New models for a different landscape

  • News
  • Monday, 24 Jul 2017

New business approach: McGhee shares insights on the business models of the future.

NEW technologies are changing the way businesses run, enabling new business models to prevail, and SMEs have been advised to look at how these emerging business models can support their growth.

New models can provide better blueprints for creating value, says ACCA director of professional insights Maggie McGhee, which give small businesses a huge opportunity to expand their customer base and create new platforms to develop themselves.

“They can make some of the best opportunities out of this because small businesses can change quickly and they are agile,” she adds.

In a report titled ‘Business models of the future: emerging value creation’ that was published earlier this year, ACCA outlined six emerging business models that are expected to thrive in the future. These are platform-based businesses, mass customisation 2.0, ‘frugal” or low-cost model, modern barter, pay-what-you-want model as well as the mega hyperlocal model.

The tumbling cost of technology, rising startup culture, availability of new tools, network capital and an evolving socio-economic environment have affected the way businesses serve their customers and how consumers acquire their goods and services. This has levelled the playing field somewhat for small businesses against larger companies.

McGhee notes that platform-based businesses, which are digitally enabled marketplaces to match buyers and sellers, are already thriving with the likes of Uber and Airbnb. Similarly, the rise of on-demand versus in-store purchases and growing support for local brands have helped models such as mass customisation 2.0 and mega hyperlocal to prosper.

“These models, or a combination of them, present routes to changing the ways that people live and work. Many of the models overlap and this points to an emerging ‘plug and play’ culture where features can be combined to create hybrid solutions that apply to specific opportunities for meeting customer needs in the 21st century. This contrasts with the rigidity of a one-size-fits-all past,” she says.

Although these models are relatively new, McGhee opines that they are sustainable models for the future. She notes that models such as marketplaces and barter systems have existed for hundreds of years.

However, the new models are much more about looking at the holistic impact of businesses.

“It’s not just about the bottomline. You’ve got to look at the value that is created for the society as a whole. So it’s actually bringing in a much more inclusive society and not just focused on the small percentage of very wealthy organisations or individuals.

“Already there is a move away from just short-term profits for businesses and towards longer term value-creation for organisations. An example of that is integrated reporting, which is not just about the financial numbers, but also about what impact am I having in terms of human capital. How do I treat my employees, do I pay them a fair wage or am I giving them the right training and development? There is also the environmental capital about how I am using finite resources.

“So it’s important for businesses to think long term and make the right decisions for its long term sustainability or the long term sustainability of the wider society,” she explains.

Granted, it may be more difficult to precisely measure the different elements under integrated reporting, but McGhee says it is not impossible.

“You can look at how you create the right culture and then measure the productivity element from it, for example. If you think about the value of a company according to its accounts, and then value the company by its share price, the share price will usually be around 85% higher than the value of the company in the accounts. So you’ve got this huge intangible value that the market already measures.

“So I think all this intangible value for a company with these new models can be measured, it’s just more difficult. But it doesn’t mean companies shouldn’t try,” she says.

No doubt, it will be easier for new companies to adapt and take advantage of the new business models but McGhee says established companies can still bring the entrepreneurial spirit into the company.

“Bigger companies may not necessarily be the driver. They can partner with innovators and bring them in to deal with individual projects or invest in them. Let’s remember that innovation continually happens. You will have more innovation coming through. So ultimately, you have to work in partnership to bring in the innovation,” she adds.

McGhee urges small businesses to explore these new models and to look at new ways of evaluating their businesses to ensure that they are not left out in the changing business landscape.

“The disruption will happen so I think it’s important that rather than run away from it or pretend it wouldn’t happen, that you run with it and embrace it.

“And they will embrace it in varying levels and degrees. Not everyone will become a master in digital overnight,” she says.

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Business , ACCA , business models , SME


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