Disruptive technology: The 'great hope' for widespread business model shake-ups
EXCLUSIVE: The unstoppable rise of "disruptive" technology such as cloud storage and the Internet of Things (IoT) will inevitably pave way for new and more sustainable business models, but entire industries will have to embrace this transitional period in different ways to accelerate the shift towards a circular and sharing-based economy.
That is the view of Forum For the Future’s director of sustainable business David Bent, who believes that a “revolution in digital technology” will change pricing and power frameworks across a variety of industries, some of which may initially “need to go into decline” to remain sustainable.
For Bent, who has just returned back from India where he was educating textile companies on how to futureproof operations against climate issues, the popularity of the 'access economy' and a shift in how consumers interact with products and services would dictate which sectors will become primed for a “world where nine billion people can have fun within an environmental limit”.
“I’m optimistic about disruption, and it has a part to play in how we interact with trends like using renewables” Bent told edie. “The great hope I have is how digital technologies can enable that. There will always be resistance of sorts, but the shift is happening.
“Generally speaking, people and companies want to stick with what they know and make that more efficient because that is a great way to generate more profit; it’s also a lot easier than exploring new models.
“But without the threat of competition and regulation, we’re not going to get the innovation that we need to drive a sustainable future. For incumbent businesses, their moves are much more responsive to the competitive pressures they can see rather than a joyous acceptance of the need for a constant process of becoming.”
Bent noted that the rise and rise of Uber – which he says was especially popular in Indian city of Mumbai – was causing the automobile industry to adapt from a business model of making products to one of “providing mobility” that was aimed around creating services and incorporating the sharing economy through car hire clubs.
Outside of the transport sector, Bent claimed that retailers like Amazon were “rare beasts” that could adopt multiple levels of disruption due to “maintaining their entrepreneurial approach”. But for incumbents, the rise in technology and new business models will create a competitive advantage for those that embrace change with open arms, Bent said.
“The business models that have technology at their heart like access and circular economies have an advantage because they can serve the customer's needs more directly and more cheaply. Over a given period of time, they’re going to be more successful than the incumbent ones.
“Disruption happens when you have an alignment between big picture trends which are putting pressure on the status quo. This creates an opportunity for new things to take a window of opportunity and jump into the mainstream.
“What we’re seeing at the big picture level is a revolution in digital technology that is changing the pricing and power of many industries. What we need from different sectors will be different and frankly some industries, like gas and oil, need to go into decline, but we still need to soften the blow of that decline for regions that still rely on it.
"There’s a second set of industries that need to reconfigure themselves so that they are much more about circular and sharing such as industrial sectors. We need them to be designing products to last as long as possible, repaired and reused as much as possible and, after many lifetimes, be taken apart and the materials sent around the lifecycle again.”
Bent added that, in order to facilitate the transition to a circular economy, the technology and finance sectors would have to embrace a “massive role” to create a stable transition to new models that doesn’t damage the economy in the short-term. While banks like ING are actively embracing the circular economy – and encouraging businesses to do so too – Bent said that the issue wasn’t to do with a lack of funds, but rather that it wasn’t being “pointed in the right places”.
Although Bent partly echoed findings from the Ellen MacArthur Foundation that technology could unlock the circular economy, he did admit that the traditional upgrade-orientated business model dominating the sector would need modifying in order to promote reuse and change consumer behaviour.
He referred to his work with O2 Recycle – which has now recycled more than two million mobile phones since its inception – as a clear example of how consumers are willing to embrace more sustainable products and services, but that businesses could do more to reduce e-waste.
“There’s far too much e-waste,” Bent added. “The nature of consumer demand is clearly crucial and there was a time when having the latest phone was a massive status symbol, but not so much now. Constant upgrading drives the wrong behaviour and drives an outcome which is worse for everybody over time.
“We do need to shift the nature of consumer demand overall, but I think you’re more likely to do that by fulfilling people’s needs in brilliant new ways. One of the positives around services like Netflix and iTunes is that you can get people used to the idea that they can access what they need without owning it; this is how the behaviour change happens.
“New business models can be the wrap-around to new behaviours which are better. If you can find a business model that gives people what they need but embeds circularity and sharing then you don’t need to change behaviour, you can just let them play their part in the business model.”