Archive for October, 2011

Five Reasons Companies Fail at Business Model Innovation

October 21st, 2011

My latest column appeared here on the Harvard Business Review site.  images-281

Business model innovation is the new strategic imperative-by now, this is becoming more generally acknowledged. But companies routinely fail at self-reinvention because they are so busy pedaling the bicycle of their current business models they leave no time, attention, or resources to design, prototype, and test new ones. Even where investments are made in innovation, those efforts are focused on new products and services delivered through today’s business models and on making the current models operate more efficiently. These are important to do, without doubt. But they are hardly sufficient in the highly networked 21st century, when business models don’t last as long as they used to and incumbents increasingly face the risk of disruption.

Having watched many companies over the years as they recognize the imperative to change, yet somehow stay stuck in their old grooves, I’ve noted some patterns in their experience. Here, I think, are five important reasons that companies fail at business model innovation:

CEOs don’t really want a new business model.
The most obvious reason companies fail at business model innovation is because CEOs and their senior leadership teams don’t want to explore new business models. They are content with the current one and want everyone in the organization focused on how to improve its performance. The clearest indication that a company and its leaders aren’t interested in business model innovation is when any discussion about emerging business models and disruptive technology is viewed and treated solely as a competitive threat. Read more

How Not To Get “Netflixed”

October 11th, 2011

My first Fortune column fortune-logo-5047660912-seeklogocom

The nuclear industry measures how long a radioactive material will retain its potency by its half-life — the time it takes for the material to lose half of its radioactivity. The half-life of Uranium-235 is 700 million years, for example. During the industrial era the half-life of a business model was typically measured in generations. Once the basic rules for how a company creates, delivers, and captures value were established, they became etched in stone, fortified by functional silos and sustained by reinforcing company cultures.Those days are over. The industrial era is not coming back. The half-life of a business model is declining. Today’s leaders are either going to learn how to change their business models while pedaling the bicycle of the current one or they are going to be “netflixed.”

If netflix isn’t a verb it should be.

1. to cause disruption or turmoil to an existing business model
2. to destroy a previously successful business model
3. to displace the way value is currently created, delivered, and captured Read more