Thanks to the hyperconnected global economy, digital citizens everywhere have had front-row seats in recent years to the transformative effect of technology in facilitating political and cultural change. In the wake of the Arab Spring, no one can question whether connected networks and free-flowing information can spawn innovative thinking and disruptive new ideas. (That’s why those who hold power and control a social system typically fear and resist these innovations.)
But let’s look closer to home — at the entrenched “dictators and regimes” running companies with business models better suited to an insular, buttoned-down business ecosystem — a world gone by. How is the hyperconnectivity within these organizations influencing their business models — which may still be vestiges of one-dimensional thinking, relics of a static approach to captive consumers and stable markets?
Facing the scrutiny of investors and a need for greater productivity, such organizations may invest in the technological trappings of innovation. All-too-often, however, these companies continue to maintain hidebound business models that simply cannot leverage those technological investments into meaningful returns.
To be sure, some change occurs organically and inevitably as a workforce integrates new software, platforms and other technological advances. But compare this laissez faire adoption — which easily succumbs to the fits-and-starts of undirected change — with the purposeful and sustainable matching of technical advances with clear-eyed business model innovations. (Versions of these competing approaches are being run every day in every industry — and it’s clear enough where the smart money will place its bets.)
“Digital Natives” Want Business Plan 2.0 (Or 20.0)
Technology provides the vehicle for innovation and change. But developing the plans and implementing the programs requires a critical mass of committed and empowered people. What’s exciting about “the human equation” today is that a company’s customers, vendors, partners and employees are ever more likely to be “digital natives.” So they not only are comfortable with technological innovation, they expect it and actively seek partners and experiences that fulfill their expectations. And the newer a manager is, the less “invested” s/he will be in preserving an outdated business model inherited from a previous generation of executives.
For digital natives, the ability to manipulate — or create — digital assets to solve problems is no afterthought; it’s in their DNA. And in an “always on” information environment, critical elements of a business model are increasingly likely to be digitized — facilitating experimentation and reducing the time and cost required for making change.
With the readily available response mechanisms providing prompt metrics and customer feedback, innovation concepts can be quickly tested and refined. Digital feedback also can provide insights on the “tipping points” where a critical mass of decision-makers recognizes the promise (or liability) of a proposed business model adjustment. This generation of executives (those born into a digital world) cannot and will not hesitate to usher in BusinessModel 2.0 — or 20.0, if that’s what it takes.
Hyperconnectivity Starts At Home
We experience the interconnectedness of data, capital, workers and ideas on a global scale. (Indeed, the market has come to take it for granted.) Ironically, however, the same connectivity that is achieved globally (despite geographic and cultural barriers) often is painfully slow within an organization itself. It’s not unlike the “last mile” problem that keeps a broadband provider from bridging the gap between a connection terminal and a consumer’s home. Only in this case, it’s the “first mile” — an organization’s management — that poses the greatest obstacles.
Innovation may be rampant at every other link in a company’s supply chain — as vendors, suppliers, customers, lenders and professional service providers all pursue better ways to compete. But if the organization itself hasn’t adopted business model innovations — and unleashed their power through intra-company hyperconnectivity and collaboration — the end result will be less than the sum of its parts.
Outdated Business Models (Like Yours)
Let’s take it as a given that every company (including yours) is operating with a business model that is in some way out-of-date. The questions then become:
- How is this outdated operational style harming our competitive position?
- What are the implications of continuing on our current path?
- What lessons can we learn from companies that already have experienced success from adaptations to the new business environment?
- What are the optimal options for an innovative business model?
- What business model adaptations can/should we implement NOW?
A Digital Business Model Framework
Where is the “low-hanging fruit” in your broken business model? Discover this, and you’ll quickly see an uptick in the perceived value of your contributions. If you’re unsure where to begin, start with a simple analytical approach. And since information technology represents sweeping, ongoing change that impacts every organization, why not make IT the focus of your initial inquiry? (With a steady increase in the number of digitized elements of every business, it could be argued that all business models essentially are digital business models.)
One such approach is described in MIT’s Sloan Management Review, where authors Peter Weill and Stephanie Woerner* identified three key components of a digital business model:
1. Content (What is consumed?)
2. Experience (How is it packaged?)
3. Platform (How is it delivered?)
For a full description, see “Optimizing Your Digital Business Model,” MIT Sloan Management Review – Spring, 2013. (Subscription required, but limited article access is available without charge.)
*Weill and Woerner both are of the MIT Sloan School of Management’s Center for Information Systems Research.
Learn more about this approach, and you’ll soon get a sense whether it is well-suited for your industry (in general) and your company (in particular). For alternative approaches, take advantage of the enthusiastic community of innovators online. Check out Business Model Generation — a site based upon the popular book of the same name. Or visit the forum at Business Model Innovation Hub, to learn more about how other practitioners are addressing these questions.
Study Companies Doing It Right
With so many organizations engaged in business model innovation, there are plenty of lessons to be learned. What’s most important is that your company finds and incorporates those innovations relevant to key competitive issues —both current matters and those earmarked as crucial for the next few years. With specialized, niche-specific matters those lessons often may reside with your leading competitor. More commonly, however, the approach that could spark your game-changing perspective will come from an industry radically different (or so you thought) from your own.
For starters, you might study some of the major companies currently getting high marks for business model innovations. Among these: Amazon, Apple, Best Buy, E-Bay, LexisNexis, Netflix, Target and USAAA. (With a Google search you will turn up coverage and commentary about their situations and solutions. Steep yourself in these case histories, and you soon will develop an instinct for identifying the underlying dynamics — lessons that might jump-start a one-off approach to transform the digital business model driving your company.)
The Biggest Mistake? Not Starting Now.
In the Digital World Order, business model innovation is a competency that must be actively cultivated and continually refined. So why not get good at it? And remember: The tools that allow you to monitor your competitors in real time are the same technologies that others (both internally and externally) will use to track your efforts and evaluate your progress. (Like it or not, the strategic changes you effect will be “under the microscope.” So why not give people something to talk about?)
The digital business model mentioned above provides one simple and useful structure for engaging company managers in business model discussions — a conversation that otherwise might seem unfamiliar and abstract to managers unaccustomed to thinking about innovation. Needless to say, there are many other such frameworks.
MIT’s Weill and Woerner offer this advice: “For a successful digital business model, your enterprise has to have good content, customer experience and digital platforms. But does your company have to be a leader in all three? We don’t think so — at least not yet.”
So do your homework, but don’t get hung up on seeking a “perfect” diagnostic framework. When considering a strategic approach, don’t be put off by thoughts that everything in the model has to change — and be perfected — overnight. The biggest mistake would be not getting started — and failing to develop a core competency that can be transformative in shaping your company’s future.