The second half of life transforms our understanding in ways that can transform our world.

For example, when guest Rachael Maddow tried to dig into the “fundamental disagreement about the facts” between Democrat’s and the GOP’s view on women’s economic issues, it could have been an opportunity for host David Gregory to add, “Might both arguments be true?” We, the audience, could have discovered how the issue is far more complex than the simplistic explanations offered by the propagandists. But it wasn’t understanding that increased, just the volume from each side spouting its pre-planned comments and incomplete solutions.

The demise of what I (and many others) valued in Meet the Press is symptomatic of a larger trend in our society: an increasing polarization that is causing more harm than good. The problem has been described very well by Father Richard Rohr, a Franciscan priest and founder of the Center for Action and Contemplation in Albuquerque, New Mexico. Rohr has a terrific new book called Falling Upward: A Spirituality for the Two Halves of Life (Jossey-Bass, 2011).

“Nothing is going to change in history as long as most people are merely dualistic, either-or thinkers. Such splitting and denying leaves us at the level of mere information, data, facts and endlessly arguing about the same, ‘My facts are better than your facts,’ as we yell at ever higher volume and with ever stronger ego attachment,” Rohr wisely writes.

It need not be this way. The first half of life, Rohr argues, is full of ego, persona and black-white judgmental thinking. Some people remain stuck here all their lives. Others enter the second half of life by experiencing a significant failure of some type. If we are open to learning, we’re then resurrected by accepting our whole self, warts and all. In so doing, we can truly love and initiate what our soul – i.e., our original blue print and our deepest meaning – calls us to do. In the second half of life we see the whole truth – multiple sides of arguments and the joy and tragedy in each moment of life. (See this video of Richard Rohr)

As the baby boom ages, more of us will be entering the second half of life and searching for deeper meaning. At the same time, new information technology will aid our search for deeper understanding in all aspects of our lives: personal, professional and political. Information technology both creates new data and makes it accessible, shedding light into the numerous black boxes that define “how things get done.” Concurrently, social media is giving us far more opportunity to share information and increase influence.

The light of transparency and use of social media will democratize and transform industries by dramatically changing access, as Mark McDonald noted in a recent WTN blog.  For example, the Internet and then Amazon created consumer access to brands beyond what local stores offered, transforming retail markets. Rob McCray, CEO of the Wireless Life Sciences Alliance, reminded me how Napstar and M3 players made the entire world of music available to everyone. In the process, how music got delivered changed dramatically – from albums to singles, with less control by music studios and more control by musicians who can reach consumers directly through websites, YouTube, etc.

Healthcare will be transformed as we learn more about which providers offer the most value and which preventative practices create better health. Consumer brands will be transformed as we learn more about egregious and laudable behavior on the part of different companies and, through social media, false brand promises.  Voting may even be transformed as we figure out ways to gain more access into who is behind what money and ads. Alternatively, citizen-ballot direct-democracy initiatives like those in Colorado may grow, reducing politicians’ power. Imagine if simple-to-use tools could help us mine government data and better understand fiscal issues freed of political parties’ slants.

I expect the data created by new access will be messy – and not just from a data management sense. The data will both contrast with and support our a priori assumptions about how things really work. This is good.

Whole people – those in the second half of their lives – are the unifiers, the “yes-and” people who make ideas better. They are the ones who create a better world, not just criticize this one, according to Rohr. Our political institutions, communities and businesses need them. Become one if life’s journey has not made you one already.

Is your industry working to advance your business model's success? (Photo thanks to Brian Norcross)

Leaders make a mistake when they assume industry dynamics are unchangeable in their model innovation work. Industry collaborations that change dynamics can be very smart strategy in both mature and emerging markets.

Industry cooperative marketing efforts can advance an industry’s products. Remember the successful “Got Milk?” campaign creatively placing milk mustaches on famous faces? Cranberries would merely remain a Thanksgiving staple without farm cooperative Ocean Spray’s efforts that landed cranberries in juice, cereals, salads toppings and snack foods.

Setting standards also shapes industry dynamics. During my tenure at Datex-Ohmeda, global leader in anesthesia systems that’s now owned by GE, we worked closely with competitors and the American Society for Testing and Measuring to establish basic monitoring standards for anesthesia equipment.  Yes, the standards advanced patient safety, but they also blocked low-cost competitors from entering the market, accelerated machine replacements and reduced our product liability costs.

Setting standards can also create entirely new product categories. Car companies, system manufacturers and the US government have been working together for years to develop communication standards for “Smart Cars” and traffic-management software products. Future cars will help us avoid sudden stops and potential rear-end collisions by alerting us to road hazards before we see them while software APPS will help us avoid traffic jams. Governments will better control traffic flows and screen commercial vehicles more efficiently.

