July 5, 2021
The 7 New Business Models
by Paul Carroll
Here are seven business models that should dominate in the next decade -- creating a host of opportunities for insurers.
While those pressing for innovation often focus on the unbelievable speed of technology change, perhaps the more important issue is the pace at which business models can change.
After all, increases in computing power have been running at the rate of Moore’s law since Intel co-founder Gordon Moore formulated it in the 1960s — processors have roughly doubled in power every 18 months at no increase in cost. But the pivotal moments came when that exponential improvement allowed for a new type of business model: e-commerce in the late 1990s; internet search and social media in the 2000s; data-heavy, asset-light platforms like Uber and Airbnb in the 2010s.
Last week, futurist Peter Diamandis shared his list of the seven business models he believes will dominate the next decade, and they sound roughly right to me, so I’m passing his writeup on to you.
His post lists the seven as:
–The Crowd Economy, which he describes as “crowdsourcing, crowdfunding, leveraged assets and staff-on-demand,” a la Uber and Airbnb or Amazon’s Mechanical Turk.
–The Free/Data Economy, which he describes as “essentially baiting the customer with free access to a cool service and then making money off the data gathered about that customer,” a la Facebook, Google and Twitter.
–The Smartness Economy, which he describes based on an analogy to the late 1800s. At that point, businesses could just “take an existing tool, say a drill or a washboard, and add electricity to it—thus creating a power drill or a washing machine. In the 2020s, AI will be the electricity.” Basically, add artificial intelligence to anything, and you could have a new, smarter, more efficient way model for doing business.
–Closed-Loop Economies, which take an environmentally conscious approach to products, for instance allowing people to pick up waste plastic, turn it in and be paid.
–Decentralized Autonomous Organizations (DAOs), such as a fleet of autonomous taxis, “with no employees, no bosses and nonstop production,” built on top of blockchain.
–Multiple World Models, businesses that reach beyond our real-world personae to online personae. Diamandis notes that people pay to design digital clothes and houses in Second Life and other virtual worlds. (I thought it was clever that the Biden campaign put up campaign signs in Animal Crossing and gave supporters QR codes that would let them put up signs on their Nintendo Switch.) Diamandis adds: “Every time we add a new layer to the digital strata, we’re also adding an entire economy built upon that layer.”
–Transformation Economy, which go beyond what’s known as the Experience Economy — such as Starbucks’ creation of a “third place” that was neither home nor work — and involve paying for a something that transforms your life.
I’d encourage you to read the whole post and dig more deeply into the models, then perhaps sign up for his newsletter, which can sometimes be over-the-top but which is routinely intriguing and informative.
From my standpoint, the most intriguing models for insurers are the Smartness Economy and the Transformation Economy. AI can be added to just about any part of the insurance process and conceivably even allow for new business models — for instance, embedding insurance offers into the process of selling cars, shipping grain in developing countries, etc., without the need for human involvement. And insurance can transform even more lives than it does now, if it shifts its emphasis toward preventing losses and goes beyond the already crucial work of providing peace of mind and making people whole following losses.
But I think it’s worth taking a look at all the potential business models, because business only happens if it can be insured, and new types of business create opportunities for new types of insurance. Just think how interesting it will be to price the risk on a digital house in a virtual world.
P.S. Here are the six articles I’d like to highlight from the past week:
You must commit to a process that more closely resembles an anthropological journey than a traditional strategic analysis. Here are four steps.
Millennials already understand the need for car and home insurance. The pandemic has given life insurers an opportunity.
Hybrid cloud models smooth digital transitions because they can easily operate their existing on-premise infrastructure during the shift.
Due to the spread of the COVID-19 pandemic, the digital health and insurtech sectors have developed rapidly in multiple directions.
Policies that insure a person in spite of the absence of bodily harm, that exist because of the threat of reputational harm—these policies are hard to find.
Success in moving from the past to the future of insurance requires a two-speed strategy: Speed of Operations and Speed of Innovation.