According to BCG, Business model innovation is the art of enhancing advantage and value creation by making simultaneous—and mutually supportive—changes both to an organization’s value proposition to customers and its underlying operating model. Professors Girotra and Netessine, economists of Cornell and Wharton universities, have presented a framework for identifying opportunities and becoming systematic about the process of taking business model innovation to the level of a reliable and improvable discipline.
Since business model innovation comes down to making changes to how a business earns its revenue, incurs its costs, and manages its risks, it should be seen as a continuous process rather than an organizational project task. Additionally, the procedural aspect comes another pre-condition for sustainable business model innovation: decentralization. Decentralization entails the non-existence of a central authority that aggregates power and defines all decision-making and the necessity to collaborate. Working in a decentralized network, all participants must co-ordinate their individual responsibilities and work packages. They have to agree upon a governance framework that defines the network’s rules and processes.
At first sight, decentralization is nothing you would expect to take place in a typical enterprise. Typically, companies or other organizations are hierarchically structured, with strategy and major decisions defined by an executive level, and lesser important aspects organized downwards in the org chart. Some organizational structures, e.g., the matrix organization, have implemented elements of decentralization. However, you won’t find a traditional organization besides cooperatives that would do without a top-down command chain.
Since I have never been a huge fan of classic centralized structures, Blockchain technology has been warmly welcomed. For the first time, a foundational technology allows for decentralized structures and processes in the real world — by leveraging its inherent components of trustlessness, immutability, and security. For me, Blockchain is the paradigm shift needed to build and develop future businesses aligned with the Sustainable Development Goals. In decentralized systems, enterprises become part of an overall protocol to add their organization-specific elements, s.a., brand, expertise, products, and services. Mechanisms ensure that each participant receives a fair return on investment into the network, depending on their contributions.
The Next Level Of Business Model Innovation — The Decentralized Network
On the basic level of a decentralized system, all participants collaboratively build, develop, and maintain foundational aspects of technology, legal, regulatory and organizational affairs. On the second level, participants coöperate in running transactions in the decentralized network. On the third layer, participants can compete with one another, building their individual applications on top of the jointly created platform. This 3‑layered Network Model is sustainable and resilient against economic downturns. However, it is far from being easily created. The challenges of setting up such a model mostly lie in overcoming the traditional beliefs of many top-level and most middle-level managers in enterprises, who try to preserve legacy organizational structures and processes. For them, terms, s.a. open-source, decentralization, or collaboration sound harmful to the economy. At least they are signs of weakness: who would collaborate or share IP if profits should be maximized when used proprietarily?
The simple truth is that the size of the economic cake isn’t fixed. And, the more enterprises collaborate, the lower their fixed costs. In other words, collaboration pays-off. It does not only pay-off but is an indispensable presupposition for environmental-friendly, sustainable businesses. While many large enterprises have learned that cooperating on individual levels makes sense, only a few of them are ready to move to the next level and integrate not another model in their organization, but — vice versa — integrate their organization in a new (business) model. A generally more negative economic outlook, combined with the actual COVID-19 pandemic, will motivate more enterprises to think about entering the new level of business model innovation and joining decentralized networks in their respective industries.
I’m quite positive about the GAIA‑X Federated Data Infrastructure for Europe initiative that we, with Datarella, have joined recently. Its general approach is a truly decentralized one: (competing) enterprises and organizations from different domains come together. They are asked to join forces to create a (standardized) data infrastructure. In 2021, we will see whether the GAIA‑X participants will make the open, decentralized intent come true!