A lot of companies, no matter the size, are not very good at defining and then enacting a compelling change in business direction. But the economic volatility of recent years coupled with ever-faster changing products and markets demand that companies remain attuned to constant change for how they are doing business and what they are selling. What comes into question is how often should the business model change, and more importantly, does the change have a strong focus on target customers and what they need.
Many companies wait too long before assessing the health of the current business model. Even then, they are slow to move to change and act effectively. As a result: core markets increasingly stagnate, management still tries to get away with doing things the old way, and the company fails to work genuinely on a new business model. Companies are often lax in identifying the "business as usual" practices that are dragging down the organization.
Increasingly, successful companies are the ones that sustain and grow by exploring and then adopting new business models -- repeatedly. These companies constantly question assumptions and the status quo, and seek to disrupt their own business, in order to move on to new possibilities, stronger competitiveness, new solutions and markets. How companies "do business" is gaining greater importance than what they do. Particularly with more companies understanding the significance of being customer-focused in every aspect of the business, how they "do" business is paramount to offering value to their customers.
To adopt a strategy of continuous business model reinvention, significant internal change will have to happen, particularly around the management of the company and for processes that are connected to customers. Reinvention, new directions, continuous growth -- all are only possible in companies that embrace change and innovation in the corporate cultural DNA, and then empower their employees to work in new ways to achieve the continuously evolving business model.
A company can succeed with new business models that are customer-driven, where the company listens well to its customers and acts on their needs and wishes, to achieve competitive positioning and success. But with the new business model comes new challenges to ensure the validity and accuracy of product directions and go-to-market strategies, and real innovation in offerings and how the business operates.
To determine whether a company should seek to reinvent its business model, consider these steps:
- Articulate what makes your existing model successful. For example, what customer problem does it solve? How does it make money for your firm?
- Watch for signals that your model needs changing, such as tough new competitors on the horizon.
- Decide whether reinventing your model is worth the effort. The answer is yes only if the new model changes the industry or market.
The final test for adopting a new business model: Business model innovation should be driven more by the value that is delivered to customers, than by simply responding to pressures and seeming disruption from competitors.
Image Source: theinnovationeffect.com
This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. I've been compensated to contribute to this program, but the opinions expressed in this post are my own and don't necessarily represent IBM's positions, strategies or opinions.
About the author: Julie Hunt understands the overlap and convergence of many business processes and software solutions that once were thought of as "separate" – and how this impacts software Vendors and Buyers, as well as the strategies that enterprises implement for how technology supports the business and its customers. Julie shares her takes on the software industry via her blog Highly Competitiveand on Twitter: @juliebhunt For more information: Julie Hunt Consulting – Strategies for B2B Software Solutions: Working from the Customer Perspective