Creating an intelligent traffic system is a Herculean challenge involving thousands of vehicles sending and receiving data records every millisecond. Legal questions and funding issues also exist.  But, according to John Kenney, Senior Research Manager for Toyota InfoTechnology Center, considerable current progress suggests that competitors, working side by side in a collaborative setting with other stakeholders, will help eliminate 80% of collisions where the driver is not impaired.

Another vital place for industry collaboration is “wireless health,” also called “connected health.” But if CEO of San Diego-based Wireless-Life Sciences Alliance (WLSA), Rob McCray, has his way, emerging applications will soon be the standard and called just plain “health and healthcare.”

WLSA was founded in 2005 as a nonprofit member association to bring innovators, globally relevant companies, scientists, physicians, associations and policy makers together to advance health as wireless technology, life sciences and consumer empowerment opportunities converged. McCray believes the solution to our high health care costs and health issues is not in continuing to “deploy the current anti-competitive, labor-intensive, inconvenient, obscenely expensive and non-transparent model for health care services and delivery” but, for the benefit of all citizens, to “migrate to a connected, affordable, personalized and accountable 21st century model of healthcare.” That new model, according to McCray, is wirelessly enabled health, a technology with tools already in place and only needing “will and commitment” to become the standard of care.

Members of the WLSA derive value through conferences in which information is shared that advances the capabilities and adoption of wireless healthcare solutions. WLSA’s fall meeting brings premiere international researchers in wireless health technology, health and medical research, clinical practice, device manufacturing, product and health services and government together to both communicate the latest developments in the field and nurture collaborations. WLSA’s upcoming Spring meeting is the premiere event for investors, healthcare companies and entrepreneurs to learn about key issues and opportunities in wireless healthcare applications.

But more is needed, according to McCray. “Why is it,” he asks, “that consumer electronics regularly increase benefits while lowering costs while our healthcare system grows in costs without significant improvements in health year after year?”  The answer rests in complex state-by-state clinical licensing regulations, institutional and clinician rigidities, FDA requirements and reimbursement issues. They not only create a costly healthcare system focused on doing procedures, but also pose barriers to rapid adoption of connected healthcare solutions that could positively revolutionize care.

A basic principle of systems thinking is that the containing system – the external forces surrounding a system – can have as much impact on a system’s success as how the system itself is designed. Children with parents involved in their education for example do better in school, all else equal. With innovative connected health solutions rapidly emerging, we must reshape the containing system to enable the best innovations to come to scale. Otherwise cost-saving, quality-improving wireless healthcare solutions will languish because they are not reimbursable by insurance payers or require costly and unnecessary regulatory approvals.

The “shape the containing system” challenge facing connected health stakeholders is as complex as that facing the coalition advancing smarter cars. But the advent of smarter health will better advance our nation’s fiscal health and free up federal funds for a Smart Car highway grid.

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.)

Your company must change as fast or faster than its industry to maintain success.

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.

Kodak

• 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

HP

• Invested too late in services that would add value to its increasingly commodity-like hardware offering
• Ineffective CEO successions
• Inconsistent Board guidance

Borders

• 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

Best Buy

• 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

Sears

• 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

J.C. Penny

• Lost sense of “place” and emotion during the shopping experience

Levi Strauss

• Got caught between cheap commodity and high end jeans
• Missed private label opportunity to secure scale, an important cost driver

Land’s End

• 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?

NudgeRx leverages technology to offer healthcare providers and their patients better post-surgical discharge care support.

“Situation” is a powerful lens for identifying business model innovation opportunities and protecting whatever market space you now command. “Situational segmentation” recognizes that any one customer’s needs – for a restaurant for example – depend on the circumstances giving rise to the need – entertaining, date-night, shopping with a friend. You can disrupt a leader or protect your position by finding situations where existing offerings fail to address situational needs.

Zipcar, founded in 2000, did just that. Errands and other short trips lead auto nonowners, like college students and young urban dwellers, to need a car for hours instead of days or weeks. Auto rental companies, designed for travel and longer-term rentals, are often too far away, too expensive and take too much time to transact with to meet short-hop situational needs. Zipcar’s car sharing subscription service addressed the unmet need, allowing its members to easily reserve, access and pay for conveniently located cars by the hour.

City specific competitors, such as Wisconsin-based Madison Environmental Group’s Community Cars, offer the same solution. The growing market is attractive enough that Hertz has created a competitive product, Hertz-on-Demand, that I believe will give Zipcar a run for its money with a lower-cost business model and a better solution for trips to and from the airport.

