Business Models

Both Business Models and Job Roles Run the Risk of Being Substituted. Here's How

While traditional competitors with similar product or service mix are important, it is the non-traditional competitors who are disrupting business models and job roles
Both Business Models and Job Roles Run the Risk of Being Substituted. Here's How
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Strategist & Management Consultant
6 min read
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The Media Industry Business Model is Shifting

Chris Anderson, editor-in-chief of the Wired Magazine has provided a good description in his bestseller ‘The Long Tail’ on how the media industry is undergoing a business model shift. He talks about how the trend of creating content for masses like movies or TV soaps, which used to bank on blockbusters to drive profits, is changing. There is now an alternative market created by digital media targeted to individual viewers and content is now being tailored as per an individual’s preferences. We are now moving from mass markets to mass customization, from one big screen (movie theatre) to multiple small screens (mobile, iPad), from one fixed place of content delivery to anywhere delivery through the internet. In a way, there is a new Media business model that poses credible threat to the traditional business model.

Video Conferencing is Challenging the Travel Industry

Another example that strikes me is how video conferencing has challenged the travel Industry. With faster and cheaper connectivity cost and falling equipment price, video conferencing is a strong business appeal. It is so seamless, that if you are sitting in your Mumbai office, you feel like being in the same room as your North American colleagues, chatting with you in your New York office. The same is happening to voice and SMS services of telecom companies, which was the major revenue driver is now shrinking. Instant messaging apps that provide voice calls, video calls and messaging features, all against a monthly subscription fees has credibly threatened the tradition revenue streams of Telecom companies.

Porter’s Five Force Model


We can understand this further using the Porter’s Five Force model. While the industry players fight for market leadership, benefits from competitive forces are often captured by customers and suppliers, in terms of higher efficiency or better prices. The industry players also have to deal with threats from new entrants and threats from substitutes. The bigger risk is when the industry players don’t realize that substitutes can become credible threats to their business model.

Digital Payment as Substitute to Banking Payment Instruments

If substitutes offer more benefits to customers, they will gradually move to the substitute just like if air fares are high, people will switch to video conferencing as a cost cutting measure. Another example is the digital payments provided by Fintech companies that are substitutes available to the banking customers, who pay using cash or other banking instruments like cheque, demand orders or online banking.

Though a bit circumstantial, we saw a huge uptick for digital payments using payment apps from Fintech providers in India. Though Fintech was growing over the past few years, when notes of large denomination were taken out from circulation in November 2016, we saw a huge jump in adoption rates for these Payment apps.

These FinTech players now pose credible threat to the banking industry and have partially, if not completely, substituted the payments line of business and now gradually diversifying into other lines of business.

Job Roles Disrupted

While the business models are being disrupted, so are job roles. The notion of gathering educational pedigree in the first 25 years of your life and then use that for the next 35 years on the job is severely challenged today. While old business models shrink and new business models replace them either completely or partially, the job roles relevant to old business models will also shrink. Hence, to be relevant in the new business models, one needs to reskill themselves.

Business models and job roles are quite inter-related; one defines the other. For example, if you are running a retail business, based on your scale, you will have to figure out how many regional managers, area managers, store managers, customer service managers, cashiers etc. you will need to support business operations smoothly.

The underlying assumption here is that you have a brick-n-mortar retail business and hence need these job roles. When you are running a retail e-Commerce site i.e. a digital retail business, while some of the job roles would be common, there would be many roles which are specific to the digital business model.

New Job Roles Substituting Old Ones

As the digital business model substitutes the traditional business model, you find the new job roles will substitute the old ones. Many professionals will reskill themselves to suit the digital business model while others who are not able to do so, become irrelevant or get stuck in the traditional business model.

The common dimension that impacts business model and job roles alike is technology. Technology advances often disrupt existing business models and cause job roles substitution through automation. It does create new job roles with necessary skills to manage the new and more technology enabled business model.

Technology shifts often create value that is captured by one or more participants in the Five Force model and when Substitutes capture that value, they threaten the established business model.

Businesses though cannot shield themselves completely from the threat of substitution, they do need to invest in few areas that will help them manage this threat.

Increased Industry Boundary for Strategic Planning: Increase your view of the industry and conduct competitive analysis to include players beyond typical competitors. It is important to understand what can cause a threat to your business model and focus on such players. For example, while Data Center providers were focused on typical competitors, the players like Amazon Web Services, Microsoft Azure, Google Cloud etc. disrupted the entire landscape by providing Infrastructure and Platforms as a Service, changing business model from CapEx to Opex. It was no longer a requirement for businesses to invest in their own Data Centers when you can rent one on the Cloud.

Innovation Through Select Acquisitions: Create a watch-list of interesting startups in emerging space and acquire one if it fits your strategy. With the PSD2 i.e. Revised Payment Service Directive implementation in 2018, the retail banking sector is poised to be disrupted. A number of interesting FinTechstartups have come up who are using this opportunity to create financial solutions on top of bank’s data and infrastructure holding customer information that will now be available to them through open APIs. Perhaps, for banks to stay competitive, they would need some of these cutting edge solutions and make it part of their portfolio and hence keep customer loyalty in place

Drive Relevance Together along with Your Partners: While new technology and new players disrupt the marketplace, you need to keep your workforce relevant by reskilling them. It is also important that you work with your partners and help them stay relevant as well. This will ensure that your ecosystem is able to support you when needed.

(Views expressed are author's personal and don't necessarily represent any company's opinions.)

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