSPECTIVE
Advertisers have been using the mech-
anisms of mirror neurons and the
mimetic desire theory
9
to trigger
tailored consumption desires
for decades. Digital platforms
are now leveraging persuasive
design and computer-generated
cues to protably shape user
experiences. When buying a
plane ticket, it is nearly impos-
sible to make an online booking
from a platform not supported
by machine learning algo-
rithms that use behavioural
economics to recommend
prices based on dynamic
pricing strategies. As products
and services become increas-
ingly sophisticated, companies need
to navigate new challenges and nd
creative ways to lead the market.
Although diering in their product
and service oers, B2C companies all
need to better understand consumer
behaviours and expectations in order
to be successful. Data sciences are
being increasingly used to this end,
so it has become crucial to secure a
trust relationship with consumers to
allow freely consented data collec-
tion. Data analysts can then process
and evaluate a large amount of data
to detect relevant market signals
in order to support strategic deci-
sion-making. However, this shi in
approach only deals with the rst
issue of complexity, in reference to
the technical sense of the word.
The second issue of complexity
relates to accessing a deeper layer
of abstraction in order to produce
information that can help advance
the sophistication of products and
services. This challenge requires
social scientists to leverage philo-
sophical, sociological, psychological
or anthropological theories to
interpret the structured data
and give it meaning. The age
of business complexity thus
calls for both data scientists
to analyse the data and social
scientists to understand it.
Most companies will prob-
ably not hire social scientists,
but those that do are best posi-
tioned to lead their market
through groundbreaking
insights. Social scientists
will be valuable not only for
supporting the analysis of
consumer behaviours (e.g.,
identifying psychological patterns,
anticipating concerns, or explaining
cultural dierences between
regions), but also for building
effective communication between
brands and consumers to ensure
The age of business
complexity thus calls for both
data scientists to analyse the
data and social scientists to
understand it. Most companies
will probably not hire social
scientists, but those that do
may have the opportunity to
lead their market through
groundbreaking insights.
BUSINESS MODEL
www.europeanbusinessreview.com 51
trust and enhance the company’s
philosophical vision. As iden-
tied by Porter,10 governments
have their role to play in such an
ecosystem, notably in supporting
the education and hiring of these
social scientists.
Contemporary business has
elevated the level of operational
complexity on dierent fronts
and across multiple levels. Within
such a scenario, a paradigm shi
is timely and necessary. To survive
in these uncertain times and in
uncharted market territories,
companies need to be prepared to
alter their market focus, commu-
nicate in inventive and emphatic
ways, and strategise using a cross-
disciplinary perspective.
Hubert Etienne is a Ph.D candidate in philosophy
at Ecole Normale Supérieure and Facebook AI
Research. He is a lecturer in data economics at
HEC Paris and a lecturer in AI ethics at Sciences
Po, Polytechnique and ESCP Europe.
ABOUT THE AUTHORS
J. Mark Munoz is a Professor of
Management and International
Business at Millikin University
and editor of the book
Global
Business Intelligence
.
1. Porter, Michael E., ‘How Competitive Forces Shape Strategy’,
Harvard Business
Review,
March 1979.
2. On the ethics of equilibriums and attractors in economic systems, see Dupuy,
Jean-Pierre,
Pour un catastrophisme éclairé. Quand l’impossible est certain,
Paris, Seuil, 2002.
3. Veblen, Thorstein,
The Theory of the Leisure Class: An Economic Study in the
Evolution of Institutions
, New York City, NY, Macmillan, 1899.
4. A recent McKinsey study rated the ‘Millennials and gen Z effect’ as the
third-most-important disruptive trend to have modified the good consump-
tion model: Kopka, Udo; Little, Eldon; Moulton, Jessica; Schmutzler, René;
and Simon, Patrick,
What got us here won’t get us there: A new model for the
consumer goods industry
, McKinsey industry white paper, July 2020.
5. https://www.blackrock.com/americas-offshore/en/2019-larry-fink-ceo-letter.
6. Bernays, Edward (1928),
Propaganda
, Brooklyn, NY, Ig Publishing, 2004.
7. Renan, Ernest (1882), ‘Qu’est-ce qu’une nation?’ in Renan, E.,
Discours et
conférences
, Paris, Calman Lévy, 1887.
8. Fogg, BJ,
Persuasive Technologies. Using Computers to Change What We Think
and Do
, Burlington, MA, Morgan Kaufmann, 2003.
9. Girard, René,
Mensonges romantiques et verité romanesque
, Paris, Grasset, 1961.
10. Porter, Michael E., ‘The competitive advantage of nations’,
Harvard Business Review,
March 1990.
REFERENCES
