Reinventing Business Models with Technology: Examining the Role of Technology in Various Revenue Models

It has been recently announced that Hyundai is launching a new car subscription program, Evolve+, allowing customers to access new electric vehicles on a month-by-month basis with no long-term contractual obligation. This program is offered at a suggested price of $699 per month, including all insurance and maintenance fees.

To comprehend the impetus behind a company's decision to reinvent its business model, as well as the associated risks and the role of technology in the various revenue models, it is necessary to explore how technology can be a decisive factor in remodeling a business.

Different revenue models are possible, such as subscription-based, pay-per-use, and one-off payment structures. Technology has been a significant contributor to the success of companies using subscription-based models, for example, by enabling automation of conveniences and analysis of customer behavior.

I invite you to navigate among facts that prove that technology is played a critical role, but in different ways, in the success of companies utilizing various revenue models, impacting the way they generate income, understand their customers, imagine experiences, and anticipate client needs.

?

Businesses and organizations rely on different topline revenue models. These models entail subscription fees, pay-per-use charges, and one-off payments for goods and services. Notable examples of subscription-based models include Netflix, Microsoft Office 365, Adobe, Spotify, Amazon Prime, and Youtube. Pay-per-use models include Microsoft Azure and Google Cloud. Meanwhile, one-off payments are associated with single transactions, such as upfront fees or one-time purchases, as in the case of Apple - primarily driven by its hardware sales. Finally, advertising revenue models involve selling ads and are exemplified by Google and Facebook. And, by investigating the guts of companies' financial statements, you are likely to find intriguing things like the case of P&G, generating relevant advertising income by selling consumer data to other companies, advertising spaces in its products, and through their in-house agencies.

Each business model allows different customer service alternatives but requires a completely different equation from the financial structure that sustains them. Each model, for example, has its specific relationship with the capital needed for its development. While in a subscription model, the investor is more exposed since it requires investments upfront and recovered over time, one-off payment allows for reducing this exposure. Similarly, businesses are more or less exposed to different macroeconomic conditions depending on how each company equates the required capital and investment in new projects and products.?

And another aspect of seeing the differences between companies' business models is understanding the different relationships of each of them with technology.

Technology has been a catalyst for success for companies with subscription-based revenue models. Modern solutions for automated and secure subscription services and customer data tracking enable personalized products and services at no extra cost. These advances allow companies to understand their customers better, build stronger relationships and loyalty, and increase revenue. Netflix is one example, utilizing techniques such as adaptive streaming, a recommendation system empowered by artificial intelligence, and an API-based strategy to support an extensive range of different devices for streaming. However, to ensure cash flow sustainability, and high upfront investments, besides managing accounting strategies, in this case, technology needs also to cheapen sophisticated audiovisual productions (which would be much more expensive or unfeasible a short time ago).

Companies leveraging pay-per-use revenue models have been greatly impacted by technology. This has enabled them to provide customers with more convenient, personalized, and efficient services. An important strategy for this model is establishing a transparent pricing system. Advanced solutions have made it possible to accurately calculate the cost of each unit of usage (SKUs) to customers, eliminating complexities. The insurance industry is an example of a sector innovating its business by utilizing new technologies and offering customers more personalized services and better risk management.

Companies using a "one-off payment" model face several challenges: encouraging customers to make repeat purchases, increasing efficiency as they expand, sustaining healthy margins, and staying connected to channels that will help them gain new customers. Fortunately, the latest solutions have been able to help with these issues.

It's the case of the social selling trend. Social selling is a powerful tool for "one-off payment" businesses of any size. It is a way to connect with prospects and customers, build relationships, and increase sales. By leveraging the power of social media, companies can create meaningful connections with their target audiences and drive more sales. Social selling involves using social media channels to find, engage, and nurture leads. And companies can use a combination of content, conversations, and targeted ads to build relationships with their target audience. In today's digital landscape, it is one of the most cost-effective ways to reach precisely targeted audiences.

?

It is evident that technology has played a critical role in the success of companies using various revenue models, impacting how they generate income, understand their customers, imagine experiences, and anticipate their needs. And cases like Netflix and Hyundai Evolve+ car subscription are just a few examples of how technology can reinvent business models and create new opportunities for companies.

Adriano Bottas.