Disappearing business models – are you going to exist in the future?

Greetings EarthlingYour worst enemy when running a business is to become disillusioned of your greatness and maybe even having reality distortion when you think that there is nothing that will change my business model as “my product is the best that was every created”. I am sure there are many examples of that including RIM with its iconic Blackberry which even I used for years due to its amazing keyboard. I discovered an article today in Harvard Business Review that gives lots of excellent examples of disruptive industries: and how breakthrough technologies and new business models are “destroying the old rule that bigger is better“. I have always said that if you want to be best in the world in what you do, it does not take huge amount of people to accomplish that. You can be the best if you decide so and work diligently towards that goal. Keep in mind that you do not always have to be the largest company in the world to be regarded as leader in your domain.

The Harvard Business Review article brings another concept to our attention which is “economies of unscale” where the vendor looks at the market by “exploiting the vast audience afforded by the Internet, and taking advantage of a host of modular services, small becomes the new big”. What is happening in the software world specifically is the transformation of how software services are changing many different areas such as payment services.  If you review new payment services (Stripe and Square) or  industries such as prescription eyeglasses can be offered for $99 (Warby Parker). I could continue on this list of other disruptive services that have already made a dent on many players specifically in the software world. What the article is describing is the trend where innovative entrepreneurs can capitalize on Internet as a vehicle to create things (both digital and physical) in a new way. A  good example is Khan Academy which is growing like wildfire providing thousands of educational sessions for people to consume regardless of location.

What can software vendors learn from this? I have researched the impact of app ecosystem on software vendors and how software management team members should view apps and the impact it might have on traditional vendor. There is a tremendous drive to build consumable services (some call them composite apps) that are used by different devices. What is important to understand is that these services have different requirements when compared with the past. We were used to selling “good enough” and maybe even buggy software, but that is no longer tolerated in the world of Software-as-a-Service and apps. Solutions have to be simple to use, software vendors have to make them “sticky” so app consumers would like to return to the service. Many solutions are driven by location-based information and there are many APIs that can be used to drive content such as Foursquare API.

If you do not think this is the trend, just watch how the youth of today are using software. Simplicity is returning and therefore I believe that there will be more discussion of Minimum Viable Product (MVP) development  when innovating new services, even for large and more established software vendors.  It does not make sense to recreate what you already have and then conclude that it is already outdated. If I were a software vendor, I would take a hard look at how apps and app strategies with Cloud services will change the way things are architected and how the software vendor can play in the overall ecosystem. The software vendor wants to become part of the ecosystem, define the value and role and ensure that others have an interest in consuming services that it exposes to the world.  This is not future trend, this is the reality in many organizations. There is lots of innovation happening in pure mobile apps that will be the main interface to large cloud service solutions. It is amazing how much things have changed in 10 years. If you are still skeptical about what is happening, spend some time doing internet search and start listing new disruptive technologies that have taken down more traditional companies. I know quite a few of these.

photo by: jurvetson

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