Linda Gorchels blogs

Business Model Advice from 8 Experts

Forget “business as usual.” Don’t believe everything you read about “best practices.” There is no “magic bullet.”

Business Model Renewal

When your market changes, you have to change your strategy–and maybe even your business model–to survive and thrive. Prepare for sustaining growth, transformative growth, and disruptive growth. And take advice from as many disparate sources as you can. Start here.

At the end of every chapter of Business Model Renewal, I included an interview with a prominent business leader or consultant. Each offered different perspectives on business models. Following are snippets of their words of wisdom for executives rethinking their business models.

The Importance of Developing a Business Model Portfolio

(Mary) Kay Plantes, Ph.D.
Expert in business models

Kay Plantes, Principal, Plantes Company, LLC

The speed with which product and service commoditization arises in today’s more open economy is remarkable. Price transparency, stronger buyers, supply chains that can copy anything, excess supply, the global recession and slow recovery—there are many forces behind the acceleration. Collectively they are shifting the basis of competition from individual products and services to business models as business models are harder for competitors to copy. I always tell my clients, “Every industry has its Wal-Mart, the lowest cost business model. If that’s not what you want to be or can be, avoid becoming your industry’s Sears. Think like Target – build a different business model.”

In industry after industry, barriers to entry are melting away. Industry boundaries are disappearing, competitive advantages are becoming obsolete as new ones arise and products and services are easily copied, thanks to supply chains that can recreate anything, seemingly overnight. In these turbulent seas, the most important question leaders can ask is: Do we have the right business models and how must we evolve them?

To secure year-in-year-out consistent performance, leaders must build a rich portfolio of business models, evolve these business models so they remain strong and then sell off the highly matured business models to make room for investing in emerging ones, like IBM did in selling off its personal computing and other commoditizing hardware businesses to make room for its Smarter-Planet service business. Leaders must build platforms that are leveraged by these business models, platforms that both advance efficiency and enable the company to offer its customers hard-to-copy benefits. And leaders must think about how their businesses relate to the external ecosystem of which they are a part, as competition is increasingly between ecosystems—the Microsoft world or Google world—and  not just individual companies.

“…[I]n today’s open economics, great execution is no longer sufficient for survival or success. Great strategy—the design of your business models, company, and ecosystem—is now a necessary ingredient for success and a key to capturing the many wonderful opportunities that today’s open markets create Make design an ongoing process that is separate from the planning work you must also do to make this year’s financial targets.”

Sustainable Growth without Radical Change

Bob Arzbaecher
Executive skilled in business model renewal

Bob Arzbaecher, Chairman, Actuant Corporation

  • Look for incremental versus transformation change.  Execute on enough incremental changes over a few years and you will look back and decide you created transformational change.
  • Focus on cash flow and ROIC.  Other metrics should support this overarching focus.
  • Focus on what your customers are saying.  Do you have processes to capture accurate Voice of Customer (VOC)?
  • Emphasize emerging markets. Where are your best opportunities and what might emerging markets do to your existing business model?

The Significance of Strategic Foresight in Thinking about the Future

Peter Bishop
Strategic foresight expert - valuable skills for business model renewal

Dr. Peter Bishop, Executive Director, Teach the Future

I guess the key learning is that you cannot predict the future.  We all know that, but we try to do it anyway.  So, a dose of humility and caution are more important than clarity and certainty.  Forecasts are always based on two things – data and assumptions. The data is usually not a problem, but most assumptions about the future have plausible alternatives, each of which leads to an alternative future scenario.

Rather than emphasizing accuracy, one should emphasize learning—that the future is a complex, unknown territory that will occur in surprising ways.  Competitive advantage is not to predict the future accurately, but to learn as quickly as possible how it is evolving and to approach it with all plausible assumptions in play.  It’s a strategic discussion about what is happening and what could happen that promotes understanding more than just information.

On the planning side, it’s less about technical processes for achieving goals and more about unleashing the aspirations of the people in the enterprise to make their mark by doing something interesting and valuable. 

Innovation From the Context of Business Models

Dave Franchino
Innovation and design thinking expert

Dave Franchino, President, Design Concepts

I’d just offer up both a cautionary tale and some encouraging words. Innovating the way in which you make money can be among the most difficult types of innovation to pursue. The problem is that business models are typically ingrained deep in the DNA of a firm, and the bigger and more complex the firm, the more ingrained and intractable the inertia around that business model. Just in the last year [recent past] we’ve seen the demise of Borders and the bankruptcy/sale of Blockbuster, two firms that were unable to revise their business models to suit a changing competitive landscape. There is an encouraging point to this risk, though. I have found that in general, no matter how the landscape for your business changes, there are usually ways to morph and alter your business model to leverage your competence and expertise and remain relevant. The best companies have found ways to do this, and both their product offerings and their business models often bear little resemblance to what they looked like originally. By leveraging the tools and methods used for products and services innovation, I think firms can think of novel new ways to both add and extract value.

