ÇAĞ UNIVERSITY

Faculty of Economics and Administrative Sciences

Department of International Finance and Banking

NEW TECHNOLOGIES FOR BUSINESS

ESSAY NO. 2 ( Business )

TOPIC: Business

PREPARED BY
Aysegul SUBAŞI - 16226031

SUBMITTED TO
Öğr. Gör. Herbert HOLL
BUSINESS
What is a Business Model? ..................................................................................................................... 3

New Business Models ............................................................................................................................. 4

New Business Models of the Digital Economy ....................................................................................... 6

New Generation Business Models Are Rising with Industry 4.0 ............................................................ 7

The Transformative Business Model....................................................................................................... 8

How Iot is Changing Business Models ................................................................................................... 8

6 Keys that Ensure Successful Transformation in New Business Models; ........................................... 10

RESULT ................................................................................................................................................ 12

REFERENCES ...................................................................................................................................... 12
INTRODUCTION

In this article, you will be able to see the effects of developing technology on business models
and its relationship with business models. At the same time, I think you will understand the
impact of new technologies on existing and emerging business models, new generation business
models are rising with Industry 4.0, and business models.

What is a Business Model?

Definitions of "business model" vary, but most people would agree that this explains how a
company creates and captures value[3]. The features of the model define the customer value
proposition and pricing mechanism, show how the company organizes itself and with whom it
will partner to generate value, and determine how to structure the supply chain[3]. Basically, a
business model is a system where various features interact in often complex ways to determine
the success of the company[3].

New Technologies in Existing and New Business Model

Advancement in technology can facilitate new business models - the most obvious historical
example is that the invention and development of steam power facilitated the mass production
business model[6]. In fact, business models and technologies interact regularly. For example,
when Amazon was founded in 1995, they applied new technology to ensure that the traditional
mail-order business model pioneered by Sears Roebuck works well in boks[6]. Amazon did not
invent a new business model, but applied well-known business model structures and developed
them in new contexts.
In contrast, Google's bilateral dynamic search engine, developed in 2003, was not only a
technological leap, but also a new business model leap[6]. Google used AdWords to provide an
interface with advertisers (one side of the two-sided platform) whose choices directly affect the
search experience of users on the other side of the platform[6].

New Business Models

In the last decade, the rapid development of e-commerce has transformed modern distribution
in both industrialized and developing countries. It has enabled new business models to emerge,
both among online platforms and among traditional manufacturers. Thanks to this, a new value
chain emerges[5].
As the Internet and smartphones are easily accessible, it has introduced new purchasing tools
to consumers.

If we compare e-commerce platforms such as Amazon, Alibaba etc. , compared to traditional

retailers, e-commerce platforms offer more significant advantages[5]. For example, they
provide instant access to a large number of products. These numbers can exceed 100 million
that traditional stores cannot[5]. They are implementing dynamic business strategies and even
starting to offer payment tools such as Ali Pay, WeChat Pay in China, or Mercado Pago in
South America[5].

Most attempts to introduce a new model fail, but sometimes, the business model, often
developed using a new technology, manages to reverse the dominant model[3].
Also, the platforms are characterized by fast deliveries. Half of the products purchased in this
way are delivered within 24 hours, some even earlier[5]. In this way, platforms can meet new
customer expectations, which are related to changing working patterns and demands[5].

Thanks to e-commerce, traditional chains in industrialized countries have rapidly turned to

digital. For example, John Lewis, a traditional retailer that was founded in the UK in 1864,
currently conducts more than 40 percent of its sales online[5].

This current transformation results in the proliferation of distribution channels and ways of
purchasing: Retail has entered the multi-channel era[5]. In addition to the traditional act of
buying products in a store, we see online purchases and home deliveries[5].

Thanks to new technologies (artificial intelligence, data, blockchain, etc.), innovation is

expected to accelerate even more[5]. How many shops will be on the street in the future is a
matter of curiosity because it is predicted that there will be no more non-food shops and
everything will be online, the main reason for this is the change of generation[5].

For example, Airbnb:

The founders of Airbnb realized that platform technology made it possible to create an entirely
new business model that would challenge the traditional economics of hotel businesses[3].
Unlike traditional hotel chains, Airbnb is not a property owner or manager[3]—it allows users
to rent out any habitable space via an online platform and pair it with homeowners willing to
share a room or house they are looking for. Airbnb manages the platform and takes a percentage
of the rent[3].

Since its income does not depend on owning or managing physical assets, Airbnb does not need
large investments to scale up and can therefore charge lower prices (typically 30% lower than
hotel rates)[3].

On the customer side, Airbnb's model redefines the value proposition by offering a more
personalized service and a cheaper service[3].