Walk through the grocery store and you’ll see all kinds of situation segmentation.  “Meals-for-one” and “crowd-sized” offerings fill columns in the frozen food section. Or one serving yogurt containers and family pack chicken breasts. Spend a week observing markets and you’ll catch the ubiquitous practice of situational segmentation.

Yet head into the healthcare sector of our economy and you’ll find an industry sorely in need of situational segmentation. Surgeons, for example, see patients in their offices and hospital or out-patient operating and recovery rooms, oftentimes leaving post-discharge needs poorly met. But a new company, NudgeRx, is wisely stepping into this void.

NudgeRx, started by medical products industry veteran David Schuster, offers hospitals a technology platform and 24-7, on-call nursing hotline to help surgical patients and their caregivers manage post-discharge care. With about a third of hospital patients having an unplanned readmission within 3-months, NudgeRx’s value promise is compelling: “We’ll help you improve surgical patient satisfaction while reducing re-admissions and their financial cost to your organization.” The company is initially targeting 10 common inpatient surgeries experienced by over five million patients per year.

NudgeRx gets its business model design right on multiple levels:

• Preventable re-admissions are a $39B financial drain on the US healthcare system at a time when everyone’s eyes are focused on its high costs. Changes in health insurer contracting and federal health policy place providers, not payers at financial risk for re-admissions, leaving providers searching for solutions.

• By leveraging software technology and the web, NudgeRx’s lowers the cost of care relative to labor-intensive case managers that hospitals use to address post-discharge needs for some home-bound patients; and, it improves quality relative to the “Call us if there’s a problem” approach for all other patients. NudgeRx’s web-based software platform provides discharge instructions through personalized daily “bite-size” recovery plans, daily monitoring questions, tips, medication reminders and other to-do lists, a welcomed and needed alternative to the written discharge documents that often overwhelm patients and their caregivers.

• NudgeRx wisely recognizes that technology must be engaging to improve outcomes. Its 24-hour hotline enables patients to build relationships with nurses, who monitor on-line patient engagement, initiate contact when patients miss milestones and respond to patient questions. The relationship motivates use of the automated system.

• The platform technology can incorporate doctor-specific discharge requests while also addressing best practices in managing specific surgical discharges.

• By offering better support, hospitals may be able to send some patients home rather than to sub-acute care facilities, a change that will benefit insurers’ bottom line, patients’ well-being and NudgeRx’s market size.

• As a start-up, NudgeRx wisely avoided targeting chronic disease discharges. These are far harder to manage, as they often require changes in deep-seated patient behaviors. And it’s offering investors a team with domain experience and clinical trial success, missing from many healthcare IT start-ups.

Healthcare IT business models could revolutionize medicine and dramatically lower its cost. Schuster says that the primary deterrent to adoption of cost-saving technology is provider management teams hesitant to disrupt established treatment patterns. Winning providers will recognize the handwriting on the wall and find the best situation-specific solutions for advancing patient care, making well-designed companies like NudgeRx valued ecosystem partners.

Break-time at the energetic Blueprint Health Inaugural Class Demonstration Day

Blueprint Health’s out-of-the box success deserves a shout-out. It serves as the hub of healthcare technology innovation in NYC by bringing together a collaborative community of entrepreneurs who build businesses and learn from each other in a co-work space that offers a broad array of educational classes. Companies that want accelerated help can apply for a 3-month program of support (in exchange for an equity share) from Blueprint’s network of healthcare entrepreneurs, investors and industry mentors, the largest in the country according to Blueprint. These mentors provide the insights, hard-love criticism, encouragement and connections to move a company from concept to becoming cash flow positive.

Blueprint Health is a Charter Member of the Global Accelerator Network, a group of independently owned and operated regional organizations that operate high quality start-up accelerator programs. Their shared aim is to dramatically increase the success rate of promising entrepreneurs in order to create 25,000 new jobs by 2015 and, in the process, build an engine for creating more successful start-ups over time. The Global Accelerator Network was started by Techstars, the #1 start-accelerator in the world with programs focused on internet and software startups in Boston, Boulder, New York City, Seattle, and San Antonio.

Each of the Blueprint Health accelerator companies did a great job of articulating a healthcare problem and how their web-based platform technology addresses it.  The fast route to positive cash flow they promised demonstrates why healthcare IT is growing relative to regulated drug, device and equipment investments, where payback is longer and investment levels and risk higher.

