Reflections on business model innovation from a company strategy retreat
“Select a once rapidly growing company whose growth stalled. Then, contemplate the root cause for its decline and be prepared to share your reflections at the retreat.”
This assignment was one of many I asked leaders of a rapidly growing, omni-channel apparel retailer to complete in preparation for our two-day strategy retreat. (Omni-channel refers to the fact that people increasingly engage with companies across multiple channels, using each channel for different tasks.)
The chosen once-celebrated examples of stalled growth included company names that used to fill articles on “best practices” to secure revenue growth. If nothing else the following names serve as a testimony to why leaders should never assume their existing business models will remain vibrant over the long haul.
- Too slow (or quarterly profit focused) to change from film to digitally-based business models
- Never fully immersed itself in digital photography technology even though it was its inventor
- Invested too late in services that would add value to its increasingly commodity-like hardware offering
- Ineffective CEO successions
- Inconsistent Board guidance
- Failed to invest in disruptive technology and innovate its business model until it was too late
Research in Motion (maker of BlackBerry)
- Missed the growing importance of an APP ecosystem that personalizes cell phones and improves their functionality
- Assumed IT Departments (who prefer BlackBerry) would control cellular phone brand choice into the future
Catherine’s (a woman’s clothing retailer)
- Alienated its core market of middle-aged women in trying to attract younger customers. This is a mistake that Talbot’s is making.
J Peterman ( Australian company using colorful storytelling to sell its unique clothing line)
- Expanded too quickly and in the process took on too much debt
- Lost relevancy as styles changed
- Isn’t adjusting fast enough to technology change and its impact on how customers learn about and purchase consumer electronics
- Failed to build emotional connection to its brand
- Failed to adjust its business model in light of Amazon’s lower cost business model
- Failed to see collapse of the discount/department store boundary
- Failed to innovate its business model as Walmart and category specialist retailers gained share
- Failed to remain relevant to younger generations
- Lost sense of “place” and emotion during the shopping experience
- Got caught between cheap commodity and high end jeans
- Missed private label opportunity to secure scale, an important cost driver
- Poor leadership succession after founder retired
- Sold to wrong company (Sears), which is draining company of investment funds. The resulting reduction in product quality is breaking a historically strong brand promise
Roller Blade (roller blades) and Gary Fisher (snow boards)
- Iconic leadership created/grew entire categories around their brand but acquiring companies homogenized these brands, curtailing growth
Never forget that your role as a leader is to work with other leaders to foster a balanced (by age) portfolio of differentiated business models and build the ecosystem, platforms and culture that keep these business models efficient and hard to copy. If your company ends up inadvertently competing largely on price, there’s no one to blame but the leadership team. Challenging the assumptions behind your business model is the best step you can take to avoid the distress that stalled growth creates according to the authors of the HBR article, “Why Growth Stalls.”
But challenging assumptions may not be enough, as leaders easily deceive themselves. Bill Welter, co-author of The Prepared Mind of a Leader: Eight Skills Leaders Use to Innovate, Make Decisions, and Solve Problems (Jossey-Bass, 2006) offers an iron-clad rule: change your business models as fast or faster than your industry is changing. In other words, you must run his “sense, make-sense, decide then act” cycle at the speed at which your industry is changing or faster.
Most industries used to run at the speed of walking. Speed increased to a brisk walk, then jogging, which became running in the information age. Most of the companies listed above failed to sense, make-sense, decide or act in time as their respective industries sped up.
Does your firm sense, make-sense, decide and act fast enough while still managing today’s business well? The secret rests in dividing to conquer:
- Have people take deliberate time off to observe and reflect. Google gives developers 20% of their time to engage in whatever they want to work on.
- Charge focused teams with the task of building new business models as other teams manage the mature ones for maximum profitability.
What changes can you make to avoid the stalled growth so many companies encounter?