Two powerful forces are transforming the nature of consumption. The empowered consumer and disruptive technologies have sent companies scrambling to find new strategies and business models for creating consumer value. At the same time, businesses are having to overhaul their operating models to drive innovation and increase their market agility.

In short, there is a digital revolution in consumer industries. To survive in a new, more collaborative environment, players must reinvent themselves to drive inclusive growth for business and society.

Revisiting the sources of disruption

Last year’s World Economic Forum Future of Retail Insights Report outlined the transformation of consumer industries. It showed how the Fourth Industrial Revolution is unleashing an unprecedented level of digital disruption that is affecting entire systems of production, distribution and consumption.

Digitalization has transformed the way that consumers discover, evaluate, purchase and use products and services. As they have become more connected, consumers have also become more empowered. They demand experiences, not just products, and have become active participants at every stage of the value chain – acting as innovators, marketers and even employees – with turbocharged expectations and demanding control.

Meanwhile, Disruptive Technologies (e.g. robotics, the Internet of Things, artificial intelligence) are driving a step change in business performance, enabling companies to offer once-impossible services.

Together, these two forces have sparked an explosion of consumer-focused start-ups, whose new business models (e.g., sharing, on-demand and subscription models) are redefining the nature of consumption. We project that consumer industries will change more in the next 10 years than in the last 40 – and at an ever-accelerating pace of transformation. To stay competitive and meet dynamic market demands, businesses must reconsider their purpose and revamp their operating models.

Exploring the impact of disruption

Thriving in this new environment will require companies to make a series of strategic decisions about their business and operating models.

A business model defines how a company captures value and goes to market; it outlines target customers and markets, products and services, a revenue model, and channels to deliver value.

The business model drives an operating model, which leverages three key components – people, process and technology – to define how a business constructs and operates its capabilities to deliver its business strategy. The operating model is a blueprint for an organization’s capabilities and the key relationships between its business functions, processes and structures. It also identifies the key organization behaviors, as well as the enabling technologies and digital capabilities.

As companies prepare for the future, they must redefine their operating models. No function and virtually no role in the industry will remain untouched as the Empowered Consumer and Disruptive Technologies transform the nature of consumption. Employees and leaders alike will need to operate very differently.

‘End-to-end’ thinking will draw functions together, reshape roles, eliminate large blocks of activity and transform others. Vital new capabilities will be needed to achieve unprecedented consumer intimacy, embed predictive analytics in decision-making, build collaborative ecosystems, and support the increased range of business models.

Further, Disruptive Technologies will dramatically change how work is done, integrating the roles of people, processes and technology. New skills and dynamic, adaptable workforce models will be required to optimize the operating model. A new strategy will govern this operating model, balancing organizational agility and the unique value proposition of each business model with central resources and shared consumer insight.

Internal evolution will not be enough, however. In this newly complex world, no company can operate in isolation. We are now in the age of the ecosystem, where industry players come together to deliver seamless consumer solutions. Individual companies are expert in a specific area, but satisfying consumers requires experts in various areas to co-operate within ecosystem partnerships.

Ecosystems will become the source of new market creation. Complete consumer experiences will not only bring together traditional value-chain partners, but create alliances with entities from outside the industry and with consumers themselves. Linear value chains will become cross-industry networks in which each business defines its strategic role within the ecosystem, focusing on core competencies and ceding capabilities and activities it once owned to new partners. As each player focuses on its comparative advantage and leverages partners’ strengths, ‘co-opetition’ arrangements will maximize collective consumer value.

Considering societal implications

Shockwaves from the impact of the Empowered Consumer and Disruptive Technologies on business will be felt across society. As the Future of Retail report showed, public-private collaborations must address and mitigate three major societal effects:

  • The effect of physical retail evolution on communities
  • The transformation of the workforce
  • The environmental consequences of last-mile delivery

While each of these is critical, we believe workforce repercussions will be the most extensive – and the most challenging to overcome. As such, it should be a primary target for public-private collaboration.

New operating models will reshape what work needs to be done and who does the work. They will need a fluid spectrum of adaptive, responsive and innovative workforce models – encompassing traditional employees, partners, freelancers and consumers-as-employees – that can meet demand with the right talent at the right time. Traditional employees and partners will provide deep business expertise and operational consistency to sustain performance. Freelancers and consumers will make up a flexible, on-demand workforce to fulfill immediate needs and provide specialized or rare skills. Managing this mix of workforce models will require significant changes in organizational culture and leadership.

To sustain these mixed workforces, companies will need to revamp talent-management activities and overhaul training efforts to enable continual upskilling and retooling. Educators must create curriculums that give students the attitude and adaptability they will need to be the employees of the future. Governments will have to help workers navigate job transition, providing a better safety net to support displaced workers, while also fostering economic growth with new labor regulations that suit new employment models. Finally, the public and private sectors will need to collaborate to expand availability and access to continuous learning opportunities, so that workers can acquire the necessary skills to change with the market and emerging technologies.

Embracing the ‘new’

The companies that survive the next 10 years will be the ones that embrace the Empowered Consumer and Disruptive Technologies. They will be data driven and far more externally oriented, working seamlessly with new partners, on-demand employees and (as part of an extended workforce) consumers.

The industry cannot reinvent itself on its own, however. Businesses, policymakers and educators must all embrace the coming changes. Each will have a crucial role to play in developing dynamic commercial and labor marketplaces, supported by effective labor regulations and relevant educational opportunities. But, more than anything else in an age of continuous disruption, open collaboration will be key to driving positive outcomes for consumers, workers and industry players alike. This initiative is designed to start the conversations that will lead to that collaboration.

The Future of Consumption System Initiative will publish its report on the future of operating models later this year. The latest news and research from the initiative can be found here.