Business models of the future: emerging value …

1 HIGHLIGHTS. Business models of the future: emerging value creation About ACCA Why does the Business ACCA (the Association of Chartered Certified model matter so much Accountants)is the global body for professional accountants. It offers Business -relevant, first-choice today? From technology qualifications to people of application, ability and ambition around the world who seek a rewarding career to demography, the in accountancy, finance and management. ACCA global economy is supports its 188,000 members and 480,000 students in 181 countries, helping them to develop successful entering a new era. careers in accounting and Business , with the skills required by employers. ACCA works through a network Reappraisal of value of 95 offices and centres and more than 7,110 Approved proposition, value Employers worldwide, who provide high standards of employee learning and development. Through its public creation and value interest remit, ACCA promotes appropriate regulation capture can open up of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and new opportunities for influence.

2 Companies to thrive. In June 2016 ACCA formed a strategic alliance with Chartered Accountants Australia and New Zealand (CA. ANZ). The alliance represents the voice of 788,000. members and future professional accountants around the world, who share the commitment to uphold the highest ethical, professional and technical standards. More information is available at: About the ESRC. The Economic and Social Research Council (ESRC) is the UK's largest funder of research on the social and economic questions facing us today. It supports the development and training of the UK's future social scientists and also funds major studies that provide the infrastructure for research. ESRC-funded research informs policymakers and practitioners and helps make businesses, voluntary bodies and other organisations more effective. The ESRC also works collaboratively with six other UK. research councils and Innovate UK to fund cross- disciplinary research and innovation addressing major societal challenges.

3 The ESRC is an independent organisation, established by Royal Charter in 1965, and funded mainly by the Government. AUTHOR CONTACT DETAILS: Jimmy Greer Senior subject manager: Business focus ACCA Professional Insights The Association of Chartered Certified Accountants January 2017. Introduction 3. New Business models can uncover new, outline a framework for assessing the Founding a Business has updated ways of creating value , giving potential of new Business models to experienced a steady global them the continued ability to make a create value Full Stack' framework rise as the career aspiration meaningful impact on the way people live du jour, usurping the long and work. explore the potential of each of the six models unchallenged job for life'. Across a range of geographies and provide a set of recommendations to industries, today's world appears both to consider when thinking about be replete with opportunities for better Business models of the future and problem solving and facing a mounting set their role in the 21st century.

4 Of interconnected challenges that affect people's ability to prosper and live well. This report is based on findings from workshops held in Hangzhou, Lagos, This highlights report examines six Singapore, Bangalore, Hong Kong, Kuala Business models and assesses the Lumpur and London. This geographic characteristics of the world in which they spread of the workshops provides a global operate. It will: view of the models and their future potential across a wide range of horizons outline factors that has caused and opportunities. Business model thinking to rise in prominence present the six selected Business models : platform-based, mass customisation , frugal, modern barter, pay what you want' and mega-hyperlocal Why does the Business model matter 4. so much today? Why does the Business model matter It is impossible to ignore the impact of From technology to so much today? From technology to the extremely rapid global growth of demography, the global demography, the global economy is internet use, followed by the more recent economy is entering a new entering a new era.

5 Reappraisal of value spread of mobile technology as the era. proposition, value creation and value number of smartphones in use exceeds capture that make up the essence of by one estimate (Ericsson 2016). Business models can open up new opportunities for Business to thrive. Nonetheless, technology is also only one of a collection of value -creation enablers This report explores the role of that, when combined with other factors technology and its impact on Business ( the value of networks') in a variety of models . Throughout this report, different contexts ( a growing middle technology is recognised as a creator of class'), leads to the reshaping of Business new opportunities and woven into the models . fabric of many of the models and issues that are set to be discussed. Figure 1: Number of internet users by world region, 1990 to 2015. n Europe & Central Asia n East Asia & Pacific n Latin America & Caribbean n South Asia n North America n Middle East & North Africa n Sub-Saharan Africa 3,000,000,000.

