Post pandemic business difficulties in Central and Eastern Europe will require business to change or update their business models. This will trigger new challenges and business will face new legal issues.
During the pandemic, businesses faced lockdowns and reduction of business operations. At the same time, businesses were forced to pay at least their overhead expenses. This led many businesses to expand their online presence. But not only that, many businesses are in the process of changing their usual behavior, changing their usual business model and searching for cost effective solutions. Here are some business innovation avenues we became aware of and our thoughts on their legal challenges:
Digital presence – digital sales, marketing, and service channels
Instead of providing face to face services many businesses have been switching to digital channels. There are obvious advantages such as increase in customer numbers, providing services during lockdowns, cost reductions due to remote self-service models, and so on. However, many businesses that hastily switched to digital service channels have neglected the legal consequences ‒ especially customers’ rights and GDPR must be checked.
New product and service delivery channels
To expand business offerings new partnerships are being built and new technology is being used. New local partners, even if a little more expensive, are more reliable than a cheaper partner abroad. New automatized technology that simplifies, automatizes, and reduces the costs of product or service delivery are being planned and implemented. This leads to increased dependency on external parties, since the producer or service deliverer is forced to use a new system/partner. A broader scope of legal challenges follows, starting from new complex contracts to specific intellectual property questions.
Shift from products to services
Especially in the IT industry, we are seeing a shift from selling ownership to selling access. Favouring services in lieu of product provision, even with typical product sellers, can be done only with correct service agreements and knowledge of local law. This is particularly true in Central and Eastern Europe when providing digitally facilitated services in different countries.
Shift to pay-for-outcome business model
This model allows the provider to supply services instead of goods. For example, instead of selling a machine, the machine is hired or rented to the user while the manufacturer still owns and maintains the machine and is paid based on use of the machine. Again, this model requires a clear agreement and regulation of each party’s rights and duties.
The pay-for-outcome business model is used in digital services, too. This usually leads to the same legal issues.
Platform business model
This model creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers. It matches the supply and demand of goods and services in an industry sector or value chain. The legal complexity of this model requires at least a knowledge of the platform business model and local law. Based on experience, this model will require further legal maintenance, since the scope of issues that must be dealt with day by day is very hard to presume in advance.
Selling data and insights
Many businesses are starting to comprehend that they are in possession of new type of assets – data or insights. It is not just about identifying a new asset, but also about finding a possible customer. However, the transfer of such assets requires a thorough legal analysis, especially with GDPR in mind. Further legal consequences should be also considered, e.g. exclusivity, re-sale, and so on.
Under this model, the number of freelancers and partners providing services is on the increase and thus they partially/fully replace employees. This model allows for easy adaptation to crises like the Covid pandemic since it allows flexible increase or reduction of resources and activities. From a legal point of view, it requires complex contract adaptation and regulation of partners’ rights and duties.
Not all these business models are new and innovative. But their application and adaptation in connection with the Covid pandemic is unique. We believe that proactively analysing and adapting one’s own business model, with the current pandemic in mind, can lead to an increase of a business’s market share.
Contact us if you have any queries or simply wish to discuss this topic.