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New models for our new world order

‘Our recent Brexit experience in the UK and Trump experience in the US reminds us that unexpected changes in political and economic models are set to have a huge impact on our lives.

The same is true of unexpected change or innovation in business models.

All around us are examples of business model innovations that impact our life. There are older examples such as the Microsoft 1980’s model to deliver a PC in every home, to more recent examples such as AirBnB, which has at one stroke removed the barriers for anyone to become a hotelier.

Other industries have turned products into services. The often-quoted example is Rolls Royce, who now sell flying hours, a service, as opposed to engines, a product. These types of changes can alter industries overnight and have other unexpected consequences both good and bad. Looking at the Rolls Royce model, their business is expected to be cash negative for the next three years as they grow their engine base, before generating cash in 2019 from the sale of services. Changes to accounting standards, where future expected profits cannot be booked against current losses, on engines sales, means a downward restating of last year’s profit by circa £750m. This has led to a difference of opinion and debate between investors and analysts as to the value of the Rolls Royce business.

UK construction is often regarded as an innovative sector, every project delivered by the sector is a masterclass in innovation, solving a myriad of bespoke problems. If this is so, then why do we see little innovation in the business models applied to delivering real estate and infrastructure assets?’

Read the full article on the Constructing Excellence website.