The technology shifts in the past five years are bringing about some pretty spectacular changes in the way companies do business. Not only are we moving more into mobile commerce, but disruptive business models that employ collaboration with customers (like Uber and AirBnB) are rattling the cages of traditional commercial enterprise.
This new style of doing business is dubbed the “network orchestration” model, and includes such companies as Tripadvisor, Alibaba, Red Hat, AirBnB and Uber. These are businesses that create a network of peers where participants share in value creation (as opposed to companies like Ford, FedEx, Cigna or Microsoft that either build assets, provide service or create technology).
Some of us have seen this coming for a while—what many marketers have called the sharing economy, brought about by the perfect storm of the social and mobile technology boom. Change is always difficult, and there has been some push-back from “the establishment,” such as the strike by French taxi drivers in protest of Uber, and increased regulation in some US cities brought on by pressure from hotel workers’ unions in response to AirBnB.
Research by OpenMatters, compares the network orchestration (NO) model to more traditional business models (S&P 500 Index companies), and it shows that the NO model outperforms the others in both revenue and profits. One reason for this difference is the increased flexibility the new model gives entrepreneurs, which traditional business models have a tough time competing against.
Change Requires a New Mindset
According to OpenMatters, “Today’s network-based business models require new technologies and competencies.” They have flatter structures that are more relationship-centric than traditional models. In order to compete, corporate leadership needs to study how and why this new business model performs so well and break out of the siloed thinking of the past.
I’ve said before that stagnation is the enemy of progress. The decades-old, entrenched mindset of most business leaders is one of the biggest hurdles to success. Rather than look at disruptive business models as the enemy, companies would do well to start thinking in terms of adding value through collaboration.
In his new book, Shareology: How Sharing is Powering the Human Economy, Bryan Kramer states that as these new models evolve, opportunities for traditional models to collaborate can provide a better customer experience overall:
“Imagine if Hilton started a property accreditation program and co-branded with property owners to create ‘Hilton Endorsed’ AirBnB rentals. After a thorough review by Hilton to get its stamp of approval, the rental could use Hilton linens, toiletries—even maid service. If you saw the Hilton logo on an AirBnB property, wouldn’t you trust it more? Of course you would! Combine that big-brand credibility with the surprise of a wonderful experience, and you’ve really got something…”
Empower Your Internal Brain Trust: Your Employees
A critical business asset that often gets overlooked in terms of sharing value is your pool of employees.
Employees are a woefully under-appreciated resource in traditional business models—a rich resource of ideas and innovation just waiting to be tapped. Your network of employees is your company’s brain trust, and the network works better when individuals are encouraged to connect and collaborate across the organization and even outside of it.
Empowering employees will become more and more important as traditional business models give way to network orchestration. But even today, executives need to be more open to listening to employees and inspiring them to freely network, float ideas and try new ways of doing things—even at the risk of failing.
Giving employees the tools to do their jobs effectively and the freedom to think outside the box builds trust, and trust builds motivation. Motivated employees can be your biggest business advocates to your customers and can enhance the value created with other networks such as partners, suppliers and distributors. They often come up with creative ideas that increase efficiency, enhance customer experience and save money. Your competition is looking for free thinkers and innovators. Stifling your employees is a good way to send your built-in brain trust (and your other network assets) packing.
Adapt or Die
The network orchestration business model might be a tough sell, but history’s graveyard is littered with the bones of companies whose leadership refused to adapt to changing times. Today is no different. As Charles Darwin once said, “It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.” Since the rise of digital more than half of all Fortune 500 companies have gone bankrupt, been acquired, ceased to exist, or fallen out of the index.
Companies that have embraced new business models and adapted to new customer needs, “digital disruptors,” are flourishing. Staying competitive requires more flexible thinking around business procedures, a willingness to be open to new ideas, and an appreciation for expanding and enhancing business (and human) networks.
The network orchestration business model may still be in its infancy, but it’s foolish to ignore its benefits and stay comfortable in the status quo. Business will continue to evolve in the human economy.