Before platform technology existed, there was no reason to change the way hotels operate.
But after its launch, the dominant business model became the focus of anyone who could
leverage this technology to create a more attractive value proposition for customers[3]. The
new business model serves as the interface between what technology enables and what the
marketplace wants[3].

New Business Models of the Digital Economy

The new economy shaped by the internet is developing its own business models[1]. The most
prominent of these models, which are seen as the first successful examples in the USA and
spread to the world from there, were developed models that will mark the new millennium such
as “Agora“, “Aggregation”, “Alliance” and “Value chain”[1].

With the increasing penetration of the internet into our lives and the business world, companies
are also changing the way they do business[1]. In order to be successful in the new economy, it
is no longer enough to have an effective sales organization, qualified human resources or strong
technology[1]. The way to success in the new economy is to create the right business model.
Companies leading the market with innovative business models capture the biggest share from
new opportunities[1].

In business models set up on the web, the situation develops differently than the company
produces a product or service and sells what it produces to its customers[1]. In the internet
world, a much more dynamic, variable and fluid production and distribution process is
experienced. The difference of this process also enables new business models to emerge[1].

A complete classification has not yet been made for these models that are developing and
interweaving on the Internet. Because the models are in constant precession. However, the
evaluations made by management groups point to five main models[1]. These models, defined
by interesting names, signal that companies will be managed with very new business systems
in the 21st century[1].

For example,
1) The “Agora” , which refers to an open market place, and can be described as a gathering
place[1].
2) “Aggregation” will be the first business models born with the internet[1].
3) Next comes the “Alliance”, an agreement-collaboration environment[1].
 4) The “Value Chain” that manages the value chains[1].
5) The “Distributive Network”, which refers to distributor networks, serves all these
business models at once[1].

New Generation Business Models Are Rising with Industry 4.0

While new business models are created thanks to new technologies, emerging business models
trigger the introduction of new technologies and innovative products to the market[2]. The fact
that businesses pay as much as they use by renting over the internet instead of buying high-cost
computer software is a good example of the technological infrastructure opening new doors to
business models[2].
On the other hand, the desire to apply this "pay-as-you-go" business model to different sectors
in the industrial field paves the way for the development of a series of new communication
protocols and connected technologies that will be shaped around the Internet of Things and
cloud computing Technologies[2].

Companies seeking to maintain their competitive edge by taking a leading role in the
transformation brought by Industry 4.0 have accelerated their search for innovative technology
to rebuild their business models[2].

R&D activities carried out on a technical scale focus on increasing the efficiency of production
processes in every sector with new generation production Technologies[2]. The basic
expectations here are increased productivity, the most efficient use of resources, production
processes independent of human factors, error-free and individual products, uninterrupted
production and digital enterprises[2].
Transition to service-oriented business models continues
The dominant business model prevailing in the production ecosystem is shifting from asset
sales to service sales with Industry 4.0 [2]. In the classic business model, the main source of
income consists of, for example, the sale and after-sales processes of an industrial engine[2].
Industry 4.0, on the other hand, makes it possible for all kinds of machines to be offered as
service on an operating hour basis[2]. In this new business model, there is no inventory on the
customer; instead, an economy based on long-term service purchases and mutual guarantees is
being created[2]. This business model, which has been applied in aircraft engines and similar
large-scale assets in previous years, is spreading day by day to many areas of the industry with
the internet of things, machine-to-machine communication, cloud computing infrastructure and
the widespread cheap cost internet Access[2].

The Transformative Business Model

Often the transformation of an industry is associated with the adoption of a new technology.
But while new technologies are often the main factors, they can never transform an industry on
their own. What drives such a transformation is a business model that can connect a new
technology to an emerging market need[3].

For example MP3; The first MP3 devices showed a huge increase in capacity over tapes and
CDs: Users could carry thousands of songs on a small device. But sales of MP3 players fell
after Apple merged iPod with iTunes in a new business model. Thanks to the iPod, music
recordings were quickly moved from the physical world to the virtual World[3].

How Iot is Changing Business Models

The Internet of Things (IoT) has benefited from innovation and significant transformations over
the past few years. These innovations were most effective in the business models these
technologies make possible. While traditional business models continue to generate significant
revenues in all areas, there are new and mixed business models that will begin to shape the
future of the field[4].

Although traditional business models continue to apply, innovation in the smart home space
provides new ways to do business [4].
The Strategy Analytics report breaks down some market opportunities with an emphasis on
smart home security and security applications[4]. IoT will deliver returns of more than $ 26
billion a year worldwide, as well as smart home applications, where consumer spending could
exceed $ 14 billion a year[4].

The IoT home security market accounts for a significant portion of the total and is a microcosm
of both new and old business models[4].Insurance companies offer discounts to customers with
approved systems installed, while others take the logical step of supplying discounted or
subsidized hardware directly to consumers as a sales package[4].

