Change drivers, ecosystems and hypercompetition

Connect environmental change to the business model

Environmental dynamism means that relevant conditions change frequently, unpredictably or substantially. Its significance is economic: a change can alter customer priorities, the cost of delivery, access to resources or the organisation's ability to earn a return. A faster technology is strategically useful only if it improves an outcome that matters.

Start with a specific observation. “Technology is changing” gives little direction. “Customers can compare service availability immediately” suggests a shift in search costs, expectations and bargaining power. The next question is whether the organisation can respond profitably.

Three recurring drivers deserve attention: technological possibilities, environmental and social expectations, and demand in emerging national markets. They interact. A new payment channel may make a service accessible, but unreliable connectivity or low trust may still prevent adoption. Analyse the combination, not just a list of trends.

Concept sources: Original Accounting Ahead diagnostic flow, bringing together the concepts explained and sourced on this page.

Automation, extension and transformation

Li's research distinguishes three ways digital technology can change activities. Classify what changes in the business, rather than the sophistication of the equipment purchased. One organisation can use all three approaches at once.

Concept sources: Feng Li: The digital transformation of business models in the creative industries — AET concepts; accepted manuscript, p. 13. Explanations and cleaning example are newly written.

The categories describe the extent of change; they are not a ranking from poor to good strategy. Automating a bottleneck may be more valuable than replacing a profitable model. For the cleaning example, outcome pricing also transfers performance risk to the supplier: unexpectedly difficult sites could turn a promising contract into a loss.

Understand the technologies without confusing them with strategy

Technology creates possibilities; a business model determines who benefits, who pays and how delivery works. Evaluate both the opportunity and its limiting condition.

Concept sources: OECD: The Next Production Revolution — Supports the production-technology categories. The decision questions and grouping are original; the sustainability context is supported by UNEP: The Role of Business in Moving from Linear to Circular Economies.

An equipment purchase is not itself evidence of innovation. Explain the mechanism: reduced downtime, a different customer experience, access to an underserved segment, or a new charging basis. Include implementation costs and the capabilities needed to realise the benefit.

Cloud computing: capacity and responsibility

Cloud services allow computing resources to be obtained over a network and adjusted as requirements change. NIST identifies on-demand access, network availability, pooled resources, elasticity and measured usage as defining characteristics. The three service models differ in how much of the technology stack the customer operates.

Concept sources: NIST SP 800-145: The NIST Definition of Cloud Computing — Essential characteristics and service models, pp. 2–3. Original comparison table.

The strategic benefit can be lower initial infrastructure investment and more flexible capacity. However, outsourcing technology does not outsource all responsibility. Data, accounts, access settings and customer-controlled components still require management. Responsibilities vary by service and contract. Check security, recovery arrangements, service interruption, switching costs and the cost of higher usage.

Concept sources: Microsoft Learn: Shared responsibility in the cloud — Supports the distinction between provider and customer security responsibilities.

Sustainability as a source of strategic change

Sustainability affects the model when resource use, waste, working conditions or wider impacts influence demand, costs, legitimacy or access to finance. It can therefore prompt redesign of the offer and value chain, rather than an additional promotional claim.

An organisation might extend product life, recover materials, sell access instead of ownership or work with suppliers to reduce losses. Examine impacts across the value chain. Moving an environmental burden to a supplier does not necessarily reduce the total burden.

Concept sources: UNEP: The Role of Business in Moving from Linear to Circular Economies — Supports value-chain thinking and business opportunities from reduced resource use. No source case studies or statistics are reproduced.

Emerging markets: examine the customer and local system

An emerging national market is not a single customer segment. Income, infrastructure, institutions and buying behaviour can differ substantially within one country. Avoid treating “emerging market” as synonymous with poverty or assuming that a cheaper version of an existing product will fit.

Inclusive business models can involve lower-income people as customers, suppliers, distributors or employees. The strategic question is how participation becomes both accessible and commercially sustainable. Customer research should explore practical barriers such as awareness, affordability, distribution and trust.

Concept sources: IFC: Accelerating Inclusive Business Opportunities — Supports commercially viable inclusion of underserved groups; it does not imply that every emerging-market segment has identical needs.

Business ecosystems and their different purposes

A business ecosystem involves interdependent participants contributing to an offer or outcome. An organisation may depend on complements it does not own, such as a compatible payment service or a specialist installation network. A supply-chain diagram mainly follows production and delivery; an ecosystem view also asks how different participants' choices affect adoption and usefulness.

The organisation can be an orchestrator that sets participation rules or a complementor that contributes within another organisation's system. Being the orchestrator is not automatically the best position. It requires an attractive proposition for partners and the ability to coordinate them. Openness also varies: collaboration can coexist with rules about access, data and intellectual property.

Concept sources: London Business School: Myth busting and exploring ecosystem definitions — Supports interdependence, complementor roles and varying openness.

Concept sources: Klimas and Czakon: Species in the wild — a typology of innovation ecosystems — Discusses ecosystem distinctions and value co-creation. These are study perspectives, not mutually exclusive boxes; the applications are original.

To analyse an ecosystem, identify the end user's need, essential participants, key dependencies and the rules governing exchange. Then ask what happens if one participant withdraws. A long partner list is less informative than identifying the one missing contribution that prevents the offer working.

Hypercompetition and the durability of advantage

Hypercompetition describes intense sequences of competitive moves that rapidly erode advantages. D'Aveni's argument is that firms in such environments need successive temporary advantages, rather than assuming that one position will remain protected indefinitely.

Concept sources: Richard D'Aveni: Hypercompetition — publisher description and excerpt — Supports the concept of rapid competitive escalation and temporary advantages.

The practical test is evidence of erosion: rivals copy features quickly, customer switching accelerates or improved alternatives arrive before earlier investments recover their cost. Rapid growth alone does not prove hypercompetition, and the concept should not be treated as a universal claim that no advantage can last.

Apply the concepts to a case

A strong response connects change → model effect → evidence → strategic implication. Explain why a development matters for this organisation, identify dependencies or constraints, and propose a test or response. Distinguish operating improvement from model transformation, and cooperation from guaranteed value capture. The next pages develop the business-model choices and the responses available to established organisations.

Sources and further reading

• Feng Li: Digital transformation of business models: automation, extension and transformation; accepted manuscript.
• OECD: The Next Production Revolution: production technologies and their strategic implications.
• NIST SP 800-145: cloud characteristics and service models.
• Microsoft: Shared responsibility in the cloud: customer and provider responsibilities.
• UNEP: The Role of Business in Moving from Linear to Circular Economies: resource use and value-chain change.
• IFC: Accelerating Inclusive Business Opportunities: inclusion and business-model development.
• London Business School: Ecosystem definitions: ecosystem roles, openness and dependencies.
• Klimas and Czakon: Species in the wild: research on ecosystem distinctions.
• D'Aveni: Hypercompetition: original author's argument, via the publisher's excerpt.