Category Archives: Business Model Innovation

Social Platforms in the Age of Generative AI

August 21, 2025 By in Business Model Innovation
This entry is part 3 of 8 in the series Gen-AI Erodes Business Models

For nearly two decades social platforms like Facebook, Twitter (X), YouTube, and TikTok have defined the way information is consumed online. Their business model has been remarkably consistent:

  1. Capture attention through feeds optimised by algorithms.
  2. Monetise discovery by inserting ads into those feeds.
  3. Lock in creators and audiences by making the platform the essential intermediary between the two.

This model relies on one central feature: control over content discovery. The feed is the bottleneck and the algorithm is the gatekeeper.

Generative AI is shifting that balance of power.

From Algorithmic Feeds to User-Directed Discovery

In the old model users consumed what the platform’s algorithms decided was relevant. Discovery was not organic, rather it was curated by the system to maximise engagement.

Generative AI enables a different interaction. Users can now summarise, filter, or reorganise content themselves without depending on the platform’s feed. For example:

  • Instead of scrolling through thousands of tweets, a user can ask an AI agent to summarise trending discussions.
  • Instead of relying on YouTube’s “up next” suggestions, a user can instruct AI to curate a learning path across multiple creators.

The power shifts from platform-driven feeds to consumer-driven control. Continue reading →

The Airline Loyalty Program Revolution

August 20, 2025 By in Business Model Innovation
This entry is part 1 of 2 in the series Business Model Innovation

Airlines are notorious for their slim margins. Volatile fuel prices, labor disputes, and economic downturns have historically left the industry exposed to shocks that can wipe out years of profitability in a single quarter. Yet hidden in plain sight lies one of the most successful business model innovations of the last half-century: the airline frequent flyer program.

What began as a simple marketing perk in the late 1970s, rewarding customers with miles for loyalty, has since evolved into a multi-billion-dollar financial powerhouse. In fact, loyalty programs have in some cases become more valuable than the airlines themselves.

Examples include:

  • United’s MileagePlus was appraised at $21.9 billion in mid‑2020 while the airline itself was much less valuable.
  • United also secured a $5 billion loan using MileagePlus as collateral—valued around $20 billion.
  • United’s and Delta’s programs were separately valued at $22 billion and $24 billion respectively.

From Perk to Balance Sheet Powerhouse

Early frequent flyer programs were straightforward: fly more, earn miles, redeem them for free flights. But over time airlines recognized that miles were more than just a perk—they were a currency.

By selling miles to banks, credit card companies, hotels, and retailers, airlines created high-margin, recurring revenue streams. In 2019 alone U.S. airlines generated billions in revenue simply from selling miles to credit card issuers.

The true significance of this shift came into focus during crises. In American Airlines’ 2011 bankruptcy its AAdvantage loyalty program was valued at nearly USD 20 billion far exceeding the airline’s market capitalization at the time. During the COVID-19 pandemic airlines used their loyalty programs as collateral to raise emergency financing. What once looked like a side business became the crown jewel of the balance sheet.

Reframing the Business: Airlines as Financial Services Firms

The key insight was reframing. Airlines realized they weren’t just in the business of moving passengers from A to B. They had become issuers of a loyalty currency, with economics closer to a financial services firm than a transport company. Continue reading →

Search Engines in the Age of Generative AI

August 18, 2025 By in Business Model Innovation 1 Comment
This entry is part 2 of 8 in the series Gen-AI Erodes Business Models

 

For two decades, search engines have been the primary gateway to the internet. Their business model rested on a simple formula:

  1. Aggregate attention by being the starting point for information discovery.
  2. Monetize visibility through advertising, with sponsored results and keyword auctions.
  3. Lock in users through habitual use and incremental improvements in relevance.

This model created some of the most profitable businesses in history. Yet generative AI now strikes at the very foundation of this model.

From Queries to Answers

Traditionally, search engines returned lists of links. Users had to sift through them to find what they needed. Advertisers paid to appear prominently in those lists.

Generative AI reframes this interaction. Instead of links, users receive direct, synthesized answers. The entire logic of the search engine — page ranking, sponsored slots, click-through funnels — is undermined when the answer bypasses the list.

Erosion of the Advertising Core

This shift has two profound consequences:

  • Fewer impressions – If the user receives their answer in the AI output, they have less reason to scroll through search results or click ads.
  • Weaker targeting – AI intermediates the query, stripping out much of the context advertisers once used to optimize placements.

The economic engine of search is paid visibility and weakens as AI compresses the user journey from query → links → clicks to simply query → answer. Continue reading →

Gen-AI Erodes Business Models: Series Introduction

August 18, 2025 By in Strategy, Business Model Innovation
This entry is part 1 of 8 in the series Gen-AI Erodes Business Models

 

Generative AI is beginning to erode some of the most entrenched business models of the last century. Where traditional competitive moats relied on scale, distribution, information asymmetry, or regulatory capture, AI is flattening those advantages. What once seemed unassailable is now vulnerable.

This series explores how AI is reshaping industries not by incremental efficiency gains, but by dismantling the very structures that created durable equity value in the first place. The common thread: AI collapses barriers to entry, redistributes power, and creates space for small, nimble actors to compete with, or even replace, incumbents.

The Core Thesis

Most legacy business models share a common foundation: they controlled the first step in the customer journey (search, discovery, or access) and extracted value through aggregation. AI undermines this control by allowing consumers and businesses to bypass the gatekeepers and move directly to optimal outcomes.

This shift does more than disrupt individual companies, it also changes the geography of global commerce. Power tilts away from monolithic institutions and toward decentralized ecosystems, where SMEs and independents can thrive on equal footing. Nations and cities that once competed to host multinational headquarters may instead compete to host the AI ecosystems that enable these SMEs worldwide.

Where We’re Going

Upcoming posts will map out how this plays out sector by sector: Continue reading →