6 2,500,000,000. 2,000,000,000. 1,500,000,000. 1,000,000,000. 500,000,000. 0. 1990 1995 2000 2005 2010 2015. Murphy, J. and Roser, M. (2016), , [Online Resource] < >, accessed 12 January 2017. Five factors that elevated the Business model 5. Five of the most significant factors that the de facto planning standard for aspiring Five of the most significant have brought Business models to the start-ups around the world for plotting factors that have brought attention of entrepreneurs and their ideas and shaping their futures. Business models to the established companies include: 4. NETWORKED CAPITAL. attention of entrepreneurs 1. TUMBLING TECH COSTS ARE. and established companies BRINGING IDEAS TO THE FORE From start-ups to SMEs and even larger include: entities, access to finance has long been a From being able to access software as a stumbling block for businesses. The service (SaaS) to reaching customers on growth of digitally enabled networks has data-enabled mobile devices, technology seen individuals start to come together to has unleashed ingenuity as the principle pool resources directly with each other to engine of value creation.

7 Fund new opportunities. The evolution of networks has seen them occupy an increasing number of spheres and with 2. THE RISE OF START-UP CULTURE' greater degrees of sophistication and value . Founding a Business has experienced a steady global rise as the career aspiration du jour, usurping the long unchallenged 5. THE CHANGING WORLD NEEDS. NEW models . target of a job for life'. This is not just occurring among millennials, for whom Over two decades, rising incomes across start-up founder' might be one of a lower-income and middle-income myriad of what-were-formerly-known-as countries have opened up new careers that they will undertake over the opportunities and, hence, space for new course of their working lives. It applies models . This has created new equally to professionals, living longer and marketplaces that are not well served by retiring later, looking to use their contacts traditional models designed for older and experience to exploit new markets.

8 At the same time, engines of opportunities, prosperity have stalled and incomes have stagnated for the middle classes in 3. THE RISE OF NEW TOOLS TO MEET advanced economies. GROWING INTEREST. Many new tools have emerged to meet this new interest. For example, tools like the The Business Model Canvas became Figure 2. 1. TUMBLING. TECH COSTS. 2. 5. THE RISE OF. CHANGING. START-UP. WORLD. CULTURE'. 4 3. NETWORKED THE RISE OF. CAPITAL NEW TOOLS. 6. Business models of the future Ths report explores a set of Business models referred to as Business models of the What are the Business future'. Together, they represent a range of areas that have the potential to alter models of the future? The the way we live and work radically. Some models have already given rise to six models chosen for this billion-dollar businesses that have become household names. Others are report have been selected for addressing customer needs in less high-profile but still value creating niches that their breadth, diversity and have the potential to create even more value in the future, in a way that responds interconnectedness.

9 With ingenuity to changes taking place around the world. 1. PLATFORM-BASED BUSINESSES 2. MASS CUSTOMISATION 3. FRUGAL. Platform-based businesses, two-sided Once, transnational supply chains Frugal' originated as low-cost fixes in or multi-sided markets, are digitally were required to bring a product lower-income economies, where a enabled marketplaces for directly together and deliver it to the lack of resources drives people to use matching buyers and sellers. The customer's doorstep. Today, on- their ingenuity and what they have to platform owner typically receives a demand' is replacing in-stock' as hand to solve their problems. It is fee from the platform users. digital designs, hosted in the cloud, now deeply woven into the Business can be sent to the customer on models of some of the world's largest request. companies. 4. MODERN BARTER 5. PAY WHAT YOU WANT' 6. MEGA-HYPERLOCAL. Exchanging goods or skills with Customers pay what they think is First-generation hyperlocal businesses others instead of paying for right, or want to pay, for the product are typically digitally enabled local something, or using digital and or service.

10 This can be anything from delivery or home utility services. Next alternative currencies to transact zero to an amount that exceeds the generation hyperlocal goes one stage instead of central-bank-backed price desired by the seller. further. Components for a product or money is on the rise. This is as much Profitability is based on attracting service are (part or wholly) sourced owing to wider access to the (digital) new customers and on the desire of and assembled within a local area and tools to enable it as it is to a response customers to become a part of the then also sold locally. to changing economic circumstances. success of the Business . The Full Stack' framework 7. What lessons about Business models can Socio-productivity: Methodologies for Do these Business models , measuring social returns are calling into be drawn from thinking about the forces or components of them, give that shape them and those that are set to question long-held assumptions about companies that use them shape them further into the future?