…Transforming business models for a new era
Nokia was once a dominant force in the mobile phone industry, known for its durable and innovative devices. However, the company failed to recognize the growing importance of smartphones and the shift towards touchscreen technology. While competitors like Apple and Samsung embraced the smartphone revolution, Nokia continued to focus on traditional mobile phone designs. This led to a decline in market share and eventually resulted in Nokia selling its phone business to Microsoft in 2014.
Kodak, a pioneer in the film and camera industry, also faced challenges in the digital era. Despite inventing the digital camera, Kodak’s focus on film-based products hindered its ability to fully embrace digital photography. The company struggled to adapt its business model and revenue streams to the shift from physical prints to digital images. As a result, Kodak experienced significant financial difficulties, including filing for bankruptcy in 2012.
Blockbuster, once a leading video rental chain, failed to recognize the transformative power of online streaming and home delivery services. While companies like Netflix and Redbox offered convenient alternatives to traditional video rental stores, Blockbuster remained reliant on its brick-and-mortar business model. The company was slow to adapt, and by the time it attempted to transition into online services, it faced fierce competition and a declining customer base. Blockbuster eventually filed for bankruptcy in 2010, unable to compete with the convenience and cost-effectiveness of online streaming platforms.
These examples emphasize the importance of staying agile, anticipating market shifts, and embracing new technologies. Failing to adapt can result in the loss of market dominance, customer relevance, and ultimately, the decline of once-prominent companies.
The examples of Nokia, Kodak, and Blockbuster serve as reminders of how failing to adapt to transformative technologies can lead to the downfall of once-dominant companies. However, the disruptive power of the internet revolution was just the beginning. In today’s ever-changing business landscape, the rapid advancement of artificial intelligence (AI) is set to have an even greater impact. The advent of AI brings forth a new wave of disruption, where winners and losers will be determined by their ability to embrace this transformative technology.
With AI poised to reshape industries, it is crucial for businesses in the service and manufacturing sectors to recognize the magnitude of this disruption and proactively adapt their business models. In the following paragraphs, we will explore the practical implications of AI and provide actionable insights for experienced executives to navigate this evolving landscape and harness the benefits of AI.
How AI is changing business models across industries
Elevating Customer Experiences:
According to a study by Gatner, chatbots will become the primary customer service channel for roughly a quarter of organizations, by 2027. Integrating AI-powered chatbots and virtual assistants can revolutionize customer service by delivering personalized interactions and prompt responses.
American Express (AmEx) for instance has embraced AI to transform its customer service operations. Through its AI-powered virtual assistant called AmexBot, the company has revolutionized the way customers interact with its services. AmexBot provides real-time assistance, helps with account inquiries, offers personalized recommendations, and resolves issues promptly. By leveraging AI to handle a significant portion of customer inquiries, AmEx has reduced response times, improved efficiency, and enhanced customer satisfaction.
Amazon, the global e-commerce giant, has extensively incorporated AI into its business model to enhance productivity and customer experience. By analysing customer behaviour, purchase history, and preferences, Amazon’s recommendation engine suggests personalized product recommendations, leading to increased sales and customer satisfaction. This AI-driven approach has significantly improved the company’s bottom line and positioned Amazon as a leader in personalized shopping experiences. According to an article by McKinsey, their product recommendation engine generates 35% of Amazon.com’s revenue. And that’s not all. They reported a 29% increase in sales from $9.9 billion to $12.83 billion during the same year.
Data-driven decision-making:
AI analytics enables organizations to extract valuable insights from vast amounts of customer data, driving data-driven strategies for marketing, product development, and operational efficiency. Executives should prioritize data collection, integration, and analysis to make informed decisions.
Aerobotics, based in South Africa, is an agricultural technology company that utilizes AI and drone technology to optimize farming practices. Their AI-powered platform helps farmers monitor crop health, identify diseases, and detect pest infestations by analysing aerial images captured by drones. The AI algorithms analyze the images to provide actionable insights, enabling farmers to make data-driven decisions related to irrigation, fertilizer application, and pest control. By leveraging AI, Aerobotics has empowered farmers to enhance crop yields, minimize losses, and increase overall farm productivity in an efficient and sustainable manner.
