In economics, one of the most famous and taught concepts is the demand curve—it depicts the relationship between price and quantity (high price, few buyers; low price, many buyers).
Typically it is combined with the supply curve to explain market dynamics and provide guidance on pricing and production. Of course, everybody knows that these curves are oversimplifications of a much more complex reality—they are seen as useful tools nonetheless.
Sadly they don’t work that well anymore.
Our business models don’t either.
Most of today’s organizations were built from models developed decades, if not hundreds of years ago. That was all well and fine when we lived in a world which was mostly stable and somewhat slow-moving. However, that is just not true anymore.
Today’s world is best described by the acronym VUCA: A world full of volatility, uncertainty, complexity, and ambiguity. Which also means that we need to adapt our organizational structures. The command and control model is not adaptable enough, hierarchies are loathed and slow, and matrix organizations are the holy mess of organizational architecture.
We live in a world which sees its fundamental assumptions being turned upside-down, from physical to digital goods, from products which were once scarce to ones which are now abundant, from printed money to cryptocurrencies, from labor to robots, from human thought to AI. All this results in a world which operates on a whole new set of business models—ones which are born in and made for, a digital-native, exponential age.
Let me give you an example: We already know that many companies don’t bother charging for their products anymore when the value is in the data their users generate. Moreover, increasingly it is not the company itself which is harvesting the value in the data (e.g., through advertising) but 3rd parties which take the data, combine it with other data sources, and create wholly new offerings based off of this.
Having had the privilege of working at Mozilla, an organization which, at the time, was similar in structure to Dee Hock’s Chaords and now working with a bunch of organizations which fall somewhere on the holacracy spectrum, I have come to believe that there is not a one-size-fits-all system but rather the need for each organization to find its own.
What all the successful organizations have in common, though, is a strong shared vision (what my friend Salim Ismail calls “an organization’s Massive Transformative Purpose (MTP)”) and an alignment on the way the organization operates. Once you have that, you and your people will figure out the how, which will become a reflection of your organization’s DNA.
This is all incredibly exciting for entrepreneurs—as it means that there are entirely new markets (and models) to be created from the ground up. I tell the entrepreneurs I work with to pay attention to this and spend time deeply thinking through their business models, how they might already be built on a new foundation and how to further extend on their insights. Empires will be created on new economic models.
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A version of this post was originally published on The Heretic as The Business Models They Are a-Changin’.