presidents perspective

Inventing Your Business Model Continuously

Robert E. Johnston, Jr., PDMA Chair, and Consultant, Insigniam Performance, chairman@pdma.org

With the responsibilityfor innovation being pushed down and across an enterprise from marketing to manufacturing to sales and more, todays business models are being advanced and polished at lower levels of the organization.

ecause marketplace turbulence has become the steady state, an enterprise must be in constant motion to keep customers and attract new ones by providing the value and experience they seek. The leadership, the value creation, and the value delivery all must be in sync. Those organizations capable of continuous business model innovation have a significant competitive advantage. Business model innovation comes in many flavors and addresses the opportunities presented by the collision between new technology, globalization, and consumers demanding more value (and a better experience) for less now! Netflix, the distributor of a vast library of films at a low cost, is an example of a company that has leapt from one business model to another. The original model depended on the postal service for the delivery and pickup of movie DVDs. Next, with films in a digitized format, they captured 61 percent of the entertainment market for movies that are downloaded. Now, Netflix is taking on HBO and other production companies in creating content. The term business model may present a semantics problem for companies slow to identify this need. Typically, models are built to be stable and rigid enough to withstand outside forces. Continuous business model innovation uses these same forces to better understand the dynamics of the marketplace and where and how new value might be delivered. Then, it harnesses these forces to shape the delivery of the new value. So, continuous business design may better describe this process. The point is, if you coast, you are toast. Your organization needs to be sensing and mapping the trends and anticipating the new ones on which your business model is based. Business assumptions of what provides value need to be regularly challenged. This cannot be left to chance. It means developing a capability that is dedicated to spotting emerging new forces and tracking the evolution of existing ones. This approach will give your

organization a sprinters advantageous lean versus the competition. The backbone of any process for continuous business model innovation is creativity. The organizations that most effectively unleash their employees creativity and successfully engage other stakeholders for value creation (customers, partners, and suppliers, among others) will have an edge. Think of this as a value creation community where each new perspective provides a new lens on the experience of the product. These points of view are all legitimate and important. Each perspective enhances the other. When combined, they provide insights on how the business model might be advanced to deliver new value in ways ranging from evolutionary to breakthrough. The conversation is constant. Having more creative options for the delivery of new value provides strategic choices that can be aligned with the short- and long-term strategy to the organizations advantage. Some companies are engaging these stakeholder communities to co-create a continuous product life cycle curve. As a product matures and the profits flatten, customers are engaged to identify and co-create where an innovative model will increase the growth curve. You will also learn when a new model is not worth the cost and avoid disruption from a lowercost competitor. With the responsibility for innovation being pushed down and across an enterprise from marketing to manufacturing to sales and more, todays business models are being advanced and polished at lower levels of the organization. There is a strong and clear mandate from leadership for innovating the way we do business. This mandate is the most important first step toward continuous business model innovation. Without it, an employees default behavior is business as usual. Elite companies such as IBM, 3M, Google, and BMW have successfully made innovation of the business a daily priority. Has yours done the same? V
VISIONS july 2011 5