Streamlining operations through automation:
AI technologies like robotic process automation (RPA) automate routine tasks, optimizing operations, reducing costs, and enabling scalability. Organizations should identify areas where automation can improve efficiency and allocate resources accordingly.
mPharma, a Ghanaian healthtech company, has integrated AI into its business model to improve healthcare access and affordability. The company operates a network of pharmacies across multiple African countries, and it utilizes AI-powered inventory management systems to optimize medication supply and reduce waste. By analyzing historical sales data, patient trends, and market dynamics, mPharma’s AI algorithms forecast demand and help pharmacies maintain optimal stock levels. This AI-driven approach enables mPharma to ensure the availability of essential medications, reduce costs, and improve operational efficiency, ultimately benefiting patients and healthcare providers. mPharma’s innovative use of AI demonstrates how Ghanaian companies are embracing technology to solve critical challenges.
Intelligent production processes:
AI-driven robotics and automation systems optimize manufacturing operations, minimizing errors and boosting productivity. Businesses should consider integrating AI technologies into their production lines to streamline processes and maximize output.
BMW, the renowned automotive manufacturer, has harnessed AI to optimize its manufacturing processes. The company employs AI-powered computer vision systems to inspect and detect defects during vehicle assembly. High-resolution cameras capture detailed images of components, which are then analyzed by AI algorithms to identify any deviations or anomalies. By automating the quality control process, BMW ensures consistent product quality, reduces rework, and minimizes production costs, leading to increased profitability.
These are just a few ways Ai is changing how leading global companies operate. These examples demonstrate how AI can have a measurable impact on organizational performance, ranging from improved customer service efficiency and cost reduction to sales growth and enhanced decision-making capabilities.
For organisations considering a re-engineering of their current operations to take advantage of new opportunities AI has to offer here are seven practical strategies they can start implementing now.
7 practical strategies for adapting business models to leverage AI
- Develop an AI Strategy: Organizations should formulate a clear AI strategy aligned with their business goals. This strategy should outline a roadmap for AI adoption, including prioritizing use cases, allocating resources, and establishing implementation timelines.
- Foster a Culture of Innovation: Encourage employees to embrace innovation and explore AI solutions. Foster collaboration across teams, create platforms for knowledge sharing, and reward creative ideas to drive AI adoption within the organization.
- Invest in Talent and Expertise: Build an AI-ready workforce by investing in talent acquisition, upskilling programs, and training initiatives. Collaborate with AI experts, consultants, or educational institutions to gain valuable guidance and support.
- Pilot Projects and Proof of Concepts: Initiate small-scale pilot projects to test AI technologies within specific areas of the business model. These experiments provide insights, help identify challenges, and inform future AI implementations.
- Collaborate with AI Partners: Engage with AI service providers, startups, or technology vendors to accelerate AI adoption. Seek partnerships that align with the organization’s objectives and leverage external expertise to facilitate AI integration.
- Ethical AI Implementation: Prioritize ethical considerations when implementing AI. Establish governance frameworks, ensure data privacy and security, and address potential biases to build trust among customers, employees, and stakeholders.
- Continual Monitoring and Evaluation: Stay updated on emerging AI trends, assess their impact on the industry, and evaluate the effectiveness of implemented AI solutions. Continuously adapt and refine strategies to harness the full potential of AI.
The disruptive power of AI is reshaping industries and challenging traditional business models at an unprecedented scale. The examples presented in this article demonstrate how leading companies across various sectors have leveraged AI to elevate customer experiences, enable data-driven decision-making, streamline operations, and optimize production processes. However, the impact of AI goes beyond these individual cases. It presents a new era of possibilities and challenges for organizations worldwide.
The future belongs to those who not only embrace change but also actively seek out opportunities to leverage AI technologies to transform their business models. With the right mindset, strategy, and execution, organizations can harness the power of AI to unlock new levels of productivity, profitability, and customer satisfaction. The time for action is now.
