How the Market of Business Model Engines Evolves in the Computing Industry: The 5 Stages


The computing industry has transformed and continues to transform our lives beyond our wild imaginations. In spite of its transformative power and accelerated rate of change, the computing industry evolves just like other industries as well as living organizations. Products, services, industries, and business models continuously emerge and compete to ideally solve B.U.M.P.S.: Big Urgent Market Problems.

The fractal model of the computer industry follows the theory of the 5 Stages of Market Evolution. The above presentation illustrates the fractal evolution of the computer industry while providing some examples at each stage of its evolution.

The diagram of the 5 Stages of Market Evolution in the Computing Industry can be used to understand and anticipate the evolution of business models not only in the computing industry but also in other industries. According to the theory of the 5 Stages of Market Evolution the vast majority of industries will be "computerized," that is, computer-based or computer-driven. The final business model in computerization is a multi-sided market. The computerization of traditional industries, which are predominantly one-sided, is now more visible than ever as we have seen in the computerization of taxis by Uber and the computerization of hotels by AirBnB.

Marc Andreesen, co-founder of Netscape and a venture capitalist in Silicon Valley, once observed, "Software is eating the world." In an article in the Wall Street Journal, Andreesen refers to many examples where software-based companies are eating the proverbial breakfast of brick-and-mortar companies. Examples of industry computerizations include the following:

  • Computerization of booksAmazon
  • Computerization of videosNetflix
  • Computerization of musicApple (iTunes); Spotify; Pandora
  • Computerization of gamesZynga
  • Computerization of filmPixar
  • Computerization of telephone serviceSkype

From my observation, there are two main trends or forces driving the computerization of industries. The first is the miniaturization trend (force) while the second is the decentralization trend (force). For the majority of customers, the ideal object or product is one that instantly gets a customer job done while it exists virtually (zero size) and is ubiquitously available (decentralized or highest degree of freedom; customized). The Value Engine Map below illustrates the trade-off of size vs. decentralization.

Illustrated in the Value Engine Map below are examples in the computing industry of the evolution of computing devices: from mini-computers to the Internet. As a tool or "device," the Internet exhibits zero size and the highest form of decentralized (distributed) computing and communication.

The interplay between the forces of centralization, decentralization, and miniaturization is illustrated below using the "0-1-N" Evolutionary Cycle.

So, from your perspective, what industries are being computerized the fastest? What industries are moving from the Red Ocean to the Blue Ocean? How are business models or business model engines evolving in your industry? What is the current proportion of multi-sided business models in your industry?

We'd love to hear your opinion.

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