New business models, which create markets, disrupt markets, shift product-market boundaries, and alter competitive structure

Abstract

The purpose of this paper is to analyse all aspects linked to the new business models which create markets, disrupt markets, shift product-market boundaries, and alter competitive structure. Traditional companies are facing these new entrants which create new competitive dynamics that threaten the bottom lines of incumbents.

In the first part, the characteristics of these new business models are detailed. Disruption, disintermediation and dematerialization represent the difference between the linear and new business models. These features allow the value chain to be reduced and transformed: linear companies no longer have the control of the entire value chain. The reconfiguration of the value chain is not the only factor to take into account. Indeed, new entrants have totally changed the way people consume because they understood that customer’s behaviour is changing over time. Being customer-centric by following an “Outside-In” approach is the key to succeed. Environmental threats and opportunities (innovation, digitalization, regulation, etc.) must be taken into account as they interact with the existing organizations to avoid business model obsolescence or less profitability. Investing in a digital transformation is therefore a necessity to help counter these new entrants and to improve the customer journey, allowing customers to experience unique and personalized experiences. However, investing in social networks only is not enough.

Then, a special focus on the hospitality sector is described. In the second part we assess the potential impact Airbnb may have on independent hotels and hotel chains. The Airbnb platform is based on the collaborative economy that has effects on technologic, economic and social dimensions. Moreover, the aim of Airbnb is to possess the end-to-end travel experience of its users. This value proposition represents the strength of the business model which is designed with new technologies. Traditional hotels, whose business models are based on a linear model, need to strengthen their position in the minds of customers, by for example simplifying the online booking procedure, emphasizing how the hotel experience is different from the others or by helping guests find local and authentic experiences. The hotel chain AccorHotels understood the importance of a digital transformation to conquer the customer. In summary, three different case studies are described to explain how new business models are disrupting market.