In today´s hyper-competitive times competition is not just on brand, product, and technological innovation. It´s also – and foremost – on the business model.
Surprised? Disturbed? This might be possible, since you´re not clear about what your business model and strategy really is, aren´t you?
Unfortunately, something you will not be able to afford any longer. Neither content nor technology is king… it´s disruption! Disruption can be caused by the introduction of products, services, or business models either in new or existing markets in such a way as to shake up the industry and eventually to oust established players.
Remember fixed line telephones? Remember then cellular phones? And afterwards? Not just a next generation of technology. Instead, a new business model: smart phones on the one side, and Skype on the other! And tomorrow… Smart watches?
Well, it´s pretty obvious that the old guard, and almost every industry, are being challenged by a countless number of cutting-edge business models. Think Nespresso for example. I like my daily cup of its Lungo Leggero from their famous refill capsules. Good quality plus excellent marketing (thanks also to George Clooney and John Malkovich). That´s all? By far not! What Nespresso actually achieved was to lock in consumers (including myself) by having created a new business model which generates repetitive sales and profits.
THREE BASIC STRATEGIC OPTIONS FOR DISRUPTORS
In general there are three options for a disruptive and visionary game changer:
Firstly, you develop your own disruptive business model (explained in more detail below). Second option, you develop further the existing business model in the current industry or in adjacent industries and categories. Nestlé, for example, is transferring Nespresso into the tea category with its Special.T concept.
Third option, you take an existing business model – let´s say something like the Nespresso business model – and apply it to (completely) different industries. Meaning to deploy existing and proven principles elsewhere. Apple, Google, Samsung & Co. have been doing it already by developing their own Nespresso-like ecosystems.
DESIGNING A DISRUPTIVE ORGANIZATION
If you´d like to apply a more entrepreneurial perspective to business modelling and to become someone who wants to create tomorrow´s businesses, to find new and innovative ways to excite customers, and to replace outdated paradigms and strategies, then the following principles might be useful:
1. Understand the business you are in, evaluate, and specify your current business model. It´s an obvious starting point. However, not many would be in a position to give a truly succinct answer to it.
2. Evaluate where your customers, your industry and adjacent industries/categories might evolve to in 5 – 10 years. Will your existing business model and associated products and technology still fit? Will a process of continuous innovation be sufficient to satisfy and to excite customers?
3. Decide to be a disruptor – even a self-disruptor – and take the lead. Also, and especially, in the new age of disruption there is nothing as powerful as the traditional first-mover advantage.
4. Broaden your scope and imagine the impossible. Look far outside of your current thinking patterns and industry boarders. Future revolutions and competition most likely will also come from what you currently might consider unrelated products, services, and industries. Think without Limits and Limitations. Consider yourself as an active subject rather than a passive objective.
5. Ensure that the new concept is simple, accurate, holistic, easily understood by all stakeholders, and at the same time not oversimplifying relevant aspects. Be specific about future customer segments (including their volatile needs and wants), your value offer (including pricing and promotions), your customer interactions, your partnerships and alliances (including virtual networks), your distribution and communication channels, and your required key resources.
6. Try to set up a business model where you can integrate so-called switching cost, i.e. think about how you can keep your customers within your system by offering them distinctive, cost saving, and value-adding advantages.
7. Replace cautiousness by bold and strategic consideration. Disruptive strategies will be driven by speed and audacity. In the short-term they might even cannibalize (part of) the existing business and/ or decrease profits, since starting margins might be lower. Apply a long-term perspective and resist short-term focused investors and management.
8. Apply new business metrics. Put revenue, cost, market shares, and profit into a new context and link them with a modified weighting and time frame. Of course, they will remain important. No doubt. They will need to be complemented, however, by criteria such as customer engagement, customer excitement, number of disruptive ideas, and the capability and ability to invent new business models.
9. Establish an entrepreneurial spirit in your organization. An environment should prevail where employees are willing to take risks. This would increase intrapreneurial conviction and drive. It also binds the corporation in an implied contract not to stop the internal disruptor for any reason other than poor performance.
Could Johannes Gutenberg, the father of modern book printing, have foreseen the advent of e-books? Most likely not! However, his publishing successors could have been better prepared, if they had applied what Peter Drucker once pointed out: “Eventually every theory of the business becomes obsolete and then invalid.”
How else could have Apple transformed from a PC maker to the world´s leading music seller? Although disruption and innovation are similar, disruption goes at least one step further by changing how markets behave, how consumers and customers think, and how we live our lives.
Today´s industries and organizations are being transformed by unprecedented scale and speed. Often it´s not an evolution any longer, but more of a revolution. Time has come for executives, business owners, academics, and employees to understand the impact and in parallel to successfully address the challenges and opportunities of those new business models.
Andreas von der Heydt is the Country Manager of Amazon BuyVIP in Germany. Before that he has been in senior management positions at L’Oréal. He´s a leadership expert, executive coach and NLP master. He also founded Consumer Goods Club. Andreas worked and lived in Europe, the U.S. and Asia.