Emerging business models

Innovation Is Not Just About Technology


What Is It?

Emerging business models are the new, disruptive ways organizations are using technology to adopt alternative revenue streams and diversify their offers. By crossing industry boundaries and integrating with customers’ lifestyles, organizations are changing expectations across the board to stay relevant.

Why Are Emerging Business Models so Essential Now?

We find a lot of correlation (and often some confusion) between our clients’ digital, innovation, and customer experience strategies. It’s true that many of today’s up-and-coming business models are tightly coupled with new or emerging technology. The experience Uber provides, for example, would not be possible without mobile and geolocation technology. However, when you look past the digital component, you can see that Uber is really built on a sharing economy business model. By connecting riders directly with drivers who own vehicles, the company has disrupted traditional transportation services and changed consumer behavior and expectations.

Not every organization needs to be like Uber, but we view emerging business models as a digital essential because it’s important to know what is happening in the world around you and how new ideas can be adapted to improve your organization.

What New Business Models Are Emerging Now?

Here are a few examples of emerging business models and the companies using them to disrupt their industries.

Sharing Economy and Fractional Ownership

Sharing economy and fractional ownership both answer consumers’ growing desire to bypass traditional ownership and only pay for what’s actually needed. For example, some consumers have determined that if they can supplement walking to work with a ride-hailing service, they can avoid the burden of purchasing, insuring, and maintaining their own vehicle.

Sharing or “access” economies entail connecting to another private individual, usually through a mobile app or website run by an intermediary, to gain temporary access to property, such as a car or living space, owned by that person. This is Uber, Airbnb, Neighbor, Rover, and other services being used to connect with trusted strangers in order to accomplish a task. Sharing economy-powered organizations have been shaking things up for a while now, and are continuing to grow in popularity and expand across industries.

Fractional ownership also enables individuals to save money by only paying for what they need, but (as the name implies) they share ownership of a property either with other individuals or with an organization. Think time-share, but without the annoying pitch. For example, we recently met with a mortgage company that offers the option to concurrently rent and have a mortgage on a piece of property. Non-traditional options like this provide flexibility and customization for consumers and can have applications across industries, including other big-ticket items such as cars, vacation properties, and even private jets.

Data Monetization

Uber is a great example of expanding its business by monetizing its proprietary data to become profitable.

Every time someone uses Uber, which happens about 14 million times per day,3 Uber collects data about the rider, the driver, the pick-up and drop-off locations, traffic conditions, and more. With 10 billion individual trips under its belt (and counting), Uber has collected a lot of data. It makes business sense to capitalize on that asset by selling anonymized data to third parties, or using it to provide value-added interpretations and insights.

Uber is not the only company selling the data it collects on users – not by a long shot. The big question, of course, is whether these companies can do so while also respecting and protecting users’ (and drivers’, in Uber’s case) data. As privacy regulations like GDPR and the California Privacy Protection Act roll into place, companies must prioritize ethical treatment of data or risk legal penalties and lost customer trust.

Direct-to-Consumer

Direct-to-consumer sales has been around for quite a while, but has grown exponentially through the advent of eCommerce, which is influencing many organizations outside of traditional consumer goods – particularly B2B brands that are connecting directly with their end users and owning more of the customer experience surrounding their product.

Caterpillar is a good example. The machinery manufacturer, which operates through a global network of dealers, is making strides to interface directly with the end users renting and operating its equipment. The company’s new Cat Rental Store mobile app enables customers to locate the equipment they need and manage their rentals using their mobile devices, allowing Caterpillar to be more involved in the rental experience while also maintaining its relationships with dealers.4

Online Only to Brick and Mortar

Just when the world was predicting the end of traditional brick-and-mortar stores, previously digital-only companies like Amazon and Warby Parker began investing in physical locations. Why? Roughly 80% of the US population lives in urban areas.5 That’s a lot of customers, really close together, who expect two-day shipping, easy returns, and for their favorite brands to make their lives easier.

