Business models

Global challenges – from climate change to pandemics – and emerging crises in specific economic sectors, such as supply bottlenecks in critical materials and key components (e.g., micro-chips), are constantly pushing industries to rethink their business models. 

This includes rethinking ways in which technologies are deployed, production is organized, supplies are sourced, production locations are chosen, as well as the way in which products and markets are developed. For example, the outsourcing-and-offshoring paradigm, which has dominated the global economy for over the last four decades, have been challenged by rising concerns about supply chain resilience. The need to restructure entire value chains through technological and organizational innovations has also made vertically integrated business models, which had been considered to be relics of the early 20^th century, more relevant.

Industrial and technological changes, digitalisation and platformisation in particular, are also transforming the ways in which business create, capture and extract values along supply chains and in final markets. In an age of climate crisis, digitalisation also promises to enable a more effective management of complex and diffused energy systems; they also make circular economy models possible while increasing overall energy and material efficiency in industries. 

The idea of a ‘green-digital twin’ speaks of some of these complementarities and their relevance for innovation in business models. Several sectors that are central to addressing climate change – from electric mobility to renewable technologies like wind – are experiencing such dramatic changes in business models. Changes in the architecture of key products, such as EVs, is leading to new organizational models for the production of cars; the ever-expanding size of wind turbine blades is changing the efficiency and the price parameters of renewable energy generation and their deployment; the ever-falling cost of solar panels and improvements in their energy productivity are opening new opportunities for business development. 

These industrial and technological changes are also impacting competition dynamics within countries and across regional and global markets, while leading to industrial restructuring in several key sectors, where traditional leaders are challenged by new entrants. Often the competitive advantage of these new entrants is not simply a technological one but based on innovation in business model (or re-discovery of business models which were dismissed as outdated). 

In regions such as Africa, where the lack of productive investments have prevented structural transformation and where traditional business models have failed to address emerging needs (such as mobility, climate risks-related insurance, and food security - just to name a few), new business models have been launched with the support of venture capital initiatives. Innovation in business model is central to successful exits by the venture capitalists, but little is known about why certain business models seem to work and adapt better in a developing country context.

This research streams focuses on understanding why and how new business models are emerging and the extent to which innovation in business models, including in the area of venture capital investments, can promote sustainable structural transformation in Africa. The research will look at both the indigenous innovation in business models, represented by diversified business groups and other emerging businesses, as well as the ways in which large international corporations are approaching investments in the continent. 

Picture: Patrick Perkins via Unsplash.