Business models should not imitate old patterns
- Paul Mitchell
- Mar 28
- 5 min read
We make sense of the new by relating it to the familiar. This is a great approach for user interfaces, but when you are trying to innovate around business models, it sucks.
Understanding new things through familiar ones
Human brains interpret new information through the filter of what we already know. As Daniel Kahneman observed, this makes us susceptible to a lot of mental biases, but most of the time it works fine. When we were cavemen, pattern matching like this kept us alive; these days it helps us to interpret an ever changing world. As I have written before, this feature has been used by designers for years, who take advantage of the fact that we have a whole library of things we recognise that can be used to help us understand something new. This tends to evolve into a design language for specific areas - you could pick up a phone belonging to a non English speaker and make a call or take a photo. This is because the icons look like the things they represent: a camera, a notepad, a calendar page. Example: the photo above is software, not hardware.
This works very well, and even as technology accelerates, we can keep up because we recognise how things should work. You can operate any phone because they use icons; you can jump in a car you have never driven and you'll be fine, although it would be nice if manufacturers could agree about which side the indicator stalk goes.
Skeuomorphism for interface design
As you probably know, this approach is called skeuomorphism. This is a word that doesn't appear in the 1982 dictionary that I pinched from my parents many years ago, but now has a Wikipedia page: That page includes this definition:
"Skeuomorphs are typically used to make something new feel familiar in an effort to speed understanding and acclimation. They employ elements that, while essential to the original object, serve no pragmatic purpose in the new system, except for identification."
This definition is perfect for describing the use of skeuomorphism in user interface design. What it also does is to highlight the problem of applying the same idea to business models. Applying skeuomorphism to business models - employing elements that serve no pragmatic purpose other than identification - holds us back.
Misusing skeuomorphism
Skeuomorphic design can be misapplied outside of user interface design. The example I keep coming across is in "new" business models. For a user interface it makes absolute sense to use what is familiar to introduce the customer to what is new. When you do the same thing with a business model, it only makes sense in one context: when you need to sell the idea to a lot of people who are already very familiar with the old model. The key benefit of a new technology is that it enables something that couldn't be done before, so why would it support the same business model?
This is an absolutely fundamental problem with innovation in business. If you look for it, you can see it everywhere, and the place I keep seeing it at the moment is in the application of tokenisation to financial services. If you take a new technology and apply it to an existing business, that should not mean that you use the new technology on top of an old model. Time and time again, incumbent players take a new technology and bowdlerise it to suit the model they understand. I don't think that this is because they don't understand it, or don't get the possibility. I think it is because this is how you sell an idea to a large business.
The guys tasked with innovating from inside big businesses have a very hard job. The old story still holds: as a startup, you talk to 100 people, and just need one to say "yes" to funding your idea. Inside a corporate, you talk to 100 people, and you only need one to say "no" to kill your idea. The smart innovation team (or "intrapreneurs" or whatever title they have given themselves) plans for this problem. They sell the faster (Trojan) horse because that gets the technology in the gate. Then they move onto the new model, building on the learning step of the skeuomorph.
Learning from the past
There are patterns in everything - history rhymes. There is always a gap between the creation of a technology and the world figuring out how to use it properly. Part of this gap is down to optimisation of the tech, adoption by customers, and so on, but the biggest problem is in realising that the new technology enables a new way of doing things. This new way of doing things almost always comes from outside the incumbent players. Mercedes didn't popularise electric cars, Tesla did. Nokia didn't create smartphones, Apple did. CBS didn't create streaming services, Spotify did.
Actually, that last one is interesting. The history of music is strewn with great examples. We still call collections of songs 'albums' because the shellac discs used to be bound in sheaves like books. Music has gone from live to shellac to vinyl to tape to CD to streaming. Cassette tapes and CDs were only a better form of the vinyl business model: record something once, mass produce it and ship it to shops to be sold, taken home and played on a HiFi. Nothing in that model survived streaming, where getting something from a performance into someone's ears is easier than ever. The technology behind streaming includes a bunch of things working together, from cheaper recording equipment, to compression of music files, to Spotify's distribution, to smartphones and earphones. I remember using Napster about 25 years ago. The response of the music industry was not to adapt, but to sue, but eventually the new model won, because it is better. I have access to (almost) all the world's music, anywhere, anytime, very cheaply.
The new model doesn't just require a new technology, it needs us to realise that there is a new way of thinking. The pieces that enable Bitcoin had been around for a while; realising the way they enabled something new was Satoshi's genius.
Transforming financial services
The technology of money is as storied as that of music. We have gone from shells to silver to software. Now we have blockchains, enabling tokenisation. There are many smart people in banks who see the possibilities of a programmable form of money, digital wallets and a new transaction layer, but they are dealing with committees and regulators who are marinated in the current models. The result is skeuomorphic business models, because this is what you can get through a committee or a compliance officer. Thus we have blockchain versions of central clearing, centralised exchanges, and so on.
The real challenge of innovation is not technological, it's cognitive. Our natural tendency to understand the new through the lens of the old can be a profound barrier to transformative thinking. Is Bitcoin the Napster of money? I think that's probably underplaying it. Great innovations don't refine existing models, they render them obsolete. This requires us to rethink what is possible, going back to first principles, and abandoning old models where necessary. The committees can handle it - you just have to get them to think.
