Should you develop a new business model or use an old one?

Sometimes the biggest innovations created by startups aren’t the technology they build but their business models. If you can devise something that’s not just a better service but a better way to pay for and organise that service then you could well be onto a winner. Archetypal examples include Google providing a new business model for search (and ultimately for advertising itself), Airbnb providing a new business model for holiday rentals, Zipcar for car ownership and so on. When people talk about disruptive startups (I prefer ‘transformative’ personally), it’s often business model innovation rather than technical innovation that’s in play.

The issue is that creating a new business model is really hard. It’s easier to look at the existing options in your sector and then find that you struggle to grow quickly (as Oliver Quinlan points out in this piece for Nesta, that’s mainly what has happened in education technology for schools). Or you can take one business model and adapt it for another context. This is one of the reasons you get so many startups described as the X of Y (e.g. the Uber of paper aeroplanes or the eBay for cocktail waiters). Occasionally this works of course — subscription services are now common in lots of sectors and reputation based marketplaces exist for everything from electronic parts to unicorn meat.

But I wonder whether we should think harder. Sometimes a new business model could be a better answer but we reach for easier options instead. I’m not arguing for disruption for disruption’s sake but I think there could be huge gains if we can develop careful interventions that can change the balance of power in entrenched and unjust systems rather than just fitting into existing patterns and flows of money.