Digital transformation, Entrepeneurship, Innovation

The new companies of the digital society

February 10, 2020

We can clearly see a difference between traditional business models so present in the entire 20th century and new business models and products pushed by several startups since the beginning of the 21st century. In a world that doesn’t look like it’s slowing down, what will be the next revolution on investors’ and entrepreneurs’ mindsets?

Let’s compare the traditional and the new business models to understand the difference, and then compare to most recent movements that can give a tip about what’s to come.

20th century: the traditional business models

For this comparison, I’ll use the Gerdau (former Ameristeel) scenario. Gerdau is a company founded in 1901 which primarily works with the Iron and Steel commodities. They produce bars, beams, rebars, semi-finished, and value-added iron. They are also vital for the production of high-quality steel for ships, oil platforms, and cars.

Their business model is B2B. They don’t focus much on the end-user. Despite recent changes, they are not on the same wave of startups and disruptive business models. Related to social impact, they do have international seals of commitment to the environment.

Very straightforward: we can say they produce the best iron in the world. That’s it. They built an empire of $11 Bi with a single source of raw material that is present in all the continents.

Gerdau logo

21st century: the current Startup business models

In the past, we had big companies excelling at broad product offers. Nowadays there are many startups we see excelling at taking one single problem of our society and solving them.

We are in the experience era. There are startups pushing banks to digitalization. Also, startups pushing old business models like taxis and hotels. There are also startups putting just a layer of experience over existing products, and making a huge success.

Duolingomade learning another language something enjoyable, simple and gave autonomy to people who want to study. All of that through a different experience of learning.

Duolingo landing page

Nest has been doing good on residential automation/control. You remember this one below?

Old thermostat

It has plenty of information and sometimes is confusing. It shows current temperature, the temperature set, the fan speed, the modes(?) in use, and more. Honestly, I’m already lost just after listing these features.

New thermostat

Now check this one from Nest. It has a futuristic appeal, but it also made controlling the air conditioner temperature simpler. All you have to do is turn clock or anti-clockwise to adjust the temperature. Then the system does the rest. It also shows you the time windows when you are saving energy and learns from your habits.

In the past, successful companies were those with broad set of products and services. For the experience era, companies growing exponentially are those focusing on the experience. But what about the future?

3rd wave to come: the new companies of the digital society

Consumers are changing their demands. Millennials are reaching profitable ages. Because of that, they are pushing companies in some directions, and we must pay attention to it.

Also, millennials are native influencers. They influence and inform their families. Teenagers and even children may not have 10 friends, but they have 10 thousand followers on YouTube and Instagram.

The new consumers are people willing to stop buying from a brand and start buying from another based on how it positions itself to social causes. Nike’s Kaepernick is a good example of a brand that stood for a social cause. Even after stocks falling and fans boycott of known products, Nike was wise enough to release the manual “how to burn our products safely” below. Watch the original full ad for Nike and Kaepernick here (you can also find more details here).

How to burn our products safely

Nike (as seen above) is one example of companies standing for social causes. Tom’s with its former “buy one give one” is another good example. Johnson & Johnson is within the companies that donate more vaccines to causes in Africa. At last, Google has been using 100% of renewable energy on its data centers and offices since 2017.

For the third wave, it won’t be enough to have a broad set of services or products. Adding experience to them will be cool, but the experience will turn into a commodity as well eventually. The successful companies of the future will be those willing to stand for real social problems, both being supported by their fans and supporting them.

Do you see your company moving towards this direction? And how can you keep helping to turn the world into a better place?

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