Decision Making is a Critical Part of Leadership

John W. Conover, IV
Executive skilled in large-scale business model renewal

John W. Conover, IV, JWC4, LLC

Leaders must seek out feedback from those with different opinions and experiences. When planning a project, initiative or investment, you have to ensure you aren’t insulated. If you’re surrounded by “yes” men and women all the time, I believe your failures will be greater than your successes.  [D]ecisions should be data-driven to the extent feasible, to make certain that decisions are as intelligent and informed as possible—with the realization that risk will always be present. In the end you need to take the input, make a decision, and act. As leaders, we need to have a bias for action.

[Regarding employees] you have to trust them to do their job. Hiring excellent people, investing in their development, aligning on the vision and clearly understanding the boundaries are the keys to success. Let your employees make decisions within those boundaries. They are closer to the action and to the customer than I am. Empowered employees are more satisfied, develop faster, and create a learning organization culture. In a learning organization, we create a safe environment where contrarian views are encouraged, and even some failures—driven by the right motivators—are celebrated. There is a clear correlation between employee engagement, customer satisfaction and corporate profitability.

Here are my three final thoughts today:

First, now more than ever we need to stay focused on the customer. By watching our customers and understanding their issues and preferences we can create solutions for their unmet needs.

Second, the organization needs to stay nimble. Invert the corporate pyramid and put the customer on top. Quickly and efficiently bringing those solutions to market will create sustainable advantage.

Third, the leadership team needs to be diverse. As the rate of change in the world continues to accelerate, an organization needs to be broad in its thinking. A leadership team with broad skills and broad life experiences brings the diversity of thought that provides the depth of thinking required today.

The Importance of Leadership Talent Bench Strength in Business Model Renewal

John Malanowski
Expert in leadership talent bench strength in business model renewal

John Malanowski, Human Resources Officer Virence

Transactional leaders maintain the status quo and don’t easily recognize the competitive threats and external factors that can quickly erode a business model. Transactional leaders work well where an organization has an “operate-for-cash” or low-growth business model.

Transformational leaders, on the other hand, act with speed in separating those business issues that are beyond their control from those that they can do something about. Transformational leaders then drive change by visible leadership. People emulate their leaders. Successful transformations are built around relentless focus on a few broad strategies, the right organization structure, top talent, and engaging front-line leaders in the need for change. Transformational leaders know how to pull each of these levers through experience. Not moving as fast as you should, could cost competitiveness.

[L]earning as a leader should never cease. Great leaders seek out big problems as opportunities to continue to differentiate themselves and hone their leadership skills. The leader who creates a compelling vision for change, and models the behavior that is critical for success, will be a catalyst for change and have a followership that can transcend organizations and generations.

Don’t hesitate to confront transitions head on. Change brings opportunities. Be the change you want to see happen in your organization and lead from the front.

Don’t hesitate to confront transitions head on. Change brings opportunities. Be the change you want to see happen in your organization and lead from the front.

Cracking the Real-World Code for Linking Strategy with Implementation

Scott Lingren
 Expert in linking strategy and implementation

Scott Lingren, Schunk Xycarb Technology

I would not underestimate the commitment and investment needed by everyone in senior leadership and management to make the execution of a strategy successful. The preparation and rollout workload are on top of the regular challenges of the job and often occurs at times that seem the least convenient.

Carefully evaluate the challenges and reasons for failure. Acknowledge upfront that these things hit every leadership team in every industry no matter how good the strategies and the teams implementing them are. Work through details of how you, your teams, and your partners must address each of the fail points in a consistent manner, with the goal of either neutralizing each problem or turning it to your advantage. Be ready for this. Get your teams ready for this. Surprise is the enemy; take the time to anticipate problems so you can get out in front of them.

Orchestrating Business Model Renewal through Effective Organizational Change Initiatives

Joan Finley, Ph.D., PMP
Expert in orchestrating business model renewal through organizational change

Joan Finley, Ph.D., Enterprise Transformation and Governance Leader, AbbVie

Change agents are critical to engaging the people who are involved in the changes that leaders and stakeholders are driving forward. They are the opinion leaders (who proactively engage those people facilitating the new paradigms) and the human bridge from the past to the future. As bridge-builders, change agents must determine what needs to be in place for successful and sustainable change to occur. They become the support system—the safety net—for those in the organization as they go from denial, to exploration, to acceptance, to inspiration and being drivers of change. They are the underpinnings of any successful change as they inspire collaboration and camaraderie through social connectedness.

For change to occur effectively and in a timely manner, it is imperative to acknowledge both the leaders and the workforce. Application of positive change management techniques can drive innovation and change in a sustainable manner. I also advise that executives be patient with the workforce and model the change they wish to see.