The pitches reinforced the lesson that a winning business model solves a problem shared by a target market in a way that generates profit. The key to profitability?

• Choose a problem many will pay to solve
• Offer the best solution in a cost-effective way
• Create barriers to replication

Investors also focused on founders’ experience, as an experienced team offers a lower-risk investment.

Here are the 6 strongest business models:

5 O’Clock Records won best-in-class in my book, reducing the time clinicians spend sending medical records to insurance companies, lawyers and other requesters while enabling them (and 5 O’Clock Records) to earn revenue from fulfilling requests.

Aidin is an on-line home healthcare services consumer reports and scheduling system that hospitals use to help discharged patients secure the highest-ranked care.  With hospitals spending $17 billion in re-admissions, the cost of which is increasingly borne by them, Aidin’s entering at the right time.

Needl connects clinicians and pharmaceutical companies in a Q&A format initiated by clinicians. Think Google, but a clinician’s search connects to an expert with the answer versus website lists the clinician must then navigate to find answers. Drug companies buy subscriptions and clinicians access Needle’s platform through commonly used clinical APPS like PI and Medscape. The pharma sales rep model is dying and Needle offers drug companies a welcomed alternative.

Patient Communicator automates how a physician’s office interacts with its patients, saving staff time and money while increasing patient satisfaction. Right product, right time.

Procured Health is a product assessment platform enabling hospitals to get more value from the $100b they collectively spend on medical equipment, devices, etc. annually. Bargain hunting for hospitals!

Symcat is a well-designed on-line triage service that saves health plans money by helping their customers chose the right care plan at the right place.

The other 3 start-ups appeared, in my view, to be too easy to copy, too hard to monetize or too hard for an investor to exit.

iCouch connects patients to therapists for internet-based counseling, saving patients time and frustration. But will insurance cover the fee?

Inquisthealth’s web-based platform organizes, aggregates, matches, schedules, and automatically connects patients with the same disease securely and privately. Its will connect all the patient support communities worldwide, like Gilda’s Club for cancer, and help providers offer patients a better experience.

Meddik curates health-related information for patients by sending subscribers up-to-date information on their health conditions. The team is strong, but consumer healthcare information is a very cluttered market space.

Leaving the event, I felt very optimistic that our dysfunctional healthcare system – it will be reinvented.

When you force prospects and customers to work with you through your silos, you won't seed a rich harvest.

For examples:

I get three bills. When I ask for one bill I am told, “All your services have different cycles and that would be a mess.”

After moving to a new residence, I returned the U-verse device (which enables TV, wireless internet and the land line connection) from my former address to the AT&T wireless store, where I was told, “We don’t accept U-verse returns here. You have to go to the UPS store.” In this same visit I asked about modifying my new U-verse bill, as the installer could not install the land line phone for which I was being billed. “We don’t do that here.”

I went to the AT&T website to pay a bill and there was no place that describes what I am to AT&T – a customer of multiple services.  Forced to connect to the webpage for each service, I inevitably confuse passwords and user names (as they were set up at different times) and get locked out of their system, requiring a phone call and long wait time for a live voice who can unlock my account.

As my husband says,  “When you have to deal with AT&T you just breathe deeply and know it will take an hour out of your day.” He’s spent a few proving to AT&T that we actually moved, cancelled the old service and returned the box.

I bring up AT&T because too many companies with multiple businesses are designed to deal with their customers from the inside out – working with customers the way their business is structured. They are unable to create an awesome customer experience because they never think from the outside in – how their customer might want to work with them.  The homepage on an inside-out company’s website says it all.

Go to Granger’s home page. Despite having different target markets, with different needs from this industrial products distributor, there is no opportunity for the user to identify which “tribe” he belongs to (e.g., manufacturing manager in a chemical plant versus project manager for a commercial construction company doing high-rise buildings). Therefore, the website is not tailored to his tribe’s needs which are in part different than those of other groups. Instead, the “here’s what we have, who needs it” approach to web design forces the user to search and hunt. Best case, the value promise for a product is never tailored to the user’s context, making him more likely to shop on price. Worst case, the user never sees some products that might be amazing, as he never knew to search for them.  3M does it better.

You know from websites like Granger’s that it’s organized internally by product group. If Granger has market-focused managers responsible for the entirety of the portfolio for one target market, they likely have little real clout, at least for website decisions. Companies with multiple target markets that remain product or technology-driven are dinosaurs.  New information technologies are leading us in the direction of mass personalization–not just of messaging but of offerings as well.  If Granger cannot get the first cut right on its website – way-finding by target market – how will it ever catch up when niche distributors enter vertical markets with a more tailored offering?

