In 1997, Reed Hastings envisioned a digital site where, for a fixed price, customers could watch an endless amount of movies. At that time the technical infrastructure didn’t exist and the viewing public, who had just become accustomed to DVDs, were simply not ready. But Hastings had a clear vision of the future, and he managed to start Netflix, albeit with a temporary business model. Using the good old-fashioned postal service, he rented out DVD movies via a subscription model. In 2011, when Hastings first dared to prioritize streaming and offer customers the opportunity to subscribe to only the digital service at a lower price, he was met by public outcry. 800,000 customers left in protest and the stock price dropped 77 percent in four months. In the long run, Hastings would prevail. In April 2017, Netflix reported about 93 million paying customers worldwide. Thanks to its temporary solution – and the courage to move on to the next business model – Netflix managed to successfully challenge both themselves and the market. They were perfectly prepared for the coming streaming explosion with a core of faithful users, large amounts of behavioral data, industry contacts and, perhaps most importantly, an excellent recommendation engine. Netflix created its own future market.

Robert Wolcott, Professor at the Kellogg School of Management, calls the phenomenon “temporary business ideas”: A company deliberately launches a business concept that cannot last – and uses that window of time to build a position and assets in anticipation of market changes.

Uber has clearly stated that their existing business model, based on freelance chauffeurs, is a temporary solution in expectation of self-driving cars. Google has invested in Nest in order to sneak a thermostat into the smart home of the future. PayPal’s founder, Peter Thiel, said in 1999 that in the future we would all be like mini-ATMs with digital wallets in our mobile phones, but at the time he could only launch a temporary payment solution based on credit cards where users could “beam” the program with their Palm Pilots. Today, over 200 million people use PayPal’s significantly more advanced mobile payment systems.

Fast-moving markets are difficult to assess. But by investing in temporary business models, prospective companies can be at the forefront of the next development stage. More start-ups than established giants invest in temporary solutions. It seems that younger companies are more likely to put energy into understanding the user needs and market structure of the future. For those companies in the midst of digital transformation, this can be an important lesson. Mark Zuckerberg annually convenes all of his employees and partners to present a detailed 10-year vision of how the market will evolve and what role Facebook will play in it. Is he always right? Certainly not, but this provides direction and instills the courage necessary to create temporary business models that will lead to the next success.

What is the difference between a temporary business model and ordinary experimentation? It’s about deliberately creating an in-road to an expected market. It demands an understanding of the direction forward to make the right investment – and the flexibility to adapt as reality unfolds.

Many companies are currently stuck in business models that have served them well for many years, but which are not watertight solutions for tomorrow’s market. If the giant step into the digitally transparent ecosystem of the future is too complicated, perhaps a contemporary version of Hasting’s DVD rental is what could save them.


Sara Öhrvall

Published in Dagens Industri, November 2017

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The ongoing technological and social transformation we are currently experiencing is often called the fourth industrial revolution. While the fourth industrial revolution is coming, we are starting to wonder how it will impact jobs? Will jobs exists in the future?  Are there still humans doing to work? Is robot going to take my job? While the questions remain unanswered, many have been looking for answers by drawing comparisons to the previous industrial revolutions. This has given birth to two schools of thought: for the other, the past this is a cause for pessimism while the other is more inclined to optimism – both of them, however, are missing the real lesson from history.

Hostler was a relatively common occupation in 19th century England referring to a man who was employed to look after horses of people staying at an inn. Hostlers and several other occupations depending on the care of horses were, however, extinct in the beginning of next century due to a revolution in transportation: motorization. According to the other school of thought, this is exactly what is about to happen for hundreds of millions of truckers around the world. Just as internal combustion engine replaced horse as main source of power, machine learning algorithms will eliminate humans from behind the wheel. Self-driving vehicles, however, are only the beginning. In the future, there will be fewer and fewer tasks that intelligent machines cannot do better than humans. Eventually, humans will face the same fate as horse a hundred years earlier – swept away from the economy by the emerging technologies.

Humans are not horses, representatives of the other school of thought rightly point out. Instead of diminishing, technology actually increases the importance of human judgement and creativity. Our species is characterized by our endless inventiveness and bottomless desires making sure we will never ever get enough. Hence, the economic transformations of the past are a cause for future optimism, not pessimism. Yes, hostlers as well as livery-stable keepers were displaced by motorization, but in turn, it created millions of new jobs as drivers, mechanics, road builders and so on. Similarly, driver-less vehicles will create new professions such as remote vehicle operators and give rise to trillion-dollar passenger economy. Hence, the rise of the intelligent machines will not yield to mass unemployment – just like during the previous 200 years.

So, which one of the schools is more right? Neither, I would argue. Both of these narratives share the same shortcoming. They focus on what might happen in the long-term and neglect the more pressing issue right under our noses: the reskilling revolution. In 19th century England, hostlers and the entire society were totally unprepared for disruption driven by the emerging industrial technologies which caused severe social unrest and human suffering. It is no coincidence that Communist Manifesto was originally published when the revolutions of 1848 erupted around Europe. Currently, similar structural change of the labor market is already taking place and it has been estimated that globally as many as 375 million workers will have to switch occupational categories entirely by 2030. However, compared to the previous industrial revolutions, our contemporary societies should have better conditions deal with transformation and the challenges related to that – if we choose to focus on the right things.

What are the right things, then? Based on the experiences of the past industrial revolutions: reskilling, upskilling, life-long learning and smooth job transitions. The skills needed in the labor market are changing rapidly and unlike in 19th century England, these changes have been largely forecasted. We already know that competence, education and learning are the most critical means coping with the transformation. Nevertheless, there are only few practical approaches mapping opportunities for life-long learning, reskilling and job transition. Hence, tackling these issues should be a top priority for both governments and corporations. Only by doing so, we can repeat the achievements of the great technological inventions of the past and at the same lessen the human suffering during the transition.

Otto Tähkäpää

The author is a Foresight Specialist at MindMill Network and a social science historian by education.

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