How Blockchain Impacts Business Models

A business model is nothing more than a combination of actions aimed at turning an idea or concept into an effective business. Usually, it is still understood as a set of things capable of making into product what was once only an idea.

It is from a structured business model that an organization creates, delivers, and captures value. According to the book Business Model Generation, a worldwide reference of countless entrepreneurs, a business model is composed of the following factors:

Market segmentation
Relationship with customers
Value Proposition
Distribution Channels
Sources of revenue
Key Features
Key Activities
Key partnerships
Cost structure

So when talking about "business opportunity," usually an entrepreneur is referring to the ability to innovate at one or more of these points. That is, it envisions a new or more efficient way to create, deliver and / or capture value in the market in which it operates, from possible innovations in at least one of the nine dimensions listed.

These variables directly affect the daily life of startups and established businesses with increasing intensity. To a large extent, this is the result of the revolution brought about by the digital economy from the large-scale diffusion of commercial internet access.

The use of personal computers and smartphones made possible from the years 2000 onwards new forms of value adding. This has led to both the improvement of traditional services and the models that did not exist until then. Among these, some good examples are the multimedia content sold by digital signatures, the streaming offers and the greater disintermediation provided by services such as Uber, Mercado Livre, among others.

These exemplary cases demonstrate precisely that digital businesses, often by approaching policy makers and service providers, shorten the size of the distribution channel and simplify the customer relationship dimension, finding a new way of adding value to what they offer , which is why they have become successful.

In other words, what was done was to take advantage of a hypothetical opportunity to transform it into an effective structured business model at the disposal of the market in the form of an innovative service.

In many cases, this phenomenon can be marked both by the emergence of completely new companies (entrepreneurship in the current view) and by the assimilation or innovation in internal processes of already established companies (idea of ​​intrapreneurship).

In both situations, operational changes, new market outlooks or both are commonly the main transforming forces of these nine dimensions that govern a business model.

In the scholarly article Why Business Schools Need to Teach About the Blockchain, researcher Kariappa Bheemaiah explains what makes blockchain technology a great asset to innovation in some markets:

[...] the Internet of Everything is increasingly becoming part of business reality. Today businesses and societies are noticing that the line between physical and virtual existence is beginning to blur at an increasing rate. In this transitory ambience, the centralized approach to building an IoT business model is expensive, lacks privacy and is not designed for endurance, as it fails to address the issues related to scale and complexity.

As the number of businesses, both large and small, begin to understand the advantage of having a decentralized system, the possibilities that are offered by the Blockchain technology begin to make economic sense. [...] In addition, decentralized architectures offer better cost benefits to companies as the peer-to-peer sharing of resources in the distributed network removes dependency on a central server, optimizes resource use and reduces costs.

Reflecting on the nine dimensions that characterize a business model, it is observed in Bheemaiah's analysis that blockchain technology can be seen as a force that imposes major changes on variables such as distribution channels and cost structure.

However, the transformative potential is not limited to promoting a closer approximation, or in some cases the merger itself, between the figures of the service provider and the consumer of the service provider. Nor is it limited to the enormous economy and consequent simplification in the structure of costs of a business, made possible by the elimination of several intermediate figures, expensive auditing processes or outsourcing of related services.

By impacting new business dimensions such as customer relationships (from automation via smart contracts), value proposition (enabling services that were previously created and enforced) and sources of revenue (given the ease with which currencies can operate in multiple protocols), blockchain technology is already in the pipeline.

Both for what it provides in new services built or under construction, and for the potential it has to dramatically improve some traditional sectors that will implement it.