Online-only brands want to keep up with those expectations. This creates the need to have a strong distribution infrastructure in place, which might mean experimenting with localized experience centers like showrooms and return drop-off points.

Some brands partner with other organizations to fill this gap. Kohl’s, for example, recently announced that all of its brick-and-mortar stores nationwide would start accepting Amazon returns.6 This move will likely prove successful for both companies, as Amazon customers enjoy returning items without the hassle and cost of shipping and Kohl’s benefits from the foot traffic those returns bring into its stores.

Inventory-Free Retail

As mentioned, many retailers recognize that their physical footprints provide a competitive advantage in an industry where everyone has an eCommerce site. Showrooming has been a trend in retail for several years, but some companies are experimenting further on the concept by completely removing inventory from the equation.

Nordstrom provided a perfect example of inventory-free retail in 2017 when it opened its first Nordstrom Local concept store.7 The purpose is to provide everything a customer could want from an in-store experience – except inventory, which they can purchase online. These service-oriented locations are much smaller than traditional Nordstrom department stores and serve as pick-up and drop-off points for online purchases and returns, personal styling and tailoring hubs, and venues for public and loyalty program member events.

The fact that Nordstrom recently announced the expansion of the Nordstrom Local footprint shows that the company sees value in this new avenue of customer experience. Nordstrom stated that the expansion is, “part of its growth strategy and ongoing commitment to better serve customers no matter when, where, or how they shop.8

Subscription Services in New Sectors

Subscription services are everywhere – from streaming services replacing cable TV to the monthly box of treats and toys for our dogs. Brands across the consumer goods sector are constantly looking for ways to turn a customer’s semi-frequent purchase or need into a committed relationship with a steady revenue stream, and this trend is expanding into other areas of daily life.  


In healthcare, for example, the concierge medicine model is becoming increasingly popular among physicians and patients.9 If an individual doesn’t want to deal with the burden of finding a doctor and scheduling appointments, they can subscribe and have those administrative tasks taken care of for them. As consumers see the benefit and convenience of outsourcing tedious tasks like scheduling medical appointments, service-focused subscriptions will become increasingly prevalent.

With the amount of new ways companies are innovating, you may feel overwhelmed by the need to keep pace. Remember, not every business model makes sense for every organization and customer experience. If you try to force a new experience that isn’t organic and sustainable, you will likely do more harm than good to your CX.

Where Can You Start?

1. Know your customers
Understanding your customers – who they are, their jobs to be done, their preferences, what drives them – has always been important. But what they don’t tell you is equally important. Emerging business models are resetting customer expectations in unexpected ways, which makes it more important to be aware of what other organizations are doing, both within and outside your industry.

2. Build on what you have
As you’re improving and expanding your digital experience and capabilities, look for ways to make the most out of the tools you have. Digitizing any interaction fundamentally creates a new source of data you can use to improve your customer experience and potentially expand into a new business model.

3. Adopt a design thinking approach
We love the phrase “Think big. Start small. Move fast.” This means starting with an open mind and a big goal, but working in small, experimental iterations. This methodology allows you to try something out with a small audience and test, learn, and repeat until the best version of your new idea is ready. It also helps you recognize when an idea is just not going to work, which is an important part of the process. It’s okay to throw out a bad idea as long as you’re learning from it.

4. Balance your innovation portfolio
There may be times when you feel you need to dive into a new business model, maintain what you’re already doing, and play catch-up all at once. You’ll never have enough time or money to do everything you want, so developing a balanced innovation portfolio is a crucial step to narrow your focus.

We use an approach called Now/New/Next, which helps you find that elusive balance. This model organizes your experiences and capabilities into six categories across the spectrum of innovation, ranging from sustaining to disruptive. We can then define a strategic roadmap of short and long-term actions that will help you expand and evolve, while also fortifying strengths.

Don’t get stuck in the trap of believing your organization is too conservative or too invested in its current strategy to change or leverage an emerging business model. There is always opportunity to improve, and the best way to start is to be open to new ideas.