Granger might argue that its scale creates barriers to entry. Ha! With cloud computing, new companies have access to best-in-class affordable IT operations.  And with the specialization the information age has fostered, new companies also have access to best-in-class back room distribution services.  And manufacturers would love to have additional channels for their products. Barriers to entry to Granger’s business model in other words are melting away in today’s networked world.

Is your business and website designed from the target market’s perspective? If not, engage in process redesign from an outside-in perspective. The more complex your company and the more target markets that you serve, the more valuable this exercise will be.

When you make customers’ lives difficult by running the company the way it’s easy for you – rather than more enjoyable and less frustrating for your customer – you create the worst kind of customer, an angry one.

When strategic plans, effectively executed, fail to drive growth a number of root causes are usually at work.

Leaders view strategic planning as the process for achieving next year’s revenue goals.  Every organization needs a process for resource allocation to achieve annual financial targets. But when you start strategic planning as that exercise, you end up with largely incremental improvements that get quickly copied by competitors.

True strategic planning is a design process in which you assess the strength of your business models in light of a changing external environment and identify:

• New business model experiments
• Innovations to existing business models, not merely incremental improvements
• Strategies to strengthen the competency, process, technology and solution platforms that your business models leverage.

All markets become commoditized. The time to escape is upstream, before the current gets so strong you cannot escape falling into competing largely on price. Strategy-as-design keeps your business in calmer waters.

All markets get commoditized and its happening at a faster and faster clip. If you don’t want to win on price, innovate your business models before its too late. A strategy-as-design process enables you to do just that.

Leaders organize planning around how their company is structured, rather than around business models and the platforms that they leverage.  In large companies, the commercial side of the business is separated from the product side business units housing product management, R&D and manufacturing. Commercial does its planning while the business side does its planning, all in silos. And the individual business units never get together to see how they might collaborate to deliver more customer value. Even worse is the situation in which R&D and manufacturing are centralized and planning is done in these silos, separate from commercial insight and significant involvement of business unit product management.

When you organize planning by how your business is organized, you end up with product, process and operational innovations, but rarely business model innovations. To create new business models and truly innovate the ones you have, you must organize strategic planning with highly cross-functional and cross-business unit teams that engage in creative thinking to innovate the business model(s) for serving their shared target market(s).  Platform teams and business units should also do their planning (e.g., a shared manufacturing resource or a business unit defined around a product), but this planning should be informed (and inform) the business model ideation work.

Finance and marketing undermine the process by not providing managerial information.  An example from a recent client assignment will make this point. The company’s value promise is to offer the “best experience” to customers in its category. But the leaders (of this large dealership) had no database or insights to answer questions such as these:

• Penetration rate of different services
• Win rate on repeat purchases
• Lifetime customer value
• Elements of the experience that matter most and least to customers
• Why lost customers bought elsewhere
• Which marketing approaches were bringing the best leads to the direct sales force

In essence, the financial information system produced good accounting information but woefully little managerial information and marketing did not dig into the system to pull out whatever insight could be had. (I tried in advance to get the data without success, believe me.) The company was for all intents and purposes driving strategy from a car without any headlights on a pitch-black night with heavy fog.

You can drive in the dark when no one is on the road if you can drive very slowly and the road is empty except for the one car you are following. But that is not today’s economy – customers have fragmented into multiple smaller markets filling the highway and competitors can ram you from any direction unexpectedly at any time.  Today, advanced analytics of digital data is a competitive advantage. Tomorrow it will be a requirement to compete.

Are your strategic planning approaches fueling growth? If not, might one of these root causes be dampening your growth rate?

Joe’s summary article

In their preoccupation with today’s challenged economic environment, business executives might not have noticed that the nature of competition is changing, but failure to adapt could put an organization on the critical list.

So says former Madisonian Kay Plantes, a principal with the San Diego-based Plantes Company who still works in Wisconsin. Plantes, delivering the March 8 keynote at the 2012 Fusion CEO-CIO Symposium, said the recession and subsequent slow recovery diverted attention away from long-term changes that are reshaping markets and industry boundaries.

The basis of competition has changed, she said, from the features of individual offerings, which demanded standardization to drive scale and efficiency, to competition based on business models.

This new basis of competition is changing the roles of those who occupy the C-Suite, and it “demands fresh approaches to how you deploy technology and work with vendors,” Plantes said.

Motorola meltdown

According to Plantes, everything we need to know about the transition from the industrial age to the information age can be learned through the decline of Motorola Mobility. The leader of the wireless pack as recently as 2004, its acquisition last year by Google, a relative newcomer to wireless communications, demonstrates how quickly transformation can occur in the Internet age.

