Model of the future: what is the economy of transformations

HSE researchers studied how modern customer-oriented business models have changed and presented the transformation economy — an economic model that will replace the experience economy

The HSE Institute for Statistical Research and Economics of Knowledge (ISSEK) has compiled a newsletter dedicated to the dissemination of customer-oriented business models. In the paper, the researchers described the logic of the transition, first from the platform business model to the sharing economy, and then to crowd models and the experience economy. According to experts, the next step will be the transformation economy. We explain what this model is and how it develops.

Modern models of economy and business

Platform business model

The basis of the business model is a digital platform for communication between the buyer and seller of goods and services. Companies with this business model do not own the means of production and do not regulate supply chains, but create links between performers and customers. And these are not only marketplaces like Alibaba and Wildberries, but also other platforms that connect buyers and sellers. For example, Google, Amazon, Apple, Microsoft. In our country, organizations with such a business model include Ozon, Yandex.Taxi, Vkontakte and others.

The sharing economy

This economic model assumes that consumers can share goods and services without purchasing them. For example, rent a scooter, bike or car. The buyer receives not a product, but a solution to the problem. The manufacturer of a product or service is interested in creating a high-quality and durable product, therefore, he is responsible throughout the entire production cycle. According to ISSEK estimates, the volume of the sharing economy by 2025 will be $335 billion.

crowd model

Crowdsourcing is the transfer of production tasks to a group of enthusiasts with certain knowledge, experience and creative abilities without concluding an employment contract. The development of this model was facilitated by the involvement of the audience in the development of companies, the promotion of their goods and services. One of the most famous crowd models is crowdfunding. This is the attraction of investors and the collection of funds for the implementation of the project. In addition, there are:

• collective cooperation – to generate ideas;
• crowd competition – to develop prototypes and create a sense of community among the team;
• user-generated content (UGC) – for example, Wikipedia, TripAdvisor, YouTube, Habr;
• other forms of crowdsourcing.

ISSEK estimated the growth of the global crowdsourcing market by 2027 at $154,8 billion.

Experience Economy

The model assumes that the consumer evaluates not the real value of the product, but the symbolic one: it is important to get emotions and impressions from a product or service. The experience economy includes the following industries: culture, tourism, restaurant, exhibition, museum business. There are four areas of experience – entertainment, learning, escape from reality and aesthetics.

Economics of transformation

In 1998, entrepreneurs Joseph Pine and James Gilmour published an article in the Harvard Business Review magazine entitled The Experience Economy, where they described the concept of the corresponding model. In 1999, the authors published a book with the same title. In it, the authors revealed the logic of the development of classical economic models, and then suggested that the next stage of development would be the economy of transformations. According to Pine and Gilmore, it will satisfy the need for self-realization – the highest rung of Maslow’s pyramid.

The economy of transformation is a model in which companies provide personalized goods and services and produce exactly what individual customers need. And these are not just neural network algorithms that offer personalized content. The product should contribute to the personal transformation of the user – intellectual, spiritual, physical. Therefore, the model is called the economy of transformations, not personalizations.

Experts from the Institute for Research and Economics of Knowledge explain: “The experience of acquiring a product involves not just getting new emotions, but changing a person – enriching knowledge and skills, self-improvement. Such an economy is based on hyper-personalization: the brand is the consumer, and goods and services are the way to maintain the brand.

In the economy of transformation, the consumer does not buy the physical characteristics of the product, not the solution to the problem and not the experience, but self-development. Under these conditions, the success of the company depends on the development of the consumer: the manufacturer must not only anticipate the desires of the buyer and sell him a personalized experience, but also allow the client to feel transformed.

What will accelerate the development of the transformation economy

ISSEK researchers have identified the factors that will promote and hinder the development of the transformation economy, and also assessed the possible effects on the market.

Drivers:

• strengthening human-centeredness in the economy;
• development of digital technologies;
• transformation of information into the main production asset;
• increasing the mobility of buyers;
• promotion of responsible consumption.

Barriers:

• high financial costs for product personalization;
• over-regulation of new business models;
• increasing the vulnerability of data, including personal data.

Features:

• personalization of offers for customers, optimization of development, production and marketing of products;
• growth of competitiveness of companies;
• accelerate the launch of products to the market;
• increasing the flexibility and efficiency of organizational structures of companies.

Threats:

• the emergence of oligopoly (imperfect market competition) in the markets for goods and services of the platform economy;
• algorithmization of individual behavior, consumer habits, social and cultural preferences.