In the oil and gas industry, IoT enables previously impossible levels of remote monitoring, such
as controlling oil spills and gas emissions that were done manually just a few years ago[4]. This
reduces the cost and also produces much more complete and responsive data. This data can then
be used to more accurately model future yields and challenges[4].

There is also the possibility to obtain stronger information by stacking the sensors by linking a
barometric pressure sensor and a window sensor to determine whether an open window and
rainy weather pose a risk worthy of alarm[4].
This blending of business models is not specific to the security area, but its success has spurred
a surprising number of other industries to approach the market.[4]

The biggest opportunities in the world of the Internet of Things for both beginners and current
gamers are to capitalize on the vast data streams created by these network sensors and
devices[4]. New data points created by connected home devices, increasingly efficient and
reliable sensors by integrating completely new business models, products and services can be
created[4].

Data-driven business models support Industry 4.0

Data-driven business models, data analytics and economic value creation flow through data
play a key role in the Industry 4.0 transformation[2]. The main focus of Big Data, Smart Data
or other similar definitions on the "data" axis is the interpretation of different types of data
collected from different sources with smart algorithms, uncovering unknown, hidden and
unrecognizable information with advanced data analysis techniques based on artificial
intelligence, and conversion into economic value[2].
Cloud computing and Internet of Things based Predictive Maintenance applications continue
to lead this trend[2]. Predictive maintenance data collected and interpreted on industrial devices
and computer units in previous years are transferred to cloud computing infrastructure over the
internet with new generation Technologies[2]. In this way, the product sales model, which
consists of classic software and hardware packages, is replaced by periodic reporting and new
business models that only offer the output as value to the customer and are based on service
sales[2].

6 Keys that Ensure Successful Transformation in New Business Models;

1. A more personalized product or service[3].

Many new models offer products or services tailored to customers' individual and immediate
needs, so they are ahead of traditional business models. Companies often use technology to
achieve this at competitive prices.

2. A more collaborative ecosystem[3].

Some innovations are successful because a new technology improves collaboration with supply
chain partners and makes it possible to reduce costs by helping to allocate business risks more
appropriately.
 3. Asset sharing[3].
Some innovations succeed as they allow for costly assets to be shared - Airbnb allows hotel
owners to share their rooms with travelers, and Uber shares assets with car owners. Sometimes
assets can be shared along a supply chain. Sharing usually takes place through two-sided online
marketplaces that bring out value for both parties: for the hotel owner it takes money from
renting out his vacant room, and for the customer a cheaper and perhaps better place to stay.

4. Usage-based pricing[3].
Some models charge customers when they use the product or service, rather than requiring them
to purchase something directly. This situation benefits companies because the number of
customers will increase.

5. Agile and adaptable organization[3].

Innovators sometimes use technology to move away from traditional hierarchical decision-
making models to make decisions that better reflect market needs and allow real-time
adaptation to changes in those needs. The result is more value for the customer, often at less
cost to the company.
6. Closed loop process[3].
Many models replace a linear consumption process with a closed loop in which the products
used are recycled. This change reduces overall resource costs.

For example, Uber:

The Uber taxi service company provides five of these[3]. The business model is built on asset
sharing - drivers use their own cars[3]. Uber has developed a collaborative ecosystem where
the driver takes the risk of winning the rides while the platform helps minimize that risk through
the application of big data[3]. The platform also creates agility through an internal decision-
making system that responds to market changes in real time. This allows Uber to apply usage-
based pricing and direct drivers to locations where they are likely to find fares[3]. Uber uses an
app where customers rate drivers. Through the Big Data Platform, a potential customer can see
the nearest drivers and their ratings on their mobile device[3]. The rating system forces drivers
to provide clean cars and quality service, and also provides personalization[3]. Letting the
customer decide between the closest car and the highest-rated car might not sound like a lot,
but it is still way ahead of traditional taxi services[3].
Uber has five key features of a potentially transformative business model.
In theory, the more of the six attributes a new business model has, the greater its potential to
transform a particular industry[3].

RESULT
I think many new business models are emerging thanks to the developing business models.
Companies using the traditional business model need to transform because most companies
have started this transformation if they do not take this into account, they can lose revenue. In
the future, most businesses may close due to the impact of e-commerce because most people
are now shopping online. I think this is an indication that new business models will emerge.

REFERENCES
[1] https://www.capital.com.tr/yonetim/liderlik/dijital-ekonominin-yeni-is-modelleri-505729
[2] https://www.endustri40.com/yeni-nesil-is-modelleri-endustri-4-0-ile-yukseliyor/
[3] https://hbr.org/2016/10/the-transformative-business-model
[4] https://www.iotforall.com/how-new-technology-changing-business-models
[5] https://www.gbm.hsbc.com/insights/innovation/retail-experience-economy
[6] https://www.sciencedirect.com/science/article/pii/S0024630113000691