New models?

Over the next ten years the very nature of competition will change. Increasingly customers will demand ever-greater choice, so that products and services are customised for market segments of one customer. Procurement will find new ways of working with suppliers - and new ways of working internally. New business models will emerge that organisations must learn to recognise and understand. This article addresses the key issues - the driving forces, the characteristics of the new business models, the keys to success and the challenges companies face.

In the traditional markets of the 20th century, barriers to entry for new suppliers were high; perfect information was an academic vision, not a reality, and conglomerate businesses were fashionable. The prevailing currencies of competition in the new, technology-enabled economy are knowledge, information and time - and a new set of rules is emerging. As a result barriers to entry are falling, information is increasingly ubiquitous and time to market is fast decreasing. In the Internet economy the prevailing model of competition is of a web of interrelationships rather than the hierarchical command and control model of the industrial economy. Unlike value chains, which reward exclusivity, the Internet economy is inclusive.

Throughout industrial history business models have adapted as markets have changed. At first competitive advantage derived from location. Access to raw materials provided advantages necessary to create and exploit temporary monopolies. But soon free markets for raw materials made it increasingly difficult to use location as the single source of competitive advantage. Innovation, new manufacturing technology and access to markets and capital became the new differentiators.

Increasing emphasis on speed and innovation and a massive demand for new products changed models again. Patent-expired innovations quickly become everyone's property and it is harder to base competitive advantage on technical monopoly. Then came the move to organisational innovation - splitting the company into small, product-focused units.

Throughout the latter half of the twentieth century organisational innovations gave rise to both minor and major temporary monopolies - for instance those based around the success of just-in-time. As organisations progressed to be more sophisticated in the use of IT, technology became an homogenising force - making companies more similar. Consequently competitiveness can no longer be based solely on location, technical or organisational innovation, since any advantages these might provide are likely to be short lived.

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