The Internet’s fundamental innovation was to dramatically lower the price of communications and increase its speed, Plantes noted. Economists know that boundaries of jobs, firms, supply chains, and industries are significantly shaped by communication costs. In the pre-Internet age of landlines and snail mail, vertical integration was an advantage in lowering costs and creating barriers to entry. Sellers of products and services had tremendous power over customers and long periods of product differentiation.

In a nutshell, the Internet led firms from being vertically integrated to increasingly reliant on external supply chains. Supply chains made it increasingly easy for existing and new competitors to quickly and effectively copy Motorola’s thin phone.

“With the Internet, everything changed,” Plantes said. “Product differentiation rapidly disappeared and power shifted from suppliers to customers.”

As this transformation occurred, lower communication costs enabled industries to regionalize, nationalize, globalize, and consolidate – giving business customers enormous buying power. Motorola is now selling to Amazon, BestBuy, AT&T, and Verizon.

“Lose their business and you are out of luck,” Plantes said. “As for consumers? They can now shop at Best Buy to try out the gear, then use a phone app to find the lowest price, further eroding Motorola’s pricing.”

These changes created the ingredients for a commoditized market, as customers are able to use their purchasing power to force companies to compete on price, which is part of the reason inflation was tamed during the past 10 years.

No business should consider itself immune to these competitive dynamics. “It only takes one other enterprise meeting customers’ requirements, and a motivated customer, for price-driven commodity-competition to emerge,” Plantes warned.

The Internet not only enabled this customer centric revolution, it opened whole new product categories and customer benefits (smart phones are just one example), and dramatically increased the speed of adoption of new categories. Thanks to the global supply chain, it’s easy for companies to enter a category, so Apple moves from computers and music devices easily into cell phones, a development that further weakened Motorola’s competitive standing.

Disruption all around

Witnessing the rapid adoption of smart phones, iPhone apps, and Facebook, Google senses that search increasingly will be mobile. So it acquires the Android wireless operating system, and gives it away for free to cell phone companies in order to secure its place as the mobile search engine. Then, as Motorola struggles with the financial pressure of being commoditized, Google steps in and buys Motorola’s phone business.

“In seven short years, wireless communication industry market shares are completely rewritten,” Plantes noted. “If you are a health care provider, government agency, or educational institution, and you think you’re immune from these disruptions, think again as the need for radical transformation of your industries is far higher than it was in wireless communications.”

Just ask Sony, which is out of TVs, and Kodak, which is out of business. Newspapers were hurt by the recession, but are more impacted by niche sources of content, and advertisers are following readers to the Internet. Lands’ End has on-line competitors that allow a consumer to create one-of-a-kind T-shirts; concierge medicine practices are picking off the cream of health care providers’ customer bases.

This is why companies that ignore the need for advanced data analytics are placing themselves at a competitive disadvantage. “Fragmentation is why your CMO is all over your case about the need for better information about customers,” Plantes explained. “In fragmenting markets, you must understand who the distinct segments are and reach them with unique messages and offerings, or someone else will.”

Better looking models

According to Plantes, too many for-profit companies, educational institutions, and health care providers still are using industrial age tools for a new set of problems and opportunities. The old strategies are no longer sufficient to build organizational success because they don’t offset the underlying drivers of stronger and more rapid commoditization, and they don’t enable organizations to capture new value-creation opportunities.

“Something else is needed,” Plantes stated. “That something is business model innovation.”

Business models have become the basis of competition because they are much harder to copy than a product or service. Apple, for instance, has aligned its resources, processes, knowledge, solutions, and even its culture – all parts of the business model – to deliver on its value promise.

“Why open retail stores? Why break with the past and open its architecture to application developers? Both decisions made the Apple experience even more effortless, and makes us even more capable,” Plantes remarked. “Dell can hire people from Apple and Samsung can try to copy Apple’s products, but copying Apple’s business model and matching its value promise will be much harder, and therein rests Apple’s sustained price premium.”

Although most organizations have multiple business models – different ones for different target markets –leaders often take their business models for granted. They fail to invest in creating hard-to-copy platforms, or they do not evolve or innovate their models. Plantes compared business models to the root system and trunk of a tree – left unattended, they stop generating healthy growth.

If your business models are not anchored in hard-to-copy, advantageous platforms that allow the organization to deliver superior benefits and customer experiences, you’d better be the Walmart of your sector – the one with the lowest cost structure. “Every industry has a Walmart,” she noted, “and they alone thrive when price drives decisions.”

Avoiding the Kodak moment

In Plantes’ view, it all boils down to this: is your enterprise like IBM, a model for continuing evolution of its business models – selling off commoditized products to invest in new platforms and business models that advance its “Smarter Planet” vision? Or is your organization on a path to its own Kodak moment?

Avoiding that path places demands on C-suite leadership. In the industrial age, Plantes said leadership teams focused on execution effectiveness around the industry’s business model design. Today, the C-suite ensures success by becoming chief architects of their organization, innovating business models and the platforms and network of partners they leverage.

In the industrial age, the focus was on efficiency, Plantes added. With rapidly changing industry boundaries, fragmenting markets, and unexpected competitors, today’s C-suite must focus first and foremost on agility. Cutting costs that reduce maneuverability is penny-wise and pound-foolish.

In addition, Plantes does not believe there is not enough capacity at the top of organizations to drive change. Instead, the C-suite must create highly adaptable cultures in which change is bottom-up, with leaders setting overall change goals and top-level strategies.

To accommodate this change, she said organizations must be far more externally focused, more reliant on outside vendors for standardized work (spend your time being more strategic), come to the table with innovative ideas, and be more collaborative in working with colleagues to transform business models and platforms.

“If you don’t want to make these shifts as an IT leader, then go work for the IT vendors whose role is to make clients more efficient, faster, and secure in acquiring and using information,” Plantes advised. “But if you do want to make these shifts, welcome to the most exciting learning period of your life, one with enormous opportunities to make a considerable difference in your enterprise’s future.”

As industries converge, be like hockey great Wayne Gretsky. Head to where the puck will be playing and get there first.

To pick the best vacation spot for hiking in February, I look at climate patterns. In the world of business, external trends help suggest the most attractive market spaces. Arrive before the crowds, and you’ll have the best experience, a principle as true for industry convergence as it is for hiking.

Nevertheless, leaders too often stay stuck in current market spaces by failing to challenge historic answers to the vital business model strategy question, “What business are we in?” They get left behind as their industry converges with others, with pharmaceutical companies the latest example.

As scientists’ understanding of cellular and molecular mechanisms deepened, pharmaceutical manufacturers added biologics to their offerings by evolving their internal R&D approaches and acquiring or partnering with biotech drug discovery start-ups. But with a few exceptions, drug companies’ core business remains developing and selling drugs that treat specific diseases.

A number of external trends, at least in the US, suggest drug companies would find more attractive returns by expanding the scope of their business. These trends foretell a likely convergence of monitoring and diagnostics, pharmaceuticals and mobile health devices.

• First, demand for healthcare cost containment grows only stronger and no element of healthcare spending will be immune. Value will flow to market spaces that reduce the cost of care.

• Second, chronic diseases like diabetes are on the rise with current obesity rates portending our worsening population health status. We need a lot more than drugs to lower chronic disease costs and shaping individual behavior will be an increasingly attractive market space.

• Third, the efficacy of drugs, we are learning, varies significantly based on an individual’s underlying genome and health, with new drug discoveries better linking drugs to the person. Drugs plus diagnostics hold more value than drugs alone as personalize medicine takes hold.

• Fourth, mobile, cloud, advanced data analytics, wired monitoring, electronic health records and social media technologies enable ongoing patient monitoring and feedback away from health care settings. Imbedded nanotechnology sensors will be added to the mix someday. Eric Topol, M.D., Chief Academic Officer at Scripps and author of The Creative Destruction of Medicine, provides a glimpse into the future of how these technologies will come together. “If it takes five years (to develop diabetes), why can’t we detect that process? Currently we have medicines but we don’t know when the immune system is under attack. It’s not a constant attack, it’s episodic, but a nanosensor could detect that.”

• Finally, individuals are taking more control over their health, seeking answers far from their providers’ offices. Online health communities like PatientsLikeMe and CureTogether bring hundreds of thousands of patients together to learn from virtual peers.

Dave Chase poses the core questions facing pharmaceutical companies in an insightful blog, “What Pharma can learn from the railroads and IBM.” He asks, “Do pharmaceutical companies see themselves in the drug business or the disease management business, or, where possible, in the disease prevention business? This is the critical question to survive and thrive.” Chase is CEO and Co-founder of Avado, a Patient Relationship Management platform that automates interactions between individuals and their healthcare providers.

Forward-thinking drug companies recognize that categories other than drugs may have the best access to attractive reimbursement and patients’ share of mind. Among them are Roche, who is moving aggressively into diagnostic technologies to deliver better clinical outcomes, a move that is also leading to a hostile effort to acquire Illumina. Belgium-based UCB redefined its business model around the patient, adding services and communities that make living with chronic inflammatory-related diseases easier. Pharmaceutical companies that remain narrowly focused risk value migrating away from drugs to other categories, leaving them with lower returns, much as the move to mobile computing hurt Microsoft’s desk-based business model returns.

Should you expand your scope? First, understand outcomes that matter to your target market. Then, identify the underlying factors driving outcomes and where significant issues and opportunities exist for changing outcomes. In this larger systems view, you’ll see opportunities to broaden your offering to create better customer outcomes.  Asking customers about “jobs they want done” is one way to surface innovations within the larger system, but don’t discount your own ability to envision innovations.

Your enterprise is not what it does any more than you are your job.  Rather, your enterprise is a collection of knowledge, skills, experiences, processes, relationships and solutions that can be melded, molded, pruned and enhanced to create transformed and new business models that better serve your stakeholders. Asking “What business are we in or should we be in?” becomes a vital leadership practice in an economy in which industries’ boundaries are far more fluid than in the past.

In adopting new technologies to build new business models, Valicom is reaching greater heights.

The newest information technologies ­on the block – social, mobile, cloud and data analytics – can and should do more than boost your organization’s efficiency. Far more than past IT innovations, these new technologies can positively transform your organization – where it competes, why it wins and how it operates.  Smart leaders understand this. Meet one in this blog.

As a young but experienced telecommunications industry professional, Nancy Peckham founded Madison, Wisconsin-based Valicom in 1991 to help companies reduce telecommunication costs. Valicom’s value promise for its direct services is very powerful: “We average 30.4% savings in telecom expenses across our client base,” according to CEO Peckham. Her company produces this savings by helping clients better manage the complex supply chain associated with providing their workforces with wired and wireless voice and data communications, internet connections, and wireless services.

As device options and mobile communications expanded, this expense area has become increasingly complex, with a lot of data errors in billing, averaging 5-12% according to Forrester Research. In Valicom’s 20+ years of doing telecom audits, they’ve found that over 35% of invoices have some type of error.  Often these errors remain hidden without an audit. “One memorable client example is a health care facility that had torn down a building. But our audit,” according to Peckham, “determined that they had been getting billed and therefore paying for fifty landline telephones in a ghost building that was now a parking lot! For twelve years!”

Valicom’s original business model provides direct services through consultants who audit client telecommunications bills, secure the right plans, order devices and manage their inventories, negotiate contracts, process invoices, allocate costs to the right budget lines and benchmark overall spending. An internal IT platform enables consultants to do this work efficiently and effectively. The model was not easily scalable, however. Furthermore, Valicom faced growing competition from Accenture and other consultancies whose names were “top of mind” in IT and CFO departments.

What to do? Midsize companies, Peckham determined, had similar telecom expense management needs to larger companies, but could not easily afford direct services. This insight led Peckham to leverage its internal platform to create a “software as a service” business model that cost-effectively addresses the needs of mid-size clients at a price they can afford.

The new solution opened doors beyond CIO, CFO and Telecom Managers in mid-size companies. Managed Service Providers, Telecom consultants and Telecom agents also benefit from the SaaS solution. By serving the needs of these under-served markets, Valicom has been able to achieve 21% more revenue and 18% more profitability over the past year.

The new approach to providing services also makes Valicom more customer-centric. According to Peckham, “Through the development of Clearview, our software as a service tool, we are well-positioned to give our clients the choices they need to fit how they want to do business. All three bases are covered, from our fully outsourced model (We Do It) to our hybrid model (We Do It Together) to our self-serve model (You Do It).”

The change had its moments, to be sure, as it was crucial that Valicom execute well while continuing to provide a high level of service to its clients and partners. During the development phase, the research, design and actual work involved to adapt Clearview to the Software-as-a-Service (SaaS) was new in terms of functionality and architecture. “This new business model was a new line of thinking for us internally. We not only had to navigate and educate our clients and partners, but also our own internal resources. With the new software, we are continuing to learn and adjust to ensure our operational efficiency, as we continue to gather ongoing feedback from our clients and partners for continued software enhancements,” Peckham shared.

It would have been natural for Peckham to look at new technology opportunities solely through the lens of “How can they make my consultants more efficient and my company more profitable?” Instead, the strong strategic leader asked different questions: “How can I use these new technologies to reach new markets with a hard-to-copy value promise? How can I use them to offer existing customers an even better customer experience?”

How are you thinking about and applying social, data analytics, mobile and cloud